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

Management Response

Management of the World Bank Group thanks the Independent Evaluation Group (IEG) for the opportunity to provide comments on The World Bank Group’s Early Support to Addressing COVID-19: Economic Response, April 2020–June 2021, An Early-Stage Evaluation. Management appreciates IEG’s efforts toward supporting the Bank Group’s COVID-19 response by offering just-in-time lessons and evaluative evidence to inform management choices.

World Bank Management Response

Overall

Management welcomes the report’s recognition of the positive prospects of the World Bank’s initial economic response to addressing COVID-19. The report notes that “the World Bank Group’s swift and broad interventions supported macro-fiscal and financial stability, public sector institutional improvements, and capital enhancement and liquidity for financial institutions and MSMEs [micro, small, and medium enterprise] in sectors affected by the pandemic and the lockdowns, resulting in jobs and incomes saved” (xiv). The report also highlights the relevance of the response, especially in low-income countries, and points out that the World Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) coordinated well in supporting the financial sector and MSMEs. The report further concludes that the World Bank’s engagement with the International Monetary Fund (IMF) was effective both at the corporate level (both institutions organized high-level events; for example, the Africa high-level panel in April 2020 to crowd-in thought leadership and mobilize partners to support the COVID-19 response) and at the country level (which was critical in addressing economic implications in client countries). Management will reflect on the lessons presented by the report and seize opportunities for further improvement, particularly as it prepares the World Bank Group Evolution Roadmap.

Processes and Policies

Management welcomes the conclusion that “the World Bank Group delivered the largest crisis response in its history thanks to strategic and agile decision-making and learning from past crises” (xii). Management confirms that, beyond corporate policies and strategies, each sector gathered its own experiences and lessons. For example, with the disruption of agriculture supply chains caused by lock-down measures and the upward pressure on food prices, World Bank senior management engaged with the Group of 20, in collaboration with Food and Agriculture Organization, the International Fund for Agriculture Development, and the World Food Programme to help avoid the adverse trade policies that negatively impacted the food price crisis response in 2007–08. The World Bank also made continuous efforts to generate new information and provide policy guidance to governments using real-time, in-country diagnostics, and a range of advisory services and analytics.1, 2 Frequent surveys were conducted to collect microdata from households and firms at different stages of the crisis for conducting distributional analysis that informed and fine-tuned response strategies. The World Bank’s knowledge work and policy engagements at the country level were also adjusted to clients’ evolving priorities during the period.3

Management notes the recognition of the agile way in which safeguards and procurement were treated during the response. Principles-based fiduciary policies (with built-in flexibilities) allowed the World Bank to move quickly by permitting higher amounts of advances, retroactive financing, and simplified reporting. This evaluation is focused on economic response to the pandemic, which was primarily addressed through development policy financing and investment project financing, with very limited procurement. Several of the investment project financing projects provided mainly cash transfers and, in some cases, loans to private sector borrowers through financial intermediaries. The procurement policy does not apply to the latter, and the cash transfer programs do not typically involve response projects to expedite clearances. This model was then followed by expedited review decentralized to each region. This initial system led to more-agile quality review for the first round of COVID-19 projects.

Debt Management and Sustainability

Management underscores that, in addition to engaging on the debt dialogue with country clients at the onset of the COVID-19 pandemic, the World Bank also facilitated jointly with the IMF the Group of 20 bilateral Debt Service Suspension Initiative, which was an example of the World Bank’s convening impact. The World Bank produced several knowledge products and was engaged with the IMF in debt dialogue at both the global and country levels. At the start of the pandemic, the World Bank and the IMF jointly urged the Group of 20 to set up the Debt Service Suspension Initiative.4 The World Bank successfully rolled out the new Sustainable Development Finance Policy, in the challenging context of COVID-19, to help International Development Association countries address core debt vulnerabilities, and it formalized the corporate review process for debt sustainability analyses (DSAs) for countries using the Low-Income Country DSA. At the country level, the World Bank was committed to addressing debt issues in operational contexts, including through development policy financing operations, which in International Development Association contexts sometimes complemented performance and policy actions under the Sustainable Development Finance Policy. The COVID-19 Debt Management Crisis Response Program provided real-time advisory support for government debt managers.5 Approaches were also used to support sustained country efforts to advance public financial management, public investment management, and debt management for overall debt sustainability.6 Along with the IMF, the World Bank supported countries seeking debt restructuring under the Common Framework, providing an input to the process through the joint DSA. While there is a growing number of sovereign debt crisis situations, the World Bank has lead on highlighting the challenges in debt transparency, the Common Framework, and other ad hoc debt relief processes.

