Rebuilding better
Reducing debt and improving fiscal sustainability
Even before COVID-19, growth was slowing in developing countries, and debt burdens had reached record highs. The pandemic has aggravated the situation, leaving these countries with little fiscal space to respond to the crisis. From the start of the pandemic, the Bank Group has helped countries free up urgently needed resources while also strengthening transparency and debt-management capacity. We have worked closely with the G20 to deliver debt relief for countries that need it most. We are also helping countries improve fiscal sustainability and mobilize domestic resources more efficiently.
The G20’s Debt Service Suspension Initiative (DSSI), established in May 2020 at the urging of the World Bank and the IMF, delivered more than $5 billion in debt relief to more than 40 participating countries. Originally set to end in December 2020, the initiative was extended twice because of the COVID-19 crisis and is expected to end in December 2021. In addition, we have helped the G20 establish the Common Framework for Debt Treatment Beyond the DSSI, which will help countries that face unsustainable debt burdens secure the debt relief they need, on a case-by-case basis.
After the DSSI was established, the Bank Group took an important step to increase transparency about countries participating in the initiative. We created a virtual one-stop shop that provides a country-by-country accounting of DSSI participants and the amounts they owe to creditors, based on information from the Bank’s International Debt Statistics database. We also introduced tools to encourage greater debt transparency in IDA countries, including heat maps on transparency in debt reporting and on the issuance of domestic debt securities.
In March 2021, our support for Sudan helped the country clear its arrears to IDA, enabling its full re-engagement with the Bank Group after nearly three decades and paving the way for it to access nearly $2 billion in IDA grants for poverty reduction and sustainable economic recovery. The clearance of arrears brought Sudan closer to qualifying for relief under the Highly-Indebted Poor Countries (HIPC) Initiative and is expected to reduce its external debt burden of nearly $57 billion.
Through our research and analytical work, we advised countries on how to manage public spending and improve domestic resource mobilization in ways that are both efficient and effective, including efforts to rebalance taxation to address rising inequality. We also contributed new insights on how to improve debt and fiscal sustainability, specifically through analysis of gaps in public debt disclosure in developing countries and guidance on how to develop local currency bond markets.
Investing in climate action
The World Bank Group is the largest multilateral funder of climate investments in developing countries, delivering $83 billion in climate finance to countries over the last five years and expanding climate change priorities to sectors not traditionally associated with climate action, from fiscal budgeting and planning to digital development and social protection. In fiscal 2020, the Bank Group committed a record-breaking $21.4 billion to climate-related investments, the highest level in a single year; financing for adaptation rose from 40 percent of the Bank’s climate finance in 2016 to 52 percent in 2020. These efforts are now even more urgent as countries combat the effects of climate change amid the COVID-19 crisis. In Honduras, we supported the country’s emergency response and recovery from hurricanes Eta and Iota during the Atlantic’s most active hurricane season on record. In the Philippines, a disaster risk reduction project addressed the multiple shocks of the pandemic-related health crisis, damaging typhoons, and the global recession.
In June 2021, we released a new Climate Change Action Plan for 2021–25. It marks a paradigm shift for the Bank Group, moving from investing in green projects to greening entire economies, and from inputs to measuring impacts that help countries reduce emissions and strengthen their resilience to climate risks.
Under the new Plan, we are committing to deliver record levels of climate finance to developing countries: an average of 35 percent of Bank Group financing to support countries’ climate action, up from the 26 percent average achieved over the previous five years, with at least 50 percent of climate finance from IBRD and IDA supporting adaptation. We will also align all financing flows with the objectives of the Paris Agreement. The World Bank will align all new operations starting July 1, 2023. For IFC and MIGA, 85 percent of Board-approved real sector operations will be aligned starting July 1, 2023, and 100 percent starting July 1, 2025.
The plan focuses on key systems—energy, agriculture, food, water, land, cities, transport, and manufacturing—that account for over 90 percent of global emissions and face significant climate impacts. To transform these systems, we will help develop global standards for financial systems to incentivize low-carbon, resilient, and sustainable investments, drawing on our experience with green bonds and other sustainable financial instruments. Our approach to the low-carbon transition focuses on people and communities, so that they can benefit from the new climate economy, by supporting citizen engagement and participatory processes to ensure that gains and losses are shared equitably. We will also help countries assess and address the distributional impacts of policies, including carbon pricing, as well as design instruments and policies that support a socially just transition away from coal.
