FY19 World Bank Budget Public Disclosure Authorized August 31, 2018 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION
CONTENTS 1 OVERVIEW AND RECOMMENDATIONS... 1 1.1 OVERVIEW... 1 1.2 FY19 BUDGET RECOMMENDATIONS... 4 STRATEGIC DIRECTIONS AND BUSINESS OUTLOOK... 6 2.1 STRATEGIC CONTEXT... 6 2.2 LENDING OUTLOOK... 8 2.3 COST OF DOING BUSINESS... 10 2.4 EFFICIENCY... 11 FY19 EXPENDITURE FRAMEWORK... 15 3.1 AGGREGATE BANK BUDGET... 15 3.2 EXTERNAL FUNDS OUTLOOK... 18 3.3 AGGREGATE BANK BUDGET AND EXTERNAL FUNDS... 19 FY19 BUDGET... 20 4.1 ADMINISTRATIVE BUDGET PROPOSAL... 20 4.2 ADJUSTMENTS TO THE BUDGET... 21 4.3 STRATEGIC ALIGNMENT BY WORK PROGRAM... 23 4.4 OPERATIONAL WORK PROGRAM... 27 4.5 GRANT-MAKING FACILITIES... 39 4.6 IG&A UNITS... 40 4.7 CENTRALLY-MANAGED ACCOUNTS... 43 4.8 EXPENSE FUNCTIONAL VIEW... 45 CAPITAL BUDGET... 48 5.1 FACILITIES... 48 5.2 TECHNOLOGY AND SYSTEMS... 49 ANNEXES ANNEX I: PROGRAM COST SUMMARY... 51 ANNEX II. INDICATORS OF BUDGET SUSTAINABILITY, STRATEGIC ALIGNMENT, AND BUDGET EFFICIENCY... 56 1 In the tables, charts, and text, the totals have been rounded to the nearest whole number. Numbers may not sum due to rounding. i
TABLES Table 2.1: Growth in IBRD/IDA Lending Portfolio... 9 Table 3.1: Bank Budget (US$ million)... 15 Table 3.2: FY19 Bank Budget and External Funds (US$ million)... 19 Table 4.1: FY19 WB Budget (US$ million)... 20 Table 4.2: Incremental Additions to the Budget (US$ million)... 22 Table 4.3. Claw-backs from Budget (US$ million)... 23 Table 4.4: FY18-19 Budget by Work Program & Funding Source (US$ million)... 23 Table 4.5: 18-19 Budget Share by Work Program and Funding Source... 24 Table 4.6: FY19 Operational Budget Envelopes (US$ million)... 29 Table 4.7: Grant-Making Facilities Budgets (US$ million)... 39 Table 4.8: FY19 IG&A Budget Envelopes (US$ million)... 42 Table 4.9: FY18 and FY19 ED and IEG Budgets (US$ million)... 43 Table 4.10: Centrally-Managed Accounts (US$ million)... 44 Table 4.11: FY18 and FY19 Functional Expense View of Administrative Expenses (US$ million)... 45 Table I.1: FY19 Funding for WB Work Program and Unit (US$ million)... 52 Table I.2: Overview of External Funds Projected Revenues FY19 by Unit (US$ million)... 55 FIGURES Figure 2.1: Growth in IBRD/IDA Supervision Portfolio (Pre-Capital Increase)... 9 Figure 2.2: Growth in IBRD/IDA Portfolio Volume vs. Administrative Budget (Percentage Growth from FY14)... 12 Figure 3.1: IBRD Budget Anchor... 16 Figure 3.2: IDA Budget Anchor... 16 Figure 3.3: Total Admin BB per Lending Project Approved (FY18US$ million)... 17 Figure 3.4: Total Admin BB per Project under Supervision (FY18US$ million)... 17 Figure 3.5: Total Admin BB per US$ Billion of Loans Approved (US$ million)... 17 Figure 3.6: Total Admin BB per US$ Billion Portfolio Under Supervision (US$ million)... 18 Figure 3.7: Share of External Funds to Total Funds... 19 Figure 4.1: Operational Share of Unit Budgets... 24 Figure 4.2: Client Engagement Share of Operational Unit Budgets (including Country Engagement and Global Engagement)... 25 Figure 4.3: Evolution of the Country Engagement Bank Budget from FY18 to FY19 (US$ million)... 30 ii
Figure 4.4: Country Engagement Bank Budget Allocations by Business Process for FY17-19 (US$ million)... 31 Figure 4.5: Country Engagement Bank Budget Allocation Shares by Business Process for FY17-19... 32 Figure 4.6: CE Spending on Fiduciary and Safeguards for FY16-19... 33 Figure 4.7: FY19 Country Engagement Allocation Shares by Practice Group... 33 Figure 4.8: Country Engagement Bank Budget Allocations for FCV and FCV at Risk Countries for FY16-19 (US$ million)... 34 Figure 4.9: Country Engagement Bank Budget Allocations to Small States for FY16-19 (US$ million) 35 Figure 4.10: FY19 Global Engagement by Practice Group and Category... 38 Figure 4.11: Full-time Bank Staff on Payroll (percentage growth since FY14)... 47 BOXES Box 4.1: Administrative Budget Envelopes... 26 iii
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ACRONYMS AFR AIP ASA BB BETF BPS CCAP CE CGIAR CMA CMU COGAM COMO CPF CPI CRO DEC DGF EAP ECA ECR EFO E/L ESF ER FCV FIAS GMF GP GPSA GT GSD HRD IBRD IAD IDA IDF IEG IFC IMF IG&A ITS Africa Region Annual Investment Plan Advisory Services and Analytics (former AAA - Analytical and Advisory Activities) Bank Budget Bank Executed Trust Fund Budget, Performance Review, and Strategic Planning Climate Change Action Plan Country Engagement Consultative Group for International Agricultural Research Centrally Managed Accounts Country Monitoring Unit Committee on Governance and Executive Directors' Administrative Matters Country Monitoring Country Partnership Framework Consumer Price Index Chief Risk Officer Development Economics Development Grant Facility East Asia and Pacific Region Europe and Central Asia Region External and Corporate Relations Externally Financed Output Equity to Loan Ratio Environment and Social Framework Expenditure Review Fragility, Conflict and Violence Facility for Investment Climate Advisory Services Grant-Making Facility Global Practice Global Partnership for Social Accountability Global Themes General Services Department Human Resources Development International Bank for Reconstruction and Development Internal Audit Department International Development Association Institutional Development Fund Independent Evaluation Group International Finance Corporation International Monetary Fund Institutional, Governance, and Administrative Units Information Technology Solutions v
LCR LEG LIC LLP MFD MIC MIGA MNA O&M OPCS PPM PSW QBRR RAS RAMP RETF SAR SBO SDG SEC SME SMI SPA SPF STC TRE UN WB WBG WPA Latin America and Caribbean Region Legal Department Low Income Countries Loan Loss Provision Maximizing Finance for Development Middle Income Countries Multilateral Investment Guarantee Agency Middle East and North Africa Region Operations and Maintenance Operations Policy and Country Services Program and Practice Management Private Sector Window Quarterly Business and Risk Review Reimbursable Advisory Service Reserves Advisory and Management Program Recipient Executed Trust Fund South Asia Region Strategy and Business Outlook Sustainable Development Goals Corporate Secretariat Small and Medium Enterprises Salary Merit Increase Salary Progression Adjustment State and Peace-Building Fund Short Term Consultant Treasury United Nations World Bank World Bank Group Work Program Agreement vi
OVERVIEW AND RECOMMENDATIONS This document presents the FY19 World Bank Budget for Board approval. This budget proposal reflects close consultations between Executive Directors and Management throughout the Strategic Planning, Budgeting and Performance Management process for the World Bank Group. 1.1 OVERVIEW 1. The WBG has developed a vision to help translate the ambitions of the 2030 Agenda into successes for development. 2. Significant steps have been taken toward the Forward Look s objective of a better and stronger World Bank Group. The World Bank Group (WBG) is in the unique position to combine knowledge and financing with global reach, and a strong representation in the field to find solutions for today s complex development challenges. To continue to fulfill its role as a leading development institution and help to translate the ambitions of the 2030 Agenda into successes for development, the WBG developed a vision to become a stronger institution. This vision, articulated in the Forward Look paper 2 endorsed by Governors at the 2016 Annual Meetings, sets a transformational path for a better and stronger WBG to help its members address today s complex development challenges and meet their rising demand for innovative services. With the successful completion of the IDA-18 replenishment, which includes the unprecedented transformation of IDA s financial model and historical capital market access, the capacity of the WBG to support Low Income Countries (LICs), especially countries facing fragility, conflict and violence and small states, has been significantly strengthened. The recent landmark decision to support the IBRD/IFC transformative package of capital measures and integrated policy reforms will enable the WBG to better support all clients, including new IDA graduates and blend countries. The launch and roll-out of the Cascade Approach (an approach to maximizing finance for development (MFD)) across the WBG, supported by the IDA-18 IFC-MIGA Private Sector Window (PSW), will leverage these resources by crowding-in private sector investment to further scale up development finance. The WBG is also breaking new ground promoting innovative responses to issues where coordinated global action is critical. Key areas include crisis management and fragility, conflict and 2 Forward Look A Vision for the World Bank Group in 2030 (DC 2016-0008). 1
