World Bank response to COVID-19 – Global

The toll from the COVID-19 pandemic is enormous, and the developing world is likely to suffer the longest and hardest. The World Bank Group is taking swift, broad and early action to help developing countries address the health, social and economic impacts of the pandemic. The World Bank provides large net positive flows to the world’s poorest countries and is moving fast, directing up to $ 160 billion to our client countries. This note focuses on the main highlights of the World Bank’s response, which we hope may help inform a review of the document recently released by the Center for Global Development (CGD), which contained factual errors.

The Bank’s response to COVID-19

Between April and September 2020 alone, the World Bank committed $ 43 billion, or 41% of the $ 104 billion in lending capacity indicated in March for the 15 months from April 2020 to June 2021. More recently, on October 13, 2020, the Board of Directors approved an envelope of $ 12 billion to fund developing countries for the acquisition and deployment of COVID-19 vaccines, when deemed safe and effective. We have a strong pipeline of operations in the works and are on track to deploy World Bank resources to support countries with the resources they need.

The World Bank’s COVID-19 financial response supports government policies and actions to respond to the health crisis, support households and businesses, finance the response, and lay the groundwork for a rapid and sustainable recovery. The WBG has developed a technical approach to the response, drawing on international experience, lessons from the evaluation and technical advice from partner institutions. This framework is adapted to the needs and context of the countries. Almost a quarter of the commitments made in the COVID-19 response are aimed at “saving lives,” the health pillar in the Bank’s approach. We are now working to support the health response to COVID-19 in more than 110 developing countries, which are home to more than 70% of the world’s population. We expect the new $ 12 billion vaccine facility to complement our efforts under this pillar. So far, the remaining response has focused at 28% on “protecting the poor and vulnerable”; 13% on “ensuring sustainable business growth and jobs”; and 36% on the fourth pillar, “strengthening policies, institutions and investments to rebuild better”.

The World Bank’s COVID-19 response focused on increasing financial flows and technical support to low- and middle-income countries, including fragile, conflict and violent states (FCVs) and small island states , which have a limited ability to resist COVID-19. shock. Of the $ 43 billion committed at the end of September, $ 25 billion was earmarked for IDA-eligible countries, 38% of which focuses specifically on crisis aid (in the area of ​​health, the aid to individuals or businesses and aid for better reconstruction); and $ 18 billion from IBRD, of which 71% focuses specifically on crisis support. Funding to FCV countries was $ 7.6 billion and funding to small states was $ 0.6 billion (for both groups of countries, 33% of these commitments were specifically for crisis response).

We use all of our instruments to support the response, including investment projects, results program and development policy operations. The mix of instruments is determined by the specific needs of countries and the nature of the response to COVID-19 and alternative sources of funding. Policy and institutional reforms – for example to introduce or improve social safety nets and unemployment benefits, fund COVID response spending while allowing tax deferrals, or lay the groundwork for a sustainable and green recovery – are essential and form part of the response of the countries that the Bank supports DPDs. As a result, the volume and share of development policy operations (DPOs) increased at the end of FY20, bringing the average DPO to 30 percent ($ 17 billion in volume) during the year. fiscal year 20, compared to an average of 25 percent over the previous five years ($ 11 billion on average over fiscal years 15-19). IDA countries are making greater use of DPOs for COVID-19 response. IDA’s DPO share in FY20 was 24% ($ 7 billion), compared to an average of 13% ($ 3 billion) in FY15-19. IBRD’s DPOs remained essentially stable in FY20, at 36% ($ 10 billion) of total commitments, compared to the average of 35% in FY15-19.

The WBG’s response to COVID-19 prioritized the needs of the poorest countries. Between April and June 2020, the WBG’s commitments reached the sum of all other MDB commitments. The WBG on the one hand and all the other MDBs on the other hand committed $ 45 billion during this period. Regarding sovereign loans, IDA and IBRD committed $ 32 billion during this period, compared to $ 31 billion for all other MDBs. During the same period, the IMF also moved forward, committing $ 81 billion, including $ 46 billion in lines of credit to middle- and upper-income countries.

Disbursements are increasing, due to COVID-19 response operations. This is the result of (i) the increased share of DPL, (ii) the reorientation of part of the portfolio to support priority activities, (iii) the COVID-19 emergency health operations under the COVID-19 global multiphase programmatic approach (MPA) (which will expand with the recently approved envelope of $ 12 billion), and (iv) proactive portfolio management by the Bank and country authorities. In the first quarter of FY21, disbursements increased to $ 11.8 billion, nearly double the $ 6.4 billion in the first quarter of FY20. The implementation and disbursements of operations under the global health program of the COVID-19 phased approach are much faster than the regular health portfolio, as expected. $ 1.2 billion disbursed (or 30 percent of health MPA program commitments) was disbursed in the first months of implementation. In addition, the higher share of development policy operations translates to $ 6.3 billion in disbursements this first quarter of FY21, compared to $ 1.8 billion in the first quarter of last year. From April to September 2020, 49% of total IBRD and IDA disbursements came from development policy financing.

The Bank’s Response to the Crisis Increases Net Flows, Particularly for IDA Countries. All IDA borrowing countries have positive net flows. At the request of shareholders, the World Bank and other MDBs have explored ways for MDBs to contribute to the goals of the Debt Service Suspension Initiative (DSSI). The role of the World Bank is to ensure that countries have significant and timely positive financial inputs during the crisis to increase available fiscal resources without increasing debt vulnerability and the CGD document demonstrates that this is the case. IDA, in particular, has the capacity to provide long-term, zero-interest grants and loans: the capacity to commit record amounts during the crisis would be much less if our market access was compromised by the suspension of debt payments without the support of shareholders to make the IBRD and IDA whole.

Comparison with the Bank’s Response to the Global Financial Crisis

The CGD document makes several comparisons with the Bank’s response to the global financial crisis (GFC) around 2009. It is important to understand the similarities and differences.

World Bank funding in fiscal year 09-11 totaled $ 149 billion, with about 70 percent of this response to IBRD countries. IBRD tripled its lending from pre-crisis levels, which was made possible by the strong capital position of IBRD at the time. On the IDA side, in part due to the more limited capacity of IDA, but also due to the nature of the global financial crisis, its transmission channels and a delayed impact of the crisis in IDA countries, IDA commitments remained around $ 15 billion throughout FY09-11. IDA contributed 30 percent of the Bank’s financing in FY09-11.

In FY20, World Bank commitments reached $ 59 billion, identical to that of the first full year of the GFC response (FY10) and higher than the commitments of the year the crisis hit (FY09, with $ 47 billion committed). Almost 52% of FY20 commitments were for IDA countries.

The announcement of $ 160 in March for the WBG’s COVID response reflects the fact that IDA and IBRD have similar financial capacity to respond. This was not the case in FY09. In fiscal 2009, IDA was in the middle of a replenishment cycle (IDA15), while IDA now has market access and is just starting to implement IDA19. IBRD entered GFC with substantial capacity due to comfortable capitalization relative to exposure in 2008, with an equity / loan ratio of 37.5% at the onset of the crisis. This compares to an E / L ratio closer to the 20% policy limit today.

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