Amid Multiple Crises, World Bank Group Refocuses Programs and Increases Financing to $74 billion in Fiscal Year 2020

 As people in developing countries around the world faced multiple crises, including the COVID-19 pandemic, the World Bank Group worked to respond quickly with technical and policy advice, and scaled up financing targeted to the poor and towards improving development outcomes. World Bank Group support rapidly adjusted to help countries fight the pandemic by focusing on four priorities: saving lives threatened by the pandemic; protecting the poor and vulnerable; securing the foundations of the economy to shorten the time to recovery; and strengthening policies and institutions for resilience based on transparent and sustainable debt and investments. To support these emergency programs, World Bank Group financing was significantly scaled up, reaching $74 billion in commitments.

Financing deployed, together with technical and policy advice and analytical support, is helping countries address health and economic impacts of the pandemic, maintaining countries’ private sector, aiding nations with food insecurity due to locust swarms in Africa and the Middle East, and combating widening inequality, among other key priorities.

“As developing countries face an unprecedented health, social and economic crisis that is jeopardizing decades of development progress, we have been working intensely on fast, broad actions to limit the harm and help countries prepare for recovery so they can rebuild better and stronger than before,” said World Bank Group President David Malpass. “We’ve been focused on helping countries overcome the pandemic with programs that reinforce healthcare systems, protect the poorest households, maintain the foundations of the economy, fight inequality and ensure a resilient and sustainable recovery.”

Over the fiscal year, which ended on June 30, the World Bank worked to further realign its delivery model for efficient coordination of work across its regions and global practices. The Bank’s new operational model, which came into effect on July 1, 2020, places country-driven development at the center of the delivery model, while strengthening thought leadership on development issues of critical importance to sustainable growth and poverty alleviation.

In addition, in FY20 the World Bank Group worked with the IMF to call on official bilateral creditors to grant debt relief to the world’s poorest countries: those eligible for International Development Association (IDA) financing. The G20 agreed on a coordinated approach, and private creditors were also called on to contribute to the initiative. The Debt Service Suspension Initiative (DSSI), which came into effect on May 1, frees up resources for the poorest countries to respond to the COVID-19 pandemic and encourages debt transparency and sustainability.

Malpass added, “Even before the COVID-19 crisis hit, we were calling for greater attention to the debt issue in poor countries, and the DSSI paves the way for long-overdue action to increase debt and investment transparency and sustainability. We were able to contribute to a significant improvement in debt transparency over the fiscal year with the G20 endorsement and the launch of a website showing the creditor country composition of projected annual debt service payments for all 73 countries eligible for relief under the initiative. Transparency of all government financial commitments and investments is a key step in creating an attractive investment climate and could make substantial progress this year to deliver better outcomes for people in developing countries.”

Support to middle-income countries from the International Bank for Reconstruction and Development (IBRD) rose to $28.5 billion in FY20, up from $23.2 billion in the previous fiscal year. Loans and grants to the world’s poorest countries from the International Development Association (IDA) were $30.4 billion during FY20. The 19th replenishment of IDA, in December 2019, secured an $82 billion financing package for the 74 poorest countries in the world to be deployed over a three-year period.

The bonds of IBRD, IFC and IDA, which are rated Aaa/AAA, fund these organizations’ operations, including programs that promote inclusive growth and policy reforms to create more opportunity for people. IBRD issued $75 billion in FY20, IFC $11 billion and IDA $5 billion.

A significant share of World Bank (IBRD and IDA) financing in FY20 was dedicated to help countries fight the COVID-19 pandemic. Within this financing, between March and the end of June, the World Bank approved $6.3 billion for emergency health support in 108 countries, including 33 fragile and conflict-affected countries and 22 small states. Health projects totaling $3.8 billion used an innovative, fast track Global COVID-19 Health Multiphase Programmatic Approach and are helping to finance health equipment, personal protective equipment (PPE), and training. An additional $2.5 billion was redirected to fight COVID-19 from the portfolio of operations under implementation.

The World Bank continued to deploy resources toward key priorities. Aside from COVID-19 health emergency projects, whose main purpose was to help fight the spread of the pandemic, 73 percent of Bank financing helped address gender gaps and 31 percent contributed climate co-benefits – estimated at $17 billion. Investments in human development doubled to $20 billion, and lending to countries affected by fragility, conflict and violence (FCV) reached $10 billion in FY20.

The International Finance Corporation (IFC), the Group’s private sector arm, committed and mobilized a total of $22 billion in long-term finance – an almost 15 percent year-on-year increase – including $11.1 billion invested on its own account. In addition, short-term financing commitments, including trade finance, totaled $6.5 billion, a 12 percent increase as compared with FY19. IDA-eligible and fragile countries accounted for 25 percent of IFC’s own account long-term finance commitments and climate business for 29 percent. IFC also committed $1.7 billion in new long-term finance for financial institutions specifically targeting women.

In March, IFC established an $8 billion fast-track COVID-19 crisis response facility to help developing countries and firms cope with the fallout from the pandemic. As of the end of the fiscal year, $3.5 billion from the facility had been used to support banks and companies in developing countries. With insolvencies looming across the developing world, IFC is now preparing phase two of its COVID-19 response, which will consist, among other things, of helping to restructure and recapitalize viable financial institutions and companies on their path to recovery.

In FY20, IFC began to operationalize its strategy to create markets by working “Upstream”, which entails identifying reforms, contributing to policies leading to private sector development, and generating bankable projects in developing countries. As client countries of the World Bank Group face a difficult recovery, and with private investment heavily subdued, the Upstream approach will be critical to attract investors back into the most vulnerable markets.

In addition, there has been a large increase in IFC’s social bonds, while the signatories to the Impact Principles grew since the advent of COVID-19, demonstrating investors’ increasing interest in impact in addition to return.

In FY20, the Multilateral Investment Guarantee Agency (MIGA), whose mandate is to help drive impactful foreign direct investment to developing countries, issued nearly $4 billion in new guarantees, helping mobilize $7.33 billion in total financing. Nearly 42 percent of MIGA’s guarantee program over the fiscal year supported projects in IDA countries and fragile settings, and over 20 percent contributed to climate change adaptation or mitigation, including multiple low-carbon energy projects in Africa. In response to the COVID-19 pandemic, MIGA launched a $6.5 billion fast track facility to help investors and lenders tackle the crisis. To date, MIGA has provided $2.1 billion for projects to mitigate the impact of the crisis in emerging markets and developing economies.

The World Bank Group will continue to focus on providing support to countries to address the health and economic impacts of the pandemic, while maintaining a line of sight on their long-term development vision. In March 2020, the Group announced that it can provide up to $160 billion over a 15 months period ending June 2021.