violence, climate change, gender, knowledge and convening, and regional integration. Actions taken in these areas, in collaboration with development partners and the private sector, support the achievement of the SDGs. Progress has been made in improving the WBG s effectiveness and operational model. The new Environmental and Social Framework (ESF) is being rolled out to help improve the sustainability of investments. Procurement reforms make it easier to implement projects, while building the capacity of borrowers. Efforts are underway through the Agile initiative to promote a culture of continuous improvement and problem solving, and accelerate the pace of project processing, ensuring that staff have more face time with clients. Through the Administrative Simplification efforts, Management is pursuing a range of reforms that include simplifying expenditure approval processes, trust fund reform, intranet modernization, implementing a shared services strategy, HR process initiatives, and leveraging technology such as robotics. Significant progress has also been made to strengthen the WBG financial position, by (i) balance sheet optimization by lowering the policy minimum for the Equity to Loans (E/L) ratio to reflect improved portfolio credit quality, (ii) adoption of an income-based formula approach for IBRD transfer to IDA-18, linking IDA transfer to IBRD s allocable net income level, (iii) implementation of a new external funds cost recovery framework, and (iv) establishment of budget anchors for IBRD and IDA. These were supported by a series of expenditure and revenue measures, including loan pricing increases, an ambitious Expenditure Review which generated over US$300 million in Bank Budget (BB) savings and an additional US$40 million of savings in Bank- Executed Trust Funds (BETFs). 2
3. Business plans are affected by a growing portfolio, rising cost of doing business and offsetting savings from efficiency measures. 4. Despite rising costs, Management is proposing a FY19 Bank administrative budget of US$2,611 million which will be flat in real terms, and a capital budget of US$190 million for FY19. 5. As agreed with the Board, Management will draw on the flexibility band to support incremental costs for implementing the capital package in FY19. Business plans are affected by cost pressures arising from a growing portfolio and rising cost of doing business that will continue to put pressure on Bank s resources. At the same time, Management plans several efficiency efforts that will help strengthen lending capacity and fund new priorities which will be complemented by economies of scale as IBRD lending is scaledup. Strengthened revenues arising from pricing measures, a constrained budget in an environment where the costs of doing business are rising, and a willingness to implement further cost reductions (after successful implementation of the Expenditure Review program) demonstrate management commitment to the institution s financial sustainability and greater efficiency. Considering strategic priorities but recognizing the need to maintain budget discipline, Management is proposing a FY19 budget that is flat in real terms and that represents a 2.4 percent nominal increase on the FY18 budget. Management is also proposing a capital budget of US$190 million for FY19, comprising US$105 million for Facilities investments and US$85 million for IT investments. Section 4 provides details underlying the administrative budget proposal and further details on the capital budget proposal are set out in Section 5. The recent decision of Shareholders to endorse the IBRD capital package presents Management with an opportunity to engage with clients on strengthening and recalibrating country programs, which will have a budgetary impact. It also involves new policy commitments, some of which will add to cost of doing business. It is too early to determine the full budgetary implications of the capital increase and Management therefore presents in this document an administrative budget based on a pre-capital increase scenario. As agreed with the Board, Management will draw on the standard 2 percent flexibility band to support any incremental costs for implementation of the capital package in FY19. If any additional administrative budget funding is required in FY19 for the IBRD scale-up above the 2 percent flexibility band, Management will seek Board approval. 3
6. The FY19 budget aligns with the WBG strategic directions and demonstrates consistency with the principles of financial sustainability and efficiency. Management has built its budget plans ensuring strategic alignment with the priorities agreed in the Forward Look and confirmed during the planning and budgeting process. Key priorities over the next few years include remaining engaged with all client groups; working in partnership with the IFC and MIGA to mainstream the MFD approach into operational work; strengthening global leadership and impact in a range of areas, notably in climate change, fragility, gender, human capital, and technological change; and strengthening our business model. 1.2 FY19 BUDGET RECOMMENDATIONS The FY19 budget will support financial sustainability with a budget that allows the Bank to maintain the discipline of budget anchors in FY19 with administrative expenses that are held within target zones below revenues from operations. It is important that we adequately fund operational delivery and supervision, supported by strong analytics and institutional, governance and administrative services. At the same time, every dollar the World Bank does not spend is a dollar it can leverage to support development financing for its clients. Building on the gains of the Expenditure Review successfully completed in FY18, Management has identified opportunities for further efficiencies over the coming years in areas including corporate procurement, project portfolio management, workforce management, travel and real estate. In addition, as part of the rolling Business Reviews of VPUs, Management plans to complete reviews of IG&A units and start reviews of operational units. 7. Management seeks Board approval of the FY19 Budget. Management seeks Board approval of the following FY19 Budget recommendations: That the total administrative budget (Bank Budget) be set at US$2,611 million, managed within a range of +/- 2 percent. This includes: o An indicative budget of US$87.4 million for Executive Directors. This is subject to a separate endorsement process by COGAM. 4
o US$29.7 million for the Independent Evaluation Group. This is subject to a separate endorsement process by CODE. That the capital budget be set at US$190 million. 5
STRATEGIC DIRECTIONS AND BUSINESS OUTLOOK This section outlines the strategic context and business outlook for FY19 and reviews the cost pressures arising from increasing cost of doing business as well as the efficiency efforts and compensation reform necessary to offset additional costs. Together with section 1, it sets the stage for the FY19 budget, which is detailed in sections 3-5. 2.1 STRATEGIC CONTEXT 8. Management has identified key focus areas for the FY19 planning and budgeting process to align resources with the Forward Look vision. Ending extreme poverty and boosting shared prosperity by 2030 requires that the WBG scale up efforts to deliver on the ambitious Forward Look vision. Four strategic focus areas have informed the FY19 planning and budgeting process for the World Bank, consistent with the Forward Look vision: serving all clients; creating markets; leading on global issues; and continually improving the business model. Across these areas, Management aims to foster greater partnership across the World Bank Group to enhance complementarities and leverage synergies for greater development impact. Achievement of the twin goals will require the Bank to scale up progress made across several fronts. 9. Serving all clients: The recent endorsement by Shareholders of the capital package will build on the IDA-18 replenishment and enable the Bank to expand its services across all client groups. IDA-18 has enabled the Bank to expand its services for low income countries, double assistance to countries affected by fragility, conflict and violence, triple assistance to small states, as well as expand IFC and MIGA services in these countries through the Private Sector Window (PSW). IDA-18 implementation got off to a robust start with strong delivery. Sustaining this trend is a key priority for FY19. The recently endorsed IBRD/IFC capital package will enable the WBG to channel more resources to countries at the lower to middle range of the client income spectrum many of which are recent IDA graduates and host large populations of extremely poor people while at the same time continuing to engage with all clients across the income spectrum. In addition, through capital strengthening measures at the IFC, the package will also strengthen WBG support to FCV countries and small states. The nature of engagements will 6
