WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE FY22 World Bank Budget Text for Public Disclosure December 2, 2021 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE CONTENTS 1 1. OVERVIEW AND RECOMMENDATIONS 1 1.1 OVERVIEW 1 1.2 FY22 BUDGET RECOMMENDATIONS 6 2. STRATEGIC DIRECTIONS AND BUSINESS OUTLOOK 7 2.1 STRATEGIC CONTEXT AND BUSINESS PRIORITIES 7 2.2 LENDING OUTLOOK 15 2.3 COST OF DOING BUSINESS 18 2.4 CONTINUED FOCUS ON BUDGET DISCIPLINE 22 3. FY22 BUDGET FRAMEWORK 27 3.1 AGGREGATE BANK BUDGET 27 3.2 EXTERNAL FUNDING OF BANK ACTIVITIES 32 3.3 AGGREGATE FY22 BANK BUDGET AND EXTERNAL FUNDS 34 4. FY22 ADMINISTRATIVE BUDGET 35 4.1 ADMINISTRATIVE BUDGET PROPOSAL 35 4.2 ADJUSTMENTS TO THE FY22 BUDGET 35 4.3 STRATEGIC ALIGNMENT BY WORK PROGRAM 49 4.4 OPERATIONAL WORK PROGRAM 53 4.5 GRANT-MAKING FACILITIES 64 4.6 IG&A UNITS 65 4.7 CENTRALLY MANAGED ACCOUNTS 69 4.8 EXPENSE FUNCTIONAL VIEW 70 5. FY22 CAPITAL BUDGET 73 5.1 OVERVIEW 73 5.2 FACILITIES 73 5.3 TECHNOLOGY AND SYSTEMS 75 6. MITIGATING BUDGET-RELATED RISKS AND UNCERTAINTIES 79 ANNEXES ANNEX I: PROGRAM COST SUMMARY................................................................................................... 81 ANNEX II. INDICATORS OF BUDGET SUSTAINABILITY, STRATEGIC ALIGNMENT, AND BUDGET EFFICIENCY .............................................................................................................. 88 1 In the tables, charts and text, the totals have been rounded to the nearest whole number. Numbers may not add due to rounding. i WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE TABLES Table 2.1: IBRD and IDA Lending Projections (US$ billion)......................................................................... 17 Table 3.1: FY21 and FY22 Bank Budgets (US$ million) ................................................................................ 27 Table 3.2: FY21-22 Administrative Budget and External Funds (US$ million) ............................................. 34 Table 4.1: FY21 WB Budget and Proposed FY22 WB Budget...................................................................... 35 Table 4.2: Incremental Additions to FY22 Budget (US$ million)................................................................... 42 Table 4.3: Incremental Savings/Adjustments in the FY22 Budget (US$ million)........................................... 45 Table 4.4: FY19-22 Savings/Adjustments in the Budgets (US$ million) ........................................................ 46 Table 4.5: FY19-22 Gross Efficiency Savings by Category (US$ million)..................................................... 47 Table 4.6: FY22 Bank Budget (US$ million) .................................................................................................. 48 Table 4.7: FY21 and FY22 Resources by Work Program and Funding Source .............................................. 50 Table 4.8: FY21 and FY22 Budget Share by Work Program and Funding Source ......................................... 50 Table 4.9: FY21 and FY22 Operational Budget Envelopes (US$ million) ..................................................... 54 Table 4.10: Grant-Making Facilities Budgets (US$ million)........................................................................... 64 Table 4.11: FY21 and FY22 EDs, IEG and Accountability Mechanism Budgets (US$ million).................... 67 Table 4.12: FY21 and FY22 IG&A Budget Envelopes (US$ million) ............................................................ 68 Table 4.13: Centrally Managed Accounts (US$ million) ................................................................................ 70 FIGURES Figure 2.1: The GRID Approach ..................................................................................................................... 13 Figure 2.2: World Bank Lending Commitments.............................................................................................. 16 Figure 2.3: IBRD/IDA Supervision Portfolio (by number of operations) ....................................................... 18 Figure 2.4: IBRD/IDA Supervision Portfolio (by net commitments, US$ billion) ......................................... 18 Figure 2.5: Costs of Doing Business................................................................................................................ 19 Figure 2.6: Fiduciary and Safeguards Budget Allocations (US$ million) ....................................................... 21 Figure 2.7: Indexed Growth in IBRD/IDA Portfolio Volume vs. Actual Expenses since FY14 ..................... 24 Figure 3.1: IBRD Budget Anchor .................................................................................................................... 28 Figure 3.2: IDA Budget Anchor ...................................................................................................................... 29 Figure 3.3: Administrative Bank Budget per US$ Billion Portfolio under Supervision (US$ million) .......... 30 Figure 3.4: Administrative Bank Budget per US$ Billion of Commitments ................................................... 30 Figure 3.5: Administrative Bank Budget per # of Projects under Supervision (FY21US$ million) ............... 31 Figure 3.6: Total Administrative Budget per Lending Project Approved (FY21US$ million) ....................... 31 ii WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 3.7: Share of External Funds to All Funds ........................................................................................... 33 Figure 3.8: Cost Recovery from Operational External Funds (US$ million) .................................................. 34 Figure 4.1: Operational Share of Unit Budgets................................................................................................ 51 Figure 4.2: Client Engagement Share of Operational Unit Budgets ................................................................ 51 Figure 4.3: Evolution of the Country Engagement Bank Budget by Region from FY21 to FY22.................. 53 Figure 4.4: Country Engagement Bank Budget Allocations by Business Process for FY20-22 .................... 56 Figure 4.5: Country Engagement Allocation on Fiduciary and Safeguards for FY19-22 (US$ million) ........ 57 Figure 4.6: Country Engagement Allocations by Practice Group (Regional and Global Units) for FY21-22 58 Figure 4.7: Country Engagement Bank Budget Allocations for FCV Countries for FY19-22 (US$ million) 59 Figure 4.8: Country Engagement Bank Budget Allocations to Small States for FY19-22 (US$ million) ...... 59 Figure 4.9: FY22 Global Engagement Funding (including prepaid collaboration) by Practice Group ........... 61 Figure 4.10: IG&A Budget Allocations, FY15-21 (US$ million) ................................................................... 65 Figure 4.11: Full-time Bank Staff on Payroll (percentage growth since FY14) .............................................. 72 BOXES Box 4.1: Administrative Bank Budget Definition............................................................................................ 49 iii WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE ACRONYMS AFR Africa Region AFRE Africa Region East AFRW Africa Region West AIP Annual Investment Plan ASA Advisory Services and Analytics BB Bank Budget BETF Bank Executed Trust Fund BPS Budget, Performance Review, and Strategic Planning CCDR Country Climate and Development Report CE Country Engagement CEN Country Engagement Note CGIAR Consultative Group for International Agricultural Research CMA Centrally Managed Accounts CO Country Office CDBA Costs of Doing Business Analysis CODE Committee on Development Effectiveness COGAM Committee on Governance and Executive Directors’ Administrative Matters CPF Country Partnership Frameworks CPI Consumer Price Index CRO Chief Risk Officer DEC Development Economics DFI Development Finance DPF Development Policy Financing DRR Decoupled Reimbursable Revenue EAP East Asia and Pacific Region ECA Europe and Central Asia Region EF External Funds EFI Equitable Growth, Finance and Institutions Group EFO Externally Financed Output ERP Enterprise Resource Planning ESF Environmental and Social Framework ETC Extended Term Consultant FCS Fragile and Conflict-Affected Situations FCV Fragility, Conflict and Violence FIF Financial Intermediary Funds FY Fiscal Year GBV Gender Based Violence GCS Global Corporate Solutions GE Global Engagement GHG Greenhouse Gas GIA Group Internal Audit GMA Global Mobility Assignment GMF Grant-Making Facilities iv WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE GPSA Global Partnership for Social Accountability GRID Green, Resilient, and Inclusive Development GWU George Washington University HD Human Development Group HQ Headquarters HRD Human Resources HSD Health & Safety Development Directorate IBRD International Bank for Reconstruction and Development IDA International Development Association IDF Institutional Development Fund IEG Independent Evaluation Group IFC International Finance Corporation IG&A Institutional, Governance and Administrative Units iLAP Integrated Loan Administration Platform IMF International Monetary Fund INF Infrastructure Group IPF Investment Project Financing IPN Inspection Panel ITS Information and Technology Solutions LCR Latin America and Caribbean Region LEG Legal Vice Presidency LIBOR London Inter-bank Offered Rate MIGA Multilateral Investment Guarantee Agency MNA Middle East and North Africa Region O&M Operations & Maintenance OPCS Operations Policy & Country Services PCRF Post-Retirement Contribution Reserve Fund PCS Program Cost Summary PFC Pension Finance Committee PforR Program-for-Results PLR Performance and Learning Review PPM Program and Practice Management PSW Private Sector Window RAMP Reserve Advisory and Management Partnership RAS Reimbursable Advisory Service RETF Recipient-executed Trust Fund SAR South Asia Region SBO Strategy and Business Outlook SCD Systematic Country Diagnostics SDFP Sustainable Development Financing Policy SD Sustainable Development Group SDG Sustainable Development Goal SPF State and Peace-Building Fund TRE Treasury v WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE SSA Shared Services Agreement VPU Vice Presidential Unit WB World Bank WBG World Bank Group WEO World Economic Outlook WPA Work Program Agreement vi WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 1. OVERVIEW AND RECOMMENDATIONS This document presents the FY22 World Bank Budget for Board approval. The proposed budget 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 Bank has delivered The World Bank committed to making available more resources to an unprecedented client countries to help deliver exceptional crisis support of up to COVID-19 crisis US$104 billion by June 2021, 2 working in partnership with IFC, response and plans to MIGA and international, regional and local actors. During April scale up and accelerate 2020 to end April 2021 IBRD/IDA new commitments amounted its support for countries to US$74.2 billion. Fifty-six percent of this financing (US$41.5 to pursue a green, billion) directly supported the COVID-19 crisis response resilient and inclusive (including for financing vaccine acquisition and combined recovery and long-term strengthening of health systems), while the remainder targeted development. related threats to food security, natural disasters and other urgent development priorities. At end April 2021, IBRD/IDA disbursements reached US$53.4 billion, of which US$18.5 billion were for crisis response operations. All of this has been achieved despite the challenges the COVID-19 crisis has presented in delivering this very ambitious work program. The Bank also stepped up analytical and advisory work to help countries manage the crisis and has contributed to shaping global action, connecting governments, private sector, local and international organization on priorities such as access and deployment of vaccines, achieving debt sustainability and helping countries manage fiscal space, and providing support to vulnerable communities. With COVID-19 vaccines offering the potential to gradually enable mobility and economic reopening, a slow economic recovery is on the horizon. In FY22 the World Bank will continue to help countries to address the health and social impacts of the COVID-19 response while nurturing a long-awaited economic recovery and long-term development. In accordance with the WBG paper “From COVID-19 Crisis Response to Resilient Recovery”, 3 2 See “WBG Additional Response to the COVID-19 Crisis: Addressing the Economic and Social Implications”, SECM2020-0079, March 27, 2020. 3“From COVID-19 Crisis Response to Resilient Recovery - Saving Lives and Livelihoods while Supporting Green, Resilient and Inclusive Development (GRID)”, DC2021-0004, March 20, 2021. 1 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE the Bank will seek to help client countries to build back better by promoting green, resilient, and inclusive development (GRID) that can underpin a strong and durable recovery from COVID-19, restore progress towards the SDGs and support long- term development in IDA and IBRD countries in a transformed world. This approach is fully aligned with, and complements, the IDA19 Special Themes and Cross-cutting Issues as well as the focus areas targeted by the IBRD capital package. 2. In support of the Bank’s In this context, FY22 is expected to be another year of strong strategic framework, five operational delivery, aiming to help countries simultaneously to business priorities have address the continuing exigencies created by the COVID-19 shaped the FY22 budget pandemic and also to resume activities needed to overcome their and how resources are longer-term development challenges. The strategic priorities for allocated. the FY22 planning and budgeting process are: (i) supporting clients in pandemic recovery and long-term development needs with increased financing in FY22 and a larger portfolio to supervise; (ii) replenishing knowledge and analytics to inform COVID-19 recovery and GRID with catch-up on country engagement/diagnostics work, increased core and extended core ASAs, catch-up work for reviewing operational risks needed to overcome the supervision backlog post-COVID-19 and effective use of global expertise deployment and development; (iii) enhancing Bank capacity to support clients through increased field presence by continuing to adapt the global footprint, particularly in IDA and FCV locations; (iv) integrating IBRD/IDA corporate policy commitments (e.g., debt, gender, climate, jobs and economic transformation, and private capital mobilization) into operational products and operationalizing key initiatives, including the ESF, IPN toolkit change implementation and Gender Based Violence (GBV) contractor disqualification; and (v) strengthening institutional support for delivery, including through the ERP system replacement, strengthened IT capacity, LIBOR transition, and evolving adjustments to the WB operating model for the post-COVID-19 context. 2 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 3. Delivering a scaled-up Delivering a scaled-up lending program and catch-up work will be program and catch-up critical to support the transition from crisis to recovery and work will have development, but will require an increased financing volume and implications not just for careful management of operational quality and associated risks, the scale of our work but resulting in increased costs of doing business. The FY22 program also for the cost of doing will also continue to create challenges for Bank staff, who have business and will put been struggling to manage increased workloads in difficult additional pressure on working conditions since the pandemic started, and who will need resources. to maintain this stepped-up pace throughout FY22 to deliver a continuing emergency program while also undertaking post- COVID-19 supervisory catch-up reviews. Management aims to address these resource pressures by adopting a dynamic and flexible planning and budgeting process to manage COVID-19 related costs and savings, endeavoring to ensure that the organization shifts resources to where they are needed most. Specifically, a relentless effort to achieve further savings - incremental to those previously embedded in the budgets - deriving from new efficiencies, economies of scale and cost recovery efforts, as well as internal unit redeployments and temporary savings from travel and other impacted costs in the early part of FY22, will help repurpose these savings to meet the growing cost pressures. 4. Management proposes a While striving to maintain budget discipline, and considering flat real administrative strategic priorities, increasing costs of doing business and the budget of US$2,851 lending capacity expansion for the COVID-19 response, together million for FY22. with the impact of targeted efficiencies, Management proposes a Bank administrative budget of US$2,851 million for FY22. This represents a budget increase of 2.3 percent in nominal terms, which – measured plan-to-plan – is flat in real terms based on latest inflation data 4 and is the same as the indicative FY22 budget set out in the FY21 Budget Document. Management is committed to fiscal discipline throughout the year. Significant one-time savings in FY21, due to COVID-related restrictions, were removed from unit trajectories after approval of the budget. The FY22 Budget is sized to fund a resumption of more normal business. Additional IDA financing in FY22 is expected to be funded partly within this budget and partly with the use of the budget flexibility 4 Deflator used is 2.3 percent for FY22. Source: US CPI per April 2021, IMF World Economic Outlook (WEO) report. 3 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE band (of up to 2 percent), if needed and with information of the Board. This budget will maintain budget sustainability and contribute to the Bank’s financial strengthening. Specifically, the resulting IBRD budget anchor is expected to be well within the anchor target zones agreed under the capital package for FY22, and the resulting IDA budget anchor is expected to continue to decline well below 100 percent. It will also result in continued progress towards achieving the capital package budget commitments to add cumulative net savings from efficiencies and economies of scale by 2030. Management is directing most of the incremental budget resources to operations and front-line services. Specifically, the overall budget allocation for operational units will increase by US$79 million, or 4.6 percent, in FY22 compared to FY21 – and by US$11 million compared to the original FY22 budget. As a result, the share of the administrative budget going to operations will continue to increase from 60.3 percent in FY21 to 60.9 percent in FY22. 5. Management is External Funds make an important contribution to the World Bank implementing measures efforts to respond to emerging global priorities and develop to better integrate transformative solutions for our clients. On External Funds planning, ensure mobilization, a trust fund reform is being implemented to move alignment and enhance towards fewer, larger Trust Funds that allow greater efficiency and financial sustainability of impact, and strengthen their alignment with corporate and country External Funds which program priorities. On External Funds usage, Management aims to directly fund Bank increase selectivity and reduce the Bank’s share of administrative activities for client expenses funded by them, especially for critical activities, by support. allocating to each VPU a dollar envelope for External Funds usage for the planning period and reducing the Bank’s share of administrative expenses funded by External Funds over time. On External Funds financial sustainability, additional cost recovery measures are being implemented to further increase recovery of Bank costs for the delivery of externally funded activities. 4 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 6. Management proposes a Long-term investments in the World Bank’s infrastructure are Capital Budget for FY22 critical to support efficient and effective delivery of the work at US$221 million. program. The capital budget for FY22 would be US$221 million, of which US$105 million is for Facilities investments and US$116 million for IT investments. This year’s investment planning process is being informed by three main transformations affecting the World Bank operating model: (i) the modernization of the WBG finance Enterprise Resource Planning (ERP) system supported by the Bank’s 21-year old SAP platform (Project Aria); (ii) continued investments for the global footprint changes; and (iii) supporting the initial phase of the COVID-19 response and adjustments of the Bank working arrangements in a post-pandemic future. These transformations involve a multi-year implementation framework and will require sustained capital investments over several years. 5 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 1.2 FY22 BUDGET RECOMMENDATIONS 7. Management seeks Management seeks Board approval of the following FY22 Budget Board approval of the recommendations: FY22 Budget. • That the total administrative budget (Bank Budget) be set at US$2,851 million, managed within a range of +/- 2 percent. This includes: o An indicative budget of US$85.6 million for Executive Directors. This is subject to a separate endorsement process by COGAM. o US$29.0 million for the Independent Evaluation Group. This is subject to a separate endorsement process by CODE. o An indicative budget of US$5.9 million for the Accountability Mechanism. This is subject to a separate endorsement process by CODE. • That the capital budget be set at US$221 million. 6 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 2. STRATEGIC DIRECTIONS AND BUSINESS OUTLOOK This section discusses the strategic context and business priorities for the World Bank for FY22. The critical element of the strategic context is the Bank’s efforts to promote a strong and durable COVID- 19 recovery and growth through green, resilient and inclusive development in its client countries. In this context, a high level of new lending and portfolio size is expected. Costs of doing business will be rising, especially as a result of increasing work in low and lower-middle income and fragile countries. Efficiency efforts across the World Bank will continue and will offset these rising cost pressures. This section highlights the elements of the strategic context and business outlook which set the stage for the FY22 budget to be presented in Sections 3-5. 