Highlights

The World Bank is often able to help stem the developmental consequences of political instability by restoring critical financing and leveraging donor funding. In these instances, the World Bank has helped preserve hard-won development gains by working with de facto governments during political transitions (and avoided risks associated with suspension and delayed engagement). However, in working with de facto governments that are also a party to conflict, the World Bank’s engagement has led to perceptions of it taking sides or being a party to a failed social transition.

Leveraging United Nations and humanitarian partnerships, including in situations in which there is no central government, has enabled the World Bank to deliver critical services to conflict-affected populations in areas inaccessible to the World Bank. This has also helped mitigate operational risks by enabling communication with certain nonstate actors that are otherwise off limits to the World Bank. However, disagreements over the implementation of fiduciary, environmental and social, and security policies and procedures when challenges arise risk undermining the effectiveness of these partnerships.

In the face of heightened conflict or political crises, the World Bank has effectively rebalanced its financial support when doubts arise about government commitment to sound fiduciary management. This has allowed it to mitigate reputational risk associated with providing fungible budget support, which could be diverted. Trust funds have also been crucial in allowing the World Bank to operate in conflict situations.

The World Bank has ramped up its security coverage to support its operations in conflict-affected situations, including by ensuring that staff have the soft skills needed to translate security analyses into operational recommendations to heads of office. However, security-related costs are extremely high and come out of project supervision charge codes. This has created a disincentive to engage in conflict-affected areas. Also, the deployment of Corporate Security staff is based on the number of nonsecurity staff and the frequency of missions per country. This may negatively affect smaller countries and Country Management Units, potentially leading to disconnects between risk level and security staffing.

There are, however, marked differences in operational responses to otherwise similar security instances. The World Bank does not provide concrete guidance to heads of mission on how to systematically process data on changes to conflict risk levels as they pertain to the country portfolio. Without this, responses to similar security incidents have varied depending on the risk tolerance of the head of office, and there is no process in place to foster an optimum approach.

This chapter assesses the ways in which the World Bank has adapted its engagement to work differently in conflict-affected countries, particularly as it pertains to reengagement after constitutional interruptions or political transitions. This has entailed acting as first mover; leveraging implementation partners, enhanced security measures, and the use of ASA; and shifting between available financial instruments and modalities. Adaptations are categorized according to how the World Bank (i) works with the client during inchoate situations; (ii) partners with external stakeholders, specifically with the UN and the International Committee of the Red Cross (ICRC); (iii) mitigates risk through security coverage; and (iv) leverages nonlending and lending instruments at its disposal to support engagement.

Quickly Reengaging after Constitutional Interruptions

The World Bank’s frequent role as one of the first development partners to engage with de facto governments after an unconstitutional transfer of power has enabled it to restore critical financing (including crowding in donor funding) to support vulnerable populations during inchoate periods. In five of the six countries that experienced serious military coups or similar unconstitutional interruptions followed by restorations of constitutional order during the evaluation period (Niger in 2010, Guinea-Bissau in 2012, Mali in 2012, the Republic of Yemen in 2012, and the Central African Republic in 2013), the World Bank was the first development partner to reengage. In these situations, the World Bank (generally at the request of member countries) took on the risk of resuming policy dialogue and restoring financing after triggering OP7.30—by recommencing disbursements of existing projects and, critically, approving new emergency operations—to preserve development gains in the face of continued uncertainty.1 First-mover status helps restore critical financing, as was the case in Niger, where the World Bank’s reengagement convinced many other development partners to reengage shortly thereafter. Similarly, in the Central African Republic, World Bank reengagement helped restore government credibility and mobilize resources for the beleaguered country. Although there are serious reputational risks associated with reengagement, these must be weighed against the risks of inaction or delayed reengagement (which can also pose reputational risks, for that matter).

Most of the World Bank’s emergency operations approved during these transitions were highly effective at maintaining critical service delivery, although the necessary haste in which they were prepared increases the possibility of exacerbating conflict drivers (or other unintended consequences). Of the 11 emergency operations approved during the political transitions mentioned above, 9 received outcome ratings of moderately satisfactory or higher (chapter 5 provides an analysis of project ratings). The 6 that had a service delivery focus were even rated satisfactory or higher.2 Mali’s Emergency Education Project, for example, was found to be critical in supporting the government to provide basic education to all citizens in spite of the armed conflict and resulting coup, which generated broad turmoil and upheaval (World Bank 2018g). Notwithstanding this success, unintended outcomes related to conflict are not assessed in self-evaluations and validations; this is troubling, as rapidly prepared projects—some completed in less than a month’s time—run the risk of overlooking avoidable actions that may unintentionally cause or exacerbate drivers of conflict.

