European Bank for Reconstruction and Development President Odile Renaud-Basso told Reuters on Monday that support from governments in countries affected by the ongoing Middle East conflict should be strictly temporary and aimed at those most impacted, given the squeeze on fiscal resources and the rise in borrowing costs.
The comments come as the EBRD prepares for its annual meeting, which begins on Friday in Riga. The gathering follows a stretch of roughly six years of consecutive crises that began with the COVID-19 pandemic and continued with Russia's full-scale invasion of Ukraine.
Renaud-Basso said those shocks have left many nations carrying heavier debt loads. She singled out the regions where the bank concentrates its private sector investments: emerging Europe, Central Asia, the Middle East and Africa.
She also flagged secondary effects from the regional conflict, saying energy price spikes and the risk of fertilizer shortages related to the ongoing war in Iran could put further upward pressure on food prices and inflation.
"There is less fiscal space in a number of countries," Renaud-Basso said. "You need to be very targeted, very focused on the most affected people and avoid very generic across the board measures that could be very expensive."
The EBRD chief said the bank will lower its growth projection and raise its inflation forecast in an economic update scheduled for publication on Wednesday, although she did not provide figures. In February, the bank had forecast 3.6% growth this year and 3.7% in 2027 across the 41 countries covered by that outlook.
In April the EBRD announced plans to deploy c5 billion to assist countries hit by the fallout from the Iran war. Renaud-Basso reiterated the need for governments to leverage private capital and noted an uptick in interest from institutional investors, naming pension funds from the Netherlands and the Nordics as examples of parties showing growing appetite.
Ukraine is expected to be a central focus during the Riga meeting. The EBRD will host a donor session on the Chornobyl nuclear plant, the site of the world's worst nuclear disaster. Renaud-Basso said the plant's protective confinement was damaged by a Russian drone strike last year, underscoring the urgency of donor coordination.
On the situation in Turkey, one of the EBRD's significant markets, Renaud-Basso said conditions appear to have stabilized after recent volatility. She said political moves targeting the main opposition party caused pressure on the lira and other assets roughly two weeks earlier, but that those pressures seemed to have eased.
Summary of key developments
- EBRD president calls for temporary, narrowly targeted fiscal support in countries affected by the Middle East conflict.
- The bank will revise down its growth outlook and up its inflation forecast in a Wednesday economic update.
- EBRD plans include a previously announced c5 billion deployment for nations impacted by the Iran war and efforts to attract private institutional capital.