Lessons from Past World Bank Lessons from Past World Bank Crisis Responses Crisis Responses

Presentation at the AIPRG ConferencePresentation at the AIPRG Conference

Yerevan, ArmeniaYerevan, Armenia

July 7-8, 2009 July 7-8, 2009

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OverviewOverview

► Crisis Episodes and Country Cases Covered

► Characteristics of World Bank Support during Crises

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Crisis Episodes and Country Cases CoveredCrisis Episodes and Country Cases Covered

► IEG looked at World Bank support in 17 crisis episodes from 1993-2003 – a total of some $21 billion in financial assistance

► Early-mid 1990s: Mexico, Argentina ($3b), Jamaica► Late 1990s: Thailand ($2b), Indonesia ($2b), Korea ($7b) +

Russia, Brazil, Bolivia, Bulgaria, Ecuador► Early 2000s: Argentina, Guatemala, Turkey ($2.5b), Uruguay► Multiple: Mongolia

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Characteristics of World Bank Support during Characteristics of World Bank Support during CrisesCrises

►Support was characterized by:

► brief surges of budget support (adjustment lending) some 10% -- of total packages;

► return to normal lending volumes after 2-3 years

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Factors Associated With Successful Crisis Factors Associated With Successful Crisis Responses: CaveatsResponses: Caveats

► these must be interpreted mutatis mutandis, allowing for differences today relative to past crisis episodes

► global reach of the current crisis episode► new environmental/climate change

imperatives

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Factors Associated With Successful Crisis Factors Associated With Successful Crisis Responses: Speed With Quality, Focus, And Responses: Speed With Quality, Focus, And SelectivitySelectivity

► Keep Coverage Selective• more focused operations performed better (e.g., financial

sector)

► Focus policy dialogue and policy measures supported by lending (“conditionality”) on areas of comparative strength, notably • financial sector (mixed record in past), public finance and

public sector (generally strong)• corporate restructuring (less successful in past, beware of

interactions with macro – e.g. Thailand)• trade (less in late 90s, perhaps more need now?)

► Do more on Poverty from the outset• insufficient historically (e.g., Russia) • a few good examples (Brazil and, with some delays, Thailand)

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Both Country Knowledge And Technical Both Country Knowledge And Technical Excellence Are Essential For Successful Excellence Are Essential For Successful InterventionsInterventions

► In responding to past crises, in many cases the Bank did not possess the requisite country-specific knowledge, undermining results

► Preparedness is key, and can be assured through regular analytic work -- Financial Sector Assessment Programs (FSAPs, joint with IMF) anticipatory poverty analysis, etc.

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An Effective Crisis Response Also Requires The An Effective Crisis Response Also Requires The Right Instruments For Delivering SupportRight Instruments For Delivering Support

►Need judicious balance between sustaining engagement over the medium term and keeping prior actions modest and realistic

► Programmatic Development Policy Loans (DPLs, replaced adjustment lending) appear to fit the bill—they operate within an indicative medium-term framework which can be updated as needed

► but individual operations can be processed against actions already taken

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Close Coordination With Other Development Close Coordination With Other Development Partners Is A Key Factor Behind Effective Crisis Partners Is A Key Factor Behind Effective Crisis SupportSupport

►Within the World Bank Group (i.e., between the IBRD/IDA, IFC and MIGA)

►With partners outside the World Bank Group:• IMF (macroeconomic framework, exchange rate

policy)• EU (given its experience and major role in

helping new-member countries to cope with the crisis)

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Internal Organizational Crisis Response Internal Organizational Crisis Response Arrangements Matter A Great DealArrangements Matter A Great Deal

► Internal organizational arrangements seek agility and timeliness of crisis response, cross-sector collaboration, access to appropriate instruments, and accountability

► In late 1990s the World Bank set up a Special Financial Operations Group -- to respond to the East Asian crisis. It ensured agility, but needed: • better cross-sectoral coordination and• to be anchored in Regions in order to bolster accountability

and to ensure that response planning and execution draws on country knowledge.

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Things To Watch Going ForwardThings To Watch Going Forward

►Volume with Quality► Poverty and Social Safety Nets► Environment and Climate Change► Leveraging Resources► Fiduciary Concerns►Monitoring and Evaluation► Preparedness and Early Warning