Constituency FY 14 ANNUAL REPORT Denny H. Kalyalya Executive - - PowerPoint PPT Presentation
Africa Group 1 Constituency FY 14 ANNUAL REPORT Denny H. Kalyalya Executive Director 1 FY14 ANNUAL REPORT Welcome to the 2014 Annual Meetings I would like to express my gratitude to you, Honorable Governors, for your unwavering
Denny H. Kalyalya Executive Director
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PROGRAMS
ENGAGEMENT WITH THE WBG
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The latest WBG forecast points to yet another disappointing year, with global growth rates slated to remain slow and weak. The downside risks remain due mainly to continued low growth in the Euro area, rising geopolitical tensions in eastern Europe and the Middle East, the slow down in China. The decline in commodity prices will have an adverse impact on trade balances and growth prospects in some countries.
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Most developing countries have seen their fiscal buffer decline compared to the pre-crisis levels and will therefore have less room to maneuver. Debt levels remain low but are growing. SSA has been a bright spot for growth in developing countries, but Ebola crisis is a serious downside risk to growth prospects. These developments and uncertainties do not augur well for our countries. There is need for more infrastructure investment to meet the deficits in energy and transport; improve the business environment and enhance competition; ensure that growth creates jobs; and improve macroeconomic management.
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IBRD total commitments were US$18.6 billion, of which only US$0.42 billion went to SSA. IDA total commitments were US$22.2 billion, with US$10.19 billion to SSA. IFC commitments stood at US$15.4 billion in FY14, down from US$18.4 billion for FY13. Share for SSA remained level at US$3.4 billion. However, IFC approvals for AfG1 in FY amounted to US$405 million in support of 18 projects, down from US$500 million in support of 23 projects in FY13. MIGA issued guarantees for AfG1 amounting to US$36 million in support
support of six projects in four countries in FY13.
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IBRD COMMITMENTS BY REGION (US$ BILLION) 5 10 15 20 FY13 FY14
IDA COMMITMENTS BY REGION (US$ BILLION)
5 10 15 20 25 EAP ECA LAC MENA SA SSA Total FY13 FY14
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APPROVALS BY REGION (US$ BILLIONS) 5 10 15 20 ECA LAC MENA SA SSA World Total FY13 FY14 IFC APPROVALS FOR AfG1
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100 200 300 400 500 600 Amount ( US$ million) FY13 FY14
FY13 FY14 0.5 1 1.5 Guarantees (US$ bilion) FY13 FY14
50 100 150 200 Amount (US$ million) FY13 FY14
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IDA17 AMOUNT : US$52 BILLION Effectiveness: July 1, 2014 – June 30, 2017
Allocations
Funding for IDA17
Ebola Emergency Operations
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IDA’s financing terms have been hardened . Starting in IDA 17, regular terms for credits for IDA-only countries will change from the current 40-year maturity and 10-year grace period to a maturity of 38 years with a 6- year grace period, with equal principal payments.
Increase in the minimum base allocation to SDR4 million per year from the IDA16 level
Changes in the poverty orientation of the regular PBA system to allow for a sizeable increase in the allocation to fragile states without undermining allocation to other well performing IDA countries. Exceptional regime for countries facing “turn-around” situations – A new exceptional regime for countries facing “turn around” situations will start in FY15. This applies to countries warranting the delivery of exceptional IDA support, including post-conflict and re-engaging countries.
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CHANGES TO THE ALLOCATION SYSTEM TURN AROUND SITUATION – CRITERIA OF ELIGIBILITY
The cessation of an ongoing conflict (e.g., interstate warfare, civil war or other cycles
development prospects); or The commitment to a major change in the policy environment following: (i) a prolonged period of disengagement from IDA lending; or (ii) a major shift in a country’s policy priorities addressing critical elements of fragility (This should be used to some of our countries like Somalia, South Sudan, Sudan and Zimbabwe). SYSTEMS also allow smooth transition from the old exceptional post-conflict and re- engaging regime to the new turn-around situation regime. There will be a case-by-case extension of the phase-out period for the duration of IDA17. This may be applicable to Burundi and Liberia.
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ALLOCATIONS WILL BE MANAGED WITHIN THE 3-YEAR IDA17 REPLENISHMENT PERIOD. EACH COUNTRY, OPERATING WITHIN ITS CUMULATIVE RESOURCE ENVELOPE, CAN FRONTLOAD OR BACKLOAD PART OF ITS IDA ALOCATIONS.
