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The World Bank Group’s Early Support to Addressing the Coronavirus (COVID-19): Economic Response (April 2020-June 2021)

Chapter 2 | Agile Corporate Response to Address the Economic Implications of the COVID-19 Crisis

Highlights

The World Bank Group COVID-19 crisis support—the largest among the development partners at $157 billion between April 2020 and June 2021 ($65 billion alone for the economic response)—was underpinned by a strong and agile corporate response. The World Bank demonstrated a strong and agile corporate response, including agile decision-making, by creating the Emergency Operations Center. The agile response of the International Finance Corporation (IFC) was evidenced in the creation of a fast-track facility based on lessons from past crises.

World Bank commitments went mainly to Africa and Latin America and the Caribbean, Regions with many International Development Association clients that had greater economic needs to respond to the crisis. The Equitable Growth, Finance, and Institutions Practice Group and the Social Protection and Jobs Global Practice provided the main share of the World Bank response, whereas the Financial Institutions Group provided the main share of IFC investment services’ response. World Bank disbursements to International Development Association clients in Africa and the Middle East and North Africa were relatively low. IFC disbursements to clients were high in all Regions.

The Bank Group acted quickly and strategically to help client countries weather the economic implications of the COVID-19 crisis. It articulated its approach to the crisis early, front-loaded its efforts to support low-income countries, and organized new decision-making committees to facilitate an agile response. It reflected lessons from past crises (including the 2008 global financial crisis) well at the onset of the COVID-19 pandemic, including to facilitate fast disbursements to clients.

The Bank Group relied on a variety of existing and new approaches and instruments to respond to the economic implications of the crisis, including the World Bank’s Multiphase Programmatic Approach, four new IFC fast-track COVID-19 envelopes under one facility, and two Multilateral Investment Guarantee Agency guarantee programs.

The World Bank Group’s Corporate Actions to Respond to the COVID-19 Crisis

In a context of high uncertainty about how to address the global economic crisis, Bank Group senior management acted quickly and strategically to address the COVID-19 crisis. Bank Group senior management articulated its strategy early. In March 2020, Bank Group senior management announced that the Bank Group would mount a large-scale effort to fight the pandemic. The World Bank’s strategy included front-loading International Development Association (IDA) spending allocations and seeking an unprecedented IDA Replenishment a year ahead of schedule, activating the International Bank for Reconstruction and Development’s crisis buffer to release additional financing, aligning with the World Health Organization (WHO) guidance on technical health issues, and launching with the IMF a global convening effort on debt suspension to help indebted client countries free up fiscal space for crisis response. The parallel IEG evaluation focused on protecting lives also found that the World Bank response exhibited “unprecedented scale and speed” (World Bank 2022d, x). Similarly, IFC and MIGA announced fast-track COVID-19 facilities and guarantee program envelopes to respond to the pandemic. In its strategy Approach Paper, the Bank Group framed the technical contents of its response in relation to four pillars and three phases, including addressing staff safety concerns in headquarters and country offices (World Bank 2020e).

The Bank Group early response demonstrated agile corporate decision-making. The World Bank quickly established the Emergency Operations Center (EOC), which proved to be a useful innovation for operational coordination. As the parallel IEG evaluation focused on protecting lives also notes (World Bank 2022d), the EOC had an agile governance structure with a director-level World Bank–wide steering committee. It worked across Global Practices (GPs), bringing technical, operational policy, legal, and fiduciary functions together and relying on subcommittees to work on technical issues. The three institutions created new corporate arrangements (for example, new committee structures for management approvals and adjustments to policies and procedures) to respond to the crisis. The Bank Group calibrated the new arrangements based on feedback from clients (such as rotating the chair of the EOC) and the findings of diagnostics conducted by the practice and industry groups. Speed of decision-making improved over time, for example, by delegating authority from the Board to the EOC to approve commitments. The agile decision-making efforts of the World Bank were organized in relation to COVID-19 rapid-response committees reporting to the EOC, with representation from multiple vice presidential units. The decisions of the rapid response committees on strategic areas to prioritize (for example, health systems or the financial sector) cascaded to the Regions and countries at the onset of the pandemic. Country- and sector-specific prioritization efforts by the Regions and Country Management Units further strengthened the Bank Group’s corporate response across the three institutions, for example, by contributing to the focus on low-income countries (LICs), strengthening public institutions, and supporting the financial sector. Similarly, IFC and MIGA fast-tracked decision-making on investment services and new guarantee issuances via emergency operations committees led by senior industry directors and MIGA operations directors.