2.1 STRATEGIC CONTEXT AND BUSINESS PRIORITIES 8. The World Bank has The World Bank’s strategic framework is defined by the vision to delivered an deliver on the Twin Goals of eradicating extreme poverty and unprecedented COVID- promoting shared prosperity in a sustainable manner, 5 and the 19 crisis response to help commitments under the IBRD capital package and the IDA19 countries save lives and Replenishment. The COVID-19 pandemic has required the Bank livelihoods, while to enhance and accelerate this strategic framework to rapidly protecting hard-won respond to the devastating impacts it has brought – with over 164 development gains million people infected worldwide as of mid-May 2021, 255 threatened by the million jobs lost one year into the pandemic 6, surging food pandemic. insecurity and the worst setback in poverty reduction and shared prosperity in decades. The World Bank has mounted an exceptional response, in collaboration with IFC and MIGA, to help client countries save lives and livelihoods, while protecting hard-won development gains threatened by COVID-19. The WBG crisis response centers on assisting countries to meet the dual challenge of addressing the health threats and the social and economic impacts of the COVID- 19 crisis, while maintaining a line of sight to long-term development goals. To this end, the Bank has reoriented its analytical work and dramatically scaled-up its financial assistance to client countries, while maintaining its focus on the IDA special themes and policy commitments as well as the IBRD capital 5 As set out in the Forward Look endorsed by the Development Committee at the 2016 Annual Meetings “Forward-Look - A Vision for the World Bank Group in 2030 – Main Messages”, DC2016-009, Sept. 20, 2016 endorsed by the Development Committee at the 2016 Annual Meetings. 6 “From COVID-19 Crisis Response to Resilient Recovery - Saving Lives and Livelihoods while Supporting Green, Resilient and Inclusive Development (GRID)”, DC2021-0004, March 20, 2021. 7 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE package commitments, which remain as important as ever. Moreover, the Bank has done so while COVID-19 mobility restrictions curtailed mission travel and obliged staff across the Bank’s offices to work from home in an almost-entirely virtual environment, juggling associated personal challenges, including COVID-19 exposure and home-schooling for young children. The World Bank’s crisis response has been fast, flexible and at scale, and globally coordinated and tailored to the specific needs of client countries. Building on WBG knowledge, Independent Evaluation Group (IEG) evaluation and lessons learned, the crisis framework brings together three phases (Relief, Restructuring and Resilient Recovery) and four thematic pillars to help countries address the crisis and transition to recovery by: (i) saving lives threatened by COVID-19, (ii) protecting the poor and vulnerable, (iii) maintaining the foundations of the economy and private sector, and (iv) strengthening policies and institutions for resilient recovery based on transparent, sustainable debt and investments backed by strong governance and private sector solutions. Interventions under all pillars have kept a clear line of sight to a green, resilient and inclusive recovery and development. These pillars also maintain alignment with the country’s long-term development and corporate policy commitments of IDA19 and the IBRD capital package, while recognizing that countries and sectors will require different interventions tailored to the pace of recovery. 9. The World Bank is on Over the two years of FY20-21, the Bank is on track to have track to meet its prepared about 900 new operations, compared to roughly 1,060 commitment to deliver over the previous three years (FY17-19), expanding the number of exceptional crisis operations in the portfolio. This has enabled the delivery of support of up to US$104 IBRD/IDA commitments of US$74.2 billion over April 2020 to billion by June 2021, end April 2021 (FY20 Q4 through end April). 7 Of this amount, working in partnership US$34.6 billion was in support of IBRD countries and US$39.6 with IFC, MIGA and billion for IDA countries. Fifty-six percent of this financing international, regional (US$41.5 billion) directly supported the COVID-19 crisis response and local actors. (including for financing vaccine acquisition and combined strengthening of health systems), while the remainder targeted related threats to food security, natural disasters and other urgent development priorities. IBRD/IDA disbursements reached 7 See “WBG Additional Response to the COVID-19 Crisis: Addressing the Economic and Social Implications”, SECM2020-0079, March 27, 2020. 8 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE US$53.4 billion, of which US$18.5 billion was from crisis response operations. 10. The Bank has also made The Bank also continued to make good progress in implementing strong strides in IDA19 and its policy commitments, and implementation of the operationalizing IDA19 IBRD capital package policy commitments is also on track, and the capital package providing a solid foundation for reaching the capital package policy commitments targets over FY19-30. This has been achieved despite the despite the difficult challenges the COVID-19 crisis has presented in delivering this operating environment. ambitious work program. Specifically, the WB has prioritized support to countries at the lower to middle range of the income spectrum, including by increasing its support for Sub-Saharan Africa, FCS and Small States. It has also continued to play a leadership role in promoting innovative responses to issues where coordinated global action is critical, including continuing to lead on the global climate agenda and strengthening its support for regional integration and the delivery of Global Public Goods. Significant progress was also made in the following areas: • FCV Strategy - In February 2020 the WBG significantly enhanced its approach to FCV situations through its FCV Strategy whose implementation is on track with progress underway on: (i) 23 measures covering programming, partnerships, policy, processes, practices and personnel; (ii) rolling-out the IDA19 FCV financing envelope by tailoring financing to country context; and (iii) tailoring the COVID-19 response to FCV settings. • Creating markets - With IFC and MIGA, the Bank has scaled up its efforts to help create markets at scale, by combining a thorough understanding of the constraints to private sector solutions and the strategic targeting of interventions coordinated across the WBG, and maintaining momentum on the Cascade approach, a vital organizational tool to support alignment and sequencing of public and private sector actions, including through the country planning cycle and staff incentives structures. • Global footprint changes - Staff country presence has been increased to enhance WB capacity to support countries despite COVID-19 restrictions. This has resulted in an increase of 2.2 percent in the number of Bank staff 9 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE outside the US compared to year-on-year end April (see para. 46). • Climate – The WB has continued to lead on the global climate agenda, including by substantially scaling up financing to tackle climate change and progressing in the climate commitments in FY21 after record climate financing in FY20 (US$17 billion), including by embedding climate financing in COVID-19 operations. In April, the WBG announced key elements of the 2021-2025 Climate Change Action Plan which will significantly step up WBG support to client countries and the private sector on climate action to help transition to a low-carbon and resilient future. • Closing gender gaps – The WB has continued to support clients to close gender gaps, including by working to ensure that COVID-19 projects consider gender impacts. Eighty- two percent of operations approved as of end-FY21 Q3 helped close gender gaps, after 61 percent in FY20, thus indicating a strong gender focus in the crisis response. • Strategic Framework for Knowledge – The WBG has developed a Strategic Framework for Knowledge to enhance impact at the country and regional levels and its contributions to knowledge as a global public good. The Framework presents a vision for the WBG to strengthen its role as a development solutions institution, combining financing with global knowledge. Four analytical products will be central to our knowledge work at the country level and will underpin Country Partnership Frameworks: Poverty Assessments, Country Economic Memoranda, Public Expenditure Reviews and Country Climate and Development Reports. • Operational structure – In July 2020, the Bank realigned the reporting lines of the Regional Directors and their teams to Regional Vice Presidents, to align accountability to outcomes in country programs and simplify decision making. Two Vice Presidencies for the Africa Region have also been created to reduce span of control and enhance management attention for a growing work program. 10 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 11. The World Bank Group With COVID-19 vaccines offering the potential to gradually will scale up and enable mobility and economic reopening, a slow economic accelerate its support for recovery is on the horizon. In FY22 the World Bank will continue countries to pursue a to help countries to address the health and social impacts of the green, resilient and COVID-19 response while nurturing a long-awaited economic inclusive COVID-19 recovery. recovery and long-term As presented in the WBG Paper “From COVID-19 Crisis development. Response to Resilient Recovery”, 8 the World Bank is applying, in collaboration with IFC and MIGA, an integrated approach to help client countries build back better by promoting green, resilient, and inclusive development (GRID) that can underpin a strong and durable recovery from COVID-19, restore progress towards the SDGs and support long-term development in IDA and IBRD countries in a transformed world (see Figure 2.1). GRID seeks to support needed economic and social transformations through an integrated framework that emphasizes interlinkages between immediate and longer-term challenges to deliver broad based and sustainable growth. This approach is fully aligned with, and complements, the IDA19 Special Themes and Cross-cutting Issues as well as the focus areas targeted by the IBRD capital package. The transition from crisis to recovery and development will be very challenging and will require coordinated interventions across three areas: first, investing in all forms of capital to scale up investments to reverse the collapse of economies and for the significant shifts needed for transformation; second, implementing macroeconomic and structural policies, institutional strengthening and technological innovation to enable the transition; and third, mobilizing capital at scale, especially from the private sector. While specific conditions vary across client countries, this approach will guide the Bank in helping clients make this transition in three important dimensions: • First, in the face of recession, mass unemployment, and changes to behavior, preferences, trade, and supply chains, countries need to find ways to restore sustainable growth, promote green development and put large numbers of 8“From COVID-19 Crisis Response to Resilient Recovery - Saving Lives and Livelihoods while Supporting Green, Resilient and Inclusive Development (GRID)”, DC2021-0004, March 20, 2021. 11 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE people back to work in ways that are greener, that leverage a digital transformation, and that seize opportunities created by the crisis. • Second, countries need to build resilience by preparing for, mitigating and adapting to a wide range of future shocks, risks and uncertainties, including climate change, health and natural disasters, food price shocks, conflict, and financial and economic disruption. • Third, in the face of mass poverty, exclusion and the regressive impacts of compound crises, there is a need and opportunity to build equity and inclusion and address structural inequalities, including by leveraging technology for more robust and inclusive delivery of health, education, and social protection. The implementation of the GRID approach will be anchored in the risks and priorities of countries to overcome the crisis and restore progress to promote green, resilient and inclusive development. It will be supported by tailored advisory services and analytical work which can help countries establish priorities and integrate the GRID pillars of sustainability into their long-term development plans. The risks and challenges that the GRID approach addresses emphasize the importance of selectivity and prioritization in knowledge activities (as noted in the WBG Strategic Framework for Knowledge) and in investments to achieve synergies and maximum impact. 12 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 2.1: The GRID Approach 12. FY22 business planning In this context, FY22 is expected to be another year of strong and budgeting are operational delivery, aiming to help countries simultaneously to informed by these address the continuing exigencies created by the COVID-19 strategic priorities. pandemic and also to resume activities needed to overcome their longer-term development challenges. The strategic priorities for the FY22 planning and budgeting process are: • Supporting clients in pandemic recovery and long-term development needs with increased financing in FY22 (US$68 billion - US$33 billion IBRD expected case and US$35 billion IDA, including additional IDA top-up resulting from the frontloading of IDA19 resources 9 with associated costs partly handled outside the FY22 base budget) and a larger portfolio to supervise. 10 9 Considering the continued elevated financing needs, IDA Participants agreed to reduce the period of IDA19 to two years (i.e. FY21 and FY22), which entails: frontloading IDA19 resources from FY23 to FY22 in order to provide US$35 billion financing in FY22, retaining a portion of FY23 financing in IDA19 as a carry-over to IDA20, and carrying out IDA20 negotiations between April and December 2021. Adjustments to the IDA19 framework will be presented for approval in June 2021. 10 The FY21-22 financing and portfolio assumptions in this paper are as set out in the FY22-24 Strategy and Business Outlook paper and are indicative for planning purposes only, subject to revisions and actual financing commitments evolution in the period. 13 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE • Replenishing knowledge and analytics to inform COVID-19 recovery and GRID with catch-up on country engagement/diagnostics work (e.g., SCDs, CPFs, PLRs and CENs), increased core and extended core ASA (including the new Country Climate and Development Report), catch-up work for reviewing operational risks (notably with in-person fiduciary and safeguard reviews and verification/validation of reported project outcomes) needed to overcome the supervision backlog post-COVID- 19, and effective use of global expertise deployment and development. • Enhancing Bank capacity to support clients through increased field presence by continuing to adapt the global footprint, particularly in IDA and FCV locations. • Integrating IBRD/IDA corporate policy commitments (e.g., debt, gender, climate, jobs and economic transformation, and private capital mobilization) into operational products and operationalizing key initiatives, including the ESF, IPN toolkit change implementation and GBV contractor disqualification. • Strengthening institutional support for delivery, including through the ERP system replacement, strengthened IT capacity, LIBOR transition, and evolving adjustments to the WB operating model for the post- COVID-19 context. 13. The Bank will continue The World Bank, IFC and MIGA are working closely together in to actively pursue several areas where synergies and complementarities are being synergies and actively pursued, leveraging each other’s strengths. In operations, complementarities with the institutions are collaborating closely on the COVID-19 crisis IFC and MIGA. response, notably on vaccines and on green recovery and development. The institutions are also continuing complementary and integrated work to strengthen/create markets and overcome obstacles that block private sector solutions. They are better coordinating analytical and advisory activities, especially for upstream work; coordinating human resource policy changes; maximizing use of available space to accommodate global footprint changes; leveraging economies of scope for services provided by the Bank’s IG&A units to the other institutions using 14 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE an agreed shared services framework; leveraging economies of scope for work related to transition for ERP system replacement and other systems developments; and jointly working on the efficiency agenda and identification of productivity improvements and savings. The recent realignment at the World Bank, IFC’s increased focus on working upstream and country-driven budgeting, and MIGA’s deepening partnership with the Bank and IFC are complementary and will promote stronger joint program delivery. 14. Delivering a scaled-up Delivering a scaled-up lending program and catch-up work will be program and catch-up critical to support the transition from crisis to recovery but will work will have require an increased financing volume and careful management of implications not just for operational quality and associated risks, and will result in increased the scale of our work but costs of doing business. An ambitious effort for efficiency and also for the cost of doing productivity improvement, including through optimization of the business and will put Bank’s operating model, will help in part to contain and offset pressure on resources. these cost pressures. In addition to such permanent cost savings being realized and redeployed, where temporary COVID-19 savings continue to emerge in the units during early FY22 (notably in travel and other related costs), they will be redeployed primarily within Operations to where resources are needed the most for increased financing volume delivery and catch-up work. 2.2 LENDING OUTLOOK 15. Delivering the Bank’s The crisis response and transition to a strong and durable recovery support for crisis from COVID-19 will result in sustained high demand and needs in response and strong and client countries for Bank support in FY22. With IDA19 front durable recovery from loading and IBRD crisis buffer utilization, lending volume and COVID-19 will involve a project portfolio size will be significantly higher compared to those significant increase in underlying the budget trends formulated in the FY21 Budget financing volume. Document pre-COVID-19. Management expects new financing levels at around US$60 billion11 pre-IDA top up - US$68 billion with additional IDA top up 12 - for new operations in FY22 to support these demands. 11 Assuming IBRD mid-case of US$33 billion in FY22 against a US$31-35 billion range projected by OPCS and for IDA US$27 billion. 12 With total IDA financing at US$35 billion in FY22, subject to the Board approval referred to in footnote 9. 15 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 2.2: World Bank Lending Commitments FY21-23 SBO Paper vs FY22 Budget Document (US$ billion) 16. IBRD lending For planning and budgeting purposes, IBRD lending is assumed to assumptions are be US$33 billion in FY22 (see Table 2.1) which represents an consistent with the increase of US$5.5 billion for FY22 compared to the scenario IBRD Financial indicated in the FY21-23 SBO paper. These lending volumes are Sustainability consistent with the Financial Sustainability Framework and include Framework (FSF). utilization of the additional lending room from portfolio restructuring, cancellations and recommitments for COVID-19 responses. 17. The IDA19 The IDA19 replenishment brought IDA’s FY21 to FY23 Replenishment provides commitment envelope to a new high of US$82 billion. Considering US$82 billion of the continued elevated financing needs, IDA Participants agreed to resources for IDA reduce the period of IDA19 to two years (i.e., FY21 and FY22), recipient countries over which entails frontloading IDA19 resources from FY23 to FY22 in FY21-23. order to provide US$35 billion financing in FY22, retaining a portion of FY23 financing in IDA19 as a carry-over to IDA20, and carrying out IDA20 negotiations between April and December 2021. Table 2.1 below illustrates an IDA envelope with this frontloading and advancement, or “IDA top-up" based on the most recent discussions (US$35 billion in FY22). Without this top-up, the envelope to be deployed would be US$26.5 billion in FY2213 (the incremental budget resources to deliver on the higher envelope 13 These figures exclude the effect of PSW and include estimates for cancellations and recommitments which are currently at US$4 billion for FY22. 16 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE will be sourced outside the FY22 base budget from temporary COVID-19 related savings and use of the flexibility band, if required). Consistent with previous planning and budgeting practice, revenue assumptions are based on pre-IDA top up lending numbers. 