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 – 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