Deploying Resources Strategically

Defining our engagement with countries

The Bank Group has a systematic, evidence-based model for providing financial, analytic, and advisory services to countries, with a focus on strong country ownership and good development outcomes. The Country Partnership Framework (CPF) articulates the strategic goals of the Bank Group’s engagement with a country for a period of four to six years, while retaining flexibility to support countries in rapidly changing global and national circumstances, as is currently the case due to COVID-19. It is the central tool for management and the Board when reviewing and guiding the Bank Group’s country programs. The Bank, IFC, and MIGA jointly prepare the CPFs by:

• Taking into account the country’s vision of its development goals;
• Drawing on the analytical findings and priorities of the Systematic Country Diagnostic (SCD), prepared by staff in close consultation with national authorities, the private sector, and other stakeholders;
• Considering the Bank Group’s comparative advantage; and 
• Aligning with the Bank Group’s development goals.

The CPF includes a results framework of agreed-upon outputs and outcomes for activities under implementation and for planned activities; this can be adjusted to incorporate our response to changing country needs and to external or domestic shocks. 

This process has been in place since July 2014. In fiscal 2020, the Bank Group prepared SCDs in 11 countries and new CPFs in 11 countries. 

We offer countries a variety of instruments and approaches that help them best achieve their development goals; these include investment project financing, which helps build physical and social infrastructure and develop institutional capacity; development policy financing, which supports borrowers in addressing policy and institutional actions and reforms, including through guarantees; and Program-for-Results financing, which supports client programs and links the disbursement of funds directly to the delivery of defined results.

The MPA, introduced in fiscal 2018, structures complex country and multicountry engagements as a set of linked phases within one program. It centers on adaptable design and learning from implementation to ensure that operations are more responsive to evolving country and project circumstances. In fiscal 2020, we applied the approach globally for the first time to support health operations in 75 countries, including 25 countries affected by FCV and 11 small states, to help address COVID-19. This global MPA enabled an integrated approach with common objectives across sectors and regions to deal with the emergency, while allowing for tailored adjustments to maximize results. We also launched the Emergency Locust Response Program, a $500 million cross-regional MPA, to help countries in Africa and the Middle East fight the locust swarms that are threatening food security and livelihoods for millions of people. 

Achieving strong results since its introduction in 2012, the Program-for-Results instrument was mainstreamed across the Bank in fiscal 2020, following the removal of a 15 percent cap on its use in operations financed by IBRD and IDA. We also continued to review and refine our use of results-based financing in investment project financing operations, incorporating lessons learned on how to more effectively strengthen project outcomes.

The Bank Group helps small states address their unique development challenges through the Small States Forum. It comprises 50 members—42 countries classified as small states by the Bank and eight with larger populations that face similar challenges—and meets semi-annually at the World Bank–IMF Spring and Annual Meetings. At the October 2019 Annual Meetings, UN Secretary-General António Guterres and Bank Group President David Malpass discussed economic and financial resilience, climate adaptation, and the suite of Bank instruments tailored to small states. 

Valuing the opinions of country stakeholders 

The World Bank Group Country Opinion Survey Program annually assesses the views of thousands of decision makers and influencers across borrowing countries. In fiscal 2019, about 10,000 opinion leaders in more than 40 countries responded to the survey. Key findings demonstrate that our current areas of emphasis—including building human capital, creating jobs, addressing corruption, and improving governance—align well with stakeholders’ top priorities.

Addressing development challenges through technical advice and analysis 

Advisory Services and Analytics (ASAs) are crucial to how the World Bank contributes to development. Countries use our analytical and technical advice to sustain development over the long term by implementing better policies and development strategies and strengthening institutions. At the country level, this work under­-pins CPFs, government programs, and projects supported by Bank lending and guarantees. At the regional and global levels, ASAs contribute to public goods and inform policy debates.

In fiscal 2020, we produced 1,515 ASA products in over 140 countries. They addressed key topics such as economic policy, human development, social pro­tection, governance, urban and rural development, and climate and the environment. In the Sahel, ASAs provided knowledge, capacity building, and timely assistance for developing, implementing, and evaluating adaptive social protection systems and programs. 