18. Combined IBRD and Together, IBRD and IDA lending is expected to remain at high IDA lending is expected levels in FY22 (see Table 2.1). Even without the expected IDA top- to be higher than up, lending projections are US$6 billion higher in FY22 than projected in last year’s planned in last year’s SBO paper. SBO paper. Table 2.1: IBRD and IDA Lending Projections (US$ billion) 19. The growth of High lending levels also increase the size of the stock of projects IBRD/IDA lending in under supervision as the sustained higher annual lending levels flow previous years coupled into the active portfolio year-on-year. The IBRD/IDA portfolio with the future lending volume and project counts have grown in recent years and are growth is expected to expected to further increase due to recent and future IDA/IBRD result in a significant lending increases. In addition to the IBRD lending scale-up and the expansion of the historically high IDA19 lending envelopes, the COVID-19 response IBRD/IDA portfolio is expected to further increase the number of projects under under supervision from implementation from 1,723 in FY20 to about 1,978 in FY22 (see US$263 billion in FY20 Figure 2.3) and the dollar size of the World Bank’s supervision to US$299 billion by portfolio from US$263 billion in FY20 to US$299 billion in FY22 FY22. (see Figure 2.4). 17 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 2.3: IBRD/IDA Supervision Portfolio (by number of operations) Figure 2.4: IBRD/IDA Supervision Portfolio (by net commitments, US$ billion) 2.3 COST OF DOING BUSINESS 20. Delivering a scaled-up Understanding and analyzing these emerging cost trends is the goal program and catch-up of the Costs of Doing Business Analysis (CDBA). Specifically, the work will have CDBA helps examine the impact of growing business volumes, implications not just for changing cost structures and projected trends in a range of sectors, the scale of the Bank’s country income groups, financing instruments, degree of riskiness work but also for the and geographic locations. cost of doing business It is important to stress that the World Bank shapes its business and will put pressure on based not principally on associated costs, but on the expected resources. development impact for total development dollars, of which the budget is a relatively small part. The choice of financing instrument, project location, sector and related degree of risks is based on an 18 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE expected development impact which drives budget allocations, and not the other way around. During the work programming phase, Country Directors, in consultation with their clients and informed by the Systematic Country Diagnostics (SCDs), decide on the activities to be funded based on the Country Partnership Frameworks (CPFs), which are discussed with the Board and which reflect national development priorities and draw lessons from completion reporting experience, Independent Evaluation Group work and other evaluations. It is also important to note that while increasing costs of doing business put an upward pressure on the budget, some of these increasing costs have already been incorporated into the budgets presented in previous Budget Documents. Other costs are new and incremental over last year and affect the FY22 budget presented in this document, as described in more detail in Section 4. 21. Five main business Five main business dynamics emerge from the cost of doing dynamics emerge from business analysis: (i) expansion of lending and the portfolio with a the cost of doing rising share in low and lower-middle income countries and small business analysis. states, and in fragile and conflict-affected situations where operating is more expensive; (ii) the shift towards riskier and more complex operations; (iii) implementation of the Environmental and Social Framework (ESF); (iv) changes in the global footprint; and (v) implementation of the capital package and IDA19 policy commitments and architecture (see Figure 2.5). Figure 2.5: Costs of Doing Business 19 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 22. Delivering higher Other operational trends are also contributing to increased costs of lending levels and a doing business, notably operating in a crisis response context, a growing portfolio, both rising number of operations in specific financing instruments, with a rising share in project locations, sectors and related degree of risks reflecting client low and lower middle- demands, and increased presence on the ground to support clients. income and fragile Delivering larger volumes of annual World Bank financing will countries, will result in result in an expansion of the project portfolio under supervision, higher cost of doing with a rising share in poorer, fragile and small countries as per our business. strategic priorities. This volume expansion and country shifts will bring opportunities for greater development impact but will also result in associated increased risks, complexity and related cost pressures. The FY20 analysis confirms the outcome of previous years that the cost of preparing financing operations as well as supervising these projects in low and lower middle-income countries is higher than in other countries. The tilt toward low- income and lower-middle income countries will continue as IDA19 new projects flow into the IDA portfolio and require increased resources. The IBRD capital package commitments to lend more in lower-middle income countries and to recent IDA graduates will have a similar effect. The cost of preparing operations in SAR and the Africa (AFE and AFW) regions is higher than in other regions, and the share of projects in these Regions is expected to increase in future years especially with an IDA top-up. The expected rising share of new commitments and the portfolio in FCV countries will also result in increasing cost pressures. Within FCV countries, project preparation costs are higher in small states and countries with high institutional and social fragility where capacity constraints tend to be greater. 23. The Bank’s share of Reflecting client demand, Investment Project Financing (IPF) more complex and remains the most frequently used financing instrument. The share riskier operations of IPF projects was higher in FY20 (63 percent) than in FY16 (52 continues to increase. percent). The average costs of preparing these operations continue to be higher than those of other lending instruments. The analysis also confirms that riskier projects have higher supervision costs than projects with low/moderate risks. These costs are driven by working in riskier environments, including in low income and FCV 20 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE countries, which requires customization of risk management and mitigation strategies to address operational risk and uncertainty. 24. A higher quality of The World Bank continues its commitment to the implementation project management and of the Environmental and Social Framework (ESF) and of the supervision will improve Inspection Panel (IPN) toolkit changes, which will both improve the the Bank’s effectiveness effectiveness of Bank policies and procedures and enhance the as well as require accountability of Bank Management and staff. Together with increased supervision fiduciary budget allocations, safeguard budget allocations have resources. been constantly growing since FY16 (see Figure 2.6). Higher ESF requirements deriving from two policies (old safeguards and the ESF introduced in October 2018) being under implementation at the same time, applied to a growing portfolio, are expected to continue to put pressure on supervision costs in FY22. Furthermore, catch- up on the supervision backlog in FY22 will involve catch-up work on the review of operational risk such as environment and social safeguard reviews and fiduciary risk reviews. Figure 2.6: Fiduciary and Safeguards Budget Allocations (US$ million) 25. Increasing the global Global footprint changes include increased field presence of footprint will enable Practice management, with more delegated authority; continuing to staff to better support deploy more Practice staff close to the clients, especially in AFR, clients, but also increase MNA and SAR, and in FCS and low-income clients; and attracting global mobility motivated and highly skilled professionals with global knowledge assignment costs, as well and experience in multiple locations, including in FCV countries. as security and facilities The Global Mobility Assignment (GMA) benefit costs per costs. assignment of decentralized Practice staff in FY20 were higher than average in AFR, MNA and SAR, the regions where the global 21 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE footprint will increase more significantly, thus adding to the cost of doing business. Expanding field presence in FCV locations will have significant additional cost implications, mainly due to related higher assignment benefits, facility costs and rising security needs. On average, staff and associated costs for a person working in an FCV country are higher than in a non-FCV environment, with staff and Global Mobility Assignment costs in FCV being higher than in non- FCV locations. Office and security costs per staff are also higher on an average basis. 2.4 CONTINUED FOCUS ON BUDGET DISCIPLINE 26. The World Bank has The World Bank continues to strive to achieve efficiency and built a track record of productivity improvement in operations and supporting units. budget discipline with Recent efforts include, among others, the Expenditure Review redeployments to meet (US$340 million annual savings); the implementation of the Trust growing operational Funds Cost Recovery Framework (US$100 million annual needs. additional cost recovery since FY16); offshoring of tasks to Chennai (estimated annual savings of US$100 million); and other efficiency initiatives, including rationalization of workforce structure and compensation, organizational realignments, and business reviews of units which have collectively helped embed savings of over US$50 million in unit trajectories. 27. Management reconfirms The World Bank will continue to face cost pressures in its budget its commitment to resulting from higher levels of lending, larger portfolio size and deliver on the efficiency operating in a riskier and more complex environment. These cost agenda as one building pressures will be broadly offset by a continuous ambitious effort to block of the capital achieve savings from efficiency, economies of scale and cost package. recovery measures which are important building blocks of the IBRD capital package. These commitments include maintaining the Expenditure Review savings, achieving additional efficiency and economies of scale savings by FY30 and complying with tight IBRD budget anchor targets which gradually fall until FY30. 22 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 28. Management has put in A comprehensive and detailed monitoring framework for the capital place a WBG monitoring package budget commitments has been established to achieve and framework that helps track cumulative efficiencies and economies of scale on a yearly track progress towards basis. This framework, which was reviewed by the Board in FY20, the capital package defines the methodology and components for calculating efficiency budget commitments. savings and economies of scale, sets out a baseline against which budget commitments are assessed (the Everything Else Being Equal trajectory) and presents a framework for monitoring and reporting. Based on this framework, progress on efficiency and economies of scale savings that have materialized throughout the year are reported to the Board after the end of each FY on a retrospective basis. 29. Significant progress has Gross efficiency savings already achieved in FY19-FY20 amount already been made to US$147 million, with net 14 efficiency savings of US$40 million, towards achieving the and economies of scale savings achieved amounting to an additional capital package budget US$38 million. Actual efficiency savings and economies of scale commitments. savings realized for FY20 exceeded the planned amount by about US$20 million and US$22 million, respectively. Further efficiency measures and economies of scale savings have already been built in the WB budget trends presented in the FY21 Budget Document. The expected pattern of economies of scale savings - starting low and building up over time as volume increase effects take time to work their way into operational programs – is materializing. These measures, and the continuing Expenditure Review savings, have allowed the Bank to significantly increase its productivity as shown by its ability to deliver a cumulative 52 percent growth of its IBRD/IDA active portfolio volume (net commitments) between FY14 and FY21 with broadly flat actual nominal administrative expenses (see Figure 2.7). 14 Net of funding to absorb new cost pressures. 23 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 2.7: Indexed Growth in IBRD/IDA Portfolio Volume vs. Actual Expenses since FY14 (in nominal terms) Key efficiency measures and their FY19 and FY20 savings impact include: (i) efforts to achieve corporate procurement savings through negotiations of new corporate procurement contracts and the introduction of transparent pricing and cost-effective standards for good and services; (ii) real estate and facilities savings deriving from optimizing HQ real estate through increased space efficiency and reduced leased footprint, resizing of country office real estate, leveraging co-location with IFC, strengthening facilities management and choosing to build rather than lease where appropriate; (iii) measures to reduce non-essential travel and to tighten travel policy exceptions, as well as expenses for food and hospitality and internal and external events; (iv) the HQ and CO compensation reforms introduced in FY19 and FY20, respectively; (v) tight management of grade mix and workforce structure and enhanced performance management; (vi) portfolio management in operations, including through a proactive management of problem and overage projects; and (vii) other savings, including from the Board, and the Annual and Spring Meetings’ budget. Economies of scale and productivity improvements are also being pursued to ensure that direct and overhead costs do not increase in a linear manner with volume increases. In FY20, economies of scale have been achieved (US$38 million) based on three key elements, focusing on containing the growth of administrative costs of non- operational units (IG&As) to below the growth of operational units’ costs, containing supporting costs (PPM) for operational units to 24 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE below the growth of Country and Global Engagement resources (excluding incremental global footprint costs) and containing average direct operational costs to below the rate of growth of the lending portfolio as volumes scale up. Additional efficiency measures and economies of scale savings have been identified in several areas and have been incorporated in the FY22 budget. These additional efficiencies and economy of scale savings, further quantified in Section 4.2 of this paper, will help offset the growing costs of doing business. With respect to the WB post-COVID-19 operating model, work is ongoing to identify and test adjustments in the areas of (i) real estate; (ii) travel; (iii) process, tools and technology; and (iv) people and culture. Adjustments will be informed by the principles of safeguarding staff health and safety and meeting the needs of our clients, and will use the lessons learnt during the COVID-19 pandemic for home based work, leverage technologies and achieve greater efficiency and a reduction in our carbon footprint. There remains significant uncertainty and adjustments to the post- COVID-19 operating model will be gradual and require time to test and implement different approaches that reflect conditions in the over 150 WB offices around the world. It is expected that travel will taper over time with resulting declines in the World Bank carbon footprint and in travel costs. Also, hybrid working arrangements, with some proportion of work being done from home, may allow for balancing the efficiencies gained by remote work with the benefits of staff interactions, creativity and innovation generated by working and collaborating in person. Adjustments to the design and use of office spaces are being explored, together with the use of video communications and digital technologies. These include creating flexible and productive work environments that ensure health, safety and employee well-being, enhance collaboration and employee engagement, and support the desired work culture. Additional reviews for the evolving workplace include assessing and deploying innovative technology to optimize space. The proposed budget incorporates incremental savings and some upfront investment (in either the administrative and/or capital budgets) that are known at this time and are described in sections 4 and 5, with the expectation that as this work progresses, it may need 25 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE to be adjusted in the future budget cycles to reflect new information. Real estate savings related to this adjustment, based on information available today, are described in para. 52, while related investments have been reflected in para. 81 for the capital budget. Investments to strengthen IT technology have been described in para. 83 for the capital budget. 30. Internal unit In addition to efficiencies and economies of scale savings, which redeployments and cost are redeployed in the budget process, internal administrative budget avoidance are also redeployments are used by unit management that make trade off sought to fund emerging decisions to be able to fund new priorities. Cost avoidance measures priorities. are also actively pursued although these are not counted as part of the efficiency savings under the capital package. These measures include, among others, cost avoidance through corporate procurement measures with additional costs absorbed by vendors or contract renewals achieved at below prevailing inflation rates in the specific industry (US$12 million in FY19-20) and cost avoidance through the staff compensation methodology (US$21 million in FY19-FY20). 31. Cost recovery from Since FY16, Management has implemented a Board endorsed External Funds has also framework which increased the recovery of Bank costs for the been increased to ensure delivery of externally funded activities. However, costs for that costs for delivering activities financed by External Funds continue to be partly covered externally funded by the IBRD-IDA administrative budget. As part of efforts for activities are financial sustainability, Management has further increased the increasingly covered by recovery of Bank costs for the delivery of externally funded their revenues. activities (US$8 million in FY19 and US$16 million in FY20), even as some level of Bank Budget expense coverage remains. 26 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 3. FY22 BUDGET FRAMEWORK This section sets out the aggregate funding for the World Bank Budget and External Funds and demonstrates the consistency of this budget framework with the principles of strategic alignment, financial sustainability and efficiency. 3.1 AGGREGATE BANK BUDGET 32. Management proposes a Striving to maintain budget discipline and considering the strategic flat real budget (2.3 priorities supporting the implementation of the operational response to percent in nominal COVID-19, IDA19 and the IBRD capital package commitments, the terms) for FY22. increasing costs of doing business, and savings derived from efficiencies, economies of scale and cost recoveries, Management proposes a flat real Bank budget for FY22 compared to FY21 on a plan-to-plan basis (increase of 2.3 percent in nominal terms and 0.0 percent in real terms) and the same nominal budget, as set out for FY22 in last year’s Budget Document. Management is committed to fiscal discipline throughout the year. Significant one-time savings in FY21, due to COVID-related restrictions, were removed from unit trajectories after approval of the budget. The FY22 Budget is sized to fund a resumption of more normal business. The FY22 budget slightly differs compared to the FY22-24 SBO to reflect the US CPI projection updated as of April 2021 in the IMF World Economic Outlook (i.e., from 2.4 percent to 2.3 percent for FY22). 15 Table 3.1: FY21 and FY22 Bank Budgets (US$ million) FY21 FY22 Current Trajectory (FY21-FY22 as per FY21 WB Budget Document) 2,787 2,851 Revision to Trajectory - Revised Trajectory (Nominal) 2,787 2,851 % Change YOY (Nominal) 2.3% 1 2,787 2,787 Proposed FY22 Budget Trajectory (in FY21$) % Change YOY (Real in FY21$) 0.0% IBRD Anchor 63% 66% Available for IBRD net income retention/transfer 665 633 IDA Anchor 69% 76% Available for other uses of IDA income 649 516 1 Del fa tor us ed i s 2.3% for FY22. Source: US CPI per Apri l , 2021, IMF Worl d Economi c Outl ook (WEO) 15This Budget Document continues the past practice of adopting the April CPI forecast from the IMF World Economic Outlook report as the FY22 deflator. 27 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 33. The proposed FY22 As part of the capital package, IBRD budget anchor targets have been budget will maintain agreed with shareholders. The IBRD anchors are specified in the form budget sustainability and of target zones identified for 3-year intervals from FY19 to FY30. contribute to the Bank’s Target zones rather than specific point targets were agreed upon given financial strengthening. that loan revenues may be affected by factors beyond Management control, including borrower decisions and global developments affecting loan maturities, and lending demand and supply; and given that the administrative expense ratio for IBRD versus IDA is subject to change depending on the size of future IDA Replenishments. The agreed goals are demanding, but Management is committed to remain within agreed target zones for each year until 2030. The IBRD budget anchor (i.e., the ratio of IBRD expenses over IBRD loan spread income) under the proposed FY22 budget is projected to be 66 percent in FY22 (see Figure 3.1). These levels are at the lower end of the budget anchor target zone range as agreed under the capital package for this period. 