In FY15 and FY16, 1st and 2nd year of the IDA17 implementation, countries can front-load (i.e. using allocation early in the replenishment period) up to a maximum of 30 percent of relevant year’s allocation. Small countries (with population of less than 1.5 million) can front-load up to 80 percent of their cumulative three-year allocation to allow for scale economies. Front-loading may mean that limited funds would remain for the final year (FY17), but promotes operational flexibility in the use of IDA resources.
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Back-loading (i.e. using allocations later in the replenishment period) of up to the entire allocation in FY15 and FY16 is possible for all countries. All unused resources in FY15 and FY16 can be fully utilized in FY17. The financing terms will be aligned with the country’s debt rating for the year in which funds are used. It is not possible to back-load to the next replenishment period (i.e. from IDA17 to IDA18). In such circumstances, intra or inter-regional reallocation will take place.
In the final year of IDA17, unused IDA funds may be allocated between countries or across regions. The rationale of this reallocation is to promote optimization of the use of IDA funds in respective regions while respecting the PBA principle. Regions and countries submitting a list of potential projects can access these resources before the close of the replenishment period.
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POSITIVE CHANGES IN THE REGIONAL PROGRAM FUNDING:
The required minimum number of countries to be eligible for regional funding has been reduced from three to two with at least one fragile country participating in the regional project. On a case-by-case basis, where it can be clearly demonstrated that the project would have a transformational impact on the region and that three or more countries (one being a fragile and conflict affected state-FCS), the IDA regional program would fund projects that require the participation of only one IDA country. Example has been the case of the INGA III project in DRC. Contributions from national annual allocation is now capped at 20 percent. Allocations within a region are based on a first come first served basis. Finally, as a pilot, up to 10 percent of the regional IDA envelope for each region can be used to provide IDA grants to regional institutions for the purpose of preparing
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IDA countries allocations are disclosed annually to promote transparency and to maintain the reputation and credibility of IDA vis-a- vis its partners. Governors are encouraged to follow up with the Vice Presidency of the Africa region on their respective country allocations. This is critical for effective management and planning of the use of the resources and aligning the intervention choices informed by the Systematic Country Diagnostics and Country Partnership Framework.
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The Ebola outbreak has had devastating effects on economic activity, particularly in the countries of Guinea, Liberia and Sierra Leone. The scope and severity of the epidemic has had and continue to have severe impact on agriculture, trade and tourism sectors, in these countries. With the outbreak still untamed, in the face of overwhelmed domestic health systems and slow initial relief from the international community, a full recovery of these economies could only occur over a relatively prolonged period. In September 2014, the World Bank undertook a special operation under the IDA Crisis Response Window in response to the Ebola crisis. The CRW established under IDA 16, sets aside US$900 million for exceptional allocations in the aftermath of severe natural disaster or economic crises caused by exogenous shocks. The Board has already approved a grant of US$105 million and has earmarked additional funding amounting to US$ 400 million as emergency support. The Board has urged Management to continue to play a leading role in mobilizing resources, exploring ways to stop the further spread of the disease, and assisting the affected countries in their socioeconomic recovery. The emergency Ebola Meeting organized by the World Bank, in conjunction with the International Monetary Fund and the African Development Bank this morning is a signal of the Bank’s commitment to assist in this dire circumstance. Governors may want to emphasize the criticality of the Bank to assist countries to strengthen and enable health systems to respond to such emergencies effectively, and to develop funding mechanisms to respond to such health systems emergencies, which do not exist at present. The CRW is not necessarily for such health outbreaks.
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Framework
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The environmental and social safeguard policies of the World Bank are under review after four decades. Consultations were held with Governors on the proposed framework during the African Caucus Meetings in Khartoum, Sudan. As a member of the Committee on Development Effectiveness, I have relayed your concerns expressed on some of the provisions such as indigenous people and the need for the Bank to take cognizance of the values and cultures of its clients and respect their national laws. We continue to urge Management to be sensitive to peculiar country circumstances, respect country sovereignty, and promote country ownership of
reiterate those concerns especially in your meeting with the President.
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One of the matters arising from your last meeting was support for small island developing countries. These countries are buffeted by the vagaries of climate change. In collaboration with other development partners, the WBG has committed to build on what is in place to create the “Small Islands States Resilience Initiative” to improve and increase assistance to SIDS for resilience and climate change. In addition to increasing financial support, the WBG will also provide expertise to build resilience and deal with impacts of climate change. The main instrument deployed in these situations is the Disaster Risk Management Development Policy Loan with Catastrophe Deferred Drawdown Option (DPL with CAT-DDO). Seychelles for instance was supported in September 2014 with US$ 7 million as immediate financing following an adverse economic event.
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Following sustained advocacy for increased access to IBRD by well performing IDA only countries, management has considered the request. In addition to the IDA blend countries, IDA-only countries with very high CPIA rating are on a case-by-case basis given consideration for access to IBRD funding. Examples include Kenya, Rwanda, and Tanzania. Governors are encouraged to follow up with the Africa Region Vice Presidency/MD in charge of Africa region on the modalities of access and related volume.
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The 2013 Memorandum of African Governors has called for assistance with the colossal infrastructure needs on the continent. In this regard, Management set up the Global Infrastructure Facility (GIF), which will support the development of well-structured and bankable infrastructure projects, which are able to attract a wide range of private financiers, including institutional investors. Given the needs for financial resources and knowledge to find solutions to complex infrastructure, it has been deemed necessary to form a partnership. Thus, through the GIF the Bank and other GIF partners will play a catalytic role in transforming the approach to infrastructure finance. The Bank, with its global reach, technical expertise in both public and private infrastructure, financial capacities, and convening power, will to host the GIF. In September 2014, the Board approved the transfer of US$15 million from IBRD surplus to the Global Infrastructure Facility (GIF), as a contribution to the seed funding of this partnership program. This amount constitutes funding for the GIF pilot phase, expected to catalyze additional donor funding to achieve a target initial capitalization of $80 million over its first two years.
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Investment Project Financing involves the provision of IBRD loan, IDA credit/grant and guarantee financing to governments for activities that create the physical/social infrastructure; Development Policy Financing involves the provision of IBRD loan, IDA credit/grant and guarantee budget support to governments or a political subdivision for a program of policy and institutional actions to help achieve sustainable, shared growth and poverty reduction; Program-for-Results (PforR) links disbursement of funds directly to the delivery of defined results, helping countries improve the design and implementation of their own development programs and achieve lasting results by strengthening institutions and building capacity. PforR can be used by any country in support of a program(s) or sub- program(s); Trust funds and grants allow scaling up of activities, notably in fragile and crisis-affected situations; enables the Bank Group to provide support when its ability to lend is limited; provide immediate assistance in response to natural disasters and other emergencies; and pilot innovations that are later mainstreamed into World Bank operations; Private sector options for financing, direct investment and guarantees are provided by MIGA and IFC; and Customized options and risk management. IBRD’s market presence and strong financial policies provide a solid foundation for offering clients a broad menu of financing options at highly competitive market-based terms.
OTHER WBG OPERATIONAL POLICIES
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COUNTRIES DRAW FROM EITHER IBRD OR IDA DEPENDING ON THEIR ELIGIBILITY TO SUPPORT A LENDING PROJECT. Loans: The World Bank (IBRD and IDA) offers two basic types of loans to client governments, which can be structured as a flexible loan, local currency loans or a loan to a sub-national entity: Investment loans provide long-term financing for a range of activities aimed at creating the physical and social infrastructure necessary for poverty alleviation and sustainable development, and Adjustment loans provide quick-disbursing assistance to support structural reforms in a sector or the economy as a whole. They support the policy and institutional changes needed to create an environment conducive to sustained and equitable growth. Contingent financing, in form of a Development Policy Loan with Deferred Drawdown Option (DPL DDO), which allows access to immediate financing following an adverse economic event; Credit and Risk Guarantees, which assist in enhancing the borrowing capability of governments from private financiers; Hedging Products including swaps (interest rate, currency and commodity), interest rate caps and collars; Disaster Risk Management Products including Catastrophe Deferred Drawdown Option (Cat DDO), Insurance pools, Catastrophe bonds; and Client Advisory Services cover management of assets, public debt, and asset-liability as well as capital market access strategy.
OTHER WBG OPERATIONAL POLICIES
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IFC operates on a commercial basis and charges markets rates for its products and services, which cover three broad areas: financial products, advisory services, and resource mobilization. Specific products include:
and expansion projects. The Corporation also makes loans to intermediary banks, leasing companies, and other financial institutions for on-lending. These credit lines are often targeted at small and medium enterprises or at specific sectors; Syndicated loans. IFC also mobilizes financing from foreign and domestic sources.; Equity finance. IFC invests directly in companies by providing equity and indirectly through private equity funds. IFC's equity investments are based on project needs and anticipated returns.; Structured Finance. IFC utilizes structured finance products to provide cost-effective financing that would not otherwise be readily available to clients. Emphasis is placed on providing long-term local currency solutions and access to local capital markets. It uses its international triple-A credit rating to help clients diversify funding, extend maturities, access new investors, and obtain local currency funding; Risk Management Products. IFC is in a unique position to offer companies in developing countries a broad range of financial risk management products. These include swaps (interest rate and cross-currency), forwards and commodity hedges; Local Currency Financing. IFC provides local currency debt financing in loans, risk management swaps, and structured finance; and Trade Finance. Through the Global Trade Finance Program (GTFP) launched in 2005, IFC issues credit guarantees where others would not, providing essential liquidity for trade flows through its global network of more than 500 bank partners, helping SMEs in the world's poorest countries join the global trading system.
OTHER WBG OPERATIONAL POLICIES
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The World Bank is reviewing its operational procurement policy and procedures, with a view to move from a one-size-fits-all policy to a fit-for-purpose policy; The new Procurement Framework proposes a more adaptive approach to the way the Bank conducts its business and enable it to accommodate the changes in clients’ demands; Consultations and thematic background studies in the first phase of the review suggested that a new framework should reflect complexity and diversity, take into account proportionality, and support client institutions; Subsequently, the Executive Directors approved a ‘Proposed New Framework for Procurement in Procurement in World Bank Investment Project Finance: Phase II’ in July 2014; and The second consultation phase is currently underway and will end on November 30, 2014. Stakeholders may provide input into the Proposed Procurement Framework, a draft procurement policy, and a number of materials setting out the implementation of the new procurement approach. These documents are accessible from http://consultations.worldbank.org/consultation/procurement-policy-review-consultations.
OTHER WBG OPERATIONAL POLICIES
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The new proposed procurement approach features Achieving value for money: This is at the center of our new procurement approach, which will avail more options in the procurement framework. When considering bids, Management will have wider ability to take into account pre-defined non-price attributes, such as quality criteria, in addition to price in all contracts; Introducing the option of sustainable procurement: The environmental and social risk assessment and in agreement with the Borrower would inform the sustainability criteria, including energy efficiency of products, chemical waste handling, hazardous substance management, and training requirements; Introducing the use of procurement systems other than the World Bank’s: If the World Bank is not the main financier of a project, client countries will be able to use the procurement systems of other Multilateral Development Banks (MDBs). Subject to implementation capacity, countries that are members of the World Trade Organization (WTO) Government Procurement Agreement (GPA) can use their own procurement systems in Bank-financed projects;
OTHER WBG OPERATIONAL POLICIES
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UPDATE ON THE PROCUREMENT POLICY REVIEW The new proposed procurement approach features Streamlining a more efficient approach to complaints: Management proposes to centrally monitor procurement related complaints and to provide more support to task team leaders, including by setting operating standards and developing measures for complaints tracking; Streamlining prior reviews: By focusing prior review on the highest risk and highest value activities, we will streamline prior reviews by 80 percent; and Engaging with strategic suppliers and contractors: The Bank will build relationships with strategic suppliers to explore opportunities to improve performance for client countries, by example, developing model specifications and contract conditions through open collaboration. The engagement will be inclusive and transparent. MANAGEMENT WILL FINALIZE THE POLICY AND PRESENT IT TO THE EXECUTIVE DIRECTORS LATER IN THE FISCAL YEAR, WITH IMPLEMENTATION EXPECTED FOR FY16.
OTHER WBG OPERATIONAL POLICIES
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Voting Power
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The voice issue will remain an on-going matter for you Governors. You will recall that as part of the Voice Reform of 2010, the Board of Governors approved the General and Special Capital Increases for the different entities of the WBG; The uptake and full subscription by member countries have implications on the number of shares, voting power and ranking of the country, and by extension voice of the Constituency on the Boards; We wish to call your attention to the deadlines for subscriptions for the 2010 reforms;
General Capital Increase is due March 16, 2016;
deadline for payment is scheduled for June 30, 2015; and
The next review of Voice Reform is slated for 2015 and we shall continue to advocate for strengthening of the voice of the developing countries.
