World Bank: COVID head winds and resurgent efforts

Without splashing its efforts but humbly working with billions of human race, World Bank has set to excel its efforts in meeting head-on collision with the most dangerous economic, unhealthy, or global disaster unheard of or even unpredicted by any disaster team in the world, namely, COVID 19, the most unrepentant event we have ever seen since the great world wars or great depression which most of us read in newspapers or books only.

Combining its 62 pages report titled “Saving Lives, Scaling-up Impact and Getting Back on Track (World Bank Group) COVID-19 Crisis Response Approach Paper issued in June 2020 is proudly reproduced below to clearly understand the world position in respect of the most notorious COVID 19 which does not seem to leave us with a clear horizon. Let me reproduce the web address for guidance.

(Saving Lives, Scaling-up Impact, and Getting Back on Track World Bank Group COVID-19 Crisis Response Approach Paper).

Source- http://documents1.worldbank.org/curated/en/136631594937150795/pdf/World-Bank-Group-COVID-19-Crisis-Response-Approach-Paper-Saving-Lives-Scaling-up-Impact-and-Getting-Back-on-Track.pdf

Though it has 6 chapters and 62 pages with the best narration on the COVID, I intend to analyze the report under the following three heads for easy understanding and less creation of mental tension.

1. From panic situations around the globe, ranging from most developed to least developed countries (Panic unwritten)

2. Resurgent efforts

3. Resultant and propitious future

Panic unwritten

The following statistical information saddens all but can’t be escaped. It has engulfed the whole earth, ranging from the poorest to the richest since the death figures contain people of all strata, sex, all ages, and above all non-discriminatory in nature. Money alone could not contain it. (Statistical information percolates from the report itself.)

• Disrupting billions of lives and livelihoods, the COVID-19 pandemic threatens decades of hard-won development gains and demands an urgent, exceptional response. There were over 6.2 million confirmed cases and 372 thousand confirmed deaths across 188 countries by June 1, 2020. The number of new cases worldwide is accelerating, with more than 100 thousand now reported daily, and the pandemic’s geography is shifting. It has remerged again in China and other places. Sad but true.
• The range of growth outcomes in 2020-21 remains exceptionally uncertain, and recovery is highly dependent on global progress in containing and mitigating the pandemic. The COVID-19 pandemic has triggered what is likely to be the deepest global recession since World War II. In a base case scenario, the global economy could shrink by 5.2 percent in 2020 before rebounding in 2021; in the downside scenario of prolonged shutdowns, world output could contract by almost 8 percent in 2020 (roughly equivalent to the combined GDP of France, Italy, and Spain). The recession in advanced economies is hitting developing countries hard, and the World Bank now projects negative growth for over 150 countries in 2020. Still, this assessment is not very scientific since moving around the globe is highly restricted. Data is sketchy too.
• Billions of jobs are under threat worldwide. Nearly 80 percent of the world’s informal economy workers – 1.6 billion people – have faced COVID-19 lockdowns and slowdowns in hard-hit industries including wholesale and retail, food and hospitality, tourism, transport, and manufacturing. With 740 million women globally in informal employment and a majority employed in services, women are particularly hard hit by the crisis.
• Remittance flows – an economic lifeline for many low-income families and a key source of revenues for many developing economies – are expected to fall by one-fifth in 2020. Since this information is based on June 2020, the figures in September 2020 may reveal the further real picture.
• Since 1998, an effect on poorer people has never been so severe as this pandemic. This will mean an estimated additional 18 million extremely poor people in FCSs, and the pandemic is deepening existing sources of fragility.
• The additional financing needs for developing countries arising from the crisis remain uncertain, but they will be exceptionally high.  Pandemic-related external financing gaps for active IDA countries could be in the range of US$25- 100 billion per year – assuming that incremental financing needs arising from the crisis are in the range of 2.5-10 percent of GDP per year and that only half of these can be met internally.
• For IBRD borrowers (representing approximately one-third of MIC GDP), the equivalent range is US$150- 600 billion annually.
• Growing from an international health emergency in January 2020 to a global pandemic by mid-March 2020, there were 6.2 million confirmed cases and 372 thousand confirmed deaths across 188 countries as of June 1, 2020.
• Advanced and emerging market economies that have implemented at least one form of major mobility restriction account for over 80 percent of global GDP. Imagine, you are landing in Mumbai from New Delhi by plane. Immediately, police will put a sticker on your hand for monitoring purposes for 14 days unless you explain with return tickets, your intention to return within the next 7 days.
• What will happen in case the pandemic prolongs with its unrestricted reach? The prolonged period of stringent lockdowns would weigh heavily on advanced economies (AEs), with output contracting by nearly 10 percent in 2020, while output in EMDEs would shrink by almost 5 percent. In all, in this downside scenario, world output would contract by almost 8 percent in 2020 (roughly equivalent to the combined GDP of France, Italy, and Spain) and the recovery in both AEs and EMDEs would be markedly sluggish.
• Remittances to low- and middle- income countries are projected to drop by 20 percent in 2020: US D 500 billion to 400 billion. (approximate)
• The following actual quote from the World Bank report is baffling for anyone.
• “According to a rapid assessment of existing clients by IFC, the most significant impacts in the real sector have, so far, been in (i) discretionary consumption and service-related sectors which face declining demand such as travel, logistics and tourism, and (ii) companies with global supply chains which confront disrupted operations including automotive, electronics, agribusiness and textile industries.” With a virtual ban on the movement of even human beings and goods alike, how can global chains function?
• However, the situation is slowly returning to normalcy, at least in India as could be seen from the resumption of traffic, both in human beings and goods traffic by the resumption of the train and vehicular traffic. Similar trends seem to have begun in other countries as per the news trickling from around the globe. Indian efforts towards meeting health requirements have been praised by all and followed by others. With just nearly 1.6% death rate, it actually cheated COVID 19 with its full preparedness, having learned past lessons from human disasters and able political leadership to take unconventional steps to protect its people. The sudden imposition of marshal law like actions baffled everyone and many criticized it for its harshness. But great statesmanlike action was a boon in saving the lives of millions of Indians. A very harsh and the most bitter medicine saved its people from millions of deaths.
• The report gives gruesome details of the pandemic on humankind up to 22 pages in total. Let us not deal further with these details. Some respite by dealing with resurgent efforts to meet its cruelty.

