February 1, 2024 -The World Bank today approved a series of innovative tools to help developing countries better respond to crises and better prepare for future shocks. These new tools expand on the recently announced crisis preparedness and response toolkit to empower countries, drive impactful development, and ultimately contribute to making the planet a better place to live and a world free of poverty.
The expanded crisis toolkit builds on lessons learned from previous crisis responses to fill in the gaps and significantly expands the tools available to countries to ensure comprehensive protection in times of crisis. The latest tools offer countries:
Quick access to cash for emergency responseThis is done through flexible resource reallocation. This includes a “rapid response option” that allows countries to quickly repurpose some of their unused bank loans across their portfolios to meet emergency needs in the event of a crisis. For example, in the event of a hurricane, governments can efficiently repurpose unspent funds from long-term infrastructure projects such as roads and bridges to immediately provide food and shelter to the population.
Significantly expanded access to pre-arranged financing for emergency response, strengthening countries' fiscal capacity and preparedness for future crises. The World Bank will provide new flexibility to countries to deploy more emergency response resources for future crises. It will also facilitate access to new financing for budgetary support in the event of a disaster. This reduces trade-offs between development priorities and emergency funding needs, ensuring readily available funds to address the impacts of disasters and support the public. Countries will undertake crisis preparedness reforms and other system-strengthening measures to better leverage these new tools and promote resilience in the long run.
Expansion of disaster insurance, strengthen protection against large-scale disasters. Building on existing tools such as catastrophe bonds, the World Bank Group will provide all countries with the option to incorporate catastrophe bonds, insurance, and other risk management products into their banks' lending operations. The government could then qualify for payments from the insurance scheme in the event of a crisis without incurring further debt. This approach would mobilize private capital and transfer the risk of high-intensity but low-frequency catastrophes to international reinsurance and capital markets. The World Bank Group also aims to work with donors to ensure that these insurance products are available in low-income countries.
The new measures work in conjunction with other key components of the expanded crisis toolkit. The Climate Resilient Debt Covenant (CRDC), announced in June, allows small states to prioritize disaster recovery over debt service in the event of a major disaster, allowing them to pay clean loans instead of paying their loan bills. You can now focus on maintaining access to water, food, and power. The World Bank Group will expand its CRDC to cover all existing loans in target countries, allow borrowers to defer interest and fee payments, and allow fees to be covered by concessional sources. did.
The World Bank Group is also stepping up support for private sector clients in crisis preparedness and response, helping businesses stay open, protect jobs, and build resilience and long-term sustainability. Masu. The International Finance Corporation is designing private sector-led crisis response solutions to help financial institutions reduce the impact of natural disasters caused by climate change. The Multilateral Investment Guarantee Agency is working with lenders and the private insurance industry to better integrate the effects of climate change on public sector lending through measures such as parametric risk insurance.
The World Bank Group remains a steadfast partner for developing countries through crises, from early risk assessments and crisis financing strategies to a variety of financial instruments for disaster response. This includes continued support for crisis prevention, preparedness and resilience through knowledge agendas such as Country Climate and Development Reports (CCDR), reflected in full alignment of financing with the Paris Agreement. It has been. The expansion of the toolkit marks a major milestone in the evolution of the World Bank Group and further strengthens the Group's commitment to better support countries in difficult times of crisis.