The Bank Group reflected lessons from past crises in the design of COVID-19–related corporate arrangements and sought delegated authority from the Bank Group shareholders for faster disbursements. The corporate initiatives of the Bank Group as part of its early response demonstrated deliberate actions to learn from past crises, for example, the global financial crisis of 2008. One of the key weaknesses in the Bank Group’s crisis response in 2008 was slow decision-making and slow disbursements. At the onset of COVID-19, the design and agile deployment of an IFC fast-track COVID-19 facility and the expansion of the World Bank Multiphase Programmatic Approach (MPA) led to faster disbursements to clients. For example, half of the $8 billion approved under the IFC fast-track COVID-19 facility was committed within six months, including the full use of the Global Trade Finance Program envelope. This rapid response suggests that management embraced the key lessons from prior crises.

Portfolio of World Bank Group Interventions

As a result of the corporate actions, the Bank Group delivered the largest overall response to COVID-19 among development partners. The Bank Group committed $157 billion to alleviate the pandemic’s health, economic, and social impacts during the first 15 months of the crisis (April 1, 2020, to June 30, 2021). This is the largest crisis response of any such period in the Bank Group’s history. The World Bank alone increased its overall commitments by more than 60 percent over the 15-month period before the pandemic, from $42 billion on average for the 2016–19 period to $67 billion on average for 2021–22, significantly above any other development partner (figure 2.1).

Figure 2.1. Annual Average Multilateral Development Bank Commitments before and during the COVID-19 Crisis

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Figure 2.1. Annual Average Multilateral Development Bank Commitments before and during the COVID-19 Crisis

 

Source: World Bank.

Note: ADB = Asian Development Bank; AfDB = African Development Bank; AIIB = Asian Infrastructure Investment Bank; CY = calendar year; IBRD = International Bank for Reconstruction and Development; IDA = International Development Association; IDB = Inter-American Development Bank; IsDB = Islamic Development Bank; NDB = New Development Bank.

The Bank Group response to specifically address the economic implications of COVID-19 accounted for $65 billion and covered an array of themes and sectors. Over the same 15 months, the Bank Group financed 1,130 COVID-19–related interventions with a volume of $65.08 billion to address the economic implications of the pandemic (table 2.1). International Bank for Reconstruction and Development and IDA lending and advisory projects accounted for 74 percent and 75 percent in project count and volume, respectively, with investment project financing (IPF) representing the largest share of the portfolio, followed by DPF. IFC projects accounted for 21 percent in project count and 16 percent in project volume, with new and restructured investment services representing more than 80 percent of the portfolio. MIGA, given its business model, had a smaller share of projects related to the economic implications of COVID-19, reflected by 5 percent and 9 percent in project count and project volume, respectively.

Table 2.1. World Bank Group COVID-19 Pandemic Response Plan Evaluation Portfolio (April 2020–April 2021)

Institution or Instrument

Projects (no.)

Amount

(US$, billions)

Total

1,130

65.08

IBRD and IDA

841

48.50

Advisory services and analytics

450

0.04

Lending

391

48.46

Development policy lending

81

19.82

Investment project financing

292

24.07

Program-for-Results financing

17

4.55

Special fund

1

0.01

International Finance Corporation

234

10.42

Global Trade Finance Program

18

0.20

Special operations transfer

24

1.96

New investment services

82

4.45

Restructured investment servicesa

61

3.72

Advisory services

49

0.10

Multilateral Investment Guarantee Agency

55

6.16

Non-honoring guarantees

10

3.54

Source: Independent Evaluation Group.