be adapted to specific development needs in all countries and interventions coordinated across WBG institutions to leverage each other and maximize WBG impact. 10. Creating markets: WBG entities are working in partnership to Maximize Financing for Development. 11. Leading on global issues: The Bank continues to enhance its engagement and focus on issues that transcend national boundaries. A strong focus on Maximizing Finance for Development (MFD), by crowding-in available private finance, is crucial to go from the billions to the trillions needed to achieve the ambitions of the 2030 Agenda and the Twin Goals. The Bank, IFC and MIGA have worked in close partnership to develop and implement the MFD approach, including in the most challenging development contexts. Going forward, the focus will be on scaling up this approach, through firmly anchoring MFD in Country Partnership Frameworks, joint implementation plans and deep dives at the regional level, strengthening of internal processes such as incentives, training and advisory, analytical and financial tools for clients to operationalize the MFD effectively. The Bank is uniquely positioned to lead on global issues given its global footprint and ability to adapt to a changing development landscape, invest in knowledge products and adopt innovative financing mechanisms. The focus will be on the following strategic priorities in support of the SDGs: (1) employ a range of innovative financing solutions and analytical capacities to address crisis risks and enhance crisis response capacity; (2) scale up efforts to tackle the climate agenda through policy advice, global advocacy and lending/investment operations; (3) step up financing to help close gender gaps; (4) increase the WBG knowledge and convening role to support the design and sharing of development solutions for greater impact; (5) continue support to help strengthen regional cooperation and the needed connective and institutional infrastructure; (6) improve access to technology and related innovative solutions as well as responding effectively to the jobs challenges that these innovations will present; and (7) develop a new human capital index to inform policy and investment decisions. In pursuing these priorities, the Bank will support South- South cooperation so that development experiences can be readily transferred and scaled up in other countries/regions. 7
12. Improving the business model: The Bank will continue to improve its effectiveness by promoting operational agility and administrative simplification, enhancing its financial sustainability, and by implementing the new Procurement and Environmental and Social Frameworks. The Bank s ability to respond to growing demand across all client segments and to increased development ambitions calls for continuous innovation, operational flexibility and agility. Through the Agile Bank program, a community of staff has been put in place to promote a culture of continuous improvement and problem solving. Efforts are also ongoing to speed up implementation of the Administrative Simplification program through a range of initiatives, including simplifying expenditure approval processes, trust fund reform, intranet modernization, implementing a shared services strategy, HR process initiatives, and leveraging technology such as robotics. As part of the capital package, a new financial sustainability framework will be implemented to ensure that IBRD s lending trajectory is aligned with long-term sustainable financial capacity and incorporates a crisis response buffer. These achievements are being complemented by the rollout of the new Procurement and the Environmental and Social Frameworks which will ensure that Bank-financed projects are delivered to the highest standards. The new Procurement Framework was introduced last year. The new Environmental and Social Framework (ESF) will become operational in FY19. 2.2 LENDING OUTLOOK 13. The IBRD capital package endorsed at the Spring Meetings has altered the lending outlook. At the Spring Meetings, the World Bank Group s shareholders endorsed an ambitious package of measures that include both internal measures and a US$13 billion paid-in capital increase for the World Bank Group, alongside a series of internal reforms, and a set of policy measures that greatly strengthen the WBG s ability to deliver on its mission. For IBRD, the paid-in capital increase will be US$7.5 billion. 8
Net Commitment Volume (US$ billion) 14. The FY19 proposed budget assumes IBRD lending to decline, in line with the precapital increase scenario. 15. The IBRD/IDA portfolio under supervision is projected to grow substantially even in the pre-capital increase scenario. Based on the pre-capital increase scenario, IBRD lending is assumed to decline from US$24 billion in FY18 to US$22 billion in FY19. However, following the approval of the capital increase, this would increase to US$25 billion in FY19. IDA lending is assumed to be US$25 billion (see Table 2.1). Table 2.1: Growth in IBRD/IDA Lending Portfolio FY17 FY18 FY19 Actual Projection Projection IBRD Pre-Capital Increase 22.6 24.0 22.0 IBRD Post Capital Increase 22.6 24.0 25.0 IDA 1 19.5 25.0 25.0 IBRD and IDA Pre-Capital Increase 42.1 49.0 47.0 IBRD and IDA Post-Capital Increase 42.1 49.0 50.0 Notes: IBRD and IDA post Capital Increase 42.1 49.0 50.0 1 The IDA FY19 US$25 billion lending projection is subject to some exchange rate volatility, and includes the Crisis Response Window and Private Sector Window. In the pre-capital increase scenario, the IBRD/IDA portfolio under supervision is projected to grow by a further 3 percent, from US$213 billion in FY17 to US$220 billion in FY19; and, more significantly, by 9 percent from 1,460 operations in FY17 to 1,589 in FY19 (see Figure 2.1). This reflects long term portfolio dynamics (timing of exits versus entries to the stock of projects under supervision, in particular the IDA-18 scale up) and an increase in the number of small projects due to our enhanced focus on FCV countries and small states. In the higher lending scenario, post capital increase, portfolio growth would increase further. Figure 2.1: Growth in IBRD/IDA Supervision Portfolio (Pre-Capital Increase) $250 $200 $150 $100 $50 $169 1,337 $207 $213 $192 $183 1,460 1,386 1,402 1,398 $221 $220 1,589 1,519 1,800 1,700 1,600 1,500 1,400 1,300 No. of Projects $- FY13 FY14 FY15 FY16 FY17 FY18P FY19P 1,200 IBRD/IDA Net Commitment (US$ billion) No. of IBRD/IDA Projects 9
2.3 COST OF DOING BUSINESS 16. The World Bank is asked to expand its activity in ways which increase the cost of doing business. 17. The Bank is significantly expanding its services to countries where the cost of doing business is higher. 18. The Bank s business mix is shifting to more complex and riskier operations which are also costlier to prepare. 19. Fiduciary and safeguard budget allocations have increased in recent years and are expected to grow further with implementation of the new frameworks. The planning and budgeting process has been informed by a Cost of Doing Business analysis that examined the cost dynamics of the Bank s activities. The analysis shows that above average efforts and costs are incurred in several areas and countries. This is expected to lead to overall higher costs as the Bank s mix of business increases in these areas and countries. The Cost of Doing Business analysis shows that lending operations tend to be more expensive to deliver in low and lower-middle income countries including fragile, more challenging, and smaller countries. The growth in the number of lending operations to these countries is outpacing that of upper-middle income countries. This trend is expected to continue as per the strategic directions discussed in sections 2.1 and 2.2. Furthermore, as the Bank expands its footprint into more complex and riskier environments, cost pressures are also rising. Ramping up the work in FCV locations has significant cost implications. Increasing our global footprint also requires increased resources, mainly due to related assignment benefits for staff decentralized to the field, and rising facilities and IT resource needs. The Bank s business mix is also shifting towards more complex and riskier lending operations, which the Cost of Doing Business analysis has shown to be costlier to prepare and supervise. Demand from clients for projects for sustainable development (mainly infrastructure) is also increasing, and these projects are also costlier to prepare. The Bank is increasingly being asked to finance projects in riskier and more complex environments. The new Environmental and Social Framework (ESF) expands the scope of related safeguards by including new topical areas, engaging borrowers more than before, and introducing expanded processes, instruments, and systems. To support the roll-out, new guidance and procedures are being developed, training of staff and familiarization of borrowers are being implemented, and an enhanced helpdesk and support infrastructure are being put in place. Implementation of the new Procurement Framework is ongoing with several supporting activities being implemented. 10
