World Bank’s Response to the Syrian Conflict- September 2016

Prior to the start of the crisis, the Bank was providing support to Syria through technical assistance, advisory services and policy advice on private sector development, human development, social protection and environmental sustainability. Due to the deterioration of the security situation in Syria, all World Bank operational activity and missions to Syria were halted in early 2011.

The Bank’s response in the Middle East and North Africa (MENA) region is mainly focused on addressing the impact of the Syrian conflict on neighboring countries, and in particular, Lebanon and Jordan, where the Bank has conducted fundamental analytical work on the social and economic impact of the refugees in the neighboring countries, rapidly prepared projects to assist hosting communities, and mobilized substantial grant funding from donor partners to be channeled towards these efforts. For Syria, a remote, in-conflict damage assessment using satellite imagery and social media analytics is assessing the state of damage in six cities and six sectors.

In addition, the Bank is currently leading with a wide range of partners and International Financial Institutions (IFIs) on two new financing mechanisms under the MENA Financing Initiative. The first is a mechanism that offers countries affected by the Syrian conflict more favorable financing on concessional terms. The main Middle East and North Africa (MENA) countries coping with large inflows of refugees—Lebanon and Jordan--are middle-income, and therefore do not have access to development financing on concessional terms. These countries face increased development financing needs given the costs of providing basic services to the refugee population (such as in the education, health, water and solid waste sectors). By combining grants from donors with loans from Multilateral Development Banks (MDBs), this instrument provides concessionality on loans from MDBs to middle income countries hosting an influx of refugees. The second financing mechanism is to leverage guarantees from supporting countries to issue World Bank bonds that can provide financing for recovery and reconstruction projects in countries affected by conflict.

More specifically, the Bank has a robust program in the Mashreq countries bordering Syria, including:

Jordan

In Jordan, where registered refugees make up 10 percent of the (2014) population , the Bank is helping mitigate the impact of the Syrian crisis in the near term while maintaining a focus on policy reforms needed for growth and job creation in the medium term.

In July 2013, the Bank provided rapid, financial assistance of US$150 million to help the country mitigate the adverse impact of the Syrian crisis on Jordan's economy. The emergency operation helped the country in managing the additional expenditures on healthcare services and basic household needs as a result of the Syrian refugee influx.

In October 2013, the Bank and development partners launched an Emergency Services and Social Resilience Program (ESSRP) to help Jordanian municipalities and host communities address immediate service delivery impacts of Syrian refugee inflows. The ESSRP is a project specific Multi-Donor Trust Fund to serve as an umbrella instrument through which donors can channel funds intended for responding to the urgent needs of local municipalities and communities. The Project is the biggest multi-donor platform for supporting local authorities in addressing the needs of host communities in urban centers where the majority of refugees reside, and reaches a total population of 1.8 million including 250,000 refugees. The project is funded by the World Bank’s State and Peace Building Fund (SPF); Canada; the UK, Swiss Development Corporation; Sweden, and Denmark. The Government of Jordan is contributing counterpart funding of US$3 million. The Arab Fund for Economic and Social Development is providing complementary funding to support municipal services directly through the Government. The project is being scaled up to include a labor-intensive public works program to generate more job opportunities for both Jordanians and Syrians.

The Bank works closely with the Jordanian Government and the international community on a holistic approach to address the refugee influx in support of the “Compact” adopted in London in February 2016. This involves creating jobs for Syrians and Jordanians and incubating the future post-conflict Syrian private economy in Jordan, including through a new US$300 million concessional project aimed at promoting Economic Opportunities project for Jordanians and Syrian refugees (concessionality provided through the new Concessional Financing Facility and an exceptional IDA allocation).

A Programmatic Development Policy Loan Series is supporting the efficiency and fiscal sustainability of the energy and water sectors (first US$250 million operation approved in September 2015). These sectors have been heavily impacted by the influx of Syrian refugees and are among the most strategic ones for the Jordanian economy. A follow up operation is under preparation.

