CRW Eligibility Matrix: IDA Crisis Response Window (CRW) Support for the Drought Emergency in the Horn of Africa

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized CRW Eligibility Matrix: IDA Crisis Response Window (CRW) Support for the Drought Emergency in the Horn of Africa International Development Association IDA Resource Mobilization Department (CFPIR) November 2011

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3 CRW Eligibility Matrix: IDA Crisis Response Window (CRW) Support for the Drought Emergency in the Horn of Africa 1. In the Board discussion of the Proposal for CRW Financing for the Drought Emergency in the Horn of Africa (Report No. IDA/R ) on September 15, 2011, Executive Directors requested additional information on the correspondence between the characteristics of the drought emergency and the CRW eligibility criteria as well as the applicable process. The attached CRW Eligibility Matrix responds to Directors request, providing an outline of the process and criteria agreed in the IDA16 Replenishment for accessing CRW financing along with the eligibility considerations for the Horn of Africa drought emergency The IDA16 Replenishment report outlines the conditions for accessing CRW resources in the case of natural disasters and establishes a two-phase process for Board consultation and approval of the CRW allocation. Specifically, In the first phase, Management consults the Board shortly after the disaster occurs to indicate that access to CRW resources would form part of an appropriate response. The consultation required in the first stage took place in the Board Briefing on the Horn of Africa emergency on July 28, The briefing outlined the broad dimensions of the emergency and the number of people affected in the worst-hit countries; the proposed three-phased Bank response to the crisis (rapid response, medium term and long term); and indicative financing requirements, including proposed CRW financing of US$ 250 million. Directors urged a rapid and comprehensive Bank response to the evolving emergency, and Management agreed to work towards presenting a proposal for CRW support by mid-september In the second phase of the CRW assessment process, Management seeks Board approval on the provision of CRW support at a specified level. In addition, the CRW allocation request is presented alongside documents for one or more projects to be financed by the CRW. Management fulfilled the second stage requirement through the Board presentation of the Proposal for CRW Financing for the Drought Emergency in the Horn of Africa (referred to as CRW Board document below) along with the first proposed project for CRW financing, the Horn of Africa Emergency Health and Nutrition Project (P127949), on September 15, The matrix makes reference to the CRW Board document and provides supplementary information for clarification as appropriate. 1 Additions to IDA Resources: Sixteenth Replenishment. Report from the Executive Directors of the International Development Association to the Board of Governors (World Bank, 2011). See Section 3 (pages 25 29) and Annex 3.

4 2 CRW Eligibility Requirements Considerations First Stage The consultation required in the first stage took place in the Board Briefing on the Horn of Africa emergency on July 28, Review available impact data to inform early assessment of need to access CRW resources 2. Assessment may also take into account whether the country has: Issued a declaration of emergency; Requested CRW resources; Requested a Post- Disaster Needs Assessment (PNDA) or Damage and Loss Assessment (DaLA) Regional management prepared an initial internal assessment of the unfolding impact of the Horn of Africa drought emergency on July 22, The assessment of the drought impact highlighted the US$1.87 billion OCHA needs estimate; the elevated Integrated Food Security Phase Classification; and the combined effects of drought and high prices for staple foods on vulnerable groups. In particular, the assessment highlighted potential impacts on 11.4 million people and up to two million children under the age of 5. Based on this assessment, regional management indicated in the July 28 Board Briefing that an exceptional CRW allocation of US$250 million was considered to be made available towards a comprehensive package of assistance for the most affected countries in the sub-region. To assess the scale and nature of the emergency, IDA Management undertook an initial review that considered available parametric comparisons and assessments of the broad impact of the drought emergency; the humanitarian requirements to date; country responses to the disaster; and the availability of undisbursed IDA balances and the IDA16 allocations for the most affected countries --Kenya, Ethiopia and Djibouti. The Government of Kenya declared a national disaster on May 30, 2011; the Government of Ethiopia outlined the growing crisis situation in a Humanitarian Requirements document in July 2011; and the Government of Djibouti declared a state of emergency, also issuing an international appeal for crisis support on July 28, While Kenya and Djibouti have requested PDNAs related to the drought emergency and Ethiopia has requested an assessment of the macroeconomic impacts of the drought, the results of these assessments were not available in time for the first or second stages of the CRW assessment process. 2 In the absence of a PDNA or DaLA and given the compressed timeframe for the Bank s response to the drought emergency, the Bank based its assessment of the emergency requirements on: (i) the best available parametric comparisons and assessments of the crisis 2 The PDNA for Djibouti began on October 8, 2011 while the PDNA for Kenya is tentatively scheduled for November 1 28, Note that a country s request for a PDNA/DaLA may be taken into account in the Bank s assessment of requirements for CRW support, although such a request is not a prerequisite for CRW financing (Additions to IDA Resources: Sixteenth Replenishment. Report from the Executive Directors of the International Development Association to the Board of Governors, Annex 3, 13).

