Crisis Financing

IDA countries are subject to a variety of crises and emergencies that can undermine their economic and social development efforts. These include economic shocks such as food, fuel and financial crises, and natural disasters, such as droughts, earthquakes, floods, tsunamis and storms.

IDA countries have limited capacity to address the impact of such crises given their limited resources, infrastructure gaps, limited economic diversification, environmental vulnerabilities, widespread poverty and often poorly developed formal safety nets. The long-term development effects of the crises often include lower growth, destruction of infrastructure assets, and declines in government revenues and resources for core development spending.

IDA has had a long-standing involvement in various aspects of crisis response, including the provision of financial support. IDA’s key comparative advantages in crisis response are its ability to link short-term crisis mitigation and long-term development objectives, its capacity to work closely and collaboratively with other organizations (notably the UN and IMF), and to build on previous analytical work and the portfolio of projects under implementation. 

The Bank's crisis and emergency response policies and procedures have evolved over the years to enhance flexibility, speed and effectiveness. In 2007, the emergency response policy framework was revised to enable more rapid preparation and approval of emergency response projects. With the adoption of the Crisis Response Window (CRW) in IDA16, the emergency financing framework was complemented by a dedicated funding mechanism. These and other efforts have significantly enhanced IDA's ability to respond to emergencies. To improve IDA's capacity to respond in the immediate aftermath of a crisis or emergency, the Immediate Response Mechanism (IRM) was adopted in 2011. The IRM allows participating IDA countries to have immediate access to a portion of the undisbursed balances of their IDA project portfolio in the event of an eligible crisis or emergency and thus shorten IDA's response time, while encouraging countries to proactively prevent and prepare to respond to crises in a rapid and effective manner.