A Systematic Country Diagnostic for Jordan was published in February 2016. In terms of the Bank’s strategy and programmatic priorities for Jordan including supporting Jordan facing its increased pressures due to the influx of Syrian refugees, the new Country Partnership Framework FY2017-2022 was presented to the WB Board of Directors in July 2016.

Lebanon

In Lebanon, the influx of over 1.5 million Syrian refugees, or 25 percent of Lebanon’s population (the highest number of refugees per capita in the world), has imperiled the Government’s public finances and service delivery, stretching them beyond their limits. In 2014 the Bank set up the Lebanon Syria Crisis Trust Fund (LSCTF) - a Multi-Donor Trust Fund - to mobilize grant funding through government to help mitigate the impact of the Syrian crisis. The establishment of this MDTF was underpinned by the Bank-led Economic and Social Impact Assessment (ESIA) of the Syrian Conflict and subsequent Roadmap of Priority Interventions (2013).

To date, the LSCTF has about US$75 million in contributions from donor governments (UK, France, Norway, Finland, the Netherlands, Sweden and Switzerland) and the World Bank-managed State and Peace Building Fund. The Government of Denmark is expected to contribute to the LSCTF in early 2017. Four emergency projects (Education, Health, Municipal Services and the National Poverty Targeting Program) are financed by the LSCTF. Another education project financed from an exceptional IDA credit of US$100 million will help Lebanon address even further the pressures the influx of Syrian refugees has placed on the education system for the next five years.

The Bank is scaling up investments in critical infrastructure and the World Bank’s ongoing program is supporting service delivery in a range of sectors, including a US$600 million programmatic engagement in water. This includes the Water Supply Augmentation project (US$474 million), which is co-financed with IsDB and will increase the provision of potable water to residents in the Greater Beirut area, including those in low-income neighborhoods. Building on this ambitious project, the Bank is ready to engage in other foundational programs, particularly in the energy, transport and telecommunications sectors, as the impact of the Syrian conflict has exacerbated long-standing weaknesses in these areas. In particular, the Bank is currently preparing a Roads and Employment project which will support Lebanese and Syrian refugee populations. In parallel, the Bank continues to inform policy making, in areas constrained by institutional, structural and infrastructure reforms (including in public financial management, business environment, capital market policy and regulation, financial institution reform and development, pension, social protection, education, health insurance, poverty, land administration modernization, disaster risk management).

A new FY16-FY21 Country Partnership Framework (CPF) was designed around the findings of the Systematic Country Diagnostic which examines the constraints to growth and poverty reduction in the country. The main objective of the CPF is to help Lebanon address the economic and social impact of the Syrian crisis, while at the same time supporting the country’s investments and reforms needed for medium- and long-term development, with a view to strengthening the legitimacy of the state and its relationship with its citizens.

Iraq

Iraq’s fight against ISIS and war on terrorism had a high cost for Iraq resulting in 3.4 million IDPs in addition to the influx of 250,000 Syrian refugees, mainly residing in the Kurdistan region of Iraq, in addition to the economic and financial costs. The IDPs and refugees are adding to the fiscal difficulties Iraq is facing as result of the decline in the oil prices. Oil is the main source of revenue for the country.

In response to a request from the Kurdistan Regional Government (KRG), the Bank prepared a rapid Economic and Social Impact Assessment (ESIA) of Internally Displaced Persons and the Syrian refugees to assist the KRG to quantify the impact on the local economy.

In parallel, the Government of Iraq requested the Bank to support reconstruction in areas liberated from ISIS. In response, the Bank developed an Emergency Operation for Development to provide funding for reconstruction efforts in seven cities in Diyala and Saladin. This project is currently under implementation.

The WBG also provided a US$1.2 billion development policy financing loan to support Iraq as the country faces fiscal pressures from the fall in oil prices and a mounting humanitarian crisis.