Reimbursable Advisory Services (RAS) are requested and paid for by country clients; all member states are able to request these services, including non-borrowing countries. In fiscal 2020, we produced 92 RAS products for 27 countries. RAS provided technical assistance, capacity building, and implementation support to countries on various topics, including public financial management, social protection programs, national reforms for quality education, and centralized health sector procurement.

Read More >

Maintaining budget discipline to maximize the use of financial resources

As part of the IBRD capital increase package agreed upon in 2018, we have committed to additional and continuous efficiencies and economies of scale to help maintain budget sustainability and strengthen the Bank’s financial position. Ongoing measures to improve efficiency and productivity, including through optimization of organizational processes and effective use of technology, will help contain some of the rising costs of doing business that we face as we deliver a growing and more complex work program. We have established a comprehensive monitoring framework for the implementation of budget commitments under the capital package to achieve and track cumulative efficiencies and economies of scale on a yearly basis.

The Bank is implementing a significant program to support client countries’ response to the COVID-19 pandemic, helping them cope with the health, social, and economic impacts and build conditions for a fast, sustainable, and resilient recovery worldwide. While prioritizing the COVID-19 response, the Bank will continue efforts to deliver on other interventions to support the twin goals of ending extreme poverty and boosting shared prosperity and the key priorities and commitments of the IBRD capital package, the IDA19 replenishment, and the FCV strategy. These commitments will result in substantial program growth in priority areas, especially in poorer and smaller countries and those affected by FCV. They will also support critical themes, including: broadening access to critical infrastructure, digital financial services and social protection; enhancing human capital; promoting growth and development of the private sector; promoting good governance and the rule of law, as well as debt and investment transparency; addressing climate change and low-carbon goals; and building resilience to exogenous shocks. 

IBRD financial commitments and services

IBRD is a global development cooperative owned by its 189 member countries. As the largest multilateral development bank in the world, it provides loans, guarantees, risk management products, and advisory services to middle-income and creditworthy low-income countries, and coordinates responses to regional and global challenges. 

In fiscal 2020, new IBRD lending commitments amounted to $28.0 billion for 152 operations, of which 10 were IBRD and IDA blended operations.

For monitoring, reporting, and better decision making about its commitments, the Bank applies a taxonomy of codes to all lending operations to reflect the sectors and themes to which it directs resources. Sector codes reflect high-level groupings of economic activities based on the types of goods and services produced, and are used to indicate which part of the economy is supported by the Bank’s intervention. Theme codes reflect the goals and objectives of Bank-supported activities and are used to capture the Bank’s support to the Sustainable Development Goals (SDGs).  

IBRD Top Country Borrowers, Fiscal 2020 (millions of dollars)

Fiscal Year Data >

IBRD financial resources and financial model

IBRD finances its loans from its own equity and from money borrowed in the capital markets through the issuance of IBRD bonds to fund development projects in member countries. IBRD is rated Aaa by Moody’s and AAA by Standard & Poor’s, and investors view its bonds as high-quality securities. Against the backdrop of a global liquidity crisis and the challenges presented by COVID-19, IBRD’s funding approach is aimed at achieving the best long-term value on a sustainable basis for borrowing members. IBRD’s ability to intermediate the funds it raises in international capital markets to developing member countries is important in helping to achieve its goals.

All IBRD bonds support sustainable development. IBRD issues its securities through both global offerings and bond issues tailored to the needs of specific markets or investor types. Its bonds connect the private and public sectors to the Bank’s development goals through investors such as asset managers, insurance companies, pension funds, central banks, corporations, and bank treasuries from around the world. IBRD issues bonds to investors in various currencies, maturities, and markets, and at fixed and variable terms. It often opens new markets for international investors by issuing new products or bonds in emerging market currencies. IBRD’s annual funding volumes vary from year to year.

IBRD’s approach has enabled it to borrow at favorable market terms and pass the savings on to its borrowing members. Funds not immediately deployed for lending are held in IBRD’s investment portfolio to provide liquidity for its operations. In fiscal 2020, IBRD raised $75 billion by issuing bonds in a variety of currencies.