The importance of reengaging quickly after a political crisis can be seen by one example of a protracted, partial disengagement (from financial activities), which contributed to significant slippage in development gains. The World Bank never fully disengages for an extended time; thanks to trust funds, the World Bank is able to maintain a minimum presence even in countries with intense conflict, such as Somalia, before arrears clearance.3 The one example, however, of a partial financing disengagement after a political intervention highlights the costs of such a measure to development gains. In Madagascar, from 2009 to 2014, the World Bank highly curtailed its financing engagement in the wake of the 2009 political coup (box 4.1). During that time, income per capita fell, poverty rose sharply, social outcomes worsened, public finances were increasingly under stress, and foreign aid dropped by approximately 30 percent, as many donors followed in the World Bank’s footsteps and delayed reengagement (World Bank 2013b). IEG is separately analyzing this unique case in a Country Program Evaluation of Madagascar to be delivered in FY22.

The costs of not quickly engaging with a de facto government are real, and so are the risks associated with partnering with a government that is also a party to conflict (a not-uncommon reality during political transitions). How to engage in conflict-affected situations is a decision that the World Bank has taken—in consultation with member countries and its Board—during times of uncertainty. Working with de facto governments during political transitions has enabled the World Bank to contribute to the preservation of hard-won development gains, including by protecting essential institutions and services; delaying reengagement had steep costs in the case of Madagascar. But engagement decisions can have—and have had—cascading effects that are not apparent in the short run. The World Bank’s Middle East and North Africa strategy acknowledges the risk that stakeholders could perceive the World Bank as taking sides in a protracted political transition when it reengages, such as when it provides support to a social transition (World Bank 2015e). This has been the case in the Republic of Yemen, where the World Bank has remained engaged—at the request of the international community—even though a large portion of the country is under the control of de facto authorities. Indeed, engaging de facto governments during political transitions has posed risks to the World Bank’s reputation in several Middle Eastern and North African and some Sub-Saharan African countries (World Bank 2019f).

Partnering with the UN and the ICRC to Implement Projects in Conflict-Affected Areas

Partnering with the UN and the ICRC to implement projects in conflict-affected countries (which is done only under exceptional circumstances) has allowed the World Bank to deliver critical services to vulnerable populations who reside in areas inaccessible to the World Bank. The UN has a wider field presence than the World Bank does, with field offices and technical staff dispersed throughout many countries experiencing conflict, such as in the Democratic Republic of Congo and the Republic of Yemen. Engaging the UN as an implementation partner allows the World Bank to reach populations that would otherwise be out of its reach. The World Bank’s new FCV strategy notes the need to step up partnerships with humanitarian, development, peace-building, security, and private sector actors to maximize its impact in the field in conflict-affected countries. For example, in South Sudan, the World Bank has a limited presence outside of Juba and therefore has relied on the UN to deliver services to the 95 percent of the population who reside outside the capital. In Somalia, partnering with the UN has enabled the World Bank to deliver livelihood protection, essential services, and, most recently, locust control to large swaths of the population living in remote border and rural areas. Such collaboration can expand the World Bank’s reach into areas of high instability to reach vulnerable conflict-affected populations, including in nongoverned areas, a complicated feat for the World Bank given its headquarters- and capital city–based footprint. In northern Mali, to provide infrastructure reconstruction and livelihood support to conflict-affected populations, the World Bank delegated contract management to the UN Office for Project Services and relied on the UN Multidimensional Integrated Stabilization Mission in Mali for logistics.

Relatedly, engaging with the UN as an implementation partner has allowed the World Bank to continue to finance critical services even in situations in which there is no central government. Without the possibility of such a partnership (authorized through OP2.30),4 the World Bank would be hard pressed to provide support to vulnerable populations when there are multiple or no governments in power, given its state-centric model. For example, because of the 2014–15 conflict in the Republic of Yemen, the government lost effective control of the country, prompting the World Bank to halt disbursements to the client. To continue supporting health services, and in line with paragraph 12 of the IPF policy Procurement in Situations of Urgent Need of Assistance or Capacity Constraints, resources were channeled through other agencies to continue financing critical services: the World Health Organization and the United Nations Children’s Fund were tapped to help implement projects through national institutions when the World Bank could not. To avoid exacerbating conflict dynamics, the World Bank has worked to ensure parity in the delivery of assistance throughout the country.