16 Figure 3.1: IBRD Budget Anchor The IDA budget anchor (i.e., the ratio of IDA expenses over IDA net revenue) 17 is expected to be 69 percent in FY21, and is projected to increase to 76 percent in FY22 (see Figure 3.2). IDA revenue 16See “Sustainable Financing for Sustainable Development: World Bank Group Capital Package Proposal” prepared for the April 21, 2018 Development Committee Meeting, DC2018-0002, April 10, 2018, p. 40. 17IDA’s revenues for budget anchor purposes are generated from service charges, interest income on concessional and non- concessional IDA credits, commitment fees, front-end fees, and guarantee fees. Investment revenue and debt costs are excluded, until outstanding debt exceeds the level of investments at which point costs associated with the residual debt would be included as well. 28 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE projections are subject to considerable uncertainty given the complexity of the IDA hybrid financial model and the sensitivity of the projections to assumptions of lending terms and disbursements and to any needed changes in the concessionality of IDA’s financing (e.g., in case of unexpected increases in grants at the expense of credits due to changes in the external environment and client countries’ economic conditions). Figure 3.2: IDA Budget Anchor 34. The aggregate budget Four years ago, the World Bank introduced twelve indicators to track reflects the continued the efficiency of resource use at the aggregate level by comparing the focus on the efficient size of lending and portfolio, the two largest drivers of Bank costs, in operation of the World relation to the budget. These indicators are used to assess resources Bank in FY22 despite the deployed per unit of produced output. As illustrated in Figures 3.3-3.6, growing volume and the FY22 budget compared with the expected commitments and the increased scope and size of the portfolio, by dollar amount and project count, demonstrates complexity of work. the Bank’s continued aggregate efficiency despite the growing volume and increased scope and complexity of work. Annex II provides a detailed breakdown of these indicators for IBRD and IDA respectively (along with other indicators of budget strategic alignment and sustainability). 29 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE • The administrative budget per US$ billion of portfolio under supervision: This indicator is expected to stabilize towards the pre FY20 trend – after the temporary drop due to the COVID- 19 rapid lending and despite the supervision levels remaining above the pre FY20 levels. This is achieved in the context of a rising share of the portfolio in low and lower-middle income and fragile countries with more difficult and riskier operating environments with resulting increased resource needs (see Figure 3.3). Figure 3.3: Administrative Bank Budget per US$ Billion Portfolio under Supervision (US$ million) • The administrative budget per US$ billion of commitments: This indicator is expected to also stabilize towards the pre FY20 trend – after a temporary drop due to the COVID-19 rapid lending. This continues the downward trend and a decline of 39 percent in FY22 since FY13 (see Figure 3.4). Figure 3.4: Administrative Bank Budget per US$ Billion of Commitments (US$ million) 30 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE • The administrative budget per number of projects under supervision: As for the indicators discussed above, this indicator is expected to drop in FY21 and FY22, reflecting the exceptionally increased number of projects to support the COVID-19 response with a modestly increased budget. Figure 3.5: Administrative Bank Budget per # of Projects under Supervision (FY21US$ million) • The administrative budget per lending project approved: This indicator will also temporarily drop in FY21 due to the exceptional COVID-19 high lending volumes. This indicator is expected to stabilize in FY22 (see Figure 3.6). Figure 3.6: Total Administrative Budget per Lending Project Approved (FY21US$ million) 31 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 3.2 EXTERNAL FUNDING OF BANK ACTIVITIES 35. External Funds will be External Funds provide strategically aligned support to the World used strategically to Bank’s efforts to respond to emerging global priorities and deliver support priority solutions for our clients. They complement IDA and IBRD activities, development issues. help fund innovative approaches, supplement knowledge and support effective partnerships. External Funds support the Bank’s development work either as (i) funding channeled to the Bank for Bank-performed activities (e.g., Bank-Executed Trust Funds (BETFs), Reimbursable Advisory Services (RASs), Externally Finance Outputs (EFOs), the Reserve Advisory and Management Partnership (RAMP) and some miscellaneous reimbursable activities); or (ii) funds channeled through the Bank to recipients (e.g., Recipient-Executed Trust Funds (RETFs) and Financial Intermediary Funds (FIFs)) for which the Bank receives fees for services. 36. The outlook for For RETFs a stable disbursement is expected. Fund balances in BETF External Funds accounts have increased in FY21 and represent about 15 months of overall (notably RETF BETF disbursements. In addition, considering signed contributions and BETF) remains (not yet paid into BETF accounts), there are enough funds available broadly stable in to maintain current level of BETF usage for 2-3 years. However, since FY22, although is the use of BETFs is not fungible across the various Trust Fund subject to pressures umbrellas/programs, a shortage of funds in specific programs can due to some donors’ materialize and financial aid budget adjustments faced by several adjustments to their major donors could accelerate this trend. EFOs and RAMP have aid budgets. remained relatively stable over the past 5 years, while RAS revenues have increased by over 40 percent in the same timeframe. 37. Management is Management is implementing measures on External Funds implementing mobilization, usage and financial sustainability to strengthen the measures to better integration of planning, enhance strategic alignment and support integrate planning, financial sustainability of External Funds which directly fund Bank enhance alignment critical activities for client support. and support A trust fund reform is being implemented to move towards fewer and sustainability of larger Trust Funds (“Umbrella 2.0 Programs”) that are thematically External Funds. organized to strengthen their alignment with corporate and country program priorities and that allow greater impact and efficiency. This reform allows the Bank to reduce fragmentation by bringing more than 550 World Bank Trust Funds into 71 Umbrella Programs. Each 32 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Umbrella has a common overarching development objective, governance structure, results framework, and reporting arrangement. In addition, Management aims to reduce the Bank’s reliance on, and related share of administrative expense funded by, External Funds over time, especially for critical activities. The share of the WB total costs covered by External Funds which directly fund Bank activities for client support grew from 27 percent in FY10 to 39 percent in FY20. 38. Management decided The External Funds usage envelope is closely monitored throughout last year to increase the fiscal year. As a result, the growth of External Funds usage for selectivity and FY22 is expected to decline (see Figure 3.7). Actual External Funds gradually reduce usage versus envelopes is being monitored, with the same reliance on External accountability for overruns as for Bank Budget usage. Funds and therefore Figure 3.7: Share of External Funds to All Funds allocated to each VPU a dollar envelope for External Funds usage for each fiscal year in the planning period. 39. Efforts to increase IBRD and IDA fully cover all direct and indirect 18 costs associated External Funds’ cost with the activities they finance with their administrative budget, but recovery for the External Funds still fall short to cover their share of indirect costs. Cost delivery of externally recovery measures for operational External Funds have been funded activities will introduced in FY16 and have increased annual cost recovery (see help redeploy IBRD- Figure 3.8). 19 IDA budget resources to fund strategic priorities. 18 Cost of corporate (IG&A) services in support of operational work. 19 An FY19 audit review by GIA confirmed that the Bank was on track to meet the Trust Funds’ cost recovery target. 33 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 3.8: Cost Recovery from Operational External Funds (US$ million) Additional cost recovery measures are being implemented with the expectation to further increase recovery of Bank costs from an FY20 baseline for the delivery of all types of externally funded activities by around US$20 million in FY22. Several types of services financed by External Funds would be provided on a full-cost basis while IBRD/IDA would continue to share some of the indirect costs related to regular Trust Funds due to the partnership and leveraging benefits that they provide. 3.3 AGGREGATE FY22 BANK BUDGET AND EXTERNAL FUNDS 40. An aggregate resource The “All Funds” sum of the Bank Budget (BB) and External Funds envelope for FY22 has (including BETFs, RASs and EFOs) shows a nominal growth of 1.3 emerged from the percent in FY22, measured plan-to-plan (See Table 3.2). discussion on the Table 3.2: FY21-22 Administrative Budget and External Funds strategic framework (US$ million) and the External FY21 FY22 Funds outlook. Nominal Bank Budget (BB) Trajectory 2,787 2,851 External Funds (EF) Assumptions 1,723 1,720 Total (Nominal) 4,510 4,571 Y-o-Y Growth 1.3% Real (in FY21$) Bank Budget (BB) Trajectory 2,787 2,787 External Funds (EF) Assumptions 1,723 1,681 Total (Real in FY21$)1 4,510 4,468 Y-o-Y Growth -0.9% 1 Defl a tor us ed i s 2.3% for FY22. Source: US CPI per Apri l , 2021, IMF Worl d Economi c Outl ook (WEO) report. 34 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4. FY22 ADMINISTRATIVE BUDGET This section presents specific details of the FY22 administrative budget proposal, the allocation to the main budget categories and their alignment 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 41. Management is The proposed administrative budget for FY22 is US$2,851 million as proposing a Bank set out in Table 4.1 below. Measured plan-to-plan, the proposed budget administrative budget represents an increase of 2.3 percent in nominal terms and 0.0 percent of US$2,851 million in real terms for FY22 (flat real). for FY22. Table 4.1: FY21 WB Budget and Proposed FY22 WB Budget (US$ million) 4.2 ADJUSTMENTS TO THE FY22 BUDGET 42. The business The FY22 planning and budgeting process is taking place in the context priorities and outlook of a high degree of uncertainty and volatility due to COVID-19, and discussed in the the need to help bolster the World Bank financial capacity to support a previous sections have resilient recovery for our client countries. The guiding planning and shaped the FY22 budgeting principles for FY22 take account of this current environment budget and how and the experience of FY21 through (i) budget flexibility to manage resources are COVID-19 related costs and savings and ensure the organization is able allocated. to shift resources dynamically to where they are needed most; (ii) greater selectivity and prioritization in the selection of activities, both for Bank budget and External Funds, to be effective in supporting clients in pandemic recovery and long-term development needs; and (iii) a proactive and gradual adjustment of the World Bank’s operating model post-COVID-19. 35 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE The five business priorities discussed in Section 2.1 of this paper have informed the sizing of the FY22 budget and adjustments to allocations: (i) supporting clients in pandemic recovery and long-term development needs with increased financing and a larger portfolio to supervise; (ii) replenishing knowledge and analytics to inform COVID-19 recovery and GRID with catch-up on country engagement/diagnostics work (e.g., SCDs, CPFs, PLRs and CENs), increased core and extended core ASA (including the new Country Climate and Development Report), catch-up work for reviewing operational risks (notably with in-person fiduciary and safeguard reviews and verification/validation of reported project outcomes) needed to overcome the supervision backlog post- COVID-19, and effective use of global expertise deployment and development; (iii) continuing to implement global footprint changes; (iv) integrating IBRD/IDA corporate policy commitments (e.g., debt, gender, climate, jobs and economic transformation, and private capital mobilization) into operational products and operationalizing key initiatives, including the ESF, IPN toolkit change implementation and GBV contractor disqualification; and (v) strengthening institutional support for delivery. 43. Funding the lending Supporting clients in the pandemic recovery is expected to lead to growth and expanded lending and portfolio volumes that are larger than assumed in the FY21 portfolio needed to Budget Document. For FY22, the lending volume is projected to be support clients in US$6 billion higher and the size of the project portfolio to be pandemic recovery supervised is projected to be larger by about 115 projects. The budget and long-term implications of funding incremental lending preparation and development is a key supervision are an incremental US$30 million in FY22. priority impacting the This budget funding assessment does not include the agreement to World Bank’s budget. bring forward the IDA20 Replenishment by one year by IDA Participants. While Replenishment discussions are ongoing, this can increase the IDA lending significantly over the period FY22-FY23, with a resulting incremental lending and supervision funding requirements estimated at up to around US$50 million per year. Funding for this estimated incremental cost increase in FY22 is envisaged to come from (i) using any temporary COVID-19 savings (primarily travel related) that may arise in the early part of FY22 and will be redeployed accordingly; and (ii) access to the budget flexibility band of up to 2 percent, as needed and with information of the Board. This approach is consistent with the approach in budgeting in FY19 when the IBRD capital increase was negotiated. 36 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 44. The COVID-19 Funding the replenishment of knowledge and analytics is another key restrictions in FY21 priority impacting the World Bank’s budget. This includes catch-up have resulted in the work on country diagnostics, core/extended core ASA, review of need to replenish operational risk (notably with in-person fiduciary and safeguard knowledge with a reviews and verification/validation of reported project outcomes) for significant catch-up the project supervision backlog, and effective use of global expertise needed on activities deployment and development. The large work program for the COVID- delayed by the 19 response and travel restrictions led to deferred completion of pandemic. country engagement products such as Systematic Country Diagnostics (SCDs), Performance and Learning Reviews (PLRs), Country Partnership Frameworks (CPFs), and Country Engagement Notes (CENs). Catch-up work on this backlog of country diagnostics will be needed in FY22 to inform the COVID-19 recovery and transition. Catch-up work on core and extended core ASAs and effective use of global expertise deployment and development are also urgently needed to inform the COVID-19 recovery and transition. Also, funding will be provided for enhanced country climate analytics (as a newly introduced core ASA as noted in the key highlights of the 2021-2025 Climate Change Action Plan) to better inform analysis in SCDs and country programs in CPFs on climate and links to poverty and shared prosperity. Review of operational risks is also needed to overcome the project supervision backlog post-COVID-19. The supervision backlog due to COVID-19 travel restrictions in FY21 has resulted in the need to address associated operational risks, notably through environment and social safeguard reviews and fiduciary risk reviews. Efforts are also ongoing to support the WBG’s continued and enhanced role as a leader in development knowledge and innovation consistent with the Strategic Framework for Knowledge. These include: (i) enhancing the relevance, quality and impact of analytical work and advice; (ii) improving knowledge flows and collaboration across the WBG; and (iii) fully realizing the WBG’s potential to learn from operations to ensure its role as a leader in development innovation. Management is also ensuring reduced reliance on External Funds for core analytics and supporting critical activities currently funded by them with the administrative budget. Incremental funding for replenishing knowledge and analytics - recognizing also that the reduction projected in the reliance of External Funds over the period will require some additional Bank budget 37 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE funding to ensure delivery of country core analytics - has been set aside in the amount of US$8 million in FY22, as well as through increased funding for Global Engagement work (an increase of US$2 million in FY22), an increase in support to DEC (about US$1m in FY22) and for collaboration work between Regions and Practice Groups (US$25 million). 45. Resources for the The Bank has over the years continued to make efforts towards aligning COVID-19 response resources with corporate priorities. Management will continue to and recovery activities prioritize funding for these efforts in the planning period for both and other key lending/supervision and advisory and analytical work, notably for the corporate priorities work on COVID-19 response and recovery and key corporate priorities and public goods have and public goods. Priority is also being given for analytics and expertise been prioritized in the in key areas of global priorities, notably climate (including for a new planning and climate core ASA), gender, FCV, regional integration and small states budgeting process. – continuing the increased focus in these areas of recent years. There is also strong focus on the areas of infrastructure (notably electricity access and clean water), private sector and market creation, debt, poverty, inequality and inclusion, human capital, vaccines, climate resilience, and jobs and economic transformation. 46. Funding the The goal of the planned global footprint changes is to increase staff implementation of presence in a way that reflects strategic and operational priorities with global footprint enhanced local decision making to support clients and deliver good changes for enhanced country outcomes, with much of the growth of staff in the field being delivery, especially in in IDA and FCV countries, and for Practice Managers decentralization. FCV and IDA Progress has been made in FY21 on the implementation of the global countries, is another footprint changes, even though COVID-19 restricted staff movements priority for the and relocations. This has resulted in a 2.2 percent increase in the planning period. number of staff outside the US compared to year-on-year end-April. Also, the number of Practice Managers in the field has more than doubled 20 at FY21 end-April, with over one-third of these currently located in Africa, and is expected to increase further. Increased field presence remains even more necessary under the post- COVID-19 operating model. The planned budget takes account of progress made in FY21 on staff movements and office expansions and has adjusted the funding allocated for FY22. As agreed with the Board last year, the global footprint incremental resources will be ringfenced. 20 This does not include Practice Managers pending relocation to the field. 38 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 47. The integration of The implementation of country, regional and corporate policy IBRD/IDA corporate commitments as per the IDA19 replenishment and the IBRD capital policy commitments package and the increased complexity of the IBRD and IDA into operational architecture (multiple windows, implementation of the Sustainable products and the Development Financing Policy (SDFP), hybrid financial model) operationalization of require additional country, regional and corporate engagement, and key initiatives are reporting. While funding for several of these commitments was being prioritized in included in the FY21 Budget Document discussed last June, additional the planning and resources have been provided for the scaled-up work on debt budgeting process. sustainability and transparency, climate change and private capital mobilization. The operationalization of key initiatives has also been prioritized in the planning and budgeting process, notably for the Environmental and Social Framework, IPN toolkit change implementation and the Gender- Based Violence contractor disqualification. With respect to the IPN toolkit change, on September 8, 2020 the Executive Directors approved the creation of the Accountability Mechanism including the Dispute Resolution Service. An incremental budget of US$0.7 million to fund the Accountability Mechanism is included in this paper, subject to a separate endorsement process by CODE, in addition to the incremental US$0.8 million allocated in the FY21 budget. 