Resurgent efforts

World Bank, International Monitory Fund, International Finance Corporation, Central banks of countries along with massive efforts of the governments (both federal and state governments) combined together to meet the effects of the pandemic immediately, as soon as they were seen and their implications on the economy of the nations, unprecedented since the great depression were understood.

Let me narrate the massive efforts as under:

What is the response of the World Bank?

Three Stages of Crisis Response – Relief, Restructuring, and Resilient Recovery

• The immediate relief stage involves an emergency response to the health threat posed by COVID-19 and its immediate social, economic, and financial impacts.
• As countries bring the pandemic under control and start re-opening their economies, the subsequent restructuring stage focuses on strengthening health systems for pandemic readiness, restoring human capital, and restructuring of firms and sectors, debt resolutions for firms, as well as recapitalization of companies and financial institutions.
• The resilient recovery stage entails taking advantage of new opportunities to build a more sustainable, inclusive, and resilient future in a world transformed by the pandemic.
• The report has also stated four thematic pillars of crisis response.
• (i) Bank emergency support for health interventions aimed at saving lives threatened by the virus;
• (ii) WBG social response for protecting poor and vulnerable people from the impact of the economic and social crisis triggered by the pandemic;
• (iii) WBG economic response for saving livelihoods, preserving jobs, and ensuring more sustainable business growth and job creation by helping firms and financial institutions survive the initial crisis shock, restructure and recapitalize to build resilience in recovery; and
• (iv) focused, cross-sectoral WBG support for strengthening policies, institutions, and investments to achieve a resilient, inclusive, and sustainable recovery by Rebuilding Better.

Or if I put these efforts in simple terms, they fall under health, economy, and ensuring a safe future.

While the massive efforts of Indian central/state governments, the unlimited sacrifices made by our doctors, paramedical, security personnel, or the trade are known to us by sight, let us do concentrate on what happened to the world at large.