5 3. Assessment of World Bank capacity to respond without accessing CRW 4. Outline cooperation with the United Nations, particularly OCHA 3 situation from the UN-OCHA, UNHCR, UNICEF and FEWSNET among other sources; 3 (ii) findings from detailed incountry assessment missions undertaken from August that included extensive dialogue with Government officials at the central government and relevant line ministries as well as with donor partners in Kenya, Ethiopia and Djibouti; and (iii) dialogue with development partners engaged in the international crisis response for purposes of information and data gathering, coordination and information sharing. Given the requirement that the CRW provide financing of last resort, IDA management initiated discussions with country teams in end-july to discuss the scope for mobilizing existing IDA resources as part of a comprehensive Bank response. Management s portfolio analysis, internal dialogue and dialogue with clients during the assessment missions in Kenya, Ethiopia and Djibouti consequently focused on maximum mobilization of undisbursed IDA balances from the portfolio as well as IDA16 allocations as appropriate. This internal review process also considered options and constraints for World Bank support to Somalia. As indicated in the July 28 Board briefing, the Bank participated in an emergency ministerial-level meeting on the Horn of Africa at FAO Headquarters in Rome on July 18, 2011, in which it was agreed that relief and recovery activities were the first order of priority and that medium- to long-term support would also be critical to promote economic recovery in the region. More broadly, Senior Bank management has had ongoing engagement in both the High Level Task Force (HLTF) chaired by the UN Secretary General and the broader coordination effort in the Horn. The Bank s approach is consistent with the guiding principles adopted by the HLTF to address the drought emergency, including inter alia (a) a country level focus; (b) working through existing mechanisms where these are functioning; (c) scaling up programs that are already working rather than starting from scratch; and, (d) focusing on institutions that have demonstrated a capacity to yield long-term results in ways that make efficient use of resources. Second Stage Management fulfilled the second stage requirement through the Board presentation of the Proposal for CRW Financing for the Drought Emergency in the Horn of Africa along with the first proposed project for CRW financing, the Horn of Africa Emergency Health and Nutrition Project (P127949) on September 15. (See CRW Board document, paragraph 27.) 5. Validation of initial impact data with PDNA and other information to calculate final As noted above, impact data from a PDNA was not available within the six-week timeframe for presentation of the CRW proposal to the Board. The Bank validated initial impact data 3 United Nations Office of Humanitarian Affairs (OCHA); United Nations Children s Fund (UNICEF); United Nations High Commissioner for Refugees (UNHCR); and FEWSNET (Famine Early Warning Systems Network).

6 allocation 6. Final decision will be informed by IDA past practice and would take account of the following factors: 6a) Severity of crisis and costs of recovery from PNDA/DaLA 6b) Number of affected persons 4 through multidisciplinary assessment missions in Ethiopia, Kenya and Djibouti in mid-august The assessments and conclusions from these missions supplemented information from available parametric comparisons and international situation reports from the UN-OCHA, UNHCR, UNICEF and FEWSNET which together provided the best available assessment of the dimensions of the evolving crisis. (See CRW Board document, Section II.) The Bank s assessment missions concluded that long-term country/regional financing needs were significantly higher than originally anticipated, resulting in an increase of the overall drought response package from US$ 686 million to US$ 1.88 billion. The size of the US$250 million CRW allocation reflects the severity of the emergency in the affected countries as well as the availability of CRW resources for the three-year IDA16 period. The distribution of the CRW resources between the country and regional programs is based on a combination of drought impact, refugee influx and the ability of the existing IDA portfolio and pipeline of IDA projects to meet the additional financing needs arising from the crisis. In particular, as financing of last resort, the CRW allocation will supplement rather than substitute for IDA financing for long-term drought resilience and climateresilience interventions as agreed in existing country partnership strategies; accordingly, the majority of the financing for mediumterm recovery and long-term resilience would be provided by IDA16 country allocations as well as reallocation of existing IDA undisbursed balances as appropriate. (See CRW Board document, paragraph 28.) The proposed US$250 million CRW allocation accounts for roughly 13 percent of the total US$1.88 billion WBG response and will be used to finance all or a portion of ten of the projects expected to contribute to the rapid response phase of the overall drought response package. According to OCHA, roughly US$1.04 billion of the total humanitarian requirements remained unmet in end-august Beyond the immediate humanitarian needs, the drought emergency also sharpened the focus on broader financing requirements for longer-term livelihood recovery, restoration of livestock production, resilience and preparedness, investment in drought resistant agriculture, and climate-resilient investments. As noted in #3 above, the Bank s estimate of the total financing required for a comprehensive drought response (encompassing immediate, medium-term and long-term interventions) was informed by the best available information on the emergency, dialogue with international partners in the context of the HLTF and in-country needs assessments with country authorities in Kenya, Djibouti and Ethiopia. By end-august, nearly 12.5 million people were affected by the drought in the most affected countries, namely Djibouti, Ethiopia, Kenya and Somalia. This included nearly 120,000 new Somali refugees in Ethiopia, Kenya and Djibouti by end-july, with up to

7 5 6c) Estimates of impact on GDP 6d) Availability of resources to respond to the crisis from (i) IDA portfolio; (ii) domestic resources; (iii) other external financing including IBRD; (iv) amount of remaining CRW resources 1,300 new arrivals per day in Kenya and 300 arrivals per day in Ethiopia in mid-august according to UN estimates. (See CRW Board document, Table 1.) Ethiopia: The affected population of 4,567,256 accounted for 5% of the total population, which equaled 84,975,606 people in Kenya: The affected population of 3,200,000 accounted for 8% of the total population, which equaled 40,862,900 in Djibouti: According to the Djibouti Government, the drought represents the fourth consecutive year of failed rainfall in the northwest and southeast and severely affected more than 120,000 people in rural areas equivalent to 50 percent of rural population and 15 percent of the total population. (See CRW Board document, paragraph 9.) The assessment of economic impact was provisional at the time of the presentation of the Board document (see CRW Board document, paragraph 15). As noted in the document, the impact of the drought emergency on affected populations in the worst-hit areas was significant, despite less pronounced effects at the national level in Kenya and Ethiopia. Preliminary IMF estimates of the economic effects of the drought emergency in Ethiopia suggested that the impact on GDP would likely be modest, partly reflecting the relatively small overall contribution of the droughtaffected areas to Ethiopia s agricultural productivity and GDP. Nonetheless, macro impacts of the drought emergency included an increase in headline inflation, which in July 2011 reached 39 percent (year on year). Estimates suggested that Kenya s GDP growth could be reduced by up to 1 percent as a result of simultaneous shocks to the economy, including the drought, higher international food and fuel prices, and emerging electricity shortages (due in part to the drought-induced need to scale-back hydroelectric generation). While information on the scale of the economic impact of the crisis in Djibouti is forthcoming, the Government of Djibouti highlighted constrained industrial production owing to water and electricity rations resulting from the drought. (See CRW Board document, paragraph 15.) IDA Portfolio: The continued relevance of IDA programming in Kenya, Ethiopia and Djibouti for the medium-term and long-term crisis response limited the scope for broad reallocation away from planned or existing programs. As discussed in the CRW Board document, the ongoing IDA program and pipeline remain highly relevant for medium-term recovery and long-term resilience, including operations focused on building agro-pastoral livelihoods and strengthening the resilience of communities in arid or semi-arid areas. In mid-august 2011, undisbursed IDA balances amounted to US$2.13 billion for Ethiopia, US$1.9 billion for Kenya and US$29.9 million for Djibouti. (See CRW Board document, paragraph 25.) Domestic resources: As discussed in the Board paper, the scale of the drought emergency both in terms of vulnerable groups in Kenya, Ethiopia and Djibouti as well as the surging refugee population quickly overwhelmed the existing emergency response capabilities of the affected countries, resulting in the

8 6 international appeal for support. 4 Ethiopia significantly mobilized its own resources to respond to the impact of the drought, in addition to donor contributions, including substantial additional grain for emergency food reserve from its own resources. Kenya too mobilized around US$10 million of its own resources towards the humanitarian response as well as long-term recovery, in conjunction with donor agencies. In end-july 2011, the Government of Djibouti established an emergency fund with US$1.2 million (200 million of Djibouti Francs) to provide emergency assistance to people most affected by the drought and extended an international appeal for external assistance due to the scale of the emergency and the burgeoning refugee population. Other external financing including IBRD: The aggregate level of resources required to address both the short- and longer-term aspects of the crisis are very substantial, and in short supply. None of the affected countries have access to IBRD financing. For the immediate needs alone, estimated at US$2.4 billion by OCHA, there is a financing gap of over US$1 billion (see CRW Board document, paragraph 25.) Amount of remaining CRW resources: The size of the allocation reflects the severity of the emergency in the affected countries as well as the availability of CRW resources, which are intended to last through the entire three-year IDA16 period. The US$250 million allocation accounts for 16.6% of the available US$1,509 billion in the IDA16 CRW envelope. 6e) Absorptive capacity Ethiopia: The CRW allocation for Ethiopia will provide US$70 million in additional financing for the Productive Safety Net Project (PSNP III). This financing will contribute towards replenishing the PSNP III Risk Financing Mechanism, which recently disbursed US$134.7 million as a response to the drought. Kenya: The three proposed CRW financed activities under the Kenya Drought Response Financing Plan were specifically selected based on the unavailability of resources under the existing projects for reallocation to drought response activities. The line ministries for each of these operations and the respective task teams have agreed on all the activities to be financed and it is envisaged that these resources would be fully utilized shortly after approval. Djibouti: Djibouti has demonstrated its ability, with a healthy portfolio for the past five years, to effectively absorb IDA's allocations as well as funds from other sources that complement IDA's support. The CRW allocation for Djibouti will provide additional finance for three projects: (i) Employment and Human Capital Social Safety Net (SSN); (ii) Natural Disaster Risk Assessment and Monitoring System; and (iii) Rural Community 4 A joint document by the Government of Ethiopia and Humanitarian Partners noted that despite ongoing efforts by the Government and its partners, resource shortfalls have impacted humanitarian operations during the first half of In particular, relief food shortage led to reduced ration sizes and distribution of incomplete food baskets in some areas. The growing food security challenges necessitate urgent reinforcement of response efforts and scaling up of operations by all actors, including mobilization of additional resources. (Source: Humanitarian Requirements document; July 2011).

9 6f) Issuance of UN Flash Appeal 6g) Country size (small states status) 7 Development and Water Mobilization. The operations will support activities identified during the July 2011 pre-pdna assessment mission as well as in the forthcoming Drought Damage Assessment. For the on-going Employment and Human Capital Social Safety Net (SSN) project, the CRW allocation will scale up the SSN with emphasis on those most impacted by the drought. In addition, the CRW will finance the Power Access and Diversification project (US$ 2.7 million) that will focus on (i) procurement and supply of diesel for immediate need; (ii) a refurbishment program; and (iii) replacement of diesels pumps for ground water pumping and project costs. Regional: In line with the focus on promoting a rapid IDA response to the emergency, the Horn of Africa Emergency Health and Nutrition Project (P127949), is 57 percent disbursed as of October 13, The UN issued a Humanitarian Requirements Document (HRD) for the Horn of Africa drought on July 28, By end-august 2011, the total of humanitarian assistance for the emergency across 67 bilateral and multilateral donors was US$1.62 billion for relief and early recovery activities in Kenya, Ethiopia, Somalia and Djibouti. (See CRW Board document, paragraph 17 and Annex 1.) With a population of approximately 900,000 people, Djibouti is a small state. As noted in #6f above, the drought severely affected approximately 50 percent of the rural population and 15 percent of the total population.