What the World Bank Is Doing
(updated September 22, 2009)

A global crisis needs a global response.

While the global economy is showing tentative signs of recovery, poor countries are still suffering the consequences of the global recession and the food, fuel and financial crises, which hit over the last two years.

The poorest countries will need additional assistance to move beyond the global recession. These countries can play a key role in helping to boost global demand to support global recovery, but they will need access to financing for years to come.

The World Bank is calling for a Crisis Response Facility to ensure that quick and effective assistance can be provided to most vulnerable poor countries following shocks. Such a facility would fill a critical gap in the global aid architecture. Failure to address this need could jeopardize the progress achieved in many poor countries based on recent strong reform efforts, and instead lead to costly reversals.

Building on reforms already underway, the Bank Group has moved swiftly over the last year to expand and speed up lending, assistance, and advice to developing countries. In fiscal year 2009, the Bank Group committed nearly $60 billion to support countries hit by the global crisis, a 54% increase over the previous year, and a record high.

• IDA commitments overall totaled a record $14 billion in 2009. The Bank also set up a new facility to speed $2 billion to help poorest countries by expediting approval processes for money from the $42 billion IDA15 fund. Money will be used for safety nets, infrastructure, education and health. Armenia ($35 million) and Democratic Republic of Congo ($100 million) were the first countries to tap the facility in February 2009. By the end of 2009, the facility provided $990 million.
• In 2009, IBRD commitments rose to $32.9 billion, to meet additional demand from developing country partners. IBRD could make new commitments of up to $100 billion over the next three years, the Bank said in 2008. In December 2008, the Bank approved $500 million for structural reforms in Ukraine to help mitigate the impact of the financial crisis. The Bank also agreed to help India with $3 billion in increased investment, as part of the Bank's new country strategy. In March 2009, the Bank approved a $2 billion standby loan for Indonesia, uniquely designed as insurance for the country should the global financial crisis worsen. In April 2009, the Bank approved a $500 million contingent line of credit for Costa Rica to be used in case a worsening in the economic environment makes access to financing difficult. In September 2009, the Bank approved $4.3 billion to bolster India's economic stimulus program, €1 billion financial sector and macro stability loan for Hungary and €200 million for Latvia's financial sector reform.
  
• In January 2009, the Bank also called for developed countries to pledge 0.7 percent of their stimulus packages, or as much as they can in additional money, to a global vulnerability fund to help developing countries, which can't afford bailouts and deficits. The vulnerability fund wasn’t a new entity but a target for developed countries to scale up help to existing development actors (national aid agencies, UN agencies multilateral development banks, non-governmental organizations, etc).
  

Bank Group Global Crisis Response Initiatives

The World Bank Group’s global crisis response initiatives focus on three priority areas: Safety net programs to protect the most vulnerable; maintaining investments in infrastructure; support for small and medium-size enterprises and microfinance. These initiatives have mobilized an additional $8.3 billion to mitigate the crisis impact in poor countries (pdf), over and above previous commitments to the institution. The Vulnerability Financial Facility streamlines support to the poor and vulnerable through:

• A Global Food Crisis Response Program (GFRP), launched in May 2008, to provide immediate relief to countries hard hit by food high prices. GFRP was increased to $2 billion in April 2009 from the initial $1.2 billion. In FY08/09 GFRP loans were processed on average in under two months.
• The Rapid Social Response Program (RSR) which focuses on social interventions by providing access to basic social services, safety net programs and labor market policies to assist in the income support of the unemployed. As announced in April 2009, the facility will triple Bank investments in safety nets and other social protection programs in health and education to $12 billion over the next two years. Support in 2009 totaled $4.5 billion.  The UK has pledged ₤200 million to the program.

INFRA (Infrastructure Recovery and Assets Platform) will provide $45 billion for infrastructure over the next three years, as announced in April 2009. Nearly $21 billion were committed in 2009.The platform is complemented by IFC’s Infrastructure Crisis Facility (see description below).

Through IFC, we are ramping up support to the private sector through the launch or expansion of five initiatives, designed to leverage donor and private sector funds.