Recommendations

Management agrees with the spirit of the first recommendation and will explore ways to further enhance the Bank Group’s operating model to address key global challenges while maintaining the country-based development model as a foundation. The country model has proved relatively effective at tackling the response to key global challenges such as the COVID-19 pandemic. Yet, management recognizes that priorities at the national level may not always add up to sufficient progress at the regional or global level, as evidenced by countries’ insufficient preparedness for pandemics. In this regard, one of the key work streams of the World Bank Group Evolution Roadmap proposes strengthening the operating model to further address cross-border issues. Management will use the lessons of this evaluation report to reflect on instruments and financial innovations that could expand the menu of options for all client countries to better prepare and respond to crises. While the report recognizes the flexibilities embedded in World Bank policies, operational innovations are constantly being updated to accompany the broader framework of crises management. Moving this process forward will be done based on several existing workstreams, all informed by the recent IEG synthesis Crisis Response and Resilience to Systemic Shocks: Lessons from IEG Evaluations. The most up-to-date statement of management thinking on crises response is the 2022 paper Navigating Multiple Crises, Staying the Course on Long-Term Development; the World Bank Group’s Response to the Crises Affecting Developing Countries. This details the Bank Group’s crisis response and proposes a framework tailored to the current situation affected by multiple, overlapping crisis. An important element of the crisis response is to advocate for and support evidence-based policies and well-tailored financing operations. The paper includes several elements recommended by the IEG report, such as the (i) effectiveness of various instruments, (ii) partnerships, (iii) strategy for countries affected by fragility, conflict, and violence, and highly indebted countries, (iv) operational flexibilities, and (v) others. In International Development Association countries, the increasing application of crisis preparedness assessments, such as the Crisis Preparedness Gap Analysis and other relevant diagnostic tools,7 provides opportunities to adapt global lessons to country contexts and reflect them in country engagements. Management remains committed to ensuring that the right lessons are learned from the COVID-19 and other crises as the Bank Group evolves to respond to a polycrisis environment.

Management agrees with the recommendation to explore the increasing use of structured finance solutions to support small and medium enterprises (SMEs). Recent reports, such as the 2021 report on supporting firms in restructuring and recovery and the 2022 World Development Report on finance for an equitable recovery, identified a menu of possible responses to the COVID-19 impact on MSMEs and the private sector more broadly, including structured finance. Structured financing is about finding the needed mix of revenue sources to attract commercial lenders combined with a package of credit enhancements to mitigate risks and, in the end, minimize the cost of borrowing. Depending on country circumstances, the usefulness of these interventions varies greatly. Management will ensure that wherever preconditions exist, structured finance is systematically assessed as the preferred option during project design. Preconditions include reliable and sustainable cash flows, political stability, bankable projects, legislation permitting ring fencing and revenue intercepts, and the use of risk mitigation measures to further reduce the risk of lending.

Early Stage

Management welcomes this rich report and its findings yet notes that the approach of isolating one aspect of the response may have limited the depth of certain conclusions. As management noted in the comments to the Approach Paper for this report, the separation of economic, social, and health aspects into two evaluations may have missed a salient aspect of the Bank Group’s response to COVID-19, which is its comprehensive approach to a multifaceted policy challenge: “… management believes that the most salient aspect of the World Bank Group’s response to the COVID-19 pandemic is its comprehensiveness—organized around interrelated pillars and implemented through a range of instrument” (World Bank 2022d). Management suggests that the subsequent ex post evaluation on the Bank Group’s COVID-19 response provide a more holistic, less compartmentalized assessment of the unprecedented Bank Group response.

