One of the priorities outlined as special themes within IDA16, which was approved by the Executive Directors of IDA on February 15, 2011, 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 the IDA16.
The primary objective of a CRW is to provide IDA countries with additional resources that will help countries to 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. The additional CRW financing would complement UN efforts to provide emergency relief by supporting safety nets for affected population and restoring basic physical assets that were destroyed by the disaster.
In case of economic crises, the CRW would target severe economic crises caused by exogenous shocks that affected a significant number of countries. The use of the CRW could be considered for crisis resulting in a widespread or a regional year-on-year projected decline of GDP growth of at least 3 percent points in a significant number of IDA countries, while the final decision on possible CRW financing would depend on an analysis of fiscal impact. If provided, the CRW financing would aim at helping to mitigate the impact on vulnerable groups and to protect core development spending at risk in health, education and infrastructure.
The CRW support might also be granted on an exceptional basis in the event of a severe price shock that might not have resulted in a GDP growth decline of 3 percentage points if: (i) the shock is broad-based and has several fiscal impact; (ii) there is a consensus that a concerted international response is needed; and (iii) the existing IDA allocations of effected countires are deemed insufficient to provide adequate response.
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.