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 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

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