20. The finance units face additional responsibilities to address the increased complexity of the hybrid IDA-18 financial model. The introduction of market leverage of the IDA balance sheet, with successful bond issuance at capital markets this spring and corresponding changes to the IDA financial risk framework such as the asset-liability management framework and liquidity policy, has resulted in additional responsibilities for the Bank s finance units. Additional requirements have also been introduced because of the increased number and complexity of IDA financing instruments. 3 The introduction of the IBRD financial sustainability framework will further add new responsibilities for the finance units. 2.4 EFFICIENCY 21. The Bank has a track record of strong budget management over the past years. Through a period of budget transformation, Management has been able to deliver significantly more in an environment of rising costs and with a flat nominal budget. In addition to meeting the Expenditure Review (ER) targets, the Bank has significantly improved strategic planning, performance monitoring and budgeting through a coordinated WBG process. It has strengthened resource management systems, reports and accountabilities. The FY18 budget is expected to close within the flexibility band and with no major structural imbalances by business area. More importantly, we have moved to a culture where Management and staff seek to systematically align resources with WBG priorities in a way that is sustainable and delivers value for money. Because of its strong commitment to efficiency measures, Management has been able to keep the budget at a flat nominal level for the past five years, despite IBRD and IDA operations growing by some 21 percent since FY14 (see Figure 2.2). 3 The Private Sector Window and the IDA Scale-up Facility have been established to provide increased non-concessional financing for transformational projects, and transitional support for IDA graduates. 11
Figure 2.2: Growth in IBRD/IDA Portfolio Volume vs. Administrative Budget (Percentage Growth from FY14) 22. The Bank achieved US$340 million of sustainable savings through the Expenditure Review. 23. Management has continued the rolling program of Business Reviews to identify opportunities for greater efficiency and strategic alignment. As part of the WBG approach to foster a culture of efficiency through the US$400 million Group-wide Expenditure Review program, the Bank realized savings of about US$340 million (US$300 million clawed-back from Bank Budget and US$40 million benefiting External Funds) by FY18 against the agreed Everything Else Being Equal budget. Sustainable efficiency gains have been achieved mainly in areas related to organizational changes, travel, workforce, technology, and facilities an effort which was made more challenging as changes in our business model increased the costs of doing business. Business Reviews have identified significant savings. Examples to date include the following: Efficiencies in the operating model: A US$20 million reduction in annual IT capital investment in FY18 (compared to the previous four-year average) will help contain depreciation costs over the coming years. Additionally, reforms to ITS operations and maintenance management resulted in a budget reduction of US$10 million that would have otherwise increased ITS s budget from FY19. Lean services and staffing: DEC, LEG and ECR tightened staff complement with exit programs targeted at higher level staff while maintaining focus on supporting the front line. ECR has also focused its efforts on delivering core services, eliminating its publishing and knowledge unit. 12
Organizational realignment: HRD off-shored more work to Chennai. Communications staff from other parts of the World Bank have been remapped to ECR which will enable it to achieve synergies and efficiencies. 24. Management is continuing its drive for efficiencies and productivity improvement. In addition to operational agility and administrative simplification initiatives and Business Reviews cited in Section 2.1 and paragraph 23, Management has identified specific efficiencies resulting from productivity improvements, savings and cost avoidance for the planning horizon in consultation with the Board. Some of these measures are being pursued in coordination with IFC and MIGA as was done during the Expenditure Review. They include the following: Corporate procurement: Management is enhancing efforts to achieve savings and cost avoidance in the procurement/negotiation of corporate contracts by better benchmarking, targeting and tracking of savings at the contract level, by clawing-back savings achieved from unit budgets, and by introducing more transparent pricing/more economical standards for goods and services through the introduction of service catalogues. Workforce structure and compensation: Changes in staff compensation methodology will result in downward budget adjustments. Other workforce measures being planned include controlling numbers and optimizing grade mix through a combination of workforce planning, natural attrition, and enhance performance management. Project portfolio management: Efforts will be made to further strengthen portfolio management and enhance consolidation of new operations in the pipeline to reduce fragmentation whenever feasible. Travel expenditures: Savings will be sought through tighter oversight of travel policy exceptions; roll-out of a mandatory global travel credit card to travelling staff; use of an external vendor to negotiate better hotel rates; rebidding the HQ travel agency contract; and tighter control over number of Bank participants in global events and conferences. 13
Real estate expenditures: Key HQ efficiency measures planned include more efficient space standards; creation of in-house conference space to accommodate large meetings currently held externally; and reduction of leased footprint. In country offices, we are exploring options to purchase rather than lease, where feasible and economical; to increase space sharing with IFC; to consolidate country office facilities depreciation; as well as additional measures to optimize the use of office space around the world. Other measures: Management intends to reduce discretionary spending on food services. It is also looking at opportunities to rationalize use of external contractors particularly in IT. Finally, it will continue to implement recommendations identified through the Business Reviews. 14
FY19 EXPENDITURE FRAMEWORK This section sets out the aggregate funding budget (Bank Budget and External Funds) for World Bank expenditures and demonstrates the budget s consistency with the principles of financial sustainability and efficiency. 3.1 AGGREGATE BANK BUDGET 25. In line with the Bank s current financial position and funding availability, Management proposes a FY19 budget which would be flat in real terms. Consistent with the need to maintain budget discipline and considering (i) strategic priorities, (ii) increasing costs of doing business, and (iii) savings that would derive from efficiencies and the impact of the revised compensation methodology, Management proposes a FY19 budget which would be flat in real terms. More specifically, Management is proposing to limit the increase of the budget for FY19 to 2.4 percent. This represents a zero increase in real terms, and a budget below the one in FY14 in real terms. (See Table 3.1 and Figure 2.2.) As agreed with the Board, Management will draw on the standard 2 percent flexibility band to fund any incremental cost of implementation of the capital package in FY19. If any additional budget funding is required in FY19 for the IBRD scale-up above the 2 percent flexibility band, Management will seek Board approval. Table 3.1: Bank Budget (US$ million) FY18 FY19 Current Trajectory (FY18-FY19 as per FY18 WB Budget Document) 2,550 2,632 Revision to Trajectory (21) Revised Trajectory 2,550 2,611 IBRD Anchor 88% 80% Available for IBRD net income retention/transfer 150 294 IDA Anchor 104% 91% Available for other uses of IDA income - 147 15