International Finance Corporation Management Response

IFC management welcomes IEG’s evaluation, the early findings, and recognition of the relevance and agility of IFC’s support.

The evaluation comes at a timely juncture, when multiple crises are enveloping the global economy, and notes an increased need for impactful and agile response strategies. IFC thanks IEG for the work it has done to formulate recommendations to strengthen IFC’s crisis response.

While the report itself acknowledges the limitations of scope and depth that such early-stage assessments entail, IFC management would like to point to the potential shortcomings such very early evaluations with limited sample size may have for formulating actionable recommendations that can help inform learning.

Given the short period under evaluation, and the limited portfolio sample reviewed, it would be unreasonable to expect an overwhelming amount of adaptive learning to be mainstreamed within the stated evaluation period. A case in point are the expedited project processing procedures developed under the umbrella of the Fast-Track COVID-19 Facility (FTCF) in March 2020. The FTCF enabled IFC to make innovative real-time changes to its operating model, leading to quantifiable efficiency gains.8 Examples include virtual site visits for due diligence and supervision, shorter documentation, and streamlined decision-making for lower-risk transactions, none of which were noted in the evaluation. While IFC was keenly aware of the potential of these models for being mainstreamed into operations outside of the facility, it took time to assess their relevance for processing efficiency and adequacy for risk mitigation. These processing enhancements have ultimately been mainstreamed under the Expedited Processing for Existing Clients. However, it was not operational until April 2022. In IFC’s view, the time frame for the evaluation was too short to demonstrate meaningful adaptive learning.

Compounding the temporal issue were the conflicting periods used for different portions of the evaluation, as well as the fragmented focus on IFC’s crisis response activities and industries where it was delivered. This resulted in the exclusion of initiatives that demonstrate the vast amount of adaptive learning that happened as IFC mounted its pandemic response. A case in point is the Global Health Platform, which was excluded because it “focused on health,” but which was also omitted in the parallel evaluation of the COVID-19 social and health response.9 As a result, a significant part of IFC’s crisis toolbox has not been covered in any COVID-19 evaluation. Given that the platform was launched to help firms diversify the production of health care products, thus saving businesses and livelihoods in emerging markets, management argues that it is not only a critical part of IFC’s “economic response” but is a good example of adaptive learning. The Global Health Platform is a comprehensive platform encompassing more immediate as well as long-term interventions for strengthening the resilience of local health care systems beyond just the current pandemic.

Finally, while the bulk of IFC’s immediate crisis response was channeled through financial institutions because of the need for quick delivery early on—a strategic choice given the market uncertainties and limitations around the operating environment at the time—IFC would like to highlight that IEG’s findings regarding its response in the real sector do not capture the full picture. IFC delivered a robust response in contact-intensive industries, including tourism, manufacturing, construction, education, and retail. The striking omission of health, specifically health services, pharmaceuticals, and medical technology manufacturing and distribution in the definition of “contact-intensive” industries in this evaluation further dilutes the comprehensiveness of IFC’s crisis response.10 During the evaluation period (April 1, 2020–June 30, 2021), IFC own-account COVID-19–related commitments under Manufacturing, Agriculture, and Services totaled $2.25 billion. The real-sector response was further strengthened through advisory and upstream engagements, none of which have been adequately captured in the evaluation.

With these gaps clearly illustrated, IFC would like to be cautious on conclusions around the relevance and comprehensiveness of its COVID-19 response based on a truncated sample and siloed approach, an issue raised explicitly at the Approach Paper stage. Hence, IFC management would like the Committee on Development Effectiveness to consider the methodological limitations of these early-stage evaluations and omissions in this particular evaluation for formulating learning insights. As the Committee on Development Effectiveness is aware, methodology concerns regarding early-stage evaluations were raised in the 2022 External Review, which noted their limited learning value for the Bank Group.

