Around the world, crises are often viewed as a surprise that are difficult to confront in advance. However, the past half decade has forced a rethink toward seeing them as a “new normal” in the face of intertwined events including the global pandemic, climate crisis, and multiple conflicts.
“The past few years have made clear that business as usual is not going to cut it, and that we can no longer afford to treat crisis as a surprise,” said Ed Mountfield, vice president for operations policy and country services at the World Bank. “As we rethink development in the age of crisis, enhancing preparedness and response and building resilience have to be central.”
In this context, innovative mechanisms are being explored to help countries be more prepared and to better respond when shocks strike. One is an expanded crisis toolkit that builds on a set of tools unveiled by World Bank President Ajay Banga at last June’s Summit for a New Global Financing Pact in Paris.
The toolkit facilitates the likes of emergency reallocation of finances, better access to prearranged and quick new financing, expanded catastrophe insurance, and a pause of debt repayments for small states after a disaster. It is aimed at helping countries to deal with crises while remaining focused on development goals, recognizing that nations have evolving priorities amid rapidly changing situations.
Speaking to Devex, Mountfield explained how the expanded toolkit can help boost nations’ resilience, contributing to the World Bank Group’s long-term vision of “a world free of poverty on a livable planet.”
This conversation has been edited for length and clarity.
Why has the World Bank introduced an expanded crisis toolkit and why is this needed now?
The world is facing a perfect storm of intertwined challenges, from intensifying climate impacts and growing pandemic risks to deepening conflicts and the slowest half decade of GDP growth in 30 years.
In this volatile world, crises are posing a huge and growing threat to poverty reduction and economic development and setting back development gains. This is making it harder for families to feed and educate their children, and for communities to build livelihoods.
Lower-income countries need more and better tools to manage these multiplying challenges. The new crisis toolkit marks a major milestone in the World Bank Group’s ambitious evolution and we think it can be a game-changer.
How does the expanded toolkit improve on current tools for handling crises?
The new toolkit is designed to fill gaps based on lessons learned from previous crisis response. It offers countries much more comprehensive protection against a broad range of crises, allowing them to respond faster and better.
Four main things are worth noting about the toolkit. First, when a crisis strikes, all our client countries will be able to immediately reallocate a portion of their unused World Bank funds to rapid response — think food and water in the aftermath of a hurricane, or being able to continue paying salaries to critical service providers.
Second, we’re offering countries new contingent financing options and quick access to new financing so they can draw additional budgetary resources for national emergencies.
Third, we’re doing more to help countries pay for catastrophe insurance, giving them a financial safety net when crises hit.
And fourth, we’ve given small states, such as island nations in the Pacific and Caribbean that are particularly vulnerable to hurricanes and other climate-related stresses, the ability to ask the World Bank to pause debt repayments after a disaster through so-called climate-resilient debt clauses.
How does the ability to repurpose funds after a disaster improve things from the previous situation?
In recent years, we’ve introduced contingent emergency-response components in many projects, allowing funds to be repurposed during a crisis within the boundaries of that project.
The new rapid-response option gives much greater flexibility not just within a single project, but across a country’s whole portfolio of loans and grants used for different purposes. Under this option, a government can move up to 10% of undisbursed funds from existing loans and other facilities into crisis response. That means they don’t have to apply for new financing, or set up a new project, which is crucial when speed is of the essence.
Being able to take action within days really matters for getting food and water to people quickly when a drought strikes, paying emergency social protection to people when a hurricane hits, or being able to launch a vaccination campaign when a pandemic comes along. These are things that can save lives and stop development gains from being lost.
Can you give more examples of where these tools might be needed and used?
You can think of a country in East Asia that’s frequently hit by earthquakes and needs to provide emergency shelter; a country in the Horn of Africa that’s being plagued by locusts and needs to rapidly launch a spraying campaign; or a country in the Sahel that’s been hit by drought and needs to get food and water to people.
I’ve seen the potential benefits that fast action can have with my own eyes. I remember working in Gujarat in India after the 2001 earthquake and seeing how being able to get basic medical supplies, emergency tents, and shelter to people and schools reopened can make a huge difference to maintaining community stability, keeping people alive, and managing trauma.
Getting immediate cash can make a huge difference, even if it’s just to help stabilize the situation while the government organizes a bigger response.
How does a country access these tools when a crisis strikes?
The important thing is that the new flexibilities or prearranged financing are prepared in advance, so that when something does happen it can be disbursed immediately without needing to start from scratch. The new rapid-response option is something we’re going to offer embedded into the basic legal documents of all our new financing, and we’ll also give countries the option to embed these flexibilities into their existing financing.
Similarly, catastrophe insurance is something that can now be offered as an option in financing the World Bank makes available to all its countries.
How can the toolkit help countries save resources and lead to longer-term benefits?
As well as saving lives, rapid response can save development gains. This is because it means, for example, that we can avoid situations whereby having invested to educate children, they suddenly have to be out of school for several years. Furthermore, it means children are not denied nutrition during a period of crisis in a way that can result in stunting or setbacks in neurological development.
But the new toolkit is about preparedness too. It means we are stepping up our work with countries to invest so they’re ready for future crises. This can range from setting up national disaster risk management strategies, to updating emergency-response procedures, to making sure there’s evacuation signposting in zones prone to hurricanes or emergency supplies in hospitals. It can also mean ensuring there’s legislation in place allowing governments to respond rapidly to crises without having to go through complicated parliamentary approvals.
Meanwhile, the new approach to aligning with the Paris Agreement that we introduced last July means we now screen 100% of our operations not just to make sure they’re adopting the lowest-carbon way of achieving a development objective, but also for climate resilience. That’s critical to making sure we support development projects that can withstand shocks and stand the test of time.