For financing purposes, the International Development Association (IDA) groups fragile states in four categories:
- Countries receiving allocations based on IDA's Performance Based Allocations (PBA) system
- Countries receiving exceptional post-conflict allocations
- Countries receiving exceptional allocations upon re-engaging with IDA after a prolonged period of inactivity, but which did not qualify for post-conflict assistance
- Countries that do not receive any IDA financing because they are in arrears on IDA repayments
IDA provides financing primarily through the PBA system, which emphasizes performance, while factoring in country needs. For fragile and conflict-affected countries, particularly post-conflict countries the Bank takes into account the special circumstances of the country.
- IDA13: IDA provided grants to the poorest countries, debt-distressed poorest countries, post-conflict countries, and for HIV/AIDS and natural disasters. Many of these provisions benefited fragile states.
- IDA14: IDA provided grants based on a country's risk of debt distress. IDA established policy-determined debt burden thresholds because generally countries with better policies and institutions can carry more debt. Because fragile states have weak policies and institutions, they also have lower debt-carrying capacity and therefore mainly receive grants.
- IDA15: The World Bank Management committed to a range of actions related to work in fragile and conflict-affected countries: progress on human resources reforms; cooperation with the UN and other development actors; implementation of good practice principles for engaging in and adapting Country Assistance Strategies to fragile and conflict environments; and strengthening IDA support for state- and peace-building activities.
- IDA 16: The World Bank Management has committed to several monitorable actions. These include, among others, examining the operational implications of the 2011 World Development Report (WDR) on Conflict, Security and Development, and developing plans for enhanced implementation of UN-World Bank Partnership Agreements in several pilot countries. During the IDA16 discussions, Deputies expressed interest in setting up working groups on four topics, including one on fragile and conflict-affected countries. The working groups will provide a forum for learning and informal discussion on the selected themes.
Because of the Multilateral Debt Relief Initiative (MDRI), IDA, the AfDF and IMF all canceled their debt for countries reaching Heavily Indebted Poor Countries (HIPC) completion point. Cancelling the debt freed resources in these countries to meet their developmental needs.
State- and Peace-Building Fund (SPF)
The multi-donor State- and Peace-Building Fund (SPF), was created in 2008, supports measures to improve governance, institutional performance, and reconstruction and development in countries emerging from, in, or at risk of sliding into crisis or arrears. SPF funds are available to all Bank member countries, IBRD and IDA-eligible countries, as well as countries in arrears.
The SPF supports strategic initiatives/projects that
- pilot innovative initiatives that address the challenges of fragility and create a foothold for wider development involvement;
- assist countries that are in arrears;
- promote cross-cutting, innovative approaches to the challenges of conflict and fragility; and
- capture and disseminate the lessons of SPF activities to promote better understanding of the dynamics of fragility and conflict and develop effective strategic and operational approaches.
The 2011 World Development Report: Conflict, Security, and Development, along with the Bank’s own operationalization strategy, marked a significant shift within the Bank and across the international development system toward new and revitalized approaches for working in fragile and conflict-affected situations (FCS). SPF funding supports development of “transformative” strategies at the regional, country, and sub-national levels that address prevention, management, and recovery from violence, conflict, and fragility, using the World Development Report as a framework. Currently three SPF strategy initiatives are under preparation: transforming citizen security in Central America; conflict mitigation in ECA; and reengagement in Yemen. There are also ongoing discussions with country teams in Zimbabwe, Guinea-Bissau, Liberia, Somalia, and Cote D’Ivoire on possible strategic initiatives.
At the end of June 2012, the SPF portfolio consisted of 50 projects (53 grants) for a total of $134.6 million. Of the 53 grants supported by the SPF, the majority are implemented in Africa (53 percent), followed by the Middle East and North Africa (15 percent) and Latin America and the Caribbean (10 percent).
Korean Trust Fund
The Korean Fund for Economic and Peace-building Transitions (KFEPT) was established in October, 2009 with two objectives:
- Support measures to improve governance and institutional performance in fragile, conflict-prone, or conflict-affected countries. This objective focuses on strengthening, building and rebuilding state effectiveness through institutional strengthening and economic governance interventions.
- Support the reconstruction and development of fragile, conflict-prone, or conflict-affected countries.
The Korean Trust fund is managed by the State and Peace Building Secretariat. Projects are approved both by the SPF Governance Committee and the Korean authorities.
Multi-Donor Trust Funds (MDTFs)
MDTFs combine the contributions of multiple donors, generally for a program of activities over many years. Their arrangements include standard legal agreements with all donors, which specify governance procedures covering trust fund management, operational and financial reporting, and the allocation and uses of funds. Bank-administered MDTFs do not allow donors to earmark funds to specific activities or recipients.
MDTFs are used frequently in post-crisis environments—both post-conflict and post-disaster. They can improve resource efficiency and effectiveness by reducing transaction costs, and by managing the high-risk levels inherent in post-crisis environments. For national authorities, MDTFs can increase and untie funding and provide political visibility. International support can bring legitimacy to the overall peace process. For donors, MDTFs reduce information, administrative, and various access costs by working in a coordinated manner.
Being involved in MDTFs can allow the Bank re-entry into countries that have not been eligible for Bank support, including helping address arrears and helping countries become eligible for IDA support. Moreover, the Bank can promote economic growth and strengthening the institutions and processes of governance in these countries by administering MDTFs.
Strategic Review of MDTFs in Fragile States
The World Bank commissioned a strategic review of the role MDTFs play in fragile states which found that the share of funding sent through the World Bank administered MDTFs versus through IDA has grown substantially, and in FY09 MDTF funding in FCS was equal IDA funding . MDTFs have evolved into the preferred modality by donors for working in FCS, and the World Bank is the manager of the largest proportion of MDTFs in FCS.
The report and annex [pdf - 301Mb] offer lessons learned from previous MDTFs and makes suggestions for ways to improve the World Bank's engagement in FCS when working with MDTFs. The video provides an overview of the findings of the MDTF review. Look at the video presentation.