Recommendations

Recommendation 1

While management broadly agrees with recommendation 1 (to effectively address future crises, codify a global crisis response playbook, ideally developed jointly with the IMF), we find it somewhat belated in light of what IFC has already been doing. More importantly, anticipating what shape a future crisis may take—while potentially useful—is unlikely to capture the actual form of the next crisis, with the global pandemic being a case in point. Since the outbreak of the COVID-19 pandemic, IFC has been diligently assessing the processes and results of its crisis response and adjusting its operational model accordingly, as stated previously. IFC continues to collaborate, identify opportunities and synergies across the Bank Group, and place the learning from its interventions in a broader context for maximum impact in addressing future crises.

We believe that the Bank Group has already laid out a clear and comprehensive strategy, included in the Bank Group roadmap (April 2022) and the follow-up paper, Navigating Multiple Crises, Staying the Course on Long-Term Development” (July 2022), which builds on the 2020 COVID-19 paper Relief, Restructuring, and Resilient Recovery and the Green, Resilient and Inclusive Development approach.

It is important to note that IFC’s ongoing crisis response is aligned with the Bank Group and goes beyond COVID-19 to address the multiple, ongoing crises. The follow-up paper proposes a robust framework of four pillars that each support the three stages of relief, restructuring, and resilient recovery. For example, IFC’s Global Food Security Platform will help support private sector activities close the financing gap for agribusinesses across the food supply chain to support pillar 1. In addition, IFC’s Africa Trade and Supply Chain Recovery Initiative, which is a trade-value-chain initiative for food and nutrition security, is designed to complement the Global Food Security Platform with a focus on African trade. Both these initiatives leverage many of the learnings from the FTCF. Through the Global Health Platform, IFC will continue efforts to support the supply of health care products and support private sector resilience under pillar 3.

Recommendation 2

IFC management agrees with recommendation 2 (to respond effectively during the recovery phase of the crisis, explore the increasing use of structured finance solutions [such as partial credit guarantees, subordinated debt, and quasi-equity instruments] to support SMEs) in theory. However, direct lending to SMEs entails significant cost and resources, which would limit the number of such interventions that IFC can undertake. More importantly, during crisis, client demand is typically driven by short-term needs and instruments. IFC views structured finance solutions as one of the many options available in its toolbox to support clients during their growth phase. IFC’s structured finance solutions (which include risk-sharing facilities, partial credit guarantees, and quasi-equity instruments but typically not subordinated debt) have been refined and developed over the years, taking into account lessons learned and client demand. IFC has a documented track record of offering structured risk-sharing products to financial institutions for building their SME loan portfolios in target markets and expanding lending to their clients in times of crisis. In fact, it is one of IFC’s flagship structured finance offerings for financial institutions to help channel their lending toward SMEs. What has been particularly challenging in times of crisis is the limited information and the compromised ability to assess the financial viability of SMEs in IFC’s countries of operation. IFC management would have welcomed more insights from the IEG evaluation, particularly good practice case studies in the context of the COVID-19 crisis and how structured finance products can be a good fit for SMEs facing capital shortages and debt overhang. Management would like to note that there appeared to be limited demand for “financial structuring” from six of the seven firms covered by the case studies in IEG’s evaluation, as reported by these clients in the recently completed IFC fiscal year 2022 Integrated Client Survey. This periodic survey of IFC clients assesses client satisfaction, the relevance of IFC’s products and services, and clients’ changing needs. Furthermore, four of the six firms rated IFC’s support during times of crisis (for example, COVID-19) as “excellent.” One rated IFC’s support as “good” and another as “average” in the survey that covers the period of the pandemic response captured in the evaluation.