26. The proposed FY19 budget will maintain budget sustainability and contribute to the Bank s financial strengthening. Expenses/Revenue US$ million Budget Anchor % Based on a pre-capital increase scenario, the IBRD anchor (the ratio of IBRD expenses over IBRD loan spread revenue) under the planned budget is projected to decline from 107 percent in FY17 to below 100 percent in FY18 and FY19 thus strengthening financial capacity. IDA s budget anchor (the ratio of IDA expenses over IDA net revenue) is estimated to be around 104 percent in FY18, falling below 100 percent in FY19. Figure 3.1: IBRD Budget Anchor 1,600 176% 189% 200% Expenses/Revenues US$ million 1,400 1,200 1,000 800 600 400 200 158% 160% 155% 147% 148% 135% 107% 88% 80% 160% 120% 80% 40% Budget Anchor % 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 0% IBRD Loan Spread Revenue IBRD-funded Expenses IBRD Budget Anchor Figure 3.2: IDA Budget Anchor 1,800 1,600 1,400 90% 93% 98% 96% 98% 102% 100% 94% 97% 104% 91% 120% 100% 1,200 80% 1,000 800 60% 600 40% 400 200 20% 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 0% IDA Revenue IDA-funded Expenses IDA Budget Anchor 27. In developing the FY19 budget, Management sought to maintain aggregate budget efficiency. As illustrated in Figures 3.3-3.6, comparing the FY19 budget envelope with the expected commitments and the size of the portfolio demonstrates the Bank s continued aggregate efficiency despite the growing volume and scope of our work. Annex II provides a detailed breakdown of these indicators for IBRD and IDA respectively. The ratio of administrative budget to number of projects approved is expected to remain flat. On the other hand, the Administrative Budget per US$ billions of loans approved has been heavily influenced by two factors. Firstly, this indicator has shown a declining trend as lending 16
volumes have surged (FY08-FY10) and as a result of cost efficiency drives (FY13-16). Over the FY18-19 period, the increase in the dollar based indicator is attributable to rising costs of doing business, as well as a decline in IBRD lending under the pre-capital increase scenario. The ratio of administrative budget to number of projects supervised is expected to slightly improve. However, the total administrative budget per US$ billions of portfolio under supervision rises only slightly in FY18-19, reflecting the combination of growing and more challenging portfolio and budget restraint. Figure 3.3: Total Admin BB per Lending Project Approved (FY18US$ million) 16 14 12 10 8 6 4 2-11 11 10 10 10 10 9 9 9 9 9 8 8 7 7 7 7 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18(P) FY19(P) IBRD+IDA Figure 3.4: Total Admin BB per Project under Supervision (FY18US$ million) 3.0 2.5 2.0 1.5 1.4 1.6 1.7 1.7 1.6 1.6 1.6 1.6 1.5 1.6 1.7 1.7 1.6 1.6 1.5 1.7 1.6 1.0 0.5 - FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18(P) FY19(P) IBRD+IDA Figure 3.5: Total Admin BB per US$ Billion of Loans Approved (US$ million) 120 100 80 60 40 88 92 90 88 83 85 46 39 53 67 79 62 59 54 59 53 57 20 - FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18(P) FY19(P) IBRD+IDA 17
Figure 3.6: Total Admin BB per US$ Billion Portfolio Under Supervision (US$ million) 30.0 25.0 20.0 15.0 17.4 20.1 21.6 22.4 21.0 20.2 16.6 14.8 13.8 14.2 14.7 13.9 13.1 11.9 11.7 11.6 12.0 10.0 5.0 - FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18(P) FY19(P) IBRD+IDA 3.2 EXTERNAL FUNDS OUTLOOK 28. External Funds have grown significantly as a source of funds in recent years but this share is expected to stabilize. 29. By FY19, Management will complete implementation of a program of measures to ensure that Trust Fund cost recovery arrangements better reflect the actual cost of administering these funds. Most of the Bank Executed Trust Funds (BETFs) that will be drawn on during FY19 have already been paid in. Cash contributions to trust funds have slowed during FY16-18 and, as a result, the double-digit BETF growth of the last few years is not expected to continue and growth in FY19 (compared to FY18 projections) is expected to be around 4 percent. Reimbursable Advisory Services (RAS) is a key element of ASA, with revenues of US$89 million in FY17 expected to reach about US$115 million by FY19. A revised set of directives and guidelines will be issued to equip the Bank with a more flexible and responsive operational framework for RAS. Arising from concerns that a significant share of the costs of administering external funds were being borne by the administrative budget, the Board approved the Trust Fund (TF) cost recovery framework in FY15 which included several measures totaling US$100 million designed to redress this imbalance. The new framework became operational on July 1, 2015. All new trust funds are established under the new cost recovery framework. Further steps were taken in FY18 by adjusting the benefit recovery rate on HQ-appointed staff from 50 percent, the previous rate, which had resulted in an under recovery of actual costs that had to be borne instead by the Bank budget, to the actual 70 percent rate. In addition, a 45 percent rate for Country Office-appointed staff was introduced in FY18 but will be applied to external funds from FY19. 18
Progress continues in aligning external funds with strategic priorities. Forecasting of external funds usage is being improved through their earlier integration into work programming agreements and the roll out of new budget planning and reporting systems. 30. External Funds share of total administrative spending plans is expected to remain flat. Under the base case scenario, External Funds as a share of total administrative spending plans are currently forecast to stabilize at around 38 percent (see Figure 3.7). Figure 3.7: Share of External Funds to Total Funds 40% 35% 32.8% 33.8% 35.4% 35.8% 37.0% 38.2% 30% 27.3% 29.1% 30.5% 31.0% 25% 20% F Y 10 F Y 11 F Y 12 F Y 13 F Y 14 F Y 15 F Y 16 F Y 17 F Y 18 F Y 19 3.3 AGGREGATE BANK BUDGET AND EXTERNAL FUNDS 31. An aggregate resource envelope for FY19 has emerged from the discussion on the strategic framework and the External Funds outlook. Resources for both the Bank Budget (BB) and All Funds (including BETFs, RASs and EFOs) show a growth of 3.5 percent in FY19. Table 3.2: FY19 Bank Budget and External Funds (US$ million) FY18 WB Budget FY18 Projection FY19 Bank Budget Trajectory 2,550 2,550 2,611 External Funds Projections 1,496 1,535 1,616 Total All Funds 4,046 4,085 4,226 * Totals have been rounded to the nearest whole number. 19
FY19 BUDGET This section presents specific details of the FY19 administrative budget proposal and indicates how resources are allocated between main budget categories, demonstrating how this aligns with the WBG strategic directions. It provides details on allocations for operational programs, IG&A units, other non-unit specific budgets, as well as an estimated expense line view. 4.1 ADMINISTRATIVE BUDGET PROPOSAL 32. Management is proposing a Bank Budget of US$2,611 million for FY19, as part of a broader total funds estimate of US$4,226 million. The proposed Budget for FY19 is US$2,611 million as set out in Table 4.1 below. The proposed budget, based on the no capital increase scenario, limits the increase over FY18 to 2.4 percent, which is in line with inflation. The All Funds FY19 envelope is expected to be around US$4,226 million (see Table 3.2). As agreed with the Board, Management will draw on the standard 2 percent flexibility band to fund any incremental cost of implementation of the capital package in FY19. If any additional budget funding is required in FY19 for the IBRD scale-up above the 2 percent flexibility band, Management will seek Board approval. Table 4.1: FY19 WB Budget (US$ million) FY18 FY19 Proposed FY18-19 Budget Trajectory (Nominal) 2,550 2,611 % Change YOY 2.4% Proposed FY18-19 Budget Trajectory (in FY18$) 2,550 2,547 % Change YOY -0.1% 20
