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Financial Sustainability: Importance, Progress and Emerging Issues

5 th World Water Forum Istanbul, March 16 – 22, 2009. Financial Sustainability: Importance, Progress and Emerging Issues. Jamal Saghir Director Energy, Transport and Water The World Bank Istanbul March 18, 2009. The Camdessus Report: Financing Water for All.

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Financial Sustainability: Importance, Progress and Emerging Issues

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  1. 5th World Water ForumIstanbul, March 16 – 22, 2009 Financial Sustainability: Importance, Progress and Emerging Issues Jamal Saghir Director Energy, Transport and Water The World Bank Istanbul March 18, 2009

  2. The Camdessus Report:Financing Water for All Key recommendations included: • Scale up funding for water projects • Improve access for Sub-Sovereigns Both were answered by the Bank

  3. World Bank answer 1: scaling up lending

  4. WBG answer 2: creation of the IFC-WB Municipal Fund • A major post-Camdessus initiative by the WBG was the establishment of the Municipal Fund in 2006 • Direct lending without sovereign guarantee • 6 water projects (Mexico, Morocco, Panama, South Africa, The Philippines). About US$ 380 million already commited

  5. “The Vulnerability Fund”0.7 Percent of Stimulus Packages Bilateral Organizations United Nations Organizations Non-Governmental Organizations Multilateral Development Banks The World Bank Group Vulnerability Framework Vulnerability Financing Facility (VFF) Infrastructure Recovery Assets Platform (INFRA) IFC Private Sector Platform GFRP IDA Fast Track Energy for the Poor • Direct Finance • Parallel Finance • Concessional finance Bank Recap Rapid Social Response Trade Finance Infrastructure Facility Microfinance Facility Trust Funds Advisory facility

  6. Crisis ResponseInfrastructure spending as a fiscal stimulus measure • Counter-cyclical public spending in infrastructure is an effective tool to create jobs and provide the foundation for economic recovery and sustained growth • Transformational opportunity to invest in “green” Infrastructure • The share of infrastructure spending in announced fiscal stimulus packages varies substantially across countries: • So far announced infrastructure spending for 2009 represents on average 64 percent of the total stimulus in emerging market economies and 22 percent of the total stimulus in high income economies

  7. Infrastructure and the Crisis: areas of action • Stabilize existing infrastructure assets • Ensure delivery of projects that remain government priority • Support PPPs in infrastructure • Support new infrastructure project development and implementation

  8. IBRD/IDA INFRA PlatformOverarching Framework Infrastructure Recovery and Assets (INFRA) • brings priority focus on infrastructure investments and maintenance; • co-ordinates a crisis response for World Bank Group pertaining to infrastructure; and • provides a platform to work with development partners to leverage finance

  9. WBG INFRA PlatformPlatform across WBG institutions MIGA World Bank IFC PRE-CRISIS $0.7 to $1 billion/year $11 to $13 billion/year $2.7 to 3.7 billion/year FINANCING to be adjusted downwards reflecting lower than anticipated FDI flow into INF • $2.1 billion • Up to $0.3 billion in Global Equity Fund under the Infrastructure Crisis Facility (1) up to $15 billion/year currently being reassessed based on regional scans and country priorities CURRENT Scaled up Response (over 3 years): • Direct Financesupport (IDA/IFC) pipelines • Parallel financeexpansion with bilaterals/other IFIs • Concessional windowfor • project preparation • project financing • IFC Infrastructure Crisis Facility(over 3 to 5 years) • Support (IDA/IFC) pipelines • Sub-national instruments • Support (IDA/IFC) pipelines • Early 2009 Board discussion. Proposed reforms include: • New Product – covering non-honoring of sovereign financial obligations • Expanded coverage – more acquisition/restructuring projects will be eligible • Enhance Breach of Contract coverage for SOEs on selective basis INFRA RESPONSE INSTRUMENTS (1) Scale up constrained by balance sheet

  10. IBRD/IDA INFRA PlatformAction points to respond to crisis ACTIONS OBJECTIVES • Project restructuring of existing portfolio • Support countries to manage currency, interest rate, and commodity risk • Development Policy Operations and other lending operations Stabilize existing infrastructure assets • Accelerating disbursements of existing projects • Additional financing (loan and guarantee) for ongoing projects • “Green” infrastructure: advance climate change and low carbon agenda • Ramp up sub-sovereign lending and related advisory services • ; non-IBRD hedging instruments Ensure delivery of projectsthat are a government priority • Support to public commitments to PPP projects (finance and advisory) • Increased use of guarantees • Innovative instruments: OBA subsidies complementing user fees • Coordination with IFC Infrastructure Crisis Facility Support PPPs in infrastructure • Advice to governments that launch growth and job enhancement programs • Support to PERs, MTEFs, increase government capacity to plan, prepare, implement, and manage infrastructure assets • Implement Energy for Poor Initiative Support new infrastructure development and implementation

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