• Ensure trade flows: IFC is doubling its Global Trade Finance Program to $3 billion over three years and is mobilizing funds from other resources. Japan has pledged $1 billion. A new Global Trade Liquidity Program (GTLP) mobilized more than $6 billion to support $50 billion of trade over three years. IFC has committed $1 billion, the UK pledged up to £300 million, Canada committed $200 million, and the Netherlands committed $50 million.
• Bolster distressed banking systems: Launching a global equity fund to recapitalize systematically important banks in emerging markets, where IFC plans to invest $1 billion over three years and Japan plans to invest $2 billion
• Keep infrastructure projects on track: IFC set up a new Infrastructure Crisis Facility to provide roll-over financing and help recapitalize viable infrastructure projects—roads, ports, and transmission lines—facing financial distress. Over the next three years IFC will contribute up to $300 million in equity with other sources expected to bring in at least $2 billion. This is likely to help mobilize additional funding worth three times that, which could cover around $10 billion worth of projects.. Germany has pledged €100 million for the facility.
• Shift advisory support services: Refocusing existing advisory services programs to help clients cope with the crisis. IFC estimates a financing need of at least $40 million over three years.
• Support microfinance institutions: A new $500 million Microfinance Enhancement Facility is providing refinancing to more than 100 microfinance institutions in up to 40 of the world's poorest countries, reaching up to 60 million low-income borrowers.

Through MIGA, we are ensuring liquidity in financial markets:

• Providing guarantees worth over $480 million to foreign banks, which have made loans to their subsidiaries in Ukraine and Russia, to help inject liquidity and bolster confidence in the countries’ financial systems.
• Providing political risk insurance capacity of up to $3 billion for bank lending in Eastern Europe.  
• Helping to facilitate up to $150 million of investments to Africa’s small and medium-size businesses, through an innovative contract with the African Development Corporation (ADC).
• Fronting transactions and partnering with private and public sector reinsurance partners to encourage greater investment, thereby leveraging faster and greater insurance capacity.
  

Establishing Agriculture Finance Support Facility to expand rural finance through a $20 million Bill & Melinda Gates Foundation contribution, as announced in June 2009. The facility will increase access to financial services, such as savings, credit, payments and insurance.

In the neediest countries, we are developing an Energy for the Poor initiative.

Speedy Help for Poor Countries, while Maintaining High Standards

• The Bank Group committed nearly $60 billion in 2009, a 54% increase over the previous year and a record high.
• 25% of FY08 investment operations were processed in four months.
• Supplemental budget support operations to respond to special situations as in the food crisis and natural disasters have been processed in FY08-09 in less than one month.
• Rapid Response reforms for projects in emergency or post conflict situations have allowed the Bank to process such investment operations were processed on an average of four months in FY08.
• Despite the need for speed, many investment projects still require thorough preparation, especially when there are significant fiduciary risks and substantial environmental or social impacts.

Advice

• We stand ready to partner with countries by providing technical analysis and advice. For example, we have diagnostic tools available to help countries move quickly if their banking systems experience problems.
• We are implementing crisis preparedness exercises for officials in emerging markets that may be affected by the financial turmoil.

Partnerships

• Support for Latin America: In April 2009,  the Inter-American Development Bank and the Inter-American Investment Corporation (IDB/IIC), the World Bank Group, Corporacion Andina de Fomento (CAF), the Caribbean Development Bank (CBD) and the Central American Bank for Economic Integration (CABEI) joined efforts to provide $90 billion during the next two years to spur economic growth by coordinating their crisis response initiatives.

• Support for Eastern Europe: In February 2009,the EBRD, the EIB Group, and the World Bank Group — the largest multilateral investors and lenders in the region—pledged to provide up to €24.5 billion ($31 billion) to support the banking sectors in the region and to fund lending to businesses hit by the global economic crisis—The World Bank Group will provide about €7.5 billion as part of this effort:
• IBRD intends to increase lending in Europe and Central Asia up to €16 billion in 2009-10. From that up to €3.5 billion is envisaged for addressing banking sector issues in emerging Europe.
• MIGA will provide political risk insurance capacity of up to $3 billion for bank lending, subject to Board approval.
• IFC, through its crisis response initiatives is expected to contribute up to €2 billion.
• We are collaborating with the IMF and others to help country governments and the private sector through lending, equity investments, innovative tools, and safety net programs. A policy package for Hungary is underway, where the Bank is providing €1 billion as part of an international support package financed jointly by the International Monetary Fund, the European Commission. In September 2009, the Bank approved €200 million for Latvia's financial sector reform as part of a joint International Financial Institution initiative to support banking sectors in Central and Eastern Europe.
• The G7 is not adequate and we are proposing a new broader steering group to address major economic challenges.
• We also seek to strengthen collaboration among multilateral development institutions to support long-term economic growth that is consistent with the Millennium Development Goals.