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Q&A: Bosnia and Herzegovina Emergency Recovery Project

What is the objective of the Floods Emergency Recovery Project?

The Floods Emergency Recovery Project is a key element of the World Bank Group’s immediate response to the devastating floods that took place in Bosnia and Herzegovina in May 2014.  The Project objective is to meet critical needs and restore functionality of infrastructure essential for public services and economic recovery in affected areas in the aftermath of the worst flooding to hit the country in recorded history.

The higher level objective to which the project seeks to contribute is to restore Bosnia and Herzegovina to a growth path following the floods. While the economic impact of the floods is yet to be fully assessed, short-term growth prospects are expected to be compromised. Nonetheless, international experience suggests the resumption of growth, albeit from a lower base, once reconstruction gets fully underway. This project will ensure that such reconstruction does get underway and set a basis for resumed economic growth.

What will this project finance?

The project will finance emergency disaster recovery goods, and the rehabilitation of key public service infrastructure such as transport, energy, and rural development.

The Project consists of three components:

The first component, $40 million for emergency disaster recovery goods, will finance the purchase of goods urgently needed during the recovery phase, including:

  • Logistical goods, like water, land, and air transport equipment; spare parts; and communications equipment.
  • Reconstruction goods, such as construction materials, construction equipment and industrial machinery (including trucks, dozers, excavators), and prefabricated houses.
  • Emergency and medical supplies and equipment - food and water containers, chemicals and equipment for water purification and sanitation of land, buildings, and other structures, basic food commodities, cleaning and hygienic supplies, mud and water pumping equipment, equipment and furniture for emergency shelters and accommodations, moisture removal equipment, emergency vehicles and supplies, and waste management and disposal equipment.
  • Goods relating to energy and power, like petroleum and fuel products, power purchases, power transmission and distribution equipment, mining equipment and pumps to remove water from mines, controls, monitoring and measurement equipment, emergency power generators, and other electrical equipment.
  • Agricultural equipment and immovable productions systems such as greenhouses, milking parlors and auxiliary installations, sorting and packaging equipment, inputs such as seedlings for perennial crops, orchards, and wine yards, as well as seeds and fertilizer for reseeding of fields - but not pesticides.  Concentrated animal forage and fodder stocks that were destroyed by floods will also be provided, as well as livestock.
  • Any other good or commodity deemed essential for recovery, as agreed in advance by the Association.

The second component, $57 million for the rehabilitation of key public infrastructure, will finance the rehabilitation or reconstruction of high priority, public service delivery infrastructure in the worst-affected areas. This component is designed under a framework approach in which activities will be identified in a demand-driven manner, based on the on-going Recovery Needs Assessment. The project will put particular emphasis on Rural Development, Energy, Transport, and Water and Sanitation activities, however, other public services (education, health) will be considered on a case-by-case basis.

The third component, $3 million in support for project implementatio and capacity building, will finance the management of the Project and any support needed for the identification and implementation of sub-activities. The component will also provide technical assistance and capacity building to help ensure future improved disaster resilience.

Who will implement the Project?

Given the importance of delivering quick results, implementation will be based on existing structures, mechanisms, and capacities built up through on-going World Bank projects (agriculture/rural development, irrigation development, flood protection, and forestry) within the line ministries for agriculture, forestry, and water management. The project activities will, therefore, be implemented by existing Project Implementation Units (PIUs) in each entity, with the RS Unit also responsible for the Brčko District part of the project. The PIUs will work in close coordination with other line Ministries, under the overall guidance of a Steering Committee*. The project will be implemented over the period of four years.

How will investments be prioritized?

The project will establish the eligibility criteria for allocation of resources to the most affected areas. The Project’s Operations Manual will outline the detailed eligibility criteria based on the findings from the Recovery Needs Assessment. The multi-sectoral Steering Committee will review proposals from local governments and ensure that the proposed subprojects are also in line with the priorities outlined in the Recovery Needs Assessment and availability of funding from other sources. Ministries of finance are expected to play a key role in guiding the operations of the Steering Committees, and have a final say on allocation of resources between the sectors.

Furthermore, most local governments have community consultation mechanisms developed to prioritize capital investments. These mechanisms are expected to be utilized in identifying subprojects to be financed under this project.

How will proper use of funds be ensured?

All World Bank projects are implemented under strict fiduciary and safeguard policies, assuring that the funds provided by the Bank are used only for the intended purpose.

What are the financing terms, and how will the funds be allocated?

The total cost of the project is US$100 million, to be financed entirely through an IDA Credit from the Crisis Response Window. The following terms will apply: maturity of 25 years, a grace period of 5 years, a 1.25 interest charge, and with principal repayable at 3.3 percent per annum for years 6-15 and 6.7 percent per annum for years 16-25.

The funds will be allocated equally between the two entities at 47.5 percent, and 5 percent for the Brčko District.

What is an International Development Association (IDA) – Crisis Response Window?

One of the priorities outlined as special themes within IDA16, is strengthening the capacity of IDA countries to deal with exogenous natural or economic shocks. To address the impact of such crises in a timely, structured, and transparent way, and provide additional financing to respond to the crisis, a separate Crisis Response Window (CRW) has been created within IDA16. The primary objective of a CRW is to provide IDA countries with additional resources that will help countries respond to severe economic crises and major natural disasters, and return to their long-term development paths.

In case of natural disasters, the CRW would target events that are exceptionally severe. Financing from the CRW shall be part of a concerted international response, and it shall only be accessed as a last resort. Therefore, while all IDA countries could potentially be eligible for CRW support, actual access to CRW resources would be linked to country-specific circumstances (e.g. magnitude of crisis impact, access to alternative financing sources, etc.). The final decision on CRW financing should be made by the World Bank’s Board of Executive Directors based on evidence of the severity of crises and absence of alternative support mechanisms.

*Note: Both entities and Brčko District are in the process of setting up coordination mechanisms for the floods recovery response. Assuming that those mechanisms are put in place in a timely manner, they could serve as the steering committees for this project. If not, an ad-hoc project steering committee will be put in place in each.