As a cooperative institution, IBRD seeks not to maximize profit but to earn enough income to ensure the long-term financial capacity necessary to sustain its development activities. Of fiscal 2020 allocable net income, the Executive Directors approved the allocation of $950 million to the General Reserve and recommended to the Board of Governors the transfer of $431 million to the Surplus. The transfer to the Surplus includes $331 million, reflecting the amount produced by the formula-based approach for transfers to IDA from allocable income for fiscal 2020. Management and the Board proposed to hold this amount in the Surplus, as a measure of prudence in view of the current uncertain outlook due to the COVID-19 crisis, so as to retain the option of subsequently deciding to use those funds to strengthen its reserves in a downside scenario.  As part of its lending, borrowing, and investment activities, IBRD is exposed to market, counterparty, country credit, and operational risks. 

IBRD Business Model

The Bank Group’s Chief Risk Officer leads the risk oversight function and supports the institutional decision making process via dedicated risk committees. In addition, IBRD has put in place a strong risk management framework, which supports management in its oversight functions. The framework is designed to enable and support IBRD in achieving its goals in a financially sustainable manner. One summary measure of IBRD’s risk profile is the ratio of equity to loans, which is closely managed in line with its financial and risk outlook. As of June 30, 2020, this ratio stood at 22.8 percent, and the cumulative subscribed capital of IBRD totaled $288.0 billion, including $18.0 billion in paid-in capital.

Read More >

IDA financial commitments and services

IDA is the world’s largest multilateral source of concessional financing for the poorest countries. It provides financing in the form of development loans, grants, and guarantees to help these countries increase economic growth, reduce poverty, and improve the living conditions of the poor. 

In fiscal 2020, 76 countries were eligible for IDA assistance, with Somalia becoming active during the fiscal year. In addition, three countries—Bolivia, Sri Lanka, and Vietnam, which graduated at the end of the IDA17 cycle—received exceptional transitional support from IDA. New IDA lending commitments amounted to $30.4 billion for 305 operations, of which 10 were IBRD and IDA blended operations. These commitments included $22.4 billion in credits, $8.0 billion in grants, and $25 million of IDA resources to back guarantees. In addition, 35 projects and sub-projects for a total of $792 million were approved for support from the IDA18 IFC-MIGA Private Sector Window (PSW) during the fiscal year.

For monitoring, reporting, and better decision making about its commitments, the Bank applies a taxonomy of codes to all lending operations to reflect the sectors and themes to which it directs resources. Sector codes reflect high-level groupings of economic activities based on the types of goods and services produced; these are used to indicate which part of the economy is supported by the Bank’s intervention. Theme codes reflect the goals and objectives of Bank-supported activities and are used to capture our support to the SDGs.

IDA Top Country Borrowers, Fiscal 2020 (millions of dollars)

Fiscal Year Data >

IDA financial resources and financial model

IDA has previously been funded largely by contributions from high- and middle-income partner countries. Additional financing comes from Bank Group transfers and borrowers’ repayments of earlier IDA credits. As part of the groundbreaking IDA18 package, which covers fiscal 2018–20, IDA partners agreed to transform IDA’s financing model, leveraging its strong capital base to pioneer a new model for development finance that combines donor funding with funding raised in the capital markets to support an ambitious policy package with focus on five special themes: jobs and economic transformation; climate change; gender and development; fragility, conflict, and violence; and governance and institutions. IDA received its first-ever public credit rating—triple-A—in 2016. IDA’s financial strength is based on its robust capital position and shareholder support, as well as on its prudent financial policies and practices, which help maintain its triple-A credit rating. 

For IDA18, development partners agreed to a financing envelope of SDR 53.5 billion (equivalent to $75.0 billion)  to provide credits, grants, and guarantees to IDA’s client countries. At the outset, $63.5 billion is expected to be used on concessional terms, $9.0 billion on IBRD terms for the Scale-Up Facility and transitional support, and $2.5 billion for the PSW. As of June 30, 2020, after the effect of reallocations agreed with IDA’s development partners during the IDA18 period, including as part of IDA’s support to clients to respond to COVID-19, $68 billion was committed on concessional terms, $8.4 billion on IBRD terms for the Scale-Up Facility and transitional support, and $1.4 billion for the PSW. IDA administrative expenses are recovered primarily through net charges and interest paid by recipient countries. 