The plan promotes transparency and accountability through monitoring systems with clear metrics, objectives, and milestones, as well as supports global standards for reducing emissions. For Bank projects, we will use new metrics to report on their resilience to disaster and climate risks, while new result indicators will better capture the impacts of our interventions in countries, including emission reductions. To better integrate climate and development and prioritize action, we will prepare new Country Climate and Development Reports, which will become a core diagnostic for the Bank Group and inform our engagements with countries. We will ramp up our support to countries as they develop and implement new Nationally Determined Contributions and long-term strategies, as well as help them strengthen their financial systems to manage climate-related risks and mobilize capital.
The Bank Group also convenes, coordinates, and participates in global partnerships that drive climate action, including the Coalition of Finance Ministers for Climate Action; as of June 2021, it comprises more than 60 countries. At its ministerial meeting on the margins of the 2021 Spring Meetings, the Coalition stepped up calls for green growth investments and discussed policies to support decarbonization and help manage climate-related risks to financial stability.
Promoting fiscal and financial reforms
Exceptional and urgent global action is needed to tackle the combined impact of cascading crises while adapting to post-pandemic realities and working toward green, resilient, and inclusive recovery. We are working to help countries combat rising poverty and deepening inequality while also addressing the devastation wrought by COVID-19 and the longer-term challenges posed by climate change.
Our approach is comprehensive. It includes advising countries on how to implement reforms and policies that address economy-wide challenges while also creating the necessary fiscal space and leveraging private capital. We help countries assess the distributional impacts of reforms and how they contribute to sustainable growth. We also help them develop climate-informed fiscal and macroeconomic policies. To support this work, we monitor global macroeconomic indicators as well as financial and commodity markets. We also advocate for implementing structural reforms and applying a poverty and equity lens to fiscal policies for green growth.
We are developing tools and how-to guides to help countries overcome perceived trade-offs between short-term macroeconomic objectives and long-term sustainable growth. We are also helping them integrate sustainability into their growth strategies to safeguard climate and natural resources while improving growth, investment, and job creation. At the regional level, we are helping design growth-oriented climate measures, such as:
- Fiscal policies for sustainable recovery. Designing tax and expenditure policies to address the challenges of climate change, net job creation, and managing fiscal stimulus in a sustainable way.
- Fuel tax and subsidy reform. Quantitative impact assessments of carbon pricing on revenues, output, employment, informality, emissions, pollution, and public health.
- Fiscal policy for sustainable land use. Raising revenues and improving sustainability through reforms of commodity taxes, ecological fiscal transfers, and forest revenue management.
Our work on fiscal policy also includes advice to governments on how to increase the efficiency and effectiveness of their public financial management and public investment management.
In Côte d’Ivoire, the $200 million First Sustainable and Inclusive Growth Project removed barriers to private sector investment in the sustainable production of electricity and cocoa. It has also helped the government secure an additional $100 million in climate financing.
We also help countries introduce standards for green bonds and reporting regulations to support greener financial systems. In Colombia, we worked with regulators to ensure that local pension funds disclose how they integrate environmental, social, and governance risk factors into their investment processes.
Tackling corruption and promoting good governance
We help countries strengthen governance and fight corruption, with the aim of creating greater fiscal space, increasing efficiency, and ensuring better quality services for those in need. We help governments better manage public finances and streamline bureaucracy, including tax administration, decentralization, and the reform of state-owned enterprises. We also help them deploy technology to deliver public services, expand public access to information, improve accountability, and reduce administrative corruption.
Our GovTech initiative supports digital transformation to modernize core government operations while also promoting civic participation and building accountability and trust. The GovTech Global Partnership and the GovTech Multidoor Trust Fund deepen this work on a global scale and reinforce our IDA commitments on governance and institutions. During the COVID-19 crisis, we have prepared policy notes and a tracking portal to help countries strengthen governance and resilience.
In fiscal 2021, we launched a set of initiatives to strengthen our anticorruption work and address the transnational nature of corruption, the role of power dynamics that can make corruption intractable, and the need to improve transparency. We produced research on how corruption can be controlled at the sector level, along with practical guides on asset recovery and managing conflicts of interest. We also led a new international, collaborative effort to establish the Methodology for Assessing Procurement Systems, which aims to accelerate the implementation of modern, efficient, sustainable, and more inclusive public procurement; the World Bank conducted assessments for 17 countries. And we launched the Procurement, Anticorruption, and Transparency platform to provide easy access to public procurement data and enable users to identify and manage integrity and transparency risks.
