The European Bank for Reconstruction and Development (EBRD) has committed to providing “hundreds of millions” in trade finance support for companies struggling in the wake of the coronavirus pandemic, part of an emergency €1bn support package.

The bank’s shareholders, which includes the European Union and 69 countries from around the world, approved the proposals on Friday.

EBRD says it will provide emergency liquidity, working capital and trade finance to help existing clients cope with the fallout from the outbreak of Covid-19.

Since the turn of the year governmental attempts to stem the spread of the deadly virus have severely disrupted supply chains, not least since the Chinese government’s moves to shutter of factories and close transport links.

Rudolf Putz, head of the EBRD’s trade facilitation programme (TFP), tells GTR the bank will raise trade finance limits for banks that are already TFP partners. Priority will be given to those in Central Asia and south-east Europe, as these regions have been worst hit by supply chain disruptions.

Putz says: “Many importers in Central Asia just cross the border, load merchandise in China onto trucks and take it back over the border to neighbouring countries like Uzbekistan, Kyrgyzstan or Tajikistan. All of a sudden these transport routes are blocked, so in these countries, importers have to look for new supply chains and supply sources, and they have to place orders over much larger distances.”

He adds: “When these borders are now closed and the transport takes much longer, there will be an increased demand for trade finance, and such demand can often only be financed by banks.”

Another challenge is that importers are forced to keep stocks high during times of crisis, due to the increased time it can take to process orders.

The move comes a couple weeks after the International Finance Corporation (IFC) announced it would put billions towards helping countries cope with the economic fallout from Covid-19, and work with commercial bank clients to expand trade finance and working capital lines.

Meanwhile the UN Conference on Trade and Development (UNCTAD) warned last week that the rapid spread of Covid-19 could impact global GDP by US$1-2tn over the course of the year.

Richard Kozul-Wright, director of UNCTAD’s division on globalisation and development strategies, said: “We envisage a slowdown in the global economy to under 2% for this year, and that will probably cost in the order of US$1tn, compared with what people were forecasting back in September.”