Supporting IDA18 were SDR 16.1 billion (equivalent to $22.6 billion) in grants from IDA’s donors, of which SDR 0.9 billion ($1.2 billion) is the grant element from concessional partner loan contributions. Partners are also providing SDR 3.6 billion ($5.1 billion) in concessional partner loans—SDR 2.7 billion ($3.8 billion) excluding the grant element of the loans—and SDR 2.9 billion ($4.1 billion) in compensation for debt relief under the Multilateral Debt Relief Initiative (MDRI). As of June 30, 2020, 50 partners had submitted IDA18 Instruments of Commitment and concessional loan agreements. Along with compensation for MDRI for the IDA18 period, contributions total SDR 21.7 billion ($30.4 billion).

IDA’s borrowing program enables it to significantly scale up its support toward achieving the SDGs, while offering investors an efficient way to contribute to global development. This optimization of its capital enables IDA to mobilize three dollars in IDA commitment authority for every dollar of development partner contributions under IDA18. On April 17, 2018, for the first time, IDA issued $1.5 billion of debt in the international capital markets. This inaugural IDA bond received strong reception in the market and paved the way for further market borrowing, including an IDA Bills Program and more benchmark issuances in euro, British pounds, and US dollars. The program has been successful in raising liquidity in various currencies from a diverse set of investors across the globe. IDA will continue to seek opportunities to further diversify its currency composition and develop its capital markets presence. 

IDA Business Model

IDA19 replenishment

Every three years, development partners meet to review IDA’s policies, assess its financial capacity, agree on the amount of financing for the next replenishment period, and commit to additional contributions of equity that are required to meet IDA’s objectives and development goals. The replenishment process for IDA19, which covers fiscal 2021–23, began in November 2018 and was finalized in December 2019. 

IDA19 is comprised of an $82 billion envelope to finance projects from July 1, 2020, to June 30, 2023, presenting a 3 percent increase in real terms compared to IDA18. Of this total, $23.5 billion comes from donor contributions and the remainder from repayments of outstanding IDA loans, contributions from the Bank, and financing raised from the capital markets. The funding will allow IDA to continue helping countries deal with the challenges posed by climate change, gender inequality, and situations of fragility, conflict, and violence, while also reinforcing support for job creation and economic transformation, good governance, and accountable institutions. IDA19 will also tackle broader development challenges, such as enhancing debt sustainability and transparency, harnessing and adapting to transformative digital technology, promoting inclusion of those living with disabilities, and investing in human capital. While the COVID-19 pandemic requires innovative responses, particularly during the IDA19 period, IDA remains committed to countries’ long-term development challenges.

Read More >

Mitigating risks to the institution amid global uncertainties

The Bank Group’s Chief Risk Officer monitors the global political and economic influences that could affect the institution’s financial stability. Amid the COVID-19 pandemic, countries have faced disruptions in global trade, supply chains, migration and remittances, international travel, and tourism. Real GDP in advanced economies is projected to contract by 7 percent this year. Lockdowns and other restrictive measures have affected both domestic demand and labor supply. As reduced economic activity has weakened revenue, fiscal deficits and public debt ratios have risen sharply.

Many countries have attempted to support economic activity by helping those hit hard by the slowdown. A number of emerging markets experienced strong capital outflows in March and April 2020, which subsequently recovered as central banks in advanced economies intensified efforts to support liquidity. Though commodity prices, particularly for oil, fell sharply at the onset of the pandemic, increasing activity in China has contributed to a modest and partial recovery in these prices, particularly for metals. A renewed commitment by OPEC and other producers to reduce oil production has also led to a partial recovery in oil prices. 

The outlook for credit quality remains uncertain and will depend on the extent and duration of the pandemic. Public debt ratios are likely to remain high in many countries. Financial sectors could present substantial contingent liabilities for many governments. The pandemic could also lead to an enduring loss of both human and physical capital, reducing potential growth rates for the long term.