• As of June 1, the Bank had approved US$5.9 billion for emergency health support to 104 countries and IFC committed US$2.6 billion to be deployed in over 35 countries. Early responses by IFC and MIGA complement each other as well as the early action by the World Bank. IFC phase 1 is under implementation: on March 17, 2020, the Board of Executive Directors approved the US$8 billion IFC Fast Track COVID-19 Facility.
• Supported by the 2018 IBRD and IFC Capital Increase and the IDA19 Replenishment, the WBG can provide up to US$160 billion over the 15 months spanning FY20Q4 and FY21, based on each institution’s existing financial sustainability framework.
• Further, as an operational strategy, we were informed that Three-fourths of the frontloaded IDA resources will be provided directly to countries as country allocations – which provide unearmarked country envelopes – and the remainder from IDA windows which complement these resources and address thematic issues.
• Additional volumes would be available to countries to the extent that they can cancel projects that are low-performing or no longer a priority. In order to encourage such cancellations, countries will be allowed to keep the exposures freed up by any projects they cancel.
• The Bank is coordinating closely with the IMF in all areas of fiscal and debt management under the crisis response.
• WBG technical support will focus on expenditure monitoring, debt transparency, and debt management – including support for implementing agreed debt relief initiatives.
• World Bank actions include: Enhance debt sustainability analysis (DSA) for both LICs and MICs. (Low-Income Countries and Middle-Income Countries). Help countries manage public debt vulnerabilities under crisis conditions. Support financial management, tax, and expenditure reforms that can contribute to creating fiscal space.
• Support measures required for macroeconomic stability, fiscal strengthening, and maintenance of service delivery – as well as selected policy and institutional reforms under the four pillars – through DPFs. (Development Policy Financing)

The COVID-19 pandemic poses severe and disproportionate risks to Caribbean small island developing states (SIDS). As countries confront the wide impacts of the pandemic, the WBG’s customized, cross-cutting approach to building resilience includes: Health emergency, protecting the poor and the vulnerable, maintaining fiscal sustainability, strengthening disaster- management, and preparing for a resilient and sustainable recovery.

How does the MIGA (Multilateral Investment Guarantee Agency) help?

In response to the COVID-19 crisis, MIGA has redirected its program to launch a US$6.5 billion Fast-track Facility that provides support for: (i) the emergency health response through guarantees to credit-enhance governments to secure financing for urgent medical supplies and services; and (ii) the emergency economic response through guarantees to credit-enhance commercial borrowings by the sovereign, sub-sovereign and SOE clients and guarantees to support IFC trade finance in IDA/FCS and LMICs (Low and Middle-income Countries), (International Development Association).

Resultant and propitious future

You can easily imagine that in this complex world filled with people who do not care for anyone when they achieve the economic might, the mighty pandemic in one stroke obliterated all the good works done in the economy, health fields, fiscal management, socio infrastructure, education, civil aviation, road transport, and made everyone look for a vaccine which does not exist or the likelihood of its appearance some project as early 2021 or I read a news item that due to side reactions not revealed, its further trials stopped in one case.

India alone shipped medical supplies to hundreds of poor countries which needed urgent requirement of these items to serve their countrymen. Obviously, known as the largest supplier of free medical supplies to poor countries, it did a wonderful disaster management work.

World Bank, IFC, MIGA, and IDA, created by foresighted statesmen from all countries in the world after the second world war have been silently revolutionizing the lives of poor people towards more healthy, prosperous, and sustainable living with dignity. How many of us do appreciate their efforts?

Conclusion

COVID 19, the inexplicable disaster which confined me to nearly 6 months homestay for good health forced me to think about the poor of the world who were already suffering from the huge financial burden, lack of basic infrastructure, and war-torn in many parts of the world for reasons unknown for centuries.

Luckily, I could lay my hands on this monumental document from World Bank throwing light towards its preparation, current efforts, or future agility for helping mankind during this horrible time. Therefore, I could hardly scratch the surface of this document of the World Bank and barely throw some light. It is expected to draw our attention to the good work done by many world level organizations for humanity. We must wholeheartedly support them for our welfare since they serve humanity with humility.   

Disclaimer: All views collected from the World Bank document referenced above are mine and do not reflect either taxguru.in or World Bank. The document available from its web site throws a lot of information for serious analysis or guidance.