48. Selective investments The FY22 budget has been allocated with strong emphasis on to strengthen operational priorities. However, Management has identified some key institutional support demands on non-operational units to strengthen the institutional for delivery have also support for delivery. These are: been prioritized for • Replacement of the Enterprise Resource Planning (ERP) funding. System: Planning and scoping of the replacement of the existing ERP system has started and administrative budget funding was provided in the FY21 Budget Document. Revised estimates since the FY21 Budget Document put the total cost pressure of US$2 million for FY22, a reduction from the original US$3 million estimate. • Corporate liability insurance: Corporate liability insurance premiums have risen by US$1 million per year due to new coverages in cybersecurity and recent industry losses and uncertainties associated with the COVID-19 pandemic. In FY21, the corporate contingency funded this increase and from 39 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE FY22 onwards incremental administrative Budget funding will be required. • LIBOR transition: The World Bank needs to take steps in transitioning from LIBOR to alternative reference rates by end 2021 for non-USD currencies, and by end June 2023 for USD LIBOR transition. Funding for this work was included in the FY21 Budget Document. Revised estimates since then, driven mainly from incremental recurring expenses needed for licensing and data subscription, and estimated completion times, put additional cost pressures (after internal redeployments) of US$1 million for FY22. • Information technology: Strengthening IT capacity is critical to support the Bank’s operational teams, enhance productivity and collaboration, and continue to facilitate the current home-based work as well as post-pandemic work modalities. Incremental funding of US$3 million is required, including for increased costs of software licenses due to market price increases, additional required services, and expansion of the user base. This includes funding (complemented by future capital investments) for development of a digital platform to support operational project management under the post- COVID-19 operating model by integrating a host of currently fragmented business capabilities into a modern, secure and mobile digital platform. • Litigation preparedness and other legal compliance issues: US$1.5 million has been allocated for FY22 to cover increased work on litigation preparedness, to support the increased LEG work for lending operations and for data privacy implementation. • Funding for other cost pressures: There are other priority cost pressures related to institutional support for delivery stemming from IG&A units. They include supporting the corporate finance function in DFI related to SDFP and IDA windows, as well as implementation of trust fund reform, strengthening global facilities management, follow up on the first set of recommendations of the Anti-Racism Task Force, and corporate risk mitigation. 40 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE • Corporate Contingency: There continues to be uncertainty on the pace of the lifting of COVID-19 related restrictions and the costs associated with the mitigation measures that will be necessary as offices re-open, from regular testing, cleaning of offices and supply of vaccines and other medical items through UN and other arrangements for staff based in countries with poor health service availability and infrastructure. This uncertainty warrants an increase in the size of the Corporate Contingency from the regular US$10 million to US$13 million in FY22 so as to strengthen the flexibility of the Bank to rapidly address related needs. 49. Management has Most of the business priorities and related funding requirements are used two modalities to already reflected in the FY21 Budget Document that was discussed by adjust the budget the Board in June 2020. However, and as described above, some new presented in the FY22 funding requirements have since emerged. Management has used two Budget Document to modalities to adjust the FY22 budget to ensure alignment of the budget ensure alignment of with new funding requirements: (i) internal redeployments; and (ii) the budget with the incremental additions to unit budget trajectories, with priority given to new funding operational needs. New efficiency savings, economies of scale and cost requirements for recovery measures will be implemented to help fund these incremental these business additions. priorities. 50. Internal Each year unit management makes trade-off decisions and internally redeployments and redeploys or reallocates resources to fund new priorities within existing reallocations are used unit budget trajectories. For example, units are phasing out skill profiles to address cost focused on areas of engagement where demand is declining and pressures. redeploying freed up resources towards staff in areas where demand is growing; operational units are moving towards establishment of umbrella funds enabling more efficient program management and the redeployment of staff to other emerging priorities; units are also funding some costs pressures by finding internal efficiencies (such as eliminating duplicative technologies, outsourcing administrative services and automating processes) and redeploying savings; and more broadly prioritizing activities to minimize fragmentation of the work program and redeploying resources to core work. 41 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 51. Additions to unit When funding the priorities and cost pressures described in the budget trajectories paragraphs above cannot be achieved with internal redeployments and have been prioritized reallocations, incremental additions to unit budget trajectories are for FY22, and current made. Current estimates of these incremental funding total US$57 estimates total US$57 million in FY22. The largest incremental funding for FY22 is for the million in FY22. IBRD and IDA volume growth (53 percent) and replenishing knowledge and analytics (20 percent). Table 4.2: Incremental Additions to FY22 Budget (US$ million) 52. New or incremental Further efficiency measures and related savings, beyond the gross efficiency measures efficiencies realized and already embedded in the budgets presented in will be implemented the FY19, FY20 and FY21 Budget Documents amounting to US$304 to help balance these million, have been identified and are incorporated in the FY22 budget. incremental additions. Key measures include: • Compensation, workforce structure and grade mix changes: In addition to the savings in FY22 of US$40 million deriving from the application of the HQ and CO staff compensation methodology and from the workforce structure and grade mix changes which were already included in the FY19 and FY20 Budget Documents, additional annual savings of US$2 million in FY22 are expected. • Real estate and facilities: Management is continuing to prioritize the utilization of the World Bank real estate portfolio, 42 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE especially under the post-COVID-19 operating model. In HQ, the focus on relinquishing leased spaces by 2025 and moving staff into owned properties will enable the Bank Group to generate cost savings. GCS has also been working with other organizations occupying three HQ campus leases expected to expire in the next few years to identify needs and timing in preparation of the lease terminations and move to Bank-owned buildings. This will result in savings for the World Bank of US$1 million for FY22, as changes in real estate take a longer time horizon to implement fully. Globally, the implementation of an enhanced lease management governance framework and a strengthened facilities management role in the two Africa regions will ensure cost-effectiveness in real estate decisions, increased oversight and better alignment with the Bank’s operational needs, notably to respond to global footprint changes. • Corporate procurement and cost optimization: Additional annual savings through negotiations of corporate procurement contracts are estimated at US$6 million in FY22. • Contributions to other organizations: The Bank provides contributions to some external organizations for collaborative work, partnerships and cost sharing services. US$1 million saving for FY22 is expected for reflecting savings into these contributions. • Savings from Executive Directors and IEG budgets: The Executive Directors have decided to reduce their base budget by US$0.9 million in FY22 while IEG is reducing its base budget by US$0.1 million in FY22. • Travel, meetings/events, hospitality, and printing: Management anticipates that the Bank’s post-COVID-19 operating model and a renewed focus on reducing its carbon footprint will result in changes in practices generating permanent travel, printing and other savings once restrictions are lifted and offices are reopened. While it is too early to gauge the full extent that a post-COVID-19 operating model will have on travel and other costs, the budget takes a prudent assumption of permanent savings in travel and for hospitality, printing and meetings/events. These reflect a permanent efficiency adjustment and have been reallocated to fund operational 43 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE strategic priorities (see Table 4.4 - US$27 million in FY22). For FY22, in addition to these permanent savings, Management expects there will also be “temporary” or one-off savings in net travel costs 21 and in meetings, hospitality, and printing costs resulting from some continuing restrictions in the early months of FY22, estimated at US$43 million. Given the uncertainty of these estimates which greatly depend on the COVID-19 evolution, Management has reallocated US$10 million of these temporary savings for operational strategic priorities (see Table 4.3) and kept the remainder in units’ budgets for internal redeployments, primarily to fund the catch-up effect and additional IDA top-up work in Operations and other COVID- 19 related administrative costs. • Staff separation and other Central Accounts savings: Staff separation costs are projected to fall from prior years’ levels through a tighter governance framework. In addition, the pandemic is expected to lead in FY22 to a temporary reduction in institutional depreciation, medical insurance costs and staff benefits related to staff turnover such as benefits upon appointment, resettlement, and termination. 53. These additional Additional savings totaling US$59 million have been identified in efficiency measures, FY22 (see Table 4.3). The savings expected to be generated by the economies of scale, described efficiencies and other measures will help absorb the required cost recoveries and gross funding needs detailed above. redeployments total US$59 million in FY22. 21Travel cost savings net of expected temporary per-trip increased costs in the initial catch-up phase deriving from higher airline costs, costs of quarantines, and possible increased mission lengths or number of trips. 44 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table 4.3: Incremental Savings/Adjustments in the FY22 Budget (US$ million) FY22 1. Efficiency measures and redeployments 38 a. Grade mix 2 b. Global real estate and facility 1 c. Corporate procurement 6 d. Permanent COVID-related savings for travel, retreats 27 and printing e. Expenditures/contributions to other organizations 1 f. Savings from Executive Directors and IEG budget 1 1 2. Global footprint temporary delays 6 3. Adjustment to Project Aria estimates in FY21 Budget 1 Document 4. Temporary COVID-related savings redeployed for strategic 10 priorities 5. Staff Separation and Other Central Accounts savings 7 Subtotal: Savings/Adjustments from Unit Trajectories 63 2 Unprogrammed savings in FY21 Budget Document (3) Total Savings/Adjustments 59 1 Incremental IEG savings of US$0.1 million in FY22 over the existing savings in the FY21 Budget. 2 Following the reduction in the budget trajectory between the FY21 SBO and the FY21 Budget Document for a change in that year's inflation assumptions, there remained US$3 million of unprogrammed savings in FY22. These require a first call on new efficiency savings in FY22 so as not to leave a shortfall in the overall budget trajectory. 54. Achieved and Significant progress has already been made towards achieving the projected cumulative capital package budget commitments (see Tables 4.4 and 4.5 below). net efficiency and The budgets presented in the FY19, FY20 and FY21 Budget economy of scale Documents and the proposed FY22 budget include gross efficiency savings of measures, economies of scale and cost recoveries of US$675 million in US$275million have FY22. These represent cumulative savings from the budget set in the been incorporated in FY18 Budget Document and so exclude embedded Expenditure the FY19, FY20, Review savings. FY21 and FY22 In the four fiscal years from FY19 to FY22, cumulative gross efficiency Budget Documents. savings amount to US$521 million, of which US$204 million are net savings (net of incremental additions to fund cost pressures not associated with either volume increases or changes which have a large budget impact that were not anticipated at the time of the capital package agreement). 45 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Economies of scale savings amount to US$71 million in FY20-FY22. These are expected to build up over time as higher lending volumes will enable the Bank to generate economies of scale as direct costs and overhead costs will be contained (e.g., the growth of administrative costs for non-operational units will be contained to below the growth in operational units’ costs; the growth of Program and Practice Management (PPM) costs in operational units will be contained to below the growth of Country Engagement (CE) and Global Engagement (GE) resources (excluding incremental global footprint costs which are part of PPM costs); and increases in average direct operational costs will be contained to below the rate of growth of the lending portfolio as volumes scale up). Table 4.4: FY19-22 Savings/Adjustments in the Budgets (US$ million) 22 FY19 FY20 FY21 FY22 FY19-22 act. act. plan plan Gross Efficiencies in FY19 Budget 41 75 86 88 290 Gross Efficiencies in FY20 Budget 31 37 56 124 Gross Efficiencies in FY21 Budget 34 38 72 Gross Efficiencies in FY22 Budget 35 35 Gross Efficiencies 41 106 157 217 521 Redeployments for non-volume related cost (29) (78) (101) (109) (316) pressures 1 Net efficiency savings 12 28 56 108 204 Economies of Scale Savings - 38 16 17 71 Gross Efficiencies and Economies of Scale 41 144 173 234 592 Savings Internal and External Cost Recoveries2 8 16 22 37 83 Gross Efficiencies, Economies of Scale, and 49 160 195 271 675 Cost Recoveries 1 Global Footprint cost pressures are excluded 2 Comprises incremental cost recoveries from both external funds and from shared service agreements 22Gross Efficiencies presented in the FY22 Budget Document comprise efficiency measures and redeployments net of unprogrammed savings in the FY21 Budget Document as shown in Table 4.3. 46 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table 4.5: FY19-22 Gross Efficiency Savings by Category (US$ million) FY19 FY20 FY21 FY22 FY19-22 act. act. plan plan Efficiencies Reduction from HQ/CO Compensation Review 12 21 33 40 106 Savings from Executive Directors Budget 2 7 8 9 26 Global Real Estate and Facilities - 5 13 13 31 Corporate procurement and cost optimization 5 9 17 24 55 Workforce Structure and grade mix 8 23 29 36 95 Efficiency Adjustments in Operations 12 39 47 57 156 Travel, Hospitality and Other Efficiencies - 1 6 34 42 Savings from Spring/Annual Meetings 1 1 1 4 4 10 Total Gross Efficiencies 41 106 157 217 521 1 Formerly labeled as "Savings from the Board of Governors" 55. There is considerable The uncertainty related to the COVID-19 pandemic, and its unfolding uncertainty related to effects on financial markets, the global economy and World Bank’s the impact of the activities and budget remain difficult to assess precisely at this point COVID-19 unfolding in time. The Bank has several established budget mechanisms to effects and address this uncertainty. These include: (i) budget redeployment implications on the within VPUs, units or country programs; (ii) regional contingencies; World Bank’s future (iii) the corporate contingency (US$13 million) to be used for needs lending volumes, which cannot be addressed with any of the mechanisms described savings and costs, and above; and (iv) lastly, the Board is asked to authorize a flexibility band budget. every year, which allows the Bank to overrun the authorized budget by up to 2 percent. This flexibility band has been used only rarely and under exceptional circumstances, and with the knowledge of the Board. 56. Management Management has continued its focus on budget efficiencies, cost proposes a 2.3 percent recoveries, redeployments, and economies of scale which are expected budget increase in to generate significant savings, as described above. Taking the cost nominal terms (flat in pressures discussed above also into account, Management proposes a real terms) for FY22, flat real World Bank administrative budget for FY22 (2.3 percent in on a plan-to-plan nominal terms), on a plan-to-plan basis. Management is committed to basis. fiscal discipline throughout the year. Significant one-time savings in FY21, due to COVID-related restrictions, were removed from unit trajectories after approval of the budget. The FY22 Budget is sized to fund a resumption of more normal business. The following table shows at an aggregated level how the FY22 Bank Budget has been derived, starting with the FY21 Budget Document 47 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE amount of US$2,787 million. The proposed budget adjustments have four components: • The FY21 budget which incorporates incremental resources to fund cost pressures identified in the FY21 Budget Document (primarily the global footprint adjustment and IBRD and IDA volume growth pre-COVID-19), net of identified savings; • Incremental funding for the FY22 budget to fund new cost pressures (see Table 4.2); • New savings from efficiencies and economies of scale, cost recoveries and redeployments (see Table 4.3); and • The impact of new inflation assumptions since the FY21 Budget Document on VPU cost structures with the internal price factor increasing from last year’s Budget Document assumption of 2.0 percent in FY22 to 2.1 percent in FY22. It should be noted that Vice Presidential units were requested to meet some of the gross incremental funding needs through internal reallocations and re-prioritization to repurpose some funding to new priorities and cost pressures. Table 4.6: FY22 Bank Budget (US$ million) FY21 FY22 Budget as per FY21 Budget Document 2,787 2,851 o/w increases already identified in the FY21 Budget Document 64 Emerging priority areas requiring additional funding 57 Budget Adjustments and efficiency savings (59) Effect of forecast internal price factors1 3 FY22 Budget (Nominal) 2,851 % Change YOY (Nominal) 2.3% Proposed FY22 Budget (in FY21$) 2,787 2,787 % Change YOY in real terms (in FY21$) 0.0% Deflator used2 2.3% 1 Unit Budget trajectories have been adjusted since the FY21 Budget Document due to the effect of internal VPU price factors forecasted. 2 Source: US CPI per April, 2021, IMF World Economic Outlook (WEO) report. 48 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4.3 STRATEGIC ALIGNMENT BY WORK PROGRAM 57. The FY22 budget and The FY22 budget and distribution reflect Management’s commitment distribution reflect the to continue to increase the share of resources going to operations and alignment of front-line services. 23 Within operations, most of the incremental resources with the funding is prioritized to respond to increased lending levels in FY22 strategic directions and the portfolio growth. In these areas, the focus will be on funding discussed in section 3. poorer and smaller countries and those affected by fragility, violence and conflict where lending and portfolio volumes are growing. Additional resources are also prioritized to replenish knowledge and analytics with catch-up work for country and global diagnostics and knowledge products to inform COVID-19 recovery and for reviewing operational risks needed to overcome the supervision backlog post- COVID-19; to enhance the Bank’s capacity to support clients by implementing global footprint changes; and to integrate IBRD/IDA corporate policy commitments into operational products and operationalize key initiatives. Selective investments to strengthen institutional support for delivery are also being funded as discussed in para. 48. Box 4.1: Administrative Bank Budget Definition As a result, the budget allocation for operational units will increase by US$79 million, or 4.6 percent, in FY22 compared to FY21. The share of the administrative budget going to operations will continue to increase from 60.3 percent in FY21 to 60.9 percent in FY22. This 23 See additional explanation of definition of the Administrative Budget Envelopes in Box 4.1. 49 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE follows a significant realignment of resources that Management has made to support operations since FY16, when the share of budget resources to operations was 54.1 percent (see Figure 4.1). The operational units’ share of their All Funds resources is projected to slightly increase from 66.5 percent in FY21 to 66.8 percent in FY22. Table 4.7: FY21 and FY22 Resources by Work Program and Funding Source (US$ million) Table 4.8: FY21 and FY22 Budget Share by Work Program and Funding Source 50 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 4.1: Operational Share of Unit Budgets Within operational unit budgets, the share of Bank budget resources for Client Engagement is increasing to 59.2 percent in FY22 compared with 58.3 percent in FY21. On an “All Funds” basis, the share of Client Engagement in operational unit trajectories is increasing slightly in FY22 (see Figure 4.2). Figure 4.2: Client Engagement Share of Operational Unit Budgets 51 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Within the Client Engagement envelope, funding for work on Country Engagement will increase by 6.2 percent (a US$56 million increase) in FY22 over FY21 to support the increased lending volume and portfolio growth discussed above (pre-IDA additional top up), the catch-up work on portfolio supervision due to COVID-19-related delays, knowledge replenishment, and integration of corporate policy commitments into operational products and the operationalization of key initiatives. The regional Country Engagement budget trajectories increase for all regions and are all above the regional CE trajectories presented in the FY21 Budget Document, reflecting the above priorities. The funding for the operational response for the COVID-19 crisis and transition to recovery, namely for the preparation and implementation of COVID-19 Fast Track facility operations and related knowledge activities, has been prioritized in the country programs. The Global Engagement budget will increase by 4.2 percent from FY21 to FY22. Resources for Program and Practice Management (PPM), which fund the management and overhead costs of running the operational work program, will increase by 2.6 percent in FY22 over FY21. The main reason for this increase is the support for the global footprint changes (global mobility benefits, facilities and security). The overall allocation to IG&A units will be decreasing slightly in real terms between FY21 and FY22, with some incremental funding selectively provided to strengthen the institutional support for delivery and externally driven cost pressures (see para. 48), and savings expected from efficiency measures, productivity improvement and economies of scale and internal reallocations. Funding for the Grant Making Facilities will remain unchanged in nominal terms. 