Protecting the Poorest Countries: Role of the Multilateral Development Banks in Times of Crisis - Explanatory Note - Section Overview

Jul 19, 2026

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Explanatory Note provides follow-up details on how Multilateral Development Banks can address obstacles to suspending debt repayments to IDA/IBRD, and the potential effects on financial sustainability. It outlines how the World Bank delivers attractive, increased net flows to help countries respond to the COVID-19 crisis, emphasizing mechanisms that expand concessional financing while avoiding higher debt vulnerabilities. The note further examines ratings, lending costs and capacity, and alternative financing options for IDA, concluding with key findings for strengthened fiscal space.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages14

Reading Time35 min

AccessFree to download

Explanatory Note Overview

Introduction

Commitment to do more

Providing Additional Financing

concessional net flows and country support

Public Disclosure Authorized Public Disclosure Authorized July 7, 2020 Protecting the Poorest Countries: Role of the Multilateral Development Banks in Times of Crisis Explanatory Note I. Introduction 1. This Explanatory Note is a follow up to the joint Multilateral Development Bank (MDB) note “Protecting the Poorest Countries: Role of the Multilateral Development Banks in times of Crisis”(“the joint MDB note”)1 and is being circulated at the request of Board members to provide further details on the obstacles to suspending debt repayments to IDA/IBRD and the potential negative impact on financial sustainability. The explanatory note follows the structure of the previous MDB joint note and explains how the World Bank provides attractive and increased net flows to help countries respond to the COVID-19 crisis. Finally, the note explores other approaches that could be considered. 2. The paper is organized as follows: Section II describes the MDBs’ commitment, as laid out in the MDB joint note, to do more. Specifically, it sets out (a) the additional financing that the World Bank is looking to provide and (b) the potential negative ramifications from suspending debt repayments to MDBs. Section III outlines key factors examined including (a) how MDBs provide net flows to member countries with specific details for IDA and IBRD,(b) potential ratings impact on MDBs like IDA and IBRD that rely on triple-A ratings to raise resources for member countries, and (c) potential impact on costs and capacity to lend. Section IV discusses other financing approaches to IDA that are being explored, including (a) donors financing a dedicated Trust Fund that would allocate resources to IDA countries to meet portions of their debt repayment obligations to IDA, and b) possible options that could optimize IDA’s temporary capital headroom to provide short-term financing for urgent needs for social, health, or economic spending in a way that complements the transparency agenda of the Sustainable Development Finance Policy. To the extent that major new resources become available through one or both of these approaches, the beneficiaries would have more fiscal space for expenditures needed to respond to COVID-19 impacts, adding new avenues and protections alongside the financial and business models of IDA and IBRD. Section V sets out the conclusions ofthe note. II. Commitment to do more 3. The coronavirus (COVID-19) crisis is threatening lives, livelihoods, and entire economies and the World Bank and other Multilateral Development Banks (MDBs) are stepping up their financing in response. IDA countries are particularly vulnerable to the crisis and have limited policy buffers to respond. Rapidly expanding the development resources available to IDA countries is one of the priorities in the immediate response to the crisis. 4. Together with other MDBs, the World Bank is ensuring that countries have timely and significantly positive financial inflows during this crisis to augment fiscal resources available without increasing debt vulnerabilities. The ability to provide highly concessional and 1 The joint MDB note was produced in response to shareholders’ call for MDBs to further explore ways to participate in DSSI. positive net flows, and scale them up at a time of crisis when other lenders withdraw, has been a core strength of the World Bank since its establishment. With respect to the poorest countries, IDA is able not only to boost flows quickly, but also to calibrate its terms to take into account a country’s debt situation. Finally, all World Bank financing also comes with sound analytical and policy advice, as well as the technical assistance that countries need to mitigate the impact of the crisis. “Providing Additional Financing” 5. During crises, IDA countries need financial assistance – namely, steady concessional positive net flows – from creditors. The extent of positive net flows has been considerably reinforced by stron

FAQs

What is the purpose of this Explanatory Note?

It follows up on a prior joint MDB note by detailing obstacles to suspending debt repayments to IDA/IBRD and assessing potential negative impacts on financial sustainability.

How do MDBs and the World Bank support IDA countries during crisis periods?

They provide timely, positive and highly concessional financial inflows to augment fiscal resources without increasing debt vulnerabilities, including scalable net flows and analytical support.

What financing approaches does the note consider beyond additional World Bank financing?

It discusses donor-funded options such as a dedicated Trust Fund for IDA debt repayment obligations, and ways to optimize IDA’s temporary capital headroom for short-term social, health, or economic needs.

Jul 19, 2026

Upload by Quinn