Note: IBRD = International Bank for Reconstruction and Development; IDA = International Development Association.a. Projects restructured because of COVID-19, which are treated differently from new investment commitments by the International Finance Corporation portfolio team. Social Protection and Jobs Global Practice projects were covered in this evaluation to the extent that they included relevant components to household support. The total number of Social Protection and Jobs projects included in the study was 154 for total commitment volume of $15.38 billion. Social Protection and Jobs commitment data specific to economic implications were not available. The stated Global Trade Finance Program volume covers only increases in trade finance limits during this evaluation period and not the total envelope used for this program. The total presented in this table should not be treated as the sum of all the International Finance Corporation envelopes’ total size but the increases during this evaluation period. Activities of the International Finance Corporation Global Health Platform and Base of the Pyramid Platform are outside the scope of this evaluation.

Africa received the largest share of the Bank Group’s commitments to respond to the economic implications of COVID-19. Most Bank Group commitments went to Africa, Latin America and the Caribbean, and Europe and Central Asia. These three Regions received about 65 percent of the commitments. South Asia and the Middle East and North Africa received relatively fewer projects (figure 2.2). Africa and Latin America and the Caribbean had more IDA countries with greater needs to respond to the economic shocks of COVID-19.

The Equitable Growth, Finance, and Institutions Practice Group and the Social Protection and Jobs GP provided the main share of the World Bank early response to COVID-19 economic implications. Together, they made up 77 percent of all lending commitments ($37 billion out of $48.5 billion) and 52 percent by number of interventions (204 out of 391) in the early response to address economic implications.

The IFC Financial Institutions Group provided the main share of IFC investment services’ early response to COVID-19 economic implications. Financial Institutions Group support made up 76 percent of IFC investment services’ early response to address COVID-19 economic implications ($3.5 billion out of $4.6 billion, excluding restructured projects and special operations transferred projects). Financial Institutions Group support is expected to prevail in the acute phase of the crisis, while real sector support should increase in the recovery phase.

World Bank disbursements in Latin America and the Caribbean and East Asia and Pacific were high, but disbursements in Africa and the Middle East and North Africa were relatively low. World Bank disbursements in Latin America and the Caribbean and East Asia and Pacific were higher than precrisis levels at 82 percent and 75 percent, respectively. World Bank disbursements in Africa and the Middle East and North Africa were lower than precrisis levels at 57 percent and 65 percent, respectively. Both Africa and the Middle East and North Africa include several IDA countries. Disbursements were partly affected by the high number of IPFs and the necessary safeguard compliance requirements before disbursements.

Figure 2.2. World Bank and IFC Commitments and Disbursements of COVID-19 Early Response Addressing Economic Implications, by Region (April 2020–June 2021)

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Figure 2.2. World Bank and IFC Commitments and Disbursements of COVID-19 Early Response Addressing Economic Implications, by Region (April 2020–June 2021)

 

Source: Independent Evaluation Group.

Note: The numerator in the disbursement to commitment ratio percentage is calculated based on aggregate disbursement flows during the evaluation period (vintage October 2021) for projects in this evaluation’s portfolio and is intended to be a high-level view of total disbursements to the Region. This ratio is not based on the World Bank’s traditional definition of disbursement ratio as annual disbursements to projects within a fiscal year. OTH refers to a special program with the Ministry of Finance and Health in the Republic of Yemen. AFR = Africa; EAP = East Asia and Pacific; ECA = Europe and Central Asia; IBRD = International Bank for Reconstruction and Development; IDA = International Development Association; IFC = International Finance Corporation; LAC = Latin America and the Caribbean; MENA = Middle East and North Africa; OTH = other; SAR = South Asia; WLD = World.

IFC disbursements to clients were high, except for those in the Middle East and North Africa region, and broadly in line with IFC’s expected countercyclical role. Across all regions, IFC’s disbursement ratio from early response projects was above 90 percent.1 This was higher than its long-term average disbursements (85 percent during 2015–18) and higher than the disbursements observed in the early response during the global financial crisis (60 percent during 2008–10), suggesting IFC’s agile response. IFC disbursement to clients from the early response in Middle East and North Africa is 44 percent and the lowest among the six regions.