52 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4.4 OPERATIONAL WORK PROGRAM 58. Country Engagement Management has increased the Country Engagement budget by US$56 allocations to all million in FY22 (or 6.2 percent), with all Regions seeing an increase Regions have been over their FY21 allocations (see Figure 4.3 and Table 4.9). The increased to support funding will support the operational response for the COVID-19 crisis the operational and transition to recovery, namely for the preparation and response for the implementation of COVID-19 Fast Track facility operations and COVID-19 crisis and related knowledge activities in country programs. The increase will be transition to recovery. more pronounced for those regions where lending and portfolios are projected to increase significantly, namely for AFR East (plus 7.1 percent), AFR West (plus 7.7 percent) and SAR (plus 7.4 percent). This builds on the increases that were already factored into the FY17- FY21 Budget Documents for all regions. 59. The outcome of the Allocations to IBRD and IDA countries in each of the Regions are set Work Program out in Figure 4.3. Overall budget allocations for operational work in Agreement (WPA) both IBRD and IDA are showing increases across the board reflecting process shows an country demands and financing availability. Country Engagement increase in Country funding for IDA countries is estimated to increase by US$22 million Engagement budget (4.2 percent), while for IBRD countries by US$33 million (9.0 allocations for work percent). in both IDA and Figure 4.3: Evolution of the Country Engagement Bank Budget by Region from IBRD countries in FY21 to FY22 (US$ million) FY22. 53 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table 4.9: FY21 and FY22 Operational Budget Envelopes (US$ million) INDICATIVE BUDGET TRAJECTORIES BB ALL FUNDS FY21 FY22 FY211 FY22 AFR East CE 169 181 322 333 PPM 90 90 101 101 Total 258 271 423 435 AFR West CE 169 182 247 260 PPM 79 79 82 82 Total 248 261 329 342 EAP CE 121 127 255 261 PPM 79 80 92 92 Total 200 207 347 352 ECA CE 97 100 209 211 PPM 68 68 73 73 Total 165 168 282 285 LCR CE 111 115 178 181 PPM 68 68 71 71 Total 179 183 248 252 MNA CE 72 76 171 175 PPM 49 49 53 53 Total 121 125 224 228 SAR CE 148 159 239 250 PPM 73 74 77 77 Total 221 232 316 327 Other Operational Units' Allocations2 CE 12 14 90 91 Total 12 14 90 91 All Regions CE 898 954 1,710 1,762 PPM 507 508 548 549 Total for Regions 1,404 1,462 2,258 2,311 Practice Group GE Practice Group GE 95 99 288 290 Memo: Plus Prepaid CE from Regions 24 25 24 25 Practice Group PPM Equitable Growth, Finance and Institutions 34 34 49 48 Human Development 16 16 30 30 Infrastructure 18 18 35 35 Sustainable Development 27 27 91 91 Total Practice Group PPM 94 94 205 204 Total for Practice Groups 190 193 493 495 Other Operational Support PPM Other Operational Support3,4 108 125 147 164 Total for Operational Support 108 125 147 164 Total Operational Units 1,702 1,781 2,897 2,970 1 FY21 External Funds by budget classification was recalibrated to align with final EF mapping post realignment in FY21. 2 CE BB funds include Young Professional (YP) Subsidy set-aside which will be distributed to the Regions based on YP placements and funds for OPCS to support operations related priorities in FY22. Any additional balance will be held for further distribution across the Regions, and other corporate priorities being programmed. This incremental funding complements base budget resources in the operational envelopes used for WPA for these priorities. All funds include EF allocation distributed to FCV and to Global Units. 3 Funding allocation was made available to the Global Practices for Gender Based Violence and ESF as corporate priority for US$2.7 million in FY22 (in addition to GBV and ESF project level funding provided from the CE envelope). 4 External funds includes the Global Partnership for Educations (GPE) Secretariat. 54 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 60. As for FY21, the The funding for the operational response for the COVID-19 crisis and Country Engagement transition to recovery, namely for the preparation and implementation budget has prioritized of COVID-19 Fast Track facility operations and related knowledge funding for the activities, will be prioritized in the country programs. The planning operational response and budgeting of COVID-19 activities reflect information available for the COVID-19 as of May, when this Document was distributed to the Board, with a crisis and transition to remaining degree of uncertainty and volatility, as other COVID-19 recovery. activities may be firmed up later given the unfolding dialogue with clients and the evolving nature of the pandemic across different countries. Thus, additional funding allocation to COVID-19 activities is expected, primarily for lending preparation, with additional activities that will be firmed up later expected to be funded from yet unallocated funds. The COVID-19 response will therefore continue to require a dynamic and flexible management of the Bank’s resources in FY22, as has been done in FY21. The Bank has several established budget mechanisms to deal flexibly with such uncertainty and volatility. These include: (i) budget redeployment within VPUs, units or country programs; (ii) regional contingencies (which add up to US$38 million) to finance preparation and supervision of new operations and other COVID-19 related activities in FY22; (iii) the corporate contingency which Management proposes to keep at an increased level of US$13 million for FY22 to be used for needs which cannot be addressed with any of the mechanisms described above; and (iv) as a last instrument, use of the flexibility band which allows the Bank to overrun the authorized budget by up to 2 percent. This flexibility band has been used only rarely and under exceptional circumstances, and with information of the Board. The flexibility provided through these budget mechanisms adds up to about US$100 million which Management considers sufficient to deliver the increased lending program including a potential IDA top-up, based on current information. If the Bank faces the unexpected scenario that this flexibility turns out not to be sufficient, Management would approach the Board in FY22 for consultation. 55 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 61. Country Engagement The Country Engagement allocations have been calibrated to support allocations across the following (see Figure 4.4): business processes are • Lending preparation (see Figure 4.4). Funding for the reflective of strategic preparation of lending operations (excluding for safeguards priorities emerging and fiduciary work) is expected to increase by US$10 million from client demand over FY21. This reflects the expected increased lending and corporate volume discussed in Section 2.2 (pre-IDA additional top up). commitments. Figure 4.4: Country Engagement Bank Budget Allocations by Business Process for FY20-22 (US$ million) • Supervision of the portfolio (see Figure 4.4). Funding for supervision (excluding for safeguards and fiduciary work) has increased by US$24 million over FY21. This reflects the growing size of the portfolio discussed in Section 2.2, the catch up work needed to overcome the supervision backlog post-COVID-19 (including verification/validation of reported project outcomes) and the tilt of the portfolio towards countries with riskier and weaker institutional environments. • Fiduciary and safeguards work for both project preparation and supervision (see Figures 4.4 and 4.5). Funding for project safeguards and fiduciary work has increased by US$8 million and US$6 million respectively – an increase of about 9 percent in both business processes when compared to FY21. This reflects the need for in-person fiduciary and safeguard reviews to overcome the supervision backlog post-COVID- 56 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 19, the complexities of two safeguard policies (old safeguards and the ESF introduced in October 2018) being under implementation at the same time, applied to a growing portfolio and the Bank’s growing and increasingly complex lending and portfolio. Figure 4.5: Country Engagement Allocation on Fiduciary and Safeguards for FY19-22 (US$ million) • Advisory Services and Analytics (ASA) activities (see Figure 4.4). Funding for ASAs has increased by US$8 million (or 5 percent) compared to FY21. This increase, in addition to the funding for country monitoring and support to country operations, reflects the focus on catch-up on country engagement/diagnostics work (e.g., SCDs, CPFs, PLRs and CENs) to inform COVID-19 recovery, increased core and extended core ASA (including the new Country Climate and Development Report), and integration of corporate commitments and global priorities into country dialogue and work. 62. Country Engagement Driven by client demands, FY22 Work Program Agreements have allocations across resulted in increased resources in all Practice Groups (see Figure 4.6). Practice Groups reflect FY22 CE allocations for Sustainable Development (including strategic priorities Safeguards funding) and Human Development both increased by emerging from country about 7 percent or US$20 million and US$10 million, respectively. dialogue. Allocations for Infrastructure increased by US$8 million (6.6 57 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE percent) and for Equitable Growth, Finance and Institutions (including fiduciary funding) by US$7 million (2.4 percent). In addition, Regions currently hold unallocated contingency funds (US$38 million) which during the year will be directed to specific Practice Groups whose allocations will therefore increase accordingly. Figure 4.6: Country Engagement Allocations by Practice Group (Regional and Global Units) for FY21-22 (US$ million) 63. Country Engagement The CE allocation to FCV countries (IDA and IBRD) has been allocations for increased significantly by US$44 million (27 percent) from US$162 fragility, conflict, and million in FY21 to US$206 million in FY22. The increase in violence (FCV) allocations to FCV countries since FY19 amounts to US$70 million affected countries has or 51 percent, confirming the sustained focus on strengthening been increased Bank’s engagement and impact in these countries (see Figure 4.7). significantly by 27 Africa’s share of this allocation has increased from 57 percent in percent in FY22, FY19 to 66 percent in FY21. which is a 51 percent increase since FY19. In line with the WBG FCV and HR strategies, the Bank also continues its commitment to fully support its staff working in fragile environments by strengthening its employment value proposition. 58 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 4.7: Country Engagement Bank Budget Allocations for FCV Countries for FY19-22 (US$ million) 64. Country Engagement As illustrated in Figure 4.8, the growth of Country Engagement allocations to Small allocation to Small States has been increased by 17 percent from States have been US$53 million in FY21 to US$62 million in FY22. The increase in increased by 17 allocations to Small States since FY19 amounts to US$13 million or percent in FY22, 26 percent. which is a 26 percent Figure 4.8: Country Engagement Bank Budget Allocations to Small States increase since FY19. for FY19-22 (US$ million) 59 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 65. The Global Within the Client Engagement envelope, the Bank’s Global Engagement budget Engagement (GE) work program supports Global Units to deliver allocation will be global activities without a specific country or regional allocation, complemented with a including (i) fulfilling corporate commitments; (ii) supporting prepaid allocation innovation and product development for evidence-based policy funded from Country making by developing global databases, tools and evaluations and to Engagement to better maintain WBG leadership on global public goods; (iii) sustaining integrate global partnerships and global engagements; and (iv) providing operational expertise in country support to leverage knowledge services and enable rapid and flexible and regional work operational response, including for the COVID-19 response (e.g. programs for higher COVID-19 Strategic Preparedness and Response Program using the impact. Multiphase Programmatic Approach). The Global Engagement budget allocation of US$99 million in FY22 will be supplemented by Country Engagement (CE) resources of about US$25 million, prepaid by the Regions to Global Units, to provide global expertise collaboration to country and regional work programs (see Figure 4.9). The total of about US$124 million in FY22 (or about 4.4 percent more year-on-year) will support the Global Units in providing expertise and knowledge at the global, regional and country level on key corporate priorities and commitments. Areas of focus include, among others, climate, debt, digital development, food security, gender, governance, FCV and resilience, jobs and economic transformation, human capital, infrastructure, poverty reduction and inclusion, private sector and market creation, and vaccines. In addition, a funding allocation will be available to the Global Practices for Gender Based Violence (GBV) and ESF as corporate priorities for US$2.7 million (in addition to GBV and ESF project level funding provided from the CE envelope). The Global Engagement budget is part of the overall funding for global knowledge and expertise deployed by the Bank, through Regions, Global Units and Development Economics (DEC). Global Engagement, together with Country Engagement funding for analytical services and advisory work (see para. 61), and the DEC budget amount to around US$1 billion for FY22 (Bank Budget and External Funds). 60 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 4.9: FY22 Global Engagement Funding (including prepaid collaboration) by Practice Group (Global Units) (US$ million) 66. The strategic focus of Key areas Global Units are engaged in, among others, include the the Global Units is on following: tasks related to the • Climate change: including support to Country Climate and response for the Development Reports (CCDR) and the Nationally COVID-19 crisis and Determined Contributions (NDCs); carbon pricing, transition to green, resilience ratings, measuring/monitoring of risk, climate co- resilient, and inclusive benefits, Greenhouse Gas (GHG) accounting; energy development, and the transition, complementary initiatives for environment, IBRD/IDA policy natural resources, blue economy; decarbonization commitments. (agriculture, energy transition, transport), climate smart cities development; climate change in Public-Private Partnerships (PPPs); climate and digital technology; policies for GHG mitigation; green finance, climate and debt, trade and climate, human capital and green development. • Debt and finance: sovereign debt monitoring and restructuring, tax policy reforms, corporate debt restructuring, financial sector reforms, domestic resource mobilization; debt sustainability analysis; debt statistics for transparency of external debt, domestic debt, debt data portal, assessment of country creditworthiness and macro- economic analysis, financial technology. • Digital development: economic impact of digital platforms, cybersecurity, green digital strategy, mainstreaming of digital development; impact evaluation on digital platforms; bridging technology divide, digital access to financial services, financial policies for digital economy, GovTech; digital economy and jobs; digital agriculture. 61 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE • Jobs, economic transformation and private sector development: jobs diagnostics and solutions support to country teams; Jobs Watch COVID-19 to monitor labor market impacts and policy responses; global report on jobs and human capital; analytics work on youth employment; labor force and digital economy, differentiated labor impacts on gender, climate change and green jobs; competitiveness, household survey, public employment, recovery policies for investment competitiveness, remittances; research and data work on regulations, policies, and institutions for jobs, productivity and competitiveness; high frequency data on hiring/trade, water security, climate change; green jobs database; GRID recovery policies for services, manufacturing, investment climate reforms and global supply chains, incl. for micro, small and medium enterprises. • Governance: anti-corruption, domestic resource mobilization, GovTech, public employment and management, Bureaucracy Lab surveys, strengthening public procurement economic policies for GRID; research on service delivery; institutions, policies, and financing for transport; health system strengthening; public policies and expenditures for agriculture. • Human capital: COVID-19 response, primary health care, building resilient health systems, health emergency preparedness; social protection, urban safety nets, social insurance and pensions, girls education, Human Capital Project; cash transfers, gender empowerment, early childhood development, disability, food security. • Gender: guidance and support to task teams for implementation of the WBG Gender Strategy, including on gender inclusion, contributions to global reports and flagships on climate change, jobs, GBV prevention and mitigation, managing of the gender-tag work program, gender data and the IDA Gender Theme. • FCV: support operational and analytical support to country teams in FCV contexts across all regions and the overall coordination of the implementation of the FCV strategy across the WBG. • Other: poverty and equity monitoring and associated database, monitoring poverty and distributional impact of COVID-19 and post-COVID-19 policies, crisis 62 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE preparedness, private sector and market creation, data and statistics on various topics, contribution to the Global Partnership for Social Accountability. 67. Resources for The Program and Practice Management (PPM) budget for operational Program and Practice units will continue to fund the management and support costs of the Management will operational work program, including for priorities like staff increase to fund training/learning, country office facilities and to support the continued adjustments in the Bank’s global footprint. implementation of the The resources for PPM in FY22 compared to FY21 will increase by global footprint 2.5 percent to US$727 million in FY22. This increase is fully for the changes. implementation of the global footprint changes to enhance the Bank’s capacity to support clients as described in para. 46, primarily for staff global mobility benefits and associated support costs (e.g., facilities, security). Other rising PPM cost pressures will be offset through efficiency measures – by optimizing organizational and management structure and grade mix, while applying agile and simplification approaches in work programs. Continued attention towards span of control and, where feasible, consolidation of PPM functions will also help contain cost pressures. 63 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4.5 GRANT-MAKING FACILITIES 68. Funding for the As part of the budget reforms in recent years, the Bank changed its Grant- Making practice from funding Grant-Making Facilities (GMFs) “below the Facilities will remain line” to allocating grant-making funds as part of the strategic planning unchanged compared and budgeting process. In some cases, Bank funding has been phased to FY21. out (e.g., Institutional Development Fund (IDF) and Development Grant Facility (DGF)); in others, it was decided to mainstream the activity into a Bank program (e.g., Global Partnership for Social Accountability (GPSA)), or reduce funding (e.g., State and Peace- Building Fund (SPF) and Consultative Group for International Agricultural Research (CGIAR)). In FY22, consistent with Executive Directors’ input in past years, funding for the SPF and the CGIAR will remain at US$35 million. Management has in the past explored alternative sources of funding for the SPF and the CGIAR. In the case of the SPF, funding levels have been reduced in recent years to US$5 million and are expected to remain at this level. Despite much effort over the past years, no additional external funding for the CGIAR has been forthcoming to replace World Bank funding. Table 4.10: Grant-Making Facilities Budgets (US$ million) 64 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4.6 IG&A UNITS 69. IG&A units have made The IG&A units have supported the Bank’s growing business volume significant efficiency and complexity as well as an efficient and effective operational efforts to fund a delivery. They have helped increase and manage the Bank’s larger growing and more financial capacity, improve risk management in an increasingly complex work program complex environment and enhance technological agility enabling a and corporate technically seamless transition to working from home during the priorities. pandemic. Figure 4.10: IG&A Budget Allocations, FY15-21 (US$ million) 70. IG&A units have been They have supported this increasing work program through targeted continuously able to incremental funding for corporate priorities and significant efficiency fund a growing work and productivity efforts and cost avoidance, including adjustments to program through their organizational structure, off-shoring to Chennai and Sofia, significant efficiency improvement of processes and policies, use of innovative efforts, productivity technologies and end-to-end/value chain process optimization. As a improvements and cost result, IG&A costs have declined since FY15, despite the growing avoidance. business volume and complexity these units have been asked to support. The budget for IG&A units has been reduced by 13 percent in real terms and 1 percent in nominal terms between FY15 and FY21 (see Figure 4.10) to redeploy resources to operational units. 