Going Forward

Management looks forward to working closely with IEG on the upcoming ex post evaluation of the COVID-19 response. Management is confident that IEG will put in place a process to ensure evaluation independence for the ex post report from the two (Health and Social Response and Economic Response) early-stage evaluations of COVID-19. This is in line with the system of governance and good practice standards outlined in the World Bank Group Evaluation Principles.

Multilateral Investment Guarantee Agency Management Response

MIGA welcomes the evaluation report, which aims to provide an early-stage assessment of the relevance and quality of the Bank Group’s early response to the COVID-19 crisis, which is critical for shaping the ongoing response and preparing for future crises.

As a part of the Bank Group response, MIGA issued $7.64 billion of guarantees under the Agency’s COVID-19 Response Program between fiscal years 2020 and 2022. MIGA appreciates IEG’s recognition of the Bank Group’s agile decision-making and learning from past crises, which contributed to delivering the largest rescue package in the Bank Group’s history and the largest crisis response among development partners. IEG has also noted the effective Bank Group collaboration with the IMF and other development institutions in supporting highly relevant operations in low-income countries.

The evaluation report’s findings on the Bank Group’s assistance to different economic sectors are useful for understanding the kinds of projects supported in relation to the varied nature of the COVID-19 economic crisis across countries. This evaluation report aimed to complement another IEG evaluation, The World Bank’s Early Support to Addressing COVID-19: Health and Social Response, An Early-Stage Evaluation. It is important for readers of this evaluation to be aware of the limitations of these evaluations. IEG did not intend to assess the relevance or quality of the overall Bank Group response across all sectors and industry groups. The report analyzes IFC and MIGA portfolios through only a sample of firm-level case studies as acknowledged in the report itself. In particular, MIGA’s support to host governments in their efforts to procure medical supplies and services during the COVID-19 pandemic (pillar one of MIGA’s COVID-19 response package), accounting for $875 million in guarantees by the end of fiscal year 2022, were not covered in the evaluation report nor the previous IEG evaluation on the health and social response to COVID-19.

The evaluation report is also designed to give early feedback; therefore, by design, the evaluation period is relatively short (April 2020–June 2021). Within this short time period, the evaluation report formulated a two-window analytical scheme for assessing the Bank Group’s response: “the acute crisis phase” (April 1, 2020–December 31, 2020) and “the incipient recovery phase” (January 1, 2021–June 30, 2021). Based on the two-window analytical scheme, the report concludes that the Bank Group’s influence on governments’—and especially firms’—actions during the incipient recovery phase were “less on target” compared with during the acute crisis phase. The report shows that the nature and extent of the COVID-19 economic crisis has varied widely across countries. In addition, the March 2022 Bank Group COVID-19 Crisis Response Operational Update has emphasized that the impacts of COVID-19 and the compounding climate change and conflict crises cannot be separated.

Intracrisis and Intercrisis Learning

As noted in the overview, the report assessed how well the Bank Group learned during the crisis. The analysis included how well the Bank Group learned from two types of activities: (i) learning during the crisis, from its work on COVID-19 (termed intracrisis learning) and (ii) learning from past crises and from developed countries’ approaches to COVID-19 (termed intercrisis learning). The report’s assessment of intracrisis and intercrisis learning is closely linked to the two-window analytical scheme, concluding that intracrisis learning had been limited, as the Bank Group did not reflect lessons from the acute crisis phase, corresponding to the first part of the evaluation period. The report also states that the Bank Group provided a low level of support to contact-intensive industries like transport, retail, hotels, tourism, and construction, and countries and firms during the incipient recovery phase. Further, the report states that learning from developed countries was limited, many of which kept workers (partially) paid during the COVID-19 crisis (different from what was done during the 2008 global financial crisis), in addition to providing support to enterprises to prevent them from going bankrupt.

MIGA questions the validity of the IEG finding that the Bank Group’s intracrisis learning was limited since it is solely based on the Bank Group’s low support to contact-intensive industries, anchored in the two-window analytical scheme. The Bank Group also applied learning from past crises to inform its early response to the COVID-19 economic crisis. Moreover, the limited evaluation period for the Bank Group learning assessment also restricts IEG’s analysis because it failed to consider projects that had yet to become operational.

Therefore, MIGA remains cautious regarding the evaluation findings and questions the learning value for operational teams who sought to respond quickly to unprecedented events in the face of high uncertainty.

Independent Evaluation Group Assessment of the Relevance of Multilateral Investment Guarantee Support

MIGA notes with emphasis that the Agency’s COVID-19 response was formulated in a context characterized by deep uncertainty and fluidity. The report has recognized MIGA’s countercyclical role in deteriorating country risk situations in stating, “The rising risk points to MIGA’s relevant role in risk mitigation and capital mobilization under guaranteeing project risk in countries where commercial financing was needed” (42).

The evaluation reviewed three MIGA operations at the early stage of the pandemic, concluding, “Two MIGA projects that did not fully consider country conditions in their designs were less relevant. MIGA overestimated the liquidity needs of banks in Panama and some African countries (Botswana and Eswatini)” (xv). MIGA disagrees with the insufficient country conditions analysis conclusion, noting MIGA’s regular and consistent assessment of country conditions through the quarterly country risk updates and extensive due diligence for underwriting MIGA guarantee projects.

Therefore, to derive substantive learning from experience, MIGA would appreciate having concrete evidence supporting the evaluation’s conclusion that MIGA’s decision to support Banco Nacional de Panamá was made without sufficient analysis of country conditions. The report states and recognizes that the IMF endorsed the MIGA guarantee, and the IMF contributed financing to Banco Nacional de Panamá’s liquidity. Given this, MIGA wonders how IEG can be so certain in stating the evaluation report’s finding of, “its low relevance could have been expected” (44) because of the fully dollarized economy (box 3.3). The fully dollarized economy is the underlying vulnerability that the MIGA supported guarantee was addressing as the economy is partly dependent on dollar inflows into the economy for its liquidity, which could come under pressure amid the uncertainties of the pandemic. The IMF’s May 2020 report on “Panama: Request for Purchase Under the Rapid Financing Instrument” states, “Building liquidity buffers remain critical to maintaining financial and external stability. Staff urged the authorities to consider the introduction of an emergency liquidity facility, which the BNP [Banco Nacional de Panamá] could operate” (IMF 2020b, 7). These were the difficult conditions that the MIGA guaranteed funding was responding to. As of August 2022, although the banking sector is assessed as sound and the liquidity facility funded by IMF’s Rapid Financing Instrument was not used, the IMF still maintains liquidity support to Panama as a precautionary measure (IMF 2022). The IMF considers the liquidity facility as a dual lender of last resort and credit facility—in the absence of a central bank and an institution acting as a lender of last resort function—given the overall context of elevated risks and uncertainties, viewing the efforts of the Panamanian authorities to enhance overall liquidity as appropriate.

Similarly, the statement in the evaluation that “capital relief was granted to tier 1 bank subsidiaries with relatively large market share (Botswana and Eswatini) and not to tier 2 bank subsidiaries with smaller market shares in countries in need (for example, Ghana, Mozambique, and Nigeria)” (44; box 3.3) However, IEG’s analysis is unclear and potentially based on a misunderstanding of the product’s design in this case. The Capital Optimization product generates additional lending capacity at the consolidated group level (MIGA guarantee holder), with the expectation that such additional lending capacity is allocated to each group’s subsidiary under separate contracts of guarantees. Such capacity does not automatically entail its use, as banks can have the capacity to grow (as endorsed and approved through the group’s budget process) but not grow because of a variety of reasons (demand, economy, regulation, and so on). The team at underwriting assesses such risks and benefits, specifically focusing on likelihood of MIGA-enabled capacity being used during the tenor of the guarantees. On such a backdrop, pointing to the “granting” of the relief to one subsidiary compared with another, appears misleading and incorrect. The ex post evaluation should be underpinned by comparing projected loans with the benefit of the MIGA guarantee, relative to actual loans disbursed, for each country/subsidiary and, in the event of deviations, try to articulate as to why there was a deviation. Moreover, the transaction was signed in late quarter 2 of 2020, at the earliest stage of the pandemic. The analysis presented in the evaluation report did not reference the project context at inception, which was at the earliest stage of the pandemic, when uncertainties were extremely high.