4.2 ADJUSTMENTS TO THE BUDGET 33. Adjustments to the budget were needed to address rising cost of doing business with offsetting adjustments resulting from efficiency measures and productivity gains. 34. Incremental funding additions to unit budget trajectories have been prioritized for FY19, with strong emphasis on clientfacing operational priorities, reflecting increased business volumes and to ease selective rising costs of doing business. Adjustments impacting the budget presented in the FY18 Budget Document come from (1) selected incremental additions to unit budget trajectories associated with rising business volumes and rising cost of doing business; and (2) new claw-backs from unit budget trajectories resulting from efficiency measures and the impact of the revised compensation methodology. It should be noted that incremental additions to the budget reflect only a small part of the cost of doing business some of the rising costs were already included in the budget presented in the FY18 Budget Document; other costs are being absorbed through efficiency measures, internal redeployments or trade-offs within/across VPUs, or minimized through cost avoidance and productivity measures. It should also be noted that new claw-backs more than offset the incremental additions to result in the flat real budget; and that these claw-backs are in addition to budget claw-backs to FY19 made in previous budget cycles. During the planning process, Management considered options for funding incremental requests through three mechanisms: (1) internal reallocations and trade-offs; (2) efficiency measures and productivity gains; and (3) prioritization of incremental funding as per the strategic priorities discussed in Section 2. VPUs were asked to present options for trade-offs and reductions in administrative budget spend. In addition, savings from efficiency measures and adjustments resulting from the revised compensation methodology were reflected in each VPU budget. The following funding additions to unit budget trajectories have been identified: Supervising an expanding portfolio with more complex and risky projects, including enhanced supervision in FCV countries and small states. Sustaining engagement with all clients with an appropriate level of analytical and advisory services at the country level. Rolling out the new Environmental and Social Framework and implementing the Gender-Based Violence Action Plan. 21
Performing additional responsibilities to address the increased complexity of the hybrid IDA-18 financial model and risk management measures, and reinvestment for efficiencies. Addressing a range of cost pressures that are building up across the institution that cannot be offset by redeployments. Table 4.2: Incremental Additions to the Budget (US$ million) Supervising an expanding portfolio, including in FCV and small states Sustaining Client engagement, including through ASA 5 Gender Based Violence Action Plan and additional funding for the Environmental and Social Framework Increased complexity of IDA 18 financial model, risk management and reinvestment for efficiencies Depreciation - Other cost pressures 1 As usual, a central contingency (US$10 million) will also be available to add to unit trajectories during FY19 for unforeseen priorities and cost pressures. FY19 Total Incremental Additions 31 2 17 6 35. Unit budget trajectories were then adjusted to reflect efficiency measures and associated clawbacks. Management has identified claw-backs for efficiency measures that more than exceed these cost pressures, with additional savings identified which have resulted in reduction in growth spending levels to flat real. Claw-backs include: Reductions to budget predicated on declining IBRD lending in the pre-capital increase scenario. 4 Reductions to budget to off-set subsidies previously paid to World Bank VPUs in lieu of full cost recovery of World Bank staff benefits for staff time spent providing shared services to IFC (IFC has agreed to cost Shared Service Agreements at the full benefit rates effective FY19). Adjustments to the budget for Executive Directors in line with the recent endorsement by COGAM. Reduction in the budget of the Board of Governors. 4 They are predicated on a reduction of IBRD lending from US$24 billion in FY18 to the pre-capital increase projections of US$22 billion in FY19. 22
Reductions to budget resulting from: (i) impact of the revised compensation methodology this is applied across units using a restated price factor; and (ii) savings from efficiency measures, including efficiencies in corporate procurement, workforce structure and other measures. Table 4.3. Claw-backs from Budget (US$ million) FY19 Savings due to lower IBRD lending volumes 3 IFC MIGA full Benefit recovery from SLAs 8 Savings from Board of Governors Budget 1 Savings from Executive Directors Budget 2 Reductions from Compensation Review 12 Efficiency savings 25 Reductions/Clawbacks from Unit Trajectories 52 4.3 STRATEGIC ALIGNMENT BY WORK PROGRAM 36. The FY19 budget distribution demonstrates increased strategic alignment of resources with frontline operational delivery. Table 4.4 presents the FY19 budget distribution by main programs and funding sources. In line with Management s commitment to the Board, the share of Bank Budget (BB) resources to Operations and front-line services will increase from 55 percent in FY16 to 59 percent in FY19. The share of Operations in the All Funds unit budget is projected to increase from 60 percent in FY16 to around two-thirds of unit trajectories in FY19. Table 4.4: FY18-19 Budget by Work Program & Funding Source (US$ million) INDICATIVE BUDGET TRAJECTORIES BANK BUDGET ALL FUNDS FY18 1 FY19 FY18 FY19 TOTAL OPERATIONAL UNITS (Excl GMF) 1,494 1,566 2,509 2,678 Client Engagement 820 871 1,745 1,888 Country Engagement 732 781 1,460 1,578 Global Engagement 88 90 285 310 Program & Practice Management 674 695 764 790 Grant Making Facilities 35 35 35 35 TOTAL OPERATIONS 1,529 1,601 2,544 2,713 IG&A PROGRAMS 1,086 1,084 1,402 1,410 Institutional Services 404 412 595 614 Governance Services 219 216 236 234 Administrative Services 463 456 571 562 TOTAL: ALL UNITS 2,614 2,685 3,945 4,123 CENTRALLY MANAGED ACCOUNTS 100 103 101 103 o/w Corporate Contingency 10 10 10 10 TOTAL TRAJECTORY 2,714 2,788 4,046 4,226 o/w Funded by External Funds (164) (177) (1,496) (1,616) Net Trajectory Funded by IBRD/IDA 2,550 2,611 2,550 2,611 23
Table 4.5: 18-19 Budget Share by Work Program and Funding Source Share of Budget Trajectory BB ALL FUNDS FY18 FY19 FY18 FY19 Total Operational Units 57.9% 59.1% 64.2% 65.5% Client Engagement 31.8% 32.9% 44.6% 46.2% Country Engagement 28.4% 29.5% 37.3% 38.6% Global Engagement 3.4% 3.4% 7.3% 7.6% Program & Practice Management 26.1% 26.2% 19.5% 19.3% IG&A Programs 42.1% 40.9% 35.8% 34.5% Institutional Services 15.7% 15.5% 15.2% 15.0% Governance Services 8.5% 8.2% 6.0% 5.7% Administrative Services 17.9% 17.2% 14.6% 13.8% TOTAL: ALL UNITS (excl. GMFs) 100% 100% 100% 100% In addition, a greater share of these resources will be allocated to Client Engagement. The current program shows an increase of the share of BB Client Engagement (Country Engagement plus Global Engagement) in operational unit trajectories from 53.7 percent in FY16 to 55.6 percent in FY19. The Client Engagement share on an All Funds basis is projected to rise from 67.4 percent in FY16 to 70.5 percent in FY19. Figure 4.1: Operational Share of Unit Budgets 68.0% 66.0% 64.0% 62.0% 60.0% 58.0% 56.0% 54.0% 52.0% 65.5% 64.2% 62.8% 60.4% 59.1% 57.9% 56.8% 54.9% FY16 FY17 FY18 FY19 BB All Funds Note: FY16-18 BB restated to reflect the new arrangements for RAMP and other asset management services (original BB operational share of unit budgets were: 54.3%, 56.2%, and 57.2% for FY16, FY17, and FY18, respectively). 24
Figure 4.2: Client Engagement Share of Operational Unit Budgets (including Country Engagement and Global Engagement) 72.0% 67.0% 67.4% 67.7% 69.6% 70.5% 62.0% 57.0% 53.7% 54.1% 54.9% 55.6% 52.0% FY16 FY17 FY18 FY19 BB All Funds 25
Box 4.1: Administrative Budget Envelopes Under the organization structure introduced in FY15, the World Bank s administrative budget is allocated to units through work program envelopes and additional expense envelopes as follows: 1. Operational Units Funding is provided to operational units through the Client Engagement and Program and Practice Management envelopes. Client Engagement: This comprises Country Engagement and Global Engagement envelopes. o o The Country Engagement (CE) envelope: This includes funding for preparation and supervision work with respect to financial services (such as lending, grants and guarantees), knowledge services (such as advisory services and analytics) and convening services (such as country strategy and partner coordination/mobilization). The Global Engagement (GE) envelope: This includes funding for global engagement activities, without a specific country identification, incl. work on Global Public Goods, global knowledge services, global convening services, and global programs administrative services. Program and Practice Management (PPM): This envelope funds the cost of running the operational work program, and includes funding for management, administrative support services, space and IT costs, extended assignment benefits for field assignments, plus knowledge management, innovation and staff training/learning. 2. Institutional, Governance and Administration (IG&A) This envelope comprises the funding provided to IG&A units to cover the cost of running the institutional, governance and administrative services that support the World Bank s operational delivery. Total unit trajectories are the sum of Operational and IG&A unit trajectories. The two additional expense area envelopes comprise the following: 3. Grant-Making Facilities (GMF) This envelope provides Board-mandated transfers to external facilities. 4. Centrally Managed Accounts (CMA) This envelope contains funding for expenses that are centrally administered and non-unit specific such as depreciation, lease costs and benefits as well as certain institutional programs. 26
4.4 OPERATIONAL WORK PROGRAM 37. As a greater share of resources is directed to operational activities in FY19 and allocations to all regions grow, additional funding will be made available for the Bank s key strategic priorities. As more resources are directed toward front-line activities, additional funding will be made available for the Bank s key strategic priorities: (i) ensuring delivery of IDA-18 scale up, (ii) enhancing engagement in FCV countries and small states, (iii) continued engagement with IBRD clients, (iv) supporting implementation of the new ESF, and (v) harnessing collaboration across the WBG in maximizing finance for development in developing client solutions. Specifically, as set out in Table 4.6, additional resources have been directed towards the two largest IDA regions, namely AFR and SAR, for the preparation and delivery of the pipeline for IDA and FCV scale-up as well as related supervision needs. The AFR Region s FY19 Country Engagement (CE) budget would increase by 8 percent (or US$20 million) over FY18. Similarly, the SAR Region s FY19 CE budget would increase by 4 percent (or US$5 million) over FY18. To avoid crowding out of other country programs due to cost pressures in delivering on small states, additional resources have been allocated to the two regions with the largest IDA allocations for these countries the EAP Region (with an increase of 4 percent or US$4 million over its FY18 CE budget) and the LCR Region (an increase of 1 percent or US$1 million over its FY18 CE budget). The MNA and ECA Regions were allocated an increase to support continuing client engagement demands. As shareholders endorsed the IBRD capital package during the Work Program Agreement (WPA) process, Management has started consulting externally with clients and internally with business units on the specific lending volumes, policy commitments and budgetary implications of this package, which are not yet reflected in the WPA outcomes discussed in this section. Any incremental funding needs for FY19 emerging from this analysis will be absorbed within the 2 percent flexibility band and, if above that, Management will seek Board approval. FY20-21 budget needs will be assessed as part of the next year s Strategic Planning and Budgeting cycle. 27
Management has recently aligned the Sustainable Development Practice Group and the Global Themes Vice-Presidency to balance the distribution of responsibility over the World Bank program. The budget of these two Vice Presidencies will be re-apportioned according to the new structure as the details are finalized and will be updated in the FY19 Q1 Quarterly Business and Risk Review (QBRR). 28
Table 4.6: FY19 Operational Budget Envelopes (US$ million) INDICATIVE BUDGET TRAJECTORIES BB ALL FUNDS FY18 FY19 FY18 FY19 AFR CE 266 286 489 528 PPM 119 123 123 127 Total 385 409 612 654 EAP CE 105 109 232 247 PPM 61 61 66 65 Total 167 171 298 312 ECA CE 86 87 188 194 PPM 54 55 55 56 Total 140 142 243 250 LCR CE 96 97 151 156 PPM 56 57 57 58 Total 152 154 207 213 MNA CE 60 61 166 189 PPM 36 36 37 38 Total 95 97 203 227 SAR CE 120 125 235 249 PPM 52 55 54 57 Total 172 180 289 306 Other Operational Units' Allocations 1 CE - 16-16 All Regions CE 732 781 1,460 1,578 PPM 378 387 393 400 Total for Regions 1,111 1,168 1,853 1,978 GP/GT GE GE 88 90 285 310 GP/GT PPM Equitable Growth, Finance and Institutions 77 80 89 92 Human Development 37 40 43 46 Sustainable Development 106 105 164 168 Other Operational Support 2 62 64 62 64 Global Themes 13 18 13 19 Total GP/GT PPM 295 308 371 390 Total GP/GT 383 398 656 700 Total Operational Units 1,494 1,566 2,509 2,678 1 CE funded to GPs for FCV enhanced supervision pilot, and additional funding for GBV Action Plan and the new ESF implementation. The latter is complemented by US$6 million additional funding to OPCS in FY19 to support the new ESF roll-out. 2 Includes Extended Assignment Benefits (EAB) for operational staff and funding to support Agile Bank initiative, and aspects of the work on FCV Supervision Pilot and Gender-based Violence (GBV) Action Plan. 29
38. The outcome of the WPA process shows a significant increase in budget allocations for work on IDA countries in FY19. Allocations to IBRD and IDA countries from the CE envelope are set out in Figure 4.3. Overall budget allocations for operational work in IDA countries have increased from US$420 million in FY18 to US$459 million in FY19 an increase of US$39 million (9 percent), bringing the IDA funded share of the Country Engagement Work Program from 57 percent to 59 percent. The allocations to IBRD countries (pre-capital increase) increased by US$10 million (3 percent), but are expected to increase further postcapital increase. Figure 4.3: Evolution of the Country Engagement Bank Budget from FY18 to FY19 (US$ million) 39. Country Engagement allocations across business processes are reflective of strategic priorities emerging from country dialogue. As highlighted in figures 4.4 and 4.5, additional resources have been directed towards front-line activities, in particular for Supervision, Fiduciary and Safeguards work. The total allocation for these categories in FY19 amounts to US$387 million or 50 percent of the total CE allocation. This is an increase of US$40 million over the FY18 allocation or an increase of 12 percent. This noteworthy increase reflects the Bank s growing and increasingly complex portfolio and the implementation of the new ESF. Funding for Analytical and Advisory Services (ASA), which aim to help our clients adopt better policies, implement reforms, strengthen institutions, build capacity and inform development operations, also see a significant increase and represents 20 percent of CE. This is the second successive annual increase and reflects the Bank s commitment to do more core diagnostic/analytical work, 30
remain engaged in dialogue across all client groups, as well as underpin future lending including in FCV/FCV-risk countries. Resources for Lending preparation (pre-capital increase), representing 17 percent of CE, on the other hand, have slightly declined from previous years reflecting an explicit effort to consolidate tasks and reduce fragmentation in the pipeline whenever feasible. Given the IDA-18 envelope that is 50 percent larger than IDA-17, the doubling of IDA resources in FCV, and a tripling in resources for small states, as well as new windows, the Bank will need to be more agile and innovative in finding synergies in consolidating lending tasks and reducing fragmentation. Figure 4.4: Country Engagement Bank Budget Allocations by Business Process for FY17-19 (US$ million) 31
Figure 4.5: Country Engagement Bank Budget Allocation Shares by Business Process for FY17-19 20% 20% 17% 31% 31% 32% 8% 9% 9% 7% 7% 8% 21% 20% 20% 4% 3% 4% 9% 9% 10% FY17 FY18 FY19 Other COMO ASA Safeguards Fiduciary Supervision Lending 40. Fiduciary and Safeguards allocations will increase significantly for the third year in a row. The roll-out of the new Procurement Framework and Environmental and Social Framework have been designed to ensure that Bank-financed projects are delivered to the highest standards. The recently introduced Procurement Framework is designed to increase the flexibility, efficiency and transparency of the procurement process, and the new Environmental and Social framework (ESF), which will become operational in FY19, will enhance the sustainability of financing by deepening protections of people and the environment from adverse impacts. Going beyond individual projects, the framework aims to strengthen national systems and institutions in client countries. As the Bank s portfolio grows, and the Bank s footprint expands into more challenging environments, Fiduciary and Safeguard allocations will increase by an additional 12 percent in FY19, or 62 percent since FY16. Following a significant increase in FY17 and FY18 to support the implementation of the new procurement framework and the IDA-18 scale up, resources for fiduciary work will increase by an additional 4 percent to US$70 million in FY19. Equally, following large increases in FY17 and FY18, allocations for Safeguards work will increase by 23 percent to US$64 million in FY19. This includes an additional allocation of US$10 million provided in response to an estimate of the incremental costs of 32
project safeguard requirements expected under the new ESF effective October 2018. Figure 4.6: CE Spending on Fiduciary and Safeguards for FY16-19 41. Country Engagement allocations across Practice Groups reflect strategic priorities emerging from country dialogue. FY19 WPAs, driven by client demands, have resulted in increased resources in all GP Practice Groups. The increases across Practice Groups are broadly equal in percentage terms and consequently the FY19 CE allocations show Sustainable Development, including Safeguards, holding the largest share, followed by Equitable Growth, Finance and Institutions, followed in turn by Human Development. Figure 4.7: FY19 Country Engagement Allocation Shares by Practice Group 33