71. IG&A units will The overall allocation to IG&A units will be decreasing slightly in continue to pursue real terms in FY22, with incremental funding selectively provided to institutional some units to address externally driven cost pressures and new and transformation. expanded mandates. At the same time, IG&A units are expected to achieve savings through grade mix efficiencies, real estate and 65 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE facilities, corporate procurement contract negotiations, savings related to travel/hospitality/ meetings/printing, as well as productivity improvements, economies of scale and internal reallocations. See Table 4.12 for the FY22 budget by IG&A units. As discussed in para. 48, selected incremental allocations have been made to IG&A units for FY22 (above incremental allocations made in the FY21 Budget Document 24) for the LIBOR transition, ERP replacement, strengthening of IT capacity, knowledge work in DEC, litigation preparedness and increased LEG work for lending operations, data privacy, enhancements of the IBRD/IDA financial capacity, strengthening global facilities management, corporate risk management, as well as for key staff initiatives following the first set of Anti-Racism Task Force recommendations. Several World Bank IG&A units provide administrative services to IFC and MIGA through Shared Services Agreements (SSAs) that leverage economies of scale and synergies. In FY20, new directives with standard templates and joint costing methodologies were introduced which have helped the WBG’s SSAs between the Bank as service provider of administrative services and the IFC and MIGA as recipients to be simplified, increasing transparency and reducing processing costs. The FY21 end-of-year SSA revenue (to fund related costs for service delivery) estimate from IFC is about US$140 million and US$8 million from MIGA. These estimates will be adjusted in June 2021 based on the Bank’s expenditures. Any increased or decreased SSAs revenues for FY21 and FY22 will reflect related costs for service delivery. 24Incremental allocations for IG&As were made in the FY21 Budget Document to support enhancements of the IBRD/IDA financial capacity, global footprint implementation (e.g., field office medical support, security and management of office lease extensions, construction or purchases), the ERP replacement, the LIBOR transition, legal risk management framework and litigation preparedness, data work for DEC, risk in operations work and data privacy compliance. 66 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 72. The FY22 WBG The FY22 budgets for the Executive Directors Offices (EDs), the budget for the Independent Evaluation Group and the Accountability Mechanism Executive Directors, increase to US$120 million. IEG and Although the Bank’s share of these budgets is authorized as part of Accountability this document and included in the total administrative budget Mechanism amount to approval, the sizing of these budgets is not determined by US$120 million. Management. In addition to its own budget, the Board makes use of the services of the Corporate Secretariat VPU, including its Annual and Spring Meetings support and shareholder relations, and draws on staff time across the Bank to better inform its deliberations. Table 4.11: FY21 and FY22 EDs, IEG and Accountability Mechanism Budgets (US$ million) 67 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table 4.12: FY21 and FY22 IG&A Budget Envelopes (US$ million) INDICATIVE BUDGET TRAJECTORIES BB External Funds All Funds FY21 FY22 FY21 FY22 FY21 FY22 1 Institutional Services 1.1 Budget, Performance & Strategy 79 80 0 0 79 80 1.2 Chief Risk Office 21 21 1 1 22 22 1.3 CMP - Data Privacy Office 2 2 - - 2 2 1.4 Development Economics 55 56 61 57 116 113 1.5 Development Finance 25 27 7 8 32 35 1.6 External & Corporate Relations 83 83 4 5 87 88 1.7 Global Environment Fund - - 36 36 36 36 1.8 Legal Services 40 42 2 2 42 44 1.9 Operational Policy & Country Services 47 47 0 0 48 47 1.10 Strategy, Performance, and Admin. 11 11 4 4 15 15 1.11 Treasury 35 36 55 58 90 94 1.12 WBG Finance & Accounting 49 49 7 7 56 55 Sub-Total 448 455 176 177 624 632 2 Governance Services 2.1 Executive Directors 85 86 - - 85 86 1 2.2 Accountability Mechanism 5 6 - - 5 6 2.3 Independent Evaluation Group 29 29 9 9 37 38 2.4 Corporate Secretariat 22 21 1 1 23 22 2.5 Administrative Tribunal 2 2 1 1 2 3 2.6 Internal Justice Services 5 5 2 1 6 7 2.7 Ethics and Business Conduct 7 6 2 3 9 9 2.8 Integrity Vice Presidency 22 22 0 0 22 22 2.9 Office of Suspension & Debarment 2 2 - - 2 2 2.10 Sanctions Board 2 2 - - 2 2 2.11 Group Internal Audit 9 9 3 3 12 12 2.12 Office of the MD and CAO 3 3 - - 3 3 2.13 Office of the MD and CFO 3 3 - - 3 3 2.14 Office of the MD, Development Policy and Partnersh. 3 4 1 2 4 6 2.15 Office of the MD, Operations 5 5 - - 5 5 2.16 Office of the President 5 5 - - 5 5 Sub-Total 208 210 19 21 227 232 3 Administrative Services 3.1 Global Corporate Solutions2 149 151 45 37 194 188 3.2 Human Resources 57 58 30 32 87 91 3.3 Health and Safety Development 9 9 4 4 13 13 3.4 Information & Technology Solutions 252 257 62 62 313 319 Sub-Total 467 476 140 134 607 610 TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN. 1,123 1,141 335 333 1,458 1,474 1 Referred to a s Ins pecti on Pa nel i n the FY21 Budget Document. Compri s es the Accounta bi l i ty Mecha ni s m Secreta ri a t, the Ins pecti on Pa nel a nd the Di s pute Res ol uti on Servi ce. 2 As offi ce cl os ures a nd home-ba s ed work a rra ngements conti nue, GCS’ revenue from fa ci l i ty/s ervi ce rel a ted cha rgeba cks a nd s ta ff-rel a ted s ervi ces a re projected to decrea s e tempora ri l y i n FY22. 68 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4.7 CENTRALLY MANAGED ACCOUNTS 73. The Centrally The Centrally Managed Accounts (CMAs) consolidate expenses not Managed Accounts easily attributed to specific units and institutional programs for which (CMAs) reflect a Management maintains budget discretion. The CMAs net budget will decline of 23 percent decline by US$27 million or 23 percent in FY22. mainly attributed to • Depreciation in the Central Accounts cover HQ facilities, higher External investments in IT systems, cloud migration strategy, facilities, Funds cost recoveries security and overall infrastructure and is projected to fall by and lower staff US$2 million due to delays in HQ capital projects funded from benefit costs in FY22. the Central Accounts. • Corporate Contingency is unchanged at US$13 million. There continues to be uncertainty on the pace of the lifting of COVID-19 related restrictions and the costs associated with the mitigation measures. The increase of US$3 million compared to the typical pre-COVID size of the Corporate Contingency lends flexibility for unforeseen priorities and cost pressures. • Institutional Programs will increase by US$1 million. This is attributed to the increase in Corporate liability insurance to include coverage for cybersecurity and increased premiums for industry losses and uncertainties associated with the COVID- 19 pandemic. Additionally, new workplace standards that prioritize health and safety based on emerging data of COVID- 19 are needed with additional sanitation measures, signage, and key investments in air handling units, fan coils, fire pumps, video conferencing equipment, and lighting upgrades partially offset by cost efficiencies from optimizing HQ real estate through a reduced leased footprint and operating expenditures planned for FY22. • Net Staff Benefits and Allowances are estimated at US$1 million in FY22, representing gross benefits and allowances of US$1,019 million offset by an estimated US$1,018 million of recoveries from units and external funds. • Other Budget Recoveries are expected to grow by US$16 million mainly due to the increase in the recovery of indirect costs from BETFs, FIFs and other EF programs. This is ensuring that costs for external funded activities are 69 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE increasingly covered by their revenues to free up resources for strategic priorities. 74. The Post-Retirement The Bank’s contributions to the staff post-retirement benefit plans Contribution Reserve remain at the established 35 percent of net salaries. The Reserve Fund, Fund (PCRF) was added to the PCRF, is the difference between the actual rate established in FY13 determined by the Pension Finance Committee (PFC) and the 35 with the objective to percent fixed contribution rate. The Staff retirement and PCRF reduce budget allocation is budgeted at US$537 million in FY22, an increase of 3 volatility from the percent. Bank’s contributions Table 4.13: Centrally Managed Accounts (US$ million) to the staff post- FY21 WB retirement plans. FY22 $ Change % Change Budget A B (B-A) (B/A) Depreciation 130 128 (2) -2% Corporate Contingency 13 13 0 0% Institutional Programs 60 61 1 3% Net Staff Benefits & Allowances 12 1 (11) -89% Gross Staff Benefits & Allowances 1,005 1,019 14 1% Institutional Benefits Recovery (993) (1,018) (25) 3% Other Budget Recoveries (96) (112) (16) 16% Total /1 119 92 (27) -23% 4.8 EXPENSE FUNCTIONAL VIEW 75. The Bank follows a The Bank does not set specific budgets by expense category, for dollar budget example, staff salaries, short term consultants or travel. Accordingly, approach which the functional expense line view presented in Table 4.14 below is an allows budget holders illustrative decomposition of the administrative budget by expense line flexibility to vary item. The estimates below represent the current view of the most inputs as long as they likely outcome of FY21 expense projections which have been severely stay within workforce affected by COVID-19 and illustrative projections for FY22, taking planning affordability account of expected temporary and permanent savings in travel, parameters and their meetings, printing, hospitality and other expenses. The actual outcome authorized budgets. may likely differ given the high level of uncertainty in FY22 and because work programs vary during the year, and decisions are made to respond to changing business needs that may entail trade-offs between different expense categories. 70 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table 4.14: FY21 and FY22 Illustrative Functional Expense View of Administrative Expenses (US$ million) FY21 FY22 Expenses by Type of Expense Projections Projections BB+Reimb. All Funds BB+Reimb. All Funds US$m % of US$m % of US$m % of US$m % of Total Total Total Total Fixed Expenses 2,485 81% 3,000 74% 2,584 76% 3,117 69% Of which: Staff Salaries and Benefits 2,101 69% 2,524 62% 2,202 65% 2,644 58% Other Fixed Expenses 1/ 384 13% 476 12% 382 11% 473 10% Variable Expenses 582 19% 1,047 26% 812 24% 1,419 31% Of which: ST Consultants & Temporaries 228 7% 441 11% 235 7% 472 10% ET Consultants & Temporaries 44 1% 75 2% 50 1% 85 2% Travel Costs 27 1% 31 1% 240 7% 337 7% Contractual Services 234 8% 444 11% 240 7% 461 10% Other Variable Expenses 2/ 48 2% 55 1% 47 1% 64 1% Total Unit Gross Expenses 3,067 100% 4,047 100% 3,395 100% 4,536 100% Grant Making Facilities (GMFs) 35 35 35 35 Total Gross Admin Expenses (incl. GMFs)3/ 3,102 4,082 3,430 4,571 Reimbursable Revenues and Fee income (565) (580) Total Net Admin Expenses (incl. GMFs) - 2,537 2,851 BB Only3/ 1 Other fixed expenses include Communications & IT, Equipment & Building, Depreciation, and TF Indirect costs. 2 Other variable expenses include Supplies, Printing, and other indirects costs. 3 FY21 All Funds expenses reflect end Q3 projections. 76. The functional Staffing will continue to be the main expense category representing expense view shows about 58 percent of total unit gross expenses on an All Funds view (65 staff costs will percent of Bank Budget). The relative share of staff costs is projected continue to be the to be lower on the Bank Budget by end FY22, compared with end main expense FY21 because the share of variable expenses is low in FY21 due to category. COVID-19. 77. Staff costs projections Staff costs across all funds are projected to increase by 4.8 percent in take into account the FY22 due to a combination of salary increases, a projected one percent 2021 Review of the increase in overall headcounts by end FY22 and increased global Staff Compensation mobility benefits in line with the global footprint adjustment paper approved by the assumptions. Board. 71 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 78. Bank Budget-funded In terms of staff count, the number of full-time Bank staff by end FY21 staffing counts is projected to be around 1 percent above that at end FY20. From a remain below FY14 longer term perspective, Bank Budget-funded Full Time Equivalent levels. (FTE) staff is 2 percent below the level in FY14 (or 2 percent higher on an all funds view), despite the significantly increased IBRD/IDA portfolio (52 percent over FY14) with a declining real budget over the same period (see Figure 4.11 below). Figure 4.11: Full-time Bank Staff on Payroll (percentage growth since FY14) 79. Variable expenses are Variable costs across all funds are expected to be at 31 percent of total estimated to increase unit gross expenses on an All Funds view (24 percent of Bank Budget) in FY22 across all with a projected increase of 36 percent in FY22, primarily due to the funds as Bank unprecedented low base in these costs in FY21. Temporary and operations and permanent savings in certain categories like travel, meetings, food expenditures are services, and printing are also expected to be realized in FY22 and expected to pick up as redeployed to support the catch up work and other key priorities in COVID-19 operations. restrictions ease. 72 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 5. FY22 CAPITAL BUDGET This section outlines the Bank’s FY22 Capital Budget proposal of US$221 which comprises US$105 million for Facilities investments and US$116 million for Technology and Systems investments. 5.1 OVERVIEW 80. The proposed Capital Management is currently planning a capital budget for FY22 of Budget for FY22 is US$221 million, of which US$105 million is for Facilities investments US$221 million. and US$116 million for IT investments. This year’s investment planning process is informed by three transformational efforts affecting the World Bank operating model: (i) the modernization of the WBG finance Enterprise Resource Planning (ERP) system supported by the Bank’s 21-year old SAP platform (Project Aria); (ii) ongoing investments in global footprint changes; and (iii) supporting the initial phase of the COVID-19 response and adjustments to the Bank working arrangements in a post-pandemic environment. In addition, the Bank will continue to undertake investments in facilities and IT investments that will ensure that our infrastructure is up-to- date, secure, and environmentally sustainable. The higher IT capital investment plan of US$116 million in FY22 compared to the US$85 million allocation in FY21 is due to the FY22 cost of the replacement of the ERP platform of US$36 million and the re-prioritization of regular IT investments leading to a reduction from US$85 million in FY21 to US$80 million in FY22. Efficiency efforts are expected to create some headroom in the capital budget and will partially help offset the investment needs discussed above. These include savings from corporate procurement and Country Office facility redeployments. 5.2 FACILITIES 81. The proposed FY22 The proposed FY22 Facilities investment of US$105 million includes Facilities Capital the following: Budget is US$105 • Country Office construction, purchases, relocations and million. upgrades (US$70 million or 66 percent). These investments aim to accommodate an increasing field presence, prioritize FCV needs, and upgrade aged infrastructure. 73 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE • HQ facilities repairs, renovations and upgrades (US$30 million or 29 percent) include efforts to modernize the office environment, essential repairs and replacement of equipment in Washington, DC. Key investments based on facilities assessment in HQ include air handling unit replacements, lighting upgrades, fire pump replacement and cyclical replacement of video conferencing equipment across the campus. • Security in HQ and Country Offices (US$5 million or 5 percent) include the purchase of security equipment in Country Offices, purchase of armored vehicles, campus-wide video surveillance enhancements and upgrading the Security Operations Center. These security investments reflect the expanded footprint in more challenging and less secure environments, as well as the deterioration of the global security environment generally. 82. Facilities investments In FY21, GCS addressed immediate health and safety concerns related will focus on to COVID-19, including increasing the frequency of filter replacement infrastructure and mechanical upgrades to ensure the highest levels of air quality modifications to throughout the buildings, deploying tiered custodial response respond to the protocols with continuous cleaning of high touch surfaces, increasing pandemic, as well as inspections and testing of air handling and water treatment systems, supporting the global installing new signage, graphics and circulation paths to enforce social footprint agenda. distancing, providing temperature screening stations and wellness surveys, and monitoring building infrastructure operations. Additional space adjustments for a post-pandemic future will be gradual, to test and implement different approaches that reflect conditions in HQ and the over 150 WB offices around the world. In headquarters, two space pilots are being implemented to introduce new workplace standards, as well as innovative health and safety measures, that may be expanded based on evaluation against specific criteria and user feedback. In Country Offices, ongoing projects are being modified, focusing on emerging trends raised by COVID-19, which take into consideration measures to address immediate wellness concerns, while planning to mitigate the risk and impact of future health crises, enhancing the overall well-being of building occupants. 74 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 5.3 TECHNOLOGY AND SYSTEMS 83. The proposed Capital The FY22 Technology and Systems investment plan of US$116 million Budget for will continue to focus on investments that support the Bank's digital Technology and transformation and overall strategic priorities. The investment plan of Systems in FY22 is US$116 million includes US$29 million in WBG investments for US$116 million. which IFC/MIGA contribute to the annual depreciation expense. Total depreciation from IFC/MIGA is expected at about US$7 million in FY22. Investments for FY22 are spread across the following areas: • IT Foundations investments are aimed at (i) ensuring the reliability, continuity, and resiliency of IT infrastructure, (ii) providing reliable WBG global network connectivity, and (iii) replacing and upgrading end-of-life infrastructure. • PC Program supports staff productivity by providing essential workplace devices, balancing value for money while maintaining a high level of service satisfaction of WBG staff. • Information Security funding supports (i) execution of the Cyber-SAFER strategy to achieve the target maturity level for information security and risk management, (ii) increasing Identity Governance and Administration maturity, and (iii) safeguarding critical assets addressing people, process and technology. • Finance, Accounting and Budget priorities are to: (i) ensure critical systems are ready to service loans and support the transition from LIBOR to appropriate alternative reference rates, (ii) modernize WBG financial management capabilities, reduce operational risk, and increase agility through the ERP platform replacement (Project Aria), and (iii) modernize and automate processes and data management related to IDA- specific mobilization capabilities. • Operations and Corporate investments will (i) modernize the Operations Portal to provide cloud-based platform for product processing and enable decommissioning of the existing ERP platform (Project Aria), (ii) transition front-line Trust Fund systems to a modern cloud platform, and (iii) enable digital 75 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE transformation and efficiencies with the use of new technologies. • Data and Analytics investments will (i) modernize the data analytics platform by providing staff with best tools to meet different analytical needs, (ii) modernize data governance platform, and (iii) strengthen the Bank's ability to use advanced analytics, including machine learning and artificial intelligence tools, to address corporate and development problems and improve the use of data in corporate decision making. • Treasury investments will (i) expand investment management capabilities to increase Treasury client base and the offering of customized financial products and services, (ii) maintain SWIFT system compliance with external requirements, and (iii) comply with mandatory systems upgrades. • Digital Workplace investments will (i) improve the ability of World Bank staff to find information on the WB Intranet, easily and quickly, via a smart, intuitive, mobile-friendly search experience powered by leading industry technologies, (ii) start implementation of a digital platform for project management to better support operational teams, and (iii) modernize client and staff learning platform. • Human Resources investments will (i) modernize the WBG compensation platform to support the organization's global and decentralized model, and (ii) leverage new technologies to gain efficiencies in HR processing and reporting. • Administrative and Health Services investments will (i) improve corporate procurement operations and processes, and (ii) provide integrated systems for GCS services to enhance staff experience, coordination and efficiency. • Risk Management investments will (i) develop models to quantify risk to improve risk capital and allocation and insurance decision making, and (ii) support the Bank's growing needs with valuation and liquidity management solution. 