Recommendation 1

MIGA agrees with recommendation 1 (to effectively address future crises, codify a global crisis response playbook, ideally developed jointly with the IMF) but would emphasize that action for implementing this recommendation is already in place through a Bank Group crisis response strategy. MIGA also considers more value would be gained and captured by memorializing the processes that the Bank Group institutions have implemented during the crisis, how the Bank Group and the constituent institutions coordinated with other development partners, including the IMF, and how management sought to communicate with the Board and other stakeholders, and what worked well and what worked less well and why. This could be updated as additional evidence and results become available. Such an exercise would help ensure that Bank Group management and staff, and future Bank Group management and staff, would have this information readily available and could use it or modify its recommendations and conclusions as needed, given the specifics of the crisis at hand. This would be a “light” exercise, since staff and management are already dealing with “future crises”—the war in Ukraine, increased fragility, the debt crisis, the food and fuel challenges, and increasing climate disasters. The idea of staging “crisis games” seems redundant, given that we are currently addressing multiple crises simultaneously. Furthermore, this approach would help ensure that the recommendation is sufficiently targeted to be relevant and appropriate to MIGA and IFC.

However, the recommendation’s inference regarding “greater flexibility” in applying safeguards in times of crisis needs extra scrutiny. In many sections, the report states that compliance requirements constrained Bank Group deployment of COVID-19 support. For example, “The Bank Group could have assessed the need to adjust compliance (including safeguard) requirements to facilitate supporting the real sector during the crisis,” (51) and “some Board members were hesitant to relax compliance and risk controls” (73). The statement needs more context and elaboration to be useful. For instance, what evidence is there to corroborate the conclusion for MIGA, and which safeguards, in particular, should the Bank Group have been more flexible on, and what would the implications have been? The flexibility measures proposed by the evaluation report (for example, risk-based tiers and early results-based options) are essentially what MIGA has been doing as standard practice in its guarantee operations, including during the COVID-19 pandemic.

Finally, any discussion regarding flexibility around environmental and social standards would also need to include a discussion on how MIGA would look at those projects from the potential harm to project-affected people as a result of relaxed standards from an accountability perspective, including potential Compliance Advisor/Ombudsman complaints and Compliance Advisor/Ombudsman cases that could result, and future IEG evaluations (project and thematic). Moreover, MIGA’s Board of Directors and civil society have been clear in the past that relaxing environmental and social and fiduciary safeguards is not an appropriate response to crises. However, if this principle has changed, it would be useful for management to discuss it with the Board, IEG, Compliance Advisor/Ombudsman, and other stakeholders (including civil society).

Recommendation 2

MIGA broadly agrees with recommendation 2 (to respond effectively during the recovery phase of the crisis, explore the increasing use of structured finance solutions [such as partial credit guarantees, subordinated debt, and quasi-equity instruments] to support SMEs) that structured finance solutions can be useful in addressing crisis situations. The report makes repeated references to “structured finance solutions being limited.” However, the report does not explain which challenges could have exclusively or been better addressed through structured finance solutions. MIGA notes that structured finance solutions typically are complex, involve multiple parties, and, most importantly, for this evaluation, take time to structure. Given the need for timely client support during the COVID-19 crisis, the report is not clear on why structured finance solutions should be preferred. Regardless of the potential role of structured finance, it is important to remember that the objective is not to deliver certain structures per se, but rather to deliver value to our clients and promote development. The recommendation to specify a specific form of financial packaging rather than adopting a menu approach that delivers the appropriate solution in the context of the country, market and challenge to be addressed would seem most suitable for a crisis response package.