The Bank Group response drew on a mix of existing instruments and new approaches. The Bank Group responded to the COVID-19 crisis by developing new approaches in addition to existing instruments and providing additional financing to existing loans (figure 2.3). The World Bank deployed the MPA—in addition to individual investment projects and development policy operations (DPOs)2—to address the crisis. The World Bank’s response leveraged contingent emergency response components (CERCs) and catastrophe deferred drawdown options (CAT DDOs) as part of its lending operations based on countries’ conditions. All seven CAT DDO operations approved to address the economic implications of COVID-19 were linked to DPF; CERCs were linked to DPF or IPF. The World Bank’s country engagement process was a critical feature of its approach to supporting client countries. Country engagement products (Country Partnership Frameworks and Performance and Learning Reviews) helped adapt the Bank Group’s country programs to respond to this crisis in its acute phase. The World Bank made efforts to generate new information and provide policy guidance to governments using in-country diagnostics and a range of advisory services and analytics.3 For example, (i) high-frequency phone surveys were conducted at the household level, often in partnership with national statistics offices, in more than 100 countries (with repeated rounds in a sizable subset);4 (ii) new data on private sector performance and impact were collected, primarily through business surveys such as the Business Pulse Surveys and Multinational Corporation Pulse Surveys; and (iii) various trackers were established to monitor governments’ policy responses by collecting new data on public policy responses.5 IFC developed a new facility and programs to respond to the crisis, including (i) the Financial Institutions Group Response Envelope, (ii) the Real Sector Crisis Response Envelope, (iii) an allocation for COVID-19 work to the Global Trade Finance Program, (iv) the Working Capital Solutions program, and (v) an allocation for COVID-19 work for the Global Trade Liquidity Program and the Critical Commodities Financing Program. IFC provided portfolio-level standstill arrangements to many existing clients to prevent loan defaults. Between June 2020 and June 2021, IFC launched two platforms to augment its early response: (i) the Global Health Platform and (ii) the Base of the Pyramid Platform; both are outside the scope of this evaluation because the Global Health Platform focuses on health, and the recent launch of the Base of the Pyramid Platform did not allow the evaluation team to assess its relevance and quality. MIGA launched two guarantee programs—credit enhancement and capital optimization—focused on the financial sector. MIGA also supported IFC’s trade finance activities by issuing risk coverage support to commercial banks.

Figure 2.3. World Bank Group COVID-19 Response—New Approaches and Existing Instruments

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Figure 2.3. World Bank Group COVID-19 Response—New Approaches and Existing Instruments

Source: Independent Evaluation Group.

Note: ASA = advisory services and analytics; BoP = Base of the Pyramid; CAT DDO = catastrophe deferred drawdown option; CERC = contingent emergency response component; DPF = development policy financing; FIG = Financial Institutions Group; FTCF = fast-track COVID-19 financing; IFC = International Finance Corporation; IPF = investment project financing; MIGA = Multilateral Investment Guarantee Agency; PforR = Program-for-Results; RSE = Real Sector Crisis Response Envelope.

Broadly, the Bank Group’s response to the economic implications of COVID-19 sought to directly meet the needs of governments and firms, in turn addressing the needs of households. It provided support for macrofiscal and financial stability, public sector institutional improvements, and capital enhancement and liquidity for financial institutions and MSMEs in sectors affected by the pandemic and the lockdowns. The Bank Group support provided through the existing instruments and new approaches described in the previous paragraph aimed at (i) supporting fiscal and financial stability by enhancing macroeconomic policy reforms in debt management and reorientation of government expenditures, and through enhancement of financial sector supervision and strengthening of deposit insurance; (ii) improving public sector institutional capacity to respond to the pandemic; (iii) providing emergency liquidity and credit to allow firms (including financial institutions) to continue to operate; and (iv) supporting workers by financing and refining pension plans, and digitalizing transfers related to the social safety net and cash transfers.

  1. Disbursement ratio is calculated as the ratio of total disbursements to date to project commitments at approval.
  2. We distinguish between development policy operations and how they are financed—development policy financing.
  3. COVID-19 Research, Analysis, and Policy Responses internal website, accessible at http://covid19research.
  4. The surveys filled a major gap in data created by the speed of the crisis and provided key information on the types of households and sectors most affected by economic losses, the extent of job losses, coping strategies, and food insecurity. These data were valuable to inform and fine-tune the World Bank’s and the governments’ responses and take heterogeneity within countries into account.
  5. For example, the Foreign Direct Investment Entry Tracker identified a rise in foreign direct investment barriers, especially among Organisation for Economic Co-operation and Development countries. An assessment of responses and programs by investment promotion agencies provided key insights on investment retention strategies.