76 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 84. ITS will continue to ITS has been focusing on cloud migration in recent years which invest in cloud provided the Bank Group with the flexibility it needed, at the onset of technologies, remote the COVID-19 pandemic, to quickly transition staff in Washington and access infrastructure around the world to home-based work. Investment in remote access and collaboration infrastructure (VPN, Virtual Desktop Environment, etc.) and platforms to support collaboration platforms such as Microsoft Teams, Jabber, Yammer, WBG operations WebEx and OneDrive allowed the Bank to establish a digital workplace during COVID-19 for staff and kept staff informed, engaged, and productive throughout and changes in its operating model the pandemic. Urgently developed changes in the Operations Portal post-pandemic. enabled staff and the Board to process COVID-19 emergency projects while working remotely. ITS will continue to invest to strengthen the intranet platform, cloud technologies, remote access infrastructure, search and collaboration platforms, and the initiation of a digital platform for project management and knowledge flow to better support WBG operations during COVID-19 and changes in its operating model post-pandemic. Also, it will invest to enhance the geo spatial platform to support remote monitoring and analytics, including integration with high resolution satellite imagery, drones and other data sources. Remote work and extensive cloud adoption are driving changes to the network security architecture to provide users with on-demand access to connect from any location that is most convenient for them. To address the changing risk landscape, ITS will implement a “zero-trust architecture” to focus on securing the applications and data, rather than protecting the network, and ensure risk-based secure access to assets and resources. With respect to the WB post-COVID-19 operating model, the capital budget will support adjustments to the design and use of office spaces deriving from a hybrid working arrangement through the leverage of video communications and digital technologies. 85. The replacement of Project Aria is a multi-year project to replace the Bank Group’s 21-year the 21-year old SAP old SAP finance Enterprise Resource Planning (ERP) platform, which ERP platform will currently supports all WBG entities and multiple lines of business, from start in FY22. accounting and loans management to External Funds and payroll. The objectives of Project Aria are to replace this retiring ERP platform and use this as an opportunity to modernize the custom applications and processes developed on it to modernize the WBG’s financial management capabilities, improve process effectiveness, increase agility, enhance business insights, and reduce operational risk. It will also involve automating some currently manual or semi-manual 77 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE processes to improve effectiveness, heighten the control and rework and improve end-user experience. 78 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 6. MITIGATING BUDGET-RELATED RISKS AND UNCERTAINTIES The FY22 budget incorporates available information and underlying business plans as of May 2021. The Bank has established several mechanisms to deal with potential risks and unexpected funding needs within a fiscal year. 86. The Bank has The World Bank regularly faces unexpected funding needs within a several established fiscal year. The highly uncertain COVID-19 environment adds mechanisms to deal uncertainty that may impact the budget. Some factors may generate with potential risks cost reductions while others may increase costs. Therefore, there is a and unexpected risk that some of the underlying estimates supporting the budget (e.g., funding needs. temporary savings) may not have a high level of predictability as those used prior to COVID-19. Although there may not be an optimal planning solution considering current uncertainties, management plans to leverage the established budget flexibility mechanisms afforded within the planning resource envelope to mitigate any related risks. Most unexpected funding needs (e.g., unexpected crises, increased implementation costs, inflation/exchange rate fluctuations or office evacuations) will be absorbed within a country program’s budget through redeployments within and across programs. If a crisis occurs in a specific Region or building up the regional lending pipeline needs significant unexpected additional resources, and these cannot be absorbed in a country’s program, there are US$38 million of regional contingencies which can be released during FY22. If regional contingencies are insufficient, a Corporate Contingency of US$13 million for FY22 is held by Senior Management and will be used for corporate needs or needs which cannot be addressed with any of the mechanisms described above (e.g., for unexpected cost pressures due to new corporate initiatives, global developments such as increased security concerns or a Region which has faced exceptional pressure beyond the capacity of its regional contingency to absorb). Regional and corporate contingencies are expected to be largely or fully released during any given fiscal year. Lastly, as a matter of last resort, the Board is asked to authorize a 2 percent flexibility band every year, which allows the Bank to under or overrun the authorized budget by up to 2 percent. This flexibility band has been used only rarely and under exceptional circumstances (e.g., once during the Global Financial Crisis and partially in FY19 due to the capital increase commitments). As indicated in para. 17, for FY22 79 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE the additional IDA financing is expected to be funded partly within the proposed budget (through the use of temporary COVID-19 related savings) and partly with the use of the flexibility band if needed. 87. Uncertainties related Every business plan involves some degree of uncertainty and volatility. to outer years will be The FY22 budget envelope incorporates available information, re-evaluated in the financial/economic assumptions (e.g., inflation, foreign exchange) and next cycle of the underlying business plans as of May 2021. As in previous years, Bank’s multi-year potential future decisions are not incorporated, as this would preempt planning and discussions Management, clients and the Board will have. Management budgeting process. will keep the Board informed, during the FY in the Quarterly Business and Risk Reviews (QBRRs) and as part of the year’s planning and budgeting process, if significant changes in business plans impacting the overall budget are expected. 80 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE ANNEX I: PROGRAM COST SUMMARY 1. Table I.1 Program Cost Summary (PCS) shows the FY22 budget by work program and unit, Bank Budget, and external funds. Table I.2 further classifies external funds into coupled reimbursable revenues (refer to definition below) and BETFs. All budget figures are reported in nominal terms. 2. The PCS reflects framework adjustments since FY15 and takes another step towards a unified approach to planning for revenues and expenditures. As has been the case since FY16, this budget is constructed using holistic revenue and expense budgeting with respect to reimbursable revenues and IBRD/IDA funding. Reimbursable revenues have been classified as either: • Coupled Reimbursable Revenues (CRR) which are earned by the Bank for services that are directly related to the underlying expense incurred by a unit; revenue is not earned unless there is a corresponding expense, similar to BETF; or • Decoupled Reimbursable Revenues (DRR), on the other hand, which are earned by the Bank for services that are not directly driven by the underlying expenses incurred by the managing unit. Examples of these revenues include: Trust Funds fee income, Health and Safety Development Directorate services, and revenues from sub-letting office space to third parties. 3. Since the FY16 Budget Framework, expenditure authorization previously given as reimbursables expense budget associated with DRR is now allocated to units or programs as regular Bank Budget (i.e., it is “budgetized” and is now no different from a unit’s other BB allocations). This facilitates better medium-term planning for the units, while allowing flexibility at the corporate level. All changes in BB allocation are now subject to the annual planning (W) process as they are no longer linked to the revenue earned. 81 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table I.1: FY22 Funding for WB Work Program and Unit (US$ million) / 1 of 3 INDICATIVE BUDGET TRAJECTORIES BB External Funds All Funds FY21 FY22 FY211 FY22 FY211 FY22 1 Country Engagement 1.1 AFEVP 168.7 181.3 152.8 152.0 321.5 333.3 1.2 AFWVP 168.6 181.9 78.7 78.3 247.3 260.1 1.3 EAPVP 120.6 127.0 134.3 133.6 254.9 260.6 1.4 ECAVP 96.7 100.0 111.9 111.3 208.5 211.3 1.5 LCRVP 110.8 115.0 66.8 66.5 177.6 181.5 1.6 MNAVP 72.1 76.3 98.9 98.4 171.0 174.7 1.7 SARVP 147.8 158.7 91.6 91.1 239.4 249.8 1.8 Other Operational Units' Allocations2 12.3 14.1 77.3 76.9 89.6 91.0 Sub-Total 897.6 954.1 812.4 808.1 1,709.9 1,762.2 2 Global Engagement 2.1 Practice Group GE 95.5 99.4 192.0 191.0 287.5 290.4 Sub-Total 95.5 99.4 192.0 191.0 287.5 290.4 A TOTAL CLIENT ENGAGEMENT 993.0 1,053.5 1,004.4 999.1 1,997.4 2,052.5 3 Region PPM 3.1 AFEVP 89.7 89.8 11.5 11.5 101.2 101.3 3.2 AFWVP 79.3 79.4 2.3 2.3 81.5 81.7 3.3 EAPVP 79.3 79.5 12.3 12.2 91.7 91.8 3.4 ECAVP 68.4 68.4 5.1 5.1 73.5 73.4 3.5 LCRVP 68.0 68.1 2.6 2.5 70.5 70.6 3.6 MNAVP 48.6 48.9 4.4 4.4 53.0 53.3 3.7 SARVP 73.4 73.6 3.2 3.2 76.6 76.8 Sub-Total 506.7 507.7 41.4 41.2 548.0 548.8 4 Practice Group PPM 4.1 Equitable Growth, Finance and Institutions 34.0 33.7 14.7 14.6 48.7 48.3 4.2 Human Development 15.7 15.5 14.4 14.3 30.0 29.8 4.3 Infrastructure 17.9 18.3 16.8 16.8 34.8 35.0 4.4 Sustainable Development 26.7 26.5 64.8 64.5 91.5 91.0 Sub-Total 94.3 93.9 110.7 110.1 205.0 204.0 5 Other Operational Support PPM 5.1 Other Operational Support3 107.9 125.4 38.9 38.7 146.8 164.1 Sub-Total 107.9 125.4 38.9 38.7 146.8 164.1 B TOTAL PROGRAM & PRACTICE MGMT. 708.9 727.0 191.0 190.0 899.9 917.0 C TOTAL OPERATIONAL UNITS 1,701.9 1,780.5 1,195.4 1,189.1 2,897.3 2,969.6 6 Operational Grant Making Facilities 6.1 CGIAR 30.0 30.0 - - 30.0 30.0 6.2 State and Peace Building Fund 5.0 5.0 - - 5.0 5.0 Sub-Total 35.0 35.0 - - 35.0 35.0 D TOTAL OPERATIONS 1,736.9 1,815.5 1,195.4 1,189.1 2,932.3 3,004.6 82 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table I.1: FY22 Funding for WB Work Program and Unit (US$ million) (Cont’d.) / 2 of 3 INDICATIVE BUDGET TRAJECTORIES BB External Funds All Funds 1 FY21 FY22 FY21 FY22 FY211 FY22 7 Institutional Services 7.1 Budget, Performance & Strategy 78.6 79.7 0.1 0.1 78.7 79.9 7.2 Chief Risk Office 21.0 21.4 0.7 1.0 21.7 22.4 7.3 CMP - Data Privacy Office 1.9 2.2 - - 1.9 2.2 7.4 Development Economics 55.1 55.9 60.8 56.6 115.9 112.5 7.5 Development Finance 25.3 27.4 6.8 7.5 32.1 34.9 7.6 External & Corporate Relations 83.5 83.4 3.9 5.1 87.4 88.5 7.7 Global Environment Fund - 36.0 36.0 36.0 36.0 7.8 Legal Services 40.3 42.1 1.9 2.0 42.2 44.0 7.9 Operational Policy & Country Services 47.3 47.3 0.2 0.0 47.5 47.3 7.10 Strategy, Performance, and Admin. 11.2 11.3 3.7 4.1 14.9 15.4 7.11 Treasury 34.8 36.0 55.2 57.9 90.0 93.9 7.12 WBG Finance & Accounting 48.9 48.6 6.7 6.9 55.6 55.4 Sub-Total 448.0 455.2 176.0 177.3 624.0 632.5 8 Governance Services 8.1 Executive Directors 84.7 85.6 - - 84.7 85.6 8.2 Accountability Mechanism4 5.0 5.9 - - 5.0 5.9 8.3 Independent Evaluation Group 28.6 29.0 8.8 9.5 37.4 38.5 8.4 Corporate Secretariat 21.6 21.2 1.4 1.1 23.0 22.3 8.5 Administrative Tribunal 1.9 2.0 0.5 0.6 2.4 2.6 8.6 Internal Justice Services 4.7 5.3 1.6 1.5 6.3 6.8 8.7 Ethics and Business Conduct 6.5 6.3 2.3 2.6 8.8 8.9 8.8 Integrity Vice Presidency 21.7 21.6 0.2 0.2 21.9 21.8 8.9 Office of Suspension & Debarment 1.8 1.9 - - 1.8 1.9 8.10 Sanctions Board 2.0 2.0 - - 2.0 2.0 8.11 Group Internal Audit 9.0 9.4 3.0 3.1 12.0 12.5 8.12 Office of the MD and CAO 2.9 3.0 - - 2.9 3.0 8.13 Office of the MD and CFO 3.5 3.0 - - 3.5 3.0 8.14 Office of the MD, Development Policy And Partnersh. 2.9 3.8 1.4 2.5 4.3 6.3 8.15 Office of the MD, Operations 5.3 5.3 - - 5.3 5.3 8.16 Office of the President 5.5 5.3 - - 5.5 5.3 Sub-Total 207.6 210.4 19.2 21.1 226.8 231.5 9 Administrative Services 9.1 Global Corporate Solutions5 148.8 150.9 44.8 36.8 193.6 187.7 9.2 Health and Safety Development 9.3 9.3 3.5 3.7 12.9 13.0 9.3 Human Resources 56.8 58.3 30.4 32.3 87.2 90.6 9.4 Information & Technology Solutions 252.0 257.4 61.5 61.7 313.5 319.1 Sub-Total 467.0 475.9 140.3 134.4 607.2 610.3 E TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN. 1,122.6 1,141.5 335.5 332.8 1,458.1 1,474.3 F TOTAL: ALL UNITS (Excl. GMFs) 2,824.5 2,922.0 1,530.9 1,521.9 4,355.4 4,443.9 83 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table I.1: FY22 Funding for WB Work Program and Unit (US$ million) (Cont’d) / 3 of 3 INDICATIVE BUDGET TRAJECTORIES BB External Funds All Funds FY21 FY22 FY211 FY22 FY211 FY22 10 Centrally Managed Accounts & Programs 10.1 Budget Recovery6 (1,089.1) (1,129.7) - - (1,089.1) (1,129.7) 10.2 Corporate Contingency7 13.0 13.0 - - 13.0 13.0 10.3 Depreciation 130.4 127.7 - - 130.4 127.7 10.4 Institutional Programs 59.8 61.1 0.5 0.5 60.3 61.7 10.5 Staff Benefits & Retirement 1,005.1 1,019.4 - - 1,005.1 1,019.4 Sub-Total 119.2 91.6 0.5 0.5 119.7 92.1 G TOTAL ALL FUNDS EXPENDITURE ENVELOPE 2,978.8 3,048.6 1,531.4 1,522.4 4,510.1 4,571.0 H o/w Funded by External Funds DRR (191.8) (197.6) - - (191.8) (197.6) I o/w Funded by External Funds CRR - - (383.9) (382.0) (383.9) (382.0) J o/w Funded by External Funds BETF - - (1,147.5) (1,140.4) (1,147.5) (1,140.4) K o/w Admin Budget Funded by IBRD/IDA 2,787.0 2,851.0 - - 2,787.0 2,851.0 1 External funds estimates presented in the FY21 budget document for operations restated to reflect the realigned operations structure. 2 CE BB funds include Young Professional (YP) Subsidy set-aside which will be distributed to the Regions based on YP placements and funds for OPCS to support operations related priorities in FY22. Any additional balance will be held for further distribution across the Regions, and other corporate priorities being programmed. This incremental funding complements base budget resources in the operational envelopes used for WPA for these priorities. 3 Includes the FCV unit, funds for ESF/GBV and Global Mobility benefits for Operational staff. External funds includes the Global Partnership for Educations (GPE) Secretariat. 4 Referred to as Inspection Panel in the FY21 Budget Document. Comprises the Accountability Mechanism Secretariat, the Inspection Panel and the Dispute Resolution Service. 5 As office closures and home-based work arrangements continue, GCS’ revenue from facility/service related chargebacks and staff-related services are projected to decrease temporarily in FY22. 6 Includes staff benefits recoveries from internal transfer pricing, TF recoveries, and Corporate Services. 7 Increased Corporate Contingency allocation for FY22 to support unforeseen cost pressure and priorities, including COVID-19 response. 84 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table I.2: Overview of External Funds Projected Revenues FY22 by Unit (US$ million) Coupled Reimbursable Bank Executed Trust External Funds Funds (CRR) Funds (BETF) FY21 1 FY22 FY21 1 FY22 FY21 1 FY22 1 Country Engagement 1.1 AFEVP 17.2 17.2 135.6 134.9 152.8 152.0 1.2 AFWVP 6.1 6.1 72.6 72.2 78.7 78.3 1.3 EAPVP 16.3 16.2 118.0 117.4 134.3 133.6 1.4 ECAVP 36.6 36.4 75.2 74.8 111.9 111.3 1.5 LCRVP 7.6 7.5 59.3 58.9 66.8 66.5 1.6 MNAVP 34.9 34.7 64.0 63.7 98.9 98.4 1.7 SARVP 7.4 7.4 84.2 83.8 91.6 91.1 2 1.8 Other Opera ti ona l Uni ts Al l oca ti ons 2.8 2.8 74.5 74.1 77.3 76.9 Sub-Total 129.0 128.3 683.4 679.8 812.4 808.1 2 Global Engagement 2.1 Pra cti ce Group GE 19.8 19.7 172.2 171.3 192.0 191.0 Sub-Total 19.8 19.7 172.2 171.3 192.0 191.0 A TOTAL CLIENT ENGAGEMENT 148.8 148.0 855.6 851.1 1,004.4 999.1 3 Region PPM 3.1 AFEVP 1.6 1.6 9.9 9.9 11.5 11.5 3.2 AFWVP 0.7 0.7 1.6 1.6 2.3 2.3 3.3 EAPVP 8.4 8.3 3.9 3.9 12.3 12.2 3.4 ECAVP 1.1 1.1 4.0 3.9 5.1 5.1 3.5 LCRVP 0.2 0.2 2.3 2.3 2.6 2.5 3.6 MNAVP 0.9 0.9 3.5 3.5 4.4 4.4 3.7 SARVP 1.2 1.2 2.0 2.0 3.2 3.2 Sub-Total 14.1 14.0 27.3 27.1 41.4 41.2 4 Practice Group PPM 4.1 Equi ta bl e Growth, Fi na nce a nd Ins ti tuti ons 0.7 0.7 13.9 13.9 14.7 14.6 4.2 Huma n Devel opment 0.4 0.4 14.0 13.9 14.4 14.3 4.3 Infra s tructure 0.3 0.3 16.5 16.5 16.8 16.8 4.4 Sus ta i na bl e Devel opment 0.1 0.1 64.8 64.4 64.8 64.5 Sub-Total 1.5 1.5 109.2 108.6 110.7 110.1 5 Other Operations Support PPM 3 5.1 Other Opera ti ona l Support - - 38.9 38.7 38.9 38.7 Sub-Total - - 38.9 38.7 38.9 38.7 B TOTAL PROGRAM & PRACTICE MGMT. 15.6 15.5 175.4 174.5 191.0 190.0 C TOTAL OPERATIONS 164.4 163.5 1,031.0 1,025.5 1,195.4 1,189.1 85 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table I.2: Overview of External Funds Projected Revenues FY22 by Unit (US$ million) (Cont’d.) / 2 of 3 Coupled Reimbursable Bank Executed Trust External Funds Funds (CRR) Funds (BETF) FY21 1 FY22 FY21 1 FY22 FY21 1 FY22 6 Institutional Services 6.1 Budget, Performa nce & Stra tegy 0.1 0.1 - - 0.1 0.1 6.2 Chi ef Ri s k Offi ce 0.7 1.0 - - 0.7 1.0 6.3 CMP - Da ta Pri va cy Offi ce - - - - - - 6.3 Devel opment Economi cs 8.1 7.6 52.7 49.0 60.8 56.6 6.4 Devel opment Fi na nce 5.1 5.1 1.7 2.4 6.8 7.5 6.5 Externa l & Corpora te Rel a ti ons 2.0 2.7 1.9 2.3 3.9 5.1 6.6 Gl oba l Envi ronment Fund - - 36.0 36.0 36.0 36.0 6.7 Lega l Servi ces 1.9 1.7 - 0.2 1.9 2.0 6.8 Opera ti ona l Pol i cy & Country Servi ces - - 0.2 0.0 0.2 0.0 6.9 Stra tegy, Performa nce, a nd Admi n. 3.7 4.1 - - 3.7 4.1 6.10 Trea s ury 53.2 56.7 2.0 1.2 55.2 57.9 6.11 WBG Fi na nce & Accounti ng 6.7 6.9 - - 6.7 6.9 Sub-Total 81.5 86.0 94.5 91.3 176.0 177.3 7 Governance Services 7.1 Executi ve Di rectors - - - - - - 7.2 Accounta bi l i ty Mecha ni s m - - - - - - 7.1 Independent Eva l ua ti on Group 8.6 8.9 0.2 0.6 8.8 9.5 7.2 Corpora te Secreta ri a t - - 1.4 1.1 1.4 1.1 7.3 Admi ni s tra ti ve Tri buna l 0.5 0.6 - - 0.5 0.6 7.4 Interna l Jus ti ce Servi ces 1.6 1.5 - - 1.6 1.5 7.5 Ethi cs a nd Bus i nes s Conduct 2.3 2.6 - - 2.3 2.6 7.6 Integri ty Vi ce Pres i dency 0.2 0.2 - - 0.2 0.2 7.9 Offi ce of Sus pens i on & Deba rment - - - - - - 7.10 Sa ncti ons Boa rd - - - - - - 7.7 Group Interna l Audi t 3.0 3.1 - - 3.0 3.1 7.12 Offi ce of the MD a nd CAO - - - - - - 7.13 Offi ce of the MD a nd CFO - - - - - - 7.8 Offi ce of the MD, Devel opment Pol i cy And Pa r - - 1.4 2.5 1.4 2.5 7.15 Offi ce of the MD, Opera ti ons - - - - - - 7.16 Offi ce of the Pres i dent - - - - - - Sub-Total 16.2 17.0 3.0 4.2 19.2 21.1 86 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table I.2: Overview of External Funds Projected Revenues FY22 by Unit (US$ million) (Cont’d.) / 3 of 3 Coupled Reimbursable Bank Executed Trust External Funds Funds (CRR) Funds (BETF) FY21 1 FY22 FY21 1 FY22 FY21 1 FY22 8 Administrative Services 8.0 Gl oba l Corpora te Sol uti ons 4 44.8 36.8 - - 44.8 36.8 8.1 Hea l th a nd Sa fety Devel opment 3.5 3.7 - - 3.5 3.7 8.2 Huma n Res ources 11.4 13.1 19.0 19.2 30.4 32.3 8.3 Informa ti on & Technol ogy Sol uti ons 61.5 61.4 - 0.3 61.5 61.7 Sub-Total 121.3 115.0 19.0 19.4 140.3 134.4 D TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN. 219.0 217.9 116.5 114.9 335.5 332.8 E TOTAL: ALL UNITS 383.4 381.5 1,147.5 1,140.4 1,530.9 1,521.9 9 Centrally Managed Accounts & Programs 9.1 Ins ti tuti ona l Progra ms 0.5 0.5 - - 0.5 0.5 Sub-Total 0.5 0.5 - - 0.5 0.5 F TOTAL ALL FUNDS EXPENDITURE ENVELOPE 383.9 382.0 1,147.5 1,140.4 1,531.4 1,522.4 1 Restated to reflect the appropriate coding for comparison purpose only 2 Represents Country Engagement (CE) work financed by external funded activity codes classified as CE from Global Practices e.g. digital and environment, and other funds managed by the Practice Groups after 3 Includes BETF projections for Global partnership for Education. 4 As office closures and home-based work arrangements continue, GCS’ revenue from facility/service related chargebacks and staff-related services are projected to decrease temporarily in FY22. 87 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE ANNEX II. INDICATORS OF BUDGET SUSTAINABILITY, STRATEGIC ALIGNMENT, AND BUDGET EFFICIENCY Focus Indicator Definition Trend IBRD Anchor Administrative expenses as a share of operational revenues (loan spread revenue) (percent) IDA Anchor Administrative expenses as a Budget Sustainability share of operational revenues (IDA net loan revenues) (percent) External Funds Ratio External funds as a share of total administrative spending plans (percent) 88 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Focus Indicator Definition Trend Operational Share of Unit Total share of unit Budgets Administrative Budget (BB) allocated to Operational Units excluