"The main reason people struggle financially is because they spent years in school but learned nothing about money. The result is, people learn to work for money... but never learn to have money work for them." (From RD&PD)
In the wake of the global financial crisis and the worldwide fiscal response, the Independent Evaluation Group has just released a report on the lessons of World Bank Group interventions in past episodes. These lessons are relevant in helping the WBG and countries to confront the most severe global financial crisis in recent decades.
In response to global events, the WBG in the past year stepped up finance mobilization in an unprecedented way -- for example, with a new $1.2 billion Global Food Response Program or the financing from a US$6 billion Climate Investment Fund. With spreading financial troubles, the Bank has announced a readiness to increase, over the next three years, IBRD lending to $100 billion and put in place new IFC facilities to the tune of $30 billion. It is also calling for 0.7 percent of bail-out packages to be devoted to needy countries, and IDA has put in place a fast-track assistance program to help the poorest countries.
Even as the current crisis differs greatly from previous ones in its origin, depth and reach, lessons from past experiences can point to crucial factors in the effectiveness of crisis response. Evaluation findings suggest seven points to consider:
Volume with quality. The scale of response is vital, and so is its quality. Quality encompasses the composition and effectiveness of public expenditures which are prime candidates for increased financing.
Poverty and social safety nets. During past financial crises, poverty issues did not get sufficient attention. It is crucial to factor in the implications for social safety nets from the beginning of the crisis rather than later.
Environment and climate change. These issues need be factored into the crisis response centrally. The WBG can build on the recent momentum in mobilizing funds to address climate change and to foster greener development activities.
Leveraging resources. The adequacy of resources is key, including through leveraging with partners. Collaboration within the WBG and across partners has proven crucial, not only to maximize synergies but also to avoid unproductive tensions, as on occasion between the WBG and the IMF.
Fiduciary concerns. Financial and risk management as well as environmental and social safeguards will continue to be vital to ensure that scarce resources reach intended beneficiaries and that negative consequences are avoided.
Monitoring and evaluation. While there is a premium on speed, there is an equally heightened need for adhering to a results framework that links objectives, program costs, and benefits. The focus on results is even more important when resources are scarce.
Preparedness and early warning. More effective mechanisms are needed for early warning of crises. The WBG needs to work with the International Monetary Fund and other international financial institutions on their design and implementation.
These are enormously difficult times. It is critical that the actions of countries and of the international community match the challenges both in scale and in quality.
Vinod Thomas Director-General, Evaluation and Senior Vice President