COVID19 and Beyond: The World Bank Group Response to Fragility
21 June 2020
The World Bank’s systemic approach and coherent policy framework for addressing fragility is guiding its response to the pandemic and enhancing its impact, argues the Bank’s Alternate Executive Director Ragui El-Etreby
There is never a good time for a crisis, particularly if triggered by a ferocious pandemic sweeping the world, respecting no boundaries, destroying lives and destabilizing livelihoods. But the World Bank Group (WBG), the largest multilateral development bank, could not have been more prepared for such an extraordinary global threat.
Key to WBG’s readiness is the successive rounds of reform and repositioning that characterized and shaped its evolution since its establishment in 1944. This permanent state of modernization reflects its vision to sustain relevance to the global economic and political rapidly changing environment, and to be a positive and impactful force in designing, supporting and implementing global, regional and national responses to economic deficiencies and financial crises.
Except for its principles and overarching objectives that continue to be its ultimate driving force, there is so little that relates today’s WBG to that founded over 75 years ago as a cornerstone of the new post-World War II order. The WBG evolved in terms of the development mindset, organizational structure, policy framework, membership, and shareholding. The built-in dynamism of the institution and the strength of the political will of its shareholders kept the WBG on track as an indispensable global public good and immunized it against the risk of irrelevance and ineffectiveness.
I take pride in being on the Board of the Executive Directors of the WBG when the last round of reform and the most ambitious so far - in terms of the size of additional lending ammunition and scale of policy reorientation - was approved in 2018. It constituted the biggest capital increase in the institution’s history and was endorsed within a wider set of new institutional and operational measures that strengthened the WBG’s ability to address increasing global economic vulnerabilities, climate change challenges, natural disasters, epidemics and unsustainable levels of inequality.
The 2018 capital increase and the new policy package, together with the 2019 historic replenishment of the International Development Agency (IDA), the institution’s arm supporting low-income countries, enabled the WBG to leverage its financial capacity more than ever. The Group became better positioned to achieve its twin goals, namely eradicating extreme poverty and boosting shared prosperity. It also empowered the institution to help the developing world achieve the Sustainable Development Goals (SDGs) and, equally important, to place the development, peace and security nexus at the core of its mission, allowing for greater responsiveness to countries in fragility, conflict and violence (FCV).
Then came COVID-19.
As the global community witnessed the unfolding of this full-fledged human, social and economic catastrophe, unprecedented in scope, scale, pace and complexity, the WBG Executive Board met on 27 February 2020 in Washington DC to endorse the Group’s first comprehensive FCV Strategy. Its main objective is to serve as a new pillar in the WBG development mission, an additional cornerstone of its lending and knowledge delivery mechanisms and an integral part of its institutional, operational and advisory DNA.
The Strategy represented a shift in the WBG approach through its four main areas of engagement. Namely: 1) pivoting to prevention by proactively addressing the root causes of conflict such as social and economic exclusion, climate change and demographic shocks; 2) remaining engaged in crisis by building institutional resilience and preserving essential services like health and education for the most vulnerable communities; 3) mitigating spillover effects at regional and global levels; and 4) helping countries to escape the fragility trap through long-term support, including private sector solutions. The Strategy also addresses the cross-border impacts of FCV by focusing on the development needs of both refugees and host communities.
More alarming, and due to COVID-19, the WBG expects at least 70 million more people to live in extreme poverty by the end of 2020, of which 18 million will be in FCV settings, while tens of millions of those already living in poverty will experience worsened social and economic conditions. This is striking in terms of the current socioeconomic impact of the pandemic, as well as the substantial risks it poses for the future: strengthening drivers of fragility, intensifying sources of instability and exacerbating existing inequalities.
This is not to suggest that the Bank has been historically indifferent to fragility. There are many success stories to share, including in Africa and the Middle East, but the WBG’s interventions were fragmented and lacked a coherent policy framework to guide and enhance its impact. In fact, the call for a more consistent approach to FCV dates way back when the legendary, Dr. Ibrahim Shihata, who served as General Counsel of the World Bank for 15 years, led the argument that political instability and fragility of institutions are sources of systemic failures in economic performance and limit countries’ ability to respond to societal development needs. He argued that it is critical to position fragility at the core of the Bank’s mandate. As more unrest, violence and instability kept mounting in several regions around the globe, business as usual became no longer acceptable. A stronger WBG footprint was much needed to address these grim realities and reverse these alarming trajectories, including that by 2030 up to two thirds of the world’s extreme poor will live in FCV countries.
Furthermore, the implications of COVID-19, if not adequately and expeditiously mitigated, will further weaken efforts to rebuild citizens trust in governments in fragile countries, where public health needs and socioeconomic challenges are not effectively addressed, thereby increasing possibilities of new cycles of unrest, violence and instability, and risking the hard-earned gains of recent years towards achieving peace, security and stability in many fragile settings.
We, at the Executive Board, while watching COVID19 gaining more ground, hunting more victims and hitting poor and fragile communities the hardest, became more determined that the new Strategy should truly be a transformational endeavor and, at this exceptionally critical juncture, be operationalized with immediate effect to break the cycle of FCV, as the cost of further delays will be much higher.
I am optimistic, particularly as I see the WBG’s rapid response to the crisis, with the FCV Strategy at its core, moving in the right direction. When it comes to agility, the Bank’s response reached more than 100 countries in only two months, a record by all means. On targeting, one third of all WBG response operations are focused on countries impacted by fragility, including those in which Bank interventions are undertaken in very challenging security environment, such as Yemen, Somalia and Afghanistan. On the diversity of response, private finance is a strong component in the WBG engagements as 40% of the support provided by the International Finance Corporation (IFC), the member of the Group focused on the private sector in developing countries, will be targeting low-income and fragile countries.
Overall, in all Bank interventions on FCV, we are prioritizing inclusion and resilience, endeavoring to preserve human capital and scaling up support to the most disadvantaged segments of the society. Our operations are designed to ensure context-sensitive recovery that tackles the root causes of fragility. The WBG is also deepening its partnerships with relevant global organizations, international financial institutions and other development partners to maximize our collective development impact.
As COVID-19 will eventually subside, I am confident that addressing fragility will remain a cornerstone of the WBG mission as it continues to reform, modernize and enhance its global footprint.
Ambassador Ragui El-Etreby is a career diplomat. Since 2016, he has been serving as an Alternate Executive Director at the World Bank Group.
Students, wearing protective masks, attend school at the Merlan School of Paillet in Abidjan, Ivory Coast, as the lockdown due to coronavirus pandemic (COVID-19) is eased. May 25, 2020. REUTERS/Luc Gnago