Lessons from Past World Bank Crisis Responses

1
Lessons from Past World Bank Crisis Responses

• Presentation at the AIPRG Conference
• Yerevan, Armenia
• July 7-8, 2009

2
Overview

• Crisis Episodes and Country Cases Covered
• Characteristics of World Bank Support during
  Crises

3
Crisis 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

4
Characteristics of World Bank Support during
Crises

• 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

5
Factors Associated With Successful Crisis
Responses 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

6
Factors Associated With Successful Crisis
Responses Speed With Quality, Focus, And
Selectivity

• 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)

7
Both Country Knowledge And Technical Excellence
Are Essential For Successful Interventions

• 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.

8
An Effective Crisis Response Also Requires The
Right 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
  billthey operate within an indicative
  medium-term framework which can be updated as
  needed
• but individual operations can be processed
  against actions already taken

9
Close Coordination With Other Development
Partners Is A Key Factor Behind Effective Crisis
Support

• 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)

10
Internal Organizational Crisis Response
Arrangements 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.

11
Things 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