Relying on UN agencies as implementation partners in situations of conflict has also helped mitigate risks to World Bank operations and staff by allowing the World Bank to communicate (through its partners) with nonstate actors otherwise off limits to the World Bank.5 Given their humanitarian, security, and political mandates, UN agencies are more able than the World Bank to negotiate access with all parties, including those with whom the World Bank cannot officially communicate, enabling the World Bank to better understand changing social relations, political economy dynamics (such as whether certain groups will act as spoilers), and how best to do no harm in complex environments in which the World Bank’s state-centric model complicates the need to engage with multiple stakeholders. This has been the case in the Republic of Yemen, where a nonstate actor—the Houthis—controls the capital and most of the country’s north: providing health and other social services to at-risk populations in those areas entails working with them to secure access. Furthermore, given their independence (in the sense of being less state-centric than the World Bank), UN agencies can negotiate access with all parties; in the Republic of Yemen, the World Bank’s UN implementation partners also communicate with regional players to make sure that there are no project activities happening in areas where aerial bombings may take place.

Such implementation partnership arrangements have been challenged by disagreements over the implementation of fiduciary and security rules and protocols when problems arise. The World Bank has signed memorandums of understanding with UN agencies (and the ICRC) allowing them to use their own rules and protocols; however, when procurement or financial management issues arise, differences between World Bank and UN systems have contributed to a perception on the side of the World Bank of heightened fiduciary risk associated with such arrangements. For example, fiduciary issues triggered in the Republic of Yemen with the World Health Organization and in Somalia with the ICRC have led the World Bank to question such arrangements, even though similar issues occur with IDA resources elsewhere; they are just handled internally, using World Bank audit and integrity procedures. Additionally, UN agencies likewise abide by their own security policies and risk tolerance measures, adopted to protect their staff and in line with a risk calculus of acceptable loss as a function of lives saved (the UN has a greater risk tolerance than the World Bank). Yet, when these calculations are made by the UN and its executing agencies (often nongovernmental organizations), the World Bank has been reticent to adhere to arrangements when risks materialize. For example, a security breach in South Sudan under a United Nations Children’s Fund–implemented maternal health project made the World Bank question its commitment to such implementation arrangements; this posed a dilemma as to whether to cancel the project to prevent further risks to executing agents or to continue providing critical resources for maternal health.

Ongoing challenges associated with World Bank and UN mandates and roles need to be addressed to ensure the continued success of such implementing partnerships. The World Bank partnership with the ICRC is an example of an institutional partnership intended to improve each other’s operational reach and expertise and leverage the benefits associated with combining the forces of organizations with different mandates (that is, developmental and humanitarian). In Somalia and Sudan, the World Bank has benefited from the ICRC’s reach, and the ICRC has expanded and secured operations into the development phases of operations. However, the administration of this partnership has been complicated by the fact that, given its different mandate, the ICRC has a duty to adhere to neutrality toward all actors—both state authorities and nonstate armed actors—but the World Bank works exclusively with state authorities. Given the nature of its humanitarian work and its operating environments, the ICRC also must accept situational fluidity. As such, standard World Bank reporting requirements may be unachievable for ICRC staff working on the front line. An example provided by the ICRC is the following requirement included in financing agreements that states that the ICRC should notify the World Bank within seven days of any “significant social, labor, health and safety, security or environmental incident, accident, or circumstance involving the Project, or any other event or circumstance having, or which could reasonably be expected to have, a material adverse effect on the implementation or operation of the Project.” According to the ICRC, such security incidents occur daily in active conflict zones, including active conflict that always has adverse effects on implementation, making the reporting requirement impractical. As the World Bank expands its support to conflict-affected areas, necessitating greater partnerships, such requirements may need to be rethought.

Expanding Security Monitoring to Ensure Operational Coverage

The World Bank has ramped up its security coverage in situations of conflict in ways that are enabling the implementation of the FCV strategy. Enhanced measures include expanding the ranks of country-based security professionals and ensuring that new staff have the appropriate qualifications—including soft skills—to support the safety of operational teams and, critically, translate security analyses into operational recommendations to heads of office. This has been done by (i) boosting Corporate Security’s analytical skills (mostly done by headquarters-based analysts); (ii) hiring security staff with an understanding of the security-development nexus (earlier hiring seemed to prioritize military backgrounds) and the know-how to explain how security issues affect operations; and (iii) pairing local security staff (with expertise in local conflict dynamics) with international security hires (who offer a broader perspective earned via service in differing security threat environments). These field staff are charged with ensuring that Security Briefing Notes—often developed in response to a shock—are provided to heads of office in support of risk-informed decision-making.

However, security-related costs are extremely high and generally come out of project supervision charge codes. This has created a disincentive to engaging more in conflict-affected areas, especially in locations where vendor-based close protection is needed. In these locations—such as Afghanistan, Iraq, and Somalia—per diem security costs can run up to or beyond $6,000, large amounts to be covered by project supervision budgets. Where trust funds have been made available, these have helped task teams cover these costs (see also the Adapting Financing Modalities to Enable Continued Support section).

Although increased security coverage has allowed for an expansion to World Bank operations in conflict-affected situations, the way in which Corporate Security staff are deployed may inadvertently penalize small countries and CMUs, potentially leading to disconnects between risk level and security staffing. Security personnel are deployed based on the number of staff and or missions per country, since head count affects exposure. The distribution of central funding for security elements based primarily (but not exclusively) on such a ratio means that conflict-affected countries with disproportionately high numbers of staff but low risks may receive more resources than smaller countries with few staff but high risks, given limited resources.

Despite this improved monitoring of security threats, there are marked differences in operational responses to otherwise similar security instances involving projects and non–World Bank staff due to different levels of risk tolerance of heads of office. The Bank Group’s new Directive Framework of Accountability for the Bank Group Security Management System (2020) provides corporate guidance on the safety and security of the World Bank’s own staff, for whom it has direct and complete duty of care. It does not, however, tackle how to measure or mitigate the security risk to and in World Bank–financed projects and nonstaff personnel (such as Project Management Unit staff). Unlike other international organizations such as the UN, the World Bank does not provide guidance on how to systematically process data on changes to conflict risk levels as they pertain to the country portfolio; without this, or a specific level of risk tolerance that the World Bank is willing to accept, project implementation responses to security incidents are subject to the different levels of risk tolerance of heads of office. For example, in the Democratic Republic of Congo, a kidnapping prompted the suspension of an entire operation, whereas in Afghanistan, during the National Solidarity Program (2003–17), 125 people associated with the project were kidnapped—and more than 370 people killed—including members of local government, partners, and staff from the project implementation unit; yet that project proceeded apace (see box 4.2 for additional examples).

Adapting Financing Modalities to Enable Continued Support

The World Bank has adapted to deteriorations of stability by rebalancing its portfolio and instrument use to continue its support to vulnerable populations while nevertheless ensuring the fiduciary or reputational integrity of its financing. After heightened episodes of conflict and political crisis in Burundi (2015), Guinea-Bissau (FY12), and Myanmar (2013), the World Bank halted budget support and repurposed IDA to support investment lending (often reformulated in line with identified conflict risks), where committed funds can only be spent on eligible procurement cleared by the World Bank. In this way, the World Bank did not have to completely halt lending despite a loss of faith in government commitment to using World Bank funds as intended; rather, it could continue providing support to critical services through investment lending. This pivot addressed (i) the need to continue supporting the delivery of basic services (through investment lending, with its strict fiduciary controls) while (ii) mitigating reputational risk associated with providing fungible budget support to an untrustworthy government. Relatedly, in Somalia and in Madagascar (during the 2009–14 political crisis), the World Bank pivoted toward subnational entities to work around political deadlock at the national level or to avoid working with regimes with reputational risks to the World Bank.

The World Bank has been able to operate in situations of conflict in which IDA is unavailable or limited or when the World Bank has had to respond rapidly to emerging conflicts by leveraging trust funds.6 In countries in which IDA is not available—either because it is not a borrowing member (for example, West Bank and Gaza) or because the country is in arrears (for example, Somalia or Sudan, prior to March 2021)—trust funds are the only sources of financing that the World Bank can tap to support operations and analysis. For example, through its trust funds financed out of International Bank for Reconstruction and Development net income, the World Bank can make Development Policy Grants to West Bank and Gaza, providing budget support amounting to roughly one-third of the Palestinian Authority’s recurrent budget expenditures. Without this, core government functions would be jeopardized. Trust funds have also been leveraged after crises as a way of rapidly responding or circumventing political roadblocks to respond quickly. For example, the Lebanon Syrian Crisis Trust Fund was critical to addressing the refugee crisis.

The World Bank has supported critical services in areas beset by extreme conflict, including in uncontrolled areas, by using trust funds to cover the extraordinary costs associated with such work. Trust funds have allowed teams to innovate in the areas of risk monitoring, conflict analysis, and third-party monitoring mechanisms. They have provided task teams with additional resources for project preparation and supervision. This is critical because security-related costs generally come out of project supervision charge codes, limiting in-person supervision and thus creating a disincentive to engaging in conflict-affected areas. Trust funds such as the Afghanistan Reconstruction Trust Fund encourage operational staff to take necessary precautions because security costs are covered centrally; this liberty allows for the preparation, implementation, and supervision of projects in insecure areas. Trust funds can also support World Bank execution of activities, helpful in situations in which the client has limited capacity or lacks control over areas; World Bank–executed activities can also address sensitive issues because trust funds are less beholden to clients than are IDA and the International Bank for Reconstruction and Development.