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The regular outreach by the Executive Board offers EDs an opportunity to gain first hand insights into the progress, constraints and development opportunities, as well as the progress of on-going World Bank Group-supported projects and implementation challenges. The observations from these visits go a long way to smoothen our discussions on the Board. The ED delegation uses these visits to meet with senior government officials, technical staff, and representatives from the private sector and civil society. They also visit some World Bank Group- supported projects. In this context, the Office hosted a delegation of seven World Bank Group Executive Directors and two Alternate Executive Directors to Burundi, Mozambique, and Zambia, during February 15-24, 2013. The EDs observed that though Burundi, Mozambique, and Zambia were at different phases of their development, the WBG could have a catalytic role in reducing poverty and promoting shared prosperity in the region. They noted the need to streamline WBG processes to improve the effectiveness of the Bank’s interventions and the limited IDA resource envelopes compared to the needs of the countries. The visit highlighted the urgent needs in the region including the severe energy infrastructure deficit in Burundi. This was instrumental in accelerating the finalization of the Burundi Jiji and Mulembwe Hydropower Project for US$100 million, which the Board approved on April 22, 2014. This outreach is helpful and should be encouraged.
REFLECTIONS AND OUTLOOK ON THE CONSTITUENCY ENGAGEMENT WITH THE WBG
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EDs’ GROUP TRAVEL TO BURUNDI, ZAMBIA AND MOZAMBIQUE
The Africa Caucus is the main channel used to draw attention to the interests of the African Countries and has proved to be effective in recent years. The office provided secretarial support for the Government of the Republic of Sudan as host of the African Caucus during 2012-2014. I would like to congratulate the Hon. Minister and Governor for the Republic of Sudan, Mr. Hon. Bader Eldin Mahmoud Abbas for the successful Caucus deliberations, and to express the gratitude of the Office for the excellent collaboration. Over the two years,
infrastructure, agriculture, energy, trade, and industrialization.
Energy, which will monitor the progress on agricultural and energy transformative projects in Africa. In conjunction with WBG Staff, the task force regularly reports on progress on the various projects to the Caucus.
adoption of governing rules. This was an important milestone in the 50-year history of the Caucus.
schedule up to 2020. This mechanism should be sustained.
REFLECTIONS AND OUTLOOK ON THE CONSTITUENCY ENGAGEMENT WITH THE WBG
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Diversity was also an issue in the last meeting and will continue to be on the agenda. As a member of the Human Resources Committee, the Office regularly follows up on your interests. Management has established a Diversity Talent Desk. This desk focuses on proactive sourcing of talent from the Sub-Saharan Africa region, the Caribbean and African Americans to build a pipeline and to manage the talent program with the ultimate objective to support recruitment and retention of midcareer professionals. The Desk launched the pilot Economist Pipeline Program in the fourth quarter of FY 14 in partnership with the Embassies for Botswana, Kenya, and Rwanda among others. Management will extend the pilot to other professionals; reach out to top academic, research, and similar institutions; and regularly consult the SSA Executive Directors’ offices
The President and the Senior Management team are committed to ensure that the WBG is a work environment, which nurtures diversity and inclusion.
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Since the inception of the Voice Secondment Program – VSP in 2004, there have been 203 graduates in ten cohorts, with 46 of them from AFG1. With the 11th cohort, which is scheduled to run from January to June 2015, the numbers will rise to 220 and 49 respectively. After 2 cycles of 5 years each, the VSP is under review. The Board will make a decision on its form later this month and we will communicate the outcome of the Board deliberations. We remain committed to this program. We believe it has been useful and should be supported.
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gratitude to you all for the privilege and honor to serve the Constituency, and for your support over the last two years. With your support, I have been able to represent you effectively at the Boards of the World Bank Group. Thank you for the guidance on several matters that came up for discussion at the Board and for the candid discussions when I visited your capitals to follow-up on Bank projects and relations. We are also grateful for your responses to our communication, and urge you to keep it up. Your continued co-operation with the Office will go a long way in the successful conduct of business by the Office. With these remarks, I wish you fruitful deliberations for the rest of this Meeting, and during the Annual Meetings. Last but not the least, let me express thanks to my Zambian Authorities, for according the
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THANK YOU, MERCI, OBRIGADO, ً اركش
DENNY H. KALYALYA