42. Country Engagement allocations for fragility, conflict, and violence (FCV) affected countries will increase by 9 percent in FY19, which is a 35 percent increase since FY16. As illustrated in Figure 4.8, the CE allocation to FCV and FCV at risk countries (IDA and IBRD) increased by US$13 million (9 percent) from US$142 million in FY18 to US$155 million in FY19. Of the total FY19 CE increase (US$49 million), some 27 percent (US$13 million) was directed to FCV/FCV-Risk countries. The increase in allocations on FCV and FCV at risk countries since FY16 amounts to US$40 million or 35 percent. The Bank is meeting its IDA-18 commitment to add staff in FCV locations during the IDA-18 three-year cycle. In the area of mobility and careers for FCV staff, the Bank s focus is on: a) emphasizing FCV experience in selections and assignment to senior positions; b) strengthening next assignment planning; and c) monitoring recruitment, deployment, development, promotion and careers. A number of leadership, learning and mentoring programs for FCV staff and managers have been developed, such as an onboarding program customized for FCV staff and delivered in Cairo in December 2017. Hazard and Fragility Pay was introduced in October 2017, benefitting over 700 country office appointed staff in 27 hazardous and/or FCV locations. Another area of focus is staff health and wellbeing, with several initiatives underway to support FCV staff. Figure 4.8: Country Engagement Bank Budget Allocations for FCV and FCV at Risk Countries for FY16-19 (US$ million) 34
43. Country Engagement allocations to Small States will increase by 8 percent in FY19, which is a 51 percent increase since FY16. As illustrated in Figure 4.9, the CE allocation to Small States increased by 8 percent from US$45 million in FY18 to US$48 million in FY19. The increase in spending on Small States since FY16 amounts to US$16 million or 51 percent. Figure 4.9: Country Engagement Bank Budget Allocations to Small States for FY16-19 (US$ million) 44. The Bank is continuing to make progress on the goals set out in the WBG Climate Change Action Plan. Continued ambitious attention to, and global leadership on, climate change is critical to meeting the development mission of the World Bank Group (WBG). To this end, the WBG is expected to reach at least 26 percent climate co-benefits in total commitments by the end of FY18 and will meet its 28 percent target by 2020. This continues the strong upward trend from 18 percent in FY15. The World Bank will continue to support transformational policies needed to deliver climate actions, mobilize private sector investment and inform the global discussion on the climate agenda. Funding for such efforts will be directed through: (1) the Country Engagement budget envelope in support of the preparation and supervision of projects that generate climate co-benefits and of climate related analytical and advisory work (both projects and analytical/advisory tasks are climate tagged during the FY as their content and design are defined); (2) the Global Engagement and PPM budgets in support of the Global Themes VPU (see Table 4.6); and (3) research work done by DEC. 35
45. Narrowing the gender gap features prominently in the World Bank Group s FY19 work program. The World Bank Group Gender Strategy (FY 2016-2023) outlines the support to countries and companies to (i) close gaps in health and education, (ii) remove constraints to women s labor force participation, (iii) work to increase women s ownership and control of assets, and (iv) enhance women s voice and agency, including addressing gender-based violence. In addition, following the report of an independent Task Force in the Fall of 2017, an action plan has been adopted by Management and shared with the Board detailing measures to help prevent and respond to sexual exploitation and abuse or gender-based violence, improve monitoring systems, and empower teams to report any cases as they emerge in the projects the Bank supports. To operationalize the Bank s gender goals, gender issues will be included in the Country Partnership Frameworks (CPF) and other diagnostic instruments. Bank tasks are becoming increasingly gender informed reflecting the mainstreaming of Gender in to the Bank s work program. Accordingly, funding for gender work will be directed through: (1) the Country Engagement budget envelope in support of the preparation and supervision of projects and of analytical and advisory work that address gender gaps (both projects and analytical/advisory tasks are gender tagged during the FY as their content and design are defined); (2) the Global Engagement and PPM budgets in support of the Global Themes VPU; (3) the Practice and Program Management budget in the two regions (AFR and EAP) where staff work on gender issues in the Gender Innovation Labs; and (4) research work done by DEC. 46. Global Engagement funding from BB sources is expected to increase in FY19 to US$90 million and is complemented by external funds provided by various partners. The Bank s Global Engagement work program supports noncountry-specific priorities, including (i) fulfilling corporate commitments; (ii) supporting innovation and product development to support evidence-based policy making by developing global databases, tools and evaluations and to maintain WBG leadership in global public goods, (iii) sustaining partnerships and global engagements, and (iv) providing operational support to leverage knowledge services and enable rapid and flexible operational response. 36
Bank funding has been allocated based on the following categories: Corporate Commitments (US$40 million). Priorities include work on data quality and production in support of both the Twin Goals and the SDGs (Data for Goals), support to the G20, and contributions to the Global Partnership for Social Accountability (US$1.5 million) and Facility for Investment Climate Advisory Services (US$2.0 million). Other engagements include work on the Human Capital Project, debt relief, sustainability and management, jobs, Universal Financial Access, support to the Financial Stability Board (FSB), products design to support MFD, and the Stolen Asset Recovery (StAR) initiative. Global Themes (US$26 million). This category supports the Bank s efforts to better deliver on cross-cutting commitments that involve multiple Global Practices, and in many cases IBRD/IDA, IFC and MIGA. These commitments comprise Fragility, Conflict and Violence (FCV), Gender, Infrastructure/PPPs/Guarantees, Knowledge Management as well as addressing key climate change mitigation and adaptation priorities in partner countries and to enable delivery of the Climate Change Action Plan. Priorities include delivering on IDA-18 commitments and the MFD approach. Operational Support (US$24 million). This includes allocations to Global Practices to support on-going and new strategic engagements, innovation, product development and partnerships, and to facilitate knowledge services. New engagements in FY19 are expected to include work on trade, poverty and inequality; Jobs Country implementation and analysis; adult learning and literacy; Schools of the Future; Disruptive Technologies for Development; pollution-smart interventions; and innovative financing for city development and infrastructure. 37
Figure 4.10: FY19 Global Engagement by Practice Group and Category 47. The Program and Practice Management (PPM) budget will increase by 3 percent (see Table 4.4), with units targeting efficiencies to address rising cost pressures. The PPM budget for operational units will continue to support the operational work program, including for priorities like decentralization and staff learning. Rising cost pressures in this area (notably for country office facilities, security and extended assignment benefits resulting from continuous decentralization) will be addressed through efficiencies measures keeping focus on how best to optimize organizational and management structure, grade mix and facilities management, and applying agile and simplification in approaching our work. Within the PPM budget, units continue to redeploy resources toward priorities, for example staff learning (including for the new ESF implementation learning requirements) and span of control of Practice Managers. PPM in FY19 also includes allocations toward aspects of work under FCV supervision pilot and the Gender Based Violence (GBV) Action Plan, and for the implementation of the Knowledge Management Action Plan. 38