As the two IEG early-stage evaluations (“health, human capital, and social response” and “economic implications”) will be complemented in the future by the IEG ex post assessment of the impact of the COVID-19 crisis response, MIGA management is looking forward to working with IEG to make the forthcoming evaluation as comprehensive as possible, covering the entire spectrum of the Bank Group activities and instruments that were delivered to address the unprecedented challenges. MIGA management is also looking forward to having a fresh discussion with IEG on the approach and methodology for the comprehensive evaluation, which will be independent from these two early-stage evaluations.

  1. COVID-19 Research, Analysis & Policy Responses internal website, accessible at http://covid19research.
  2. Significant efforts were made to use data, existing diagnostics, real-time indicators, and lessons from past crises to support the World Bank’s response to COVID-19. Findings from these informed operation designs. For example, the following were tasked in 2020: (i) the COVID-19 Mobility Analytics Task Force, (ii) the COVID-19 Open Data website, and (iii) data tools and research, among others. At the country level, the Business Pulse Surveys were conducted to measure the impact of the pandemic on firms, companies, and public policy responses; phone surveys were conducted to collect sector related microdata from households for distributional analysis; real-time indicators were used to track the economic impact. https://www.worldbank.org/en/about/annual-report/advancing-knowledge
  3. Examples include the following: (i) Global Investment Competitiveness Report: Rebuilding Investor Confidence in Times of Uncertainty (May 2020); (ii) A Phased Approach of Investment Climate Policy Responses to COVID-19 (June 2020); (iii) COVID-19 and FDI: How Should Governments Respond? (October 2022); (iv) Re-Thinking the Approach to Informal Businesses: Typologies, Evidence and Future Exploration (November 2020); (v) Supporting Firms in Restructuring and Recovery (March 2021); and (vi) FCI Policy Compendium, which provided an overview of the “real-time” financial sector policy that was deployed during the crisis; (vi) infrastructure accessible at INF Covid19 Hub.
  4. Established in May 2020, the Debt Service Suspension Initiative helped countries concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people. Forty-eight of 73 eligible countries participated in the initiative before it expired at the end of December 2021. From May 2020 to December 2021, the initiative suspended $12.9 billion in debt-service payments owed by participating countries to their creditors, according to the latest estimates. The World Bank and the IMF supported the implementation of the Debt Service Suspension Initiative by monitoring spending, enhancing public debt transparency, and ensuring prudent borrowing. https://www.worldbank.org/en/topic/debt/brief/covid-19-debt-service-suspension-initiative
  5. The support has been provided mostly through training sessions (including with the Macroeconomic and Financial Management Institute of Eastern and Southern Africa), as well as through bilateral calls or videoconferences on topics such as the revision of the issuance program given increased financing needs, implementation of liability management operations (bond buybacks, switches), and so on.
  6. This is consistent with past Independent Evaluation Group evaluations, which called for closer integration of public financial management and debt management. https://ieg.worldbankgroup.org/evaluations/public-financial-and-debt-management
  7. The World Bank’s Crisis preparedness diagnostic instruments include Ready2Respond, Emergency Preparedness & Response Programs, Social Protection Stress Testing Methodology, Disaster Risk Finance diagnostics, Pandemic preparedness diagnostics, and the DRR-PFM Toolkit.
  8. In fiscal year 2021, median mandate to first disbursement stood at 139 days for Fast-Track COVID-19 Facility projects, against 313 days for other projects.
  9. It is worth noting the biased treatment of health in this evaluation, which included health in the needs analysis (appendix A) but chose to exclude it in the response analysis.
  10. World Bank Group pharmaceutical experts confirm that the Bank Group’s work related to pharmaceuticals is downstream and should be classified under the health sector and not technology, as defined by the IEG team.