To address COVID-19, we worked with suppliers to share estimates of aggregate demand and develop a streamlined procedure to procure medical supplies, equipment, and vaccines. This involved facilitating emergency fast-track procurement, addressing supply-chain constraints, and managing the impact of COVID-19 on non-emergency procurement and contract execution. To enhance transparency, all contracts are published on the Bank’s external website.
Protecting natural resources and supporting biodiversity
Managing and recognizing the value of natural capital—such as forests, the ocean, water, and soil—is core to a green, resilient, and inclusive recovery. Poorly managed land drives the emergence of zoonotic diseases, while protecting natural resources will help reduce the risk of future pandemics. The Bank works with countries to implement policies that better value ecosystems while combating climate change and improving livelihoods for people who rely on natural resources; this includes people working in forestry, fisheries, and agriculture.
We made investments to provide quick support to the fisheries, tourism, and ecotourism sectors and support communities whose lives have been disrupted by COVID-19. The pandemic has led to greater use of single-use plastics and medical waste, which can end up in oceans and waterways; in India and Pakistan, we are supporting efforts to address medical waste. We are also providing financial support, technical assistance, and knowledge products to help countries address the environmental impacts of the pandemic and use stimulus funds toward a green, resilient, and inclusive recovery. In Mexico and Egypt, we are supporting efforts to improve air quality to help save lives, improve productivity, and mitigate climate change.
We contributed to new research and analytics on threats to biodiversity and ecosystem services, which provide a strong economic rationale to invest in nature. At the One Planet Summit in January 2021, which focused on biodiversity, we committed to invest more than $5 billion over the next five years to the Great Green Wall initiative. This initiative seeks to restore degraded landscapes, improve agricultural productivity, and invest in climate-resilient infrastructure in 11 African countries, ranging from Djibouti to Senegal.
Building greener, more resilient, and inclusive cities
In fiscal 2021, city leaders faced multiple crises: a health emergency that disproportionately affected low-income residents, an economic downturn that battered municipal finances, and ongoing natural hazards. The Bank drew on its disaster risk management experience and technical assistance from the Global Facility for Disaster Reduction and Recovery to help countries and cities cope with these unforeseen and compounding risks. In Lebanon, we supported a rapid damage and needs assessment in partnership with the EU and UN just days after the devastating explosion at the port in Beirut in August 2020.
Analysis of COVID-19 hotspots in urban settings confirmed the correlation between crowding and contagion and highlighted the need to improve living conditions for the urban poor, who have been particularly hard hit by the virus and the impact of lockdown policies on the informal economy. In Kenya, we helped improve tenure security and access to basic services—including drainage, water, sanitation, and street lighting—for nearly 2 million people who live in informal urban settlements, working in partnership with the Agence Française de Développement. In Sierra Leone and Tanzania, we supported efforts to map the urban landscape and better understand flooding risks through digital cash-for-work programs that allowed unemployed youth to earn money using mobile applications.
The pandemic has tested the resilience of basic services that are essential to the functioning of healthy cities. In India, we are working to strengthen the management of solid waste in the state of Kerala to improve human health as well as reduce coastal pollution and the contamination of water resources.
Looking ahead to recovery, the City Climate Finance Gap Fund approved its first batch of technical assistance grants, totaling nearly $2 million, to help nine cities transform their climate ambitions into finance-ready projects. These will support cities in the Democratic Republic of Congo, Ethiopia, India, Kosovo, Mexico, Morocco, and Vietnam as they identify sources of urban emissions and prioritize critical policies and infrastructure investments.
In June 2021, we launched From Pancakes to Pyramids: City Form for Sustainable Growth, a report based on a survey of nearly 10,000 cities. By shedding light on what makes a city grow outward, inward, or upward, the report can help us better understand the interplay between city density, public transport, and non-car modes of transportation as well as help cities reduce their climate footprints. The Bank aims to scale up support to cities, so that they can integrate or enhance low-carbon and climate- and disaster-resilient considerations into urban planning, policy, and investment.
Supporting resilient transport
Countries need well-functioning transport and logistics networks to keep their economies moving and ensure that vaccines reach everyone, including the poor. The pandemic has exposed the sector’s vulnerabilities, with huge disruptions to supply chains and significant revenue losses for operators worldwide. Yet even before this crisis, many countries had major gaps in transport accessibility , with 1 billion people living more than 2 kilometers from an all-weather road; more than 1.3 million people, mostly in developing countries, dying every year in road crashes; one in six women avoiding jobs due to fear of harassment on public transport; countless children unable to travel to schools; and crops rotting before reaching markets. The transport sector also claims about 24 percent of energy-related carbon emissions, as demand grows with urbanization and economic growth. Without aggressive measures, its emissions are expected to grow 60 percent by 2050: achieving climate goals will not be feasible without decarbonizing transport. Compounding the challenge, transport infrastructure is highly vulnerable to extreme climate events. With the right policies and resources, however, transport can spur economies; connect people to jobs, health, and education; and address climate change.
The Bank’s transport investment portfolio of about $45 billion covers nearly 100 countries through projects that support public transport, logistics, roads, railways, aviation, ports, and waterways, as well as newer innovations such as drones and electric vehicles. These efforts are helping countries as they rethink mobility amid the recovery from COVID-19. In fiscal 2021, we launched the Global Facility to Decarbonize Transport, the first umbrella trust fund that puts climate action at the heart of transport development. It will help scale up innovation and investment across all transport modes by supporting knowledge creation, project preparation, technical assistance, and advocacy. The facility will expand on Bank-supported successes, such as Ecuador’s first metro line, in Quito, which will save an estimated 65,000 tons of emissions yearly and give 377,000 daily riders a fast, reliable way to reach jobs and services. In Senegal, the Transport and Urban Mobility Project has halved travel time between Dakar and Saint-Louis for about a million people, while creating road paving jobs for men and women. The Pacific Aviation Investment Program is improving the resilience of aviation infrastructure and strengthening compliance with international regulations in Kiribati, Samoa, Tonga, Tuvalu, and Vanuatu.
Ensuring access to energy for all for sustainable growth
Today, nearly 759 million people still live without electricity, and about 3 billion lack access to clean cooking. Despite faster progress, it is unlikely that everyone will be able to access affordable, reliable, sustainable, and modern energy by 2030. To keep pace with population growth, 940 million more people would need access to electricity over the next decade—yet COVID-19 has slowed the necessary investments.
To help close the gap, the Bank has more than doubled our financing for energy access, from less than $400 million on average in fiscal 2013–15 to nearly $900 million in fiscal 2018–20, with more than 90 percent of this going to Sub-Saharan Africa. In the past five years, we have provided $4.2 billion in financing to establish or improve electricity connections for nearly 120 million people. We have also committed more than $400 million across 21 countries to help 20 million people gain access to healthier and more efficient cooking and heating. This work is supported by partners such as the Energy Sector Management Assistance Program, which provides technical expertise and financing to help achieve universal access to energy by 2030. The program contributes to our energy portfolio and helps mainstream off-grid and mini-grid solutions to expand access; its lending represents a quarter of global mini-grid investment.
Recent advances in technology have greatly reduced the cost of renewable energy, presenting an opportunity to increase its share in the global energy mix. The Bank Group is one of the largest providers of financing for renewable energy and energy efficiency projects in developing countries, committing $8.4 billion over the past five years and helping mobilize private capital for the sector. We are supporting Uzbekistan’s first solar photovoltaic power plant to help the country reduce its dependency on natural gas and coal, produce clean energy, strengthen the security of supply, and combat climate change. It will be the country’s first large-scale, privately developed and operated renewable energy facility; it is supported by IFC loans, a Bank guarantee, financing from the Asian Development Bank, and private sector investment.
The World Bank also helps client countries manage oil, gas, and mining in ways that contribute to sustainable growth and development, protect communities, and reduce emissions. In 2020, we worked with Bosnia and Herzegovina, Bulgaria, Greece, Poland, Serbia, and Ukraine to help them plan and prepare for a just transition of their coal regions. The Platform Initiative for Coal Regions Transition in the Western Balkans and Ukraine promotes inclusive strategies for transitioning to low-carbon energy. Meanwhile, the Extractives Global Programmatic Support Trust Fund is helping artisanal and small-scale miners and their communities cope with the impacts of COVID-19. In May 2021, it released the 2020 State of the Artisanal and Small-Scale Mining Sector report, which finds that better working conditions could improve productivity, health, and safety for more than 44 million artisanal miners across 80 countries. The Bank Group’s Climate-Smart Mining Initiative is also helping countries respond to the rising demand for critical minerals and metals with sustainable mining practices.
We work with countries and partners to reduce gas flaring, which wastes resources and releases harmful emissions into the atmosphere. In fiscal 2021, support for the Zero Routine Flaring by 2030 initiative—introduced by the Bank and partners in 2015—grew to 79 governments and oil companies. In addition, through the Global Gas Flaring Reduction Partnership, we continue to work with seven countries that have high levels of gas flaring.