© Reuters. Smoke rises following Israeli strikes in Gaza, October 9, 2023. REUTERS/Saleh Salem
By Andrea Shalal and David Lawder
MARRAKECH, Morocco (Reuters) -The World Bank on Monday urged a “rapid de-escalation” of the fighting in Israel and Gaza as the violence cast a pall over the start of the bank’s annual meetings with the International Monetary Fund in Morocco.
An internal World Bank memo seen by Reuters cited a “devastating loss of life, destruction and heavy toll on civilians being incurred on both sides,” but voiced support for the lender’s work in Gaza and the West Bank.
“We hope for a rapid de-escalation of the conflict and end to the violence. The World Bank and our development partners have long worked to support the poorest, most vulnerable people in the West Bank and Gaza, and we remain committed to building the foundations for a more stable and sustainable future.”
The Oct. 9-15 annual meetings in Marrakech are expected to focus heavily on increasing resources for the IMF and the World Bank, both potentially contentious moves. But the attention of many government officials and non-profit representatives on the first day turned to the possibility of a wider conflict.
“We’re all just very much taken aback by the magnitude of the casualties on both sides,” Anna Bjerde, the World Bank’s managing director of operations told Reuters in an interview.
The conflict already has spiked oil prices and prompted a rush into safe-haven assets such as gold, which could hurt developing economies.
World Bank Chief Economist Indermit Gill told Reuters that he worried the violence could overshadow important discussions at the IMF-World Bank meetings about sovereign debt, mediocre growth prospects and the big setback for development caused by the COVID-19 pandemic.
“It’s always the low-income countries that you take attention away from, and there are 750 million people who live there.”
Eric LeCompte, director of Jubilee USA Network, a faith-based group campaigning for country debt relief, drew parallels to the attention shift caused when Russia launched its invasion of Ukraine in 2022.
“We saw world leaders slow down on making decisions on development, debt and taxes when the war in Ukraine started,” LeCompte said. “Now, when we finally have their attention on track again, conflict in Israel and Gaza makes everything more difficult.”
Gill said the conflict could add to growing risks to the global economy, including fragmentation of trade, especially if it resurrects supply chain delays that sent prices higher during the COVID-19 pandemic.
“It’s in a very trade sensitive part of the world,” Gill told Reuters, adding that another risk was the conflict would drive up headline inflation, with potential knock-on effects for monetary policy that could hit developing countries hardest.
“Right now the most pressing thing is inflation, if you start to see fuel prices go up and goods prices go up because of these logistic jams, this will just compound the problems,” he said.
IMF Managing Director Kristalina Georgieva did not mention the conflict in opening remarks at the meetings, focusing instead on her Monday morning visit to a school destroyed by the Sept. 8 earthquake, praising host Morocco for returning children to classrooms within 10 days.
On Sunday night, Georgieva participated in a “friendly” soccer match with World Bank President Ajay Banga and members of Morocco’s Atlas (NYSE:ATCO) Lions club attended by children from damaged mountain villages.
She later told civil society groups that it was important for IMF shareholders to push this week to increase IMF quota resources to ensure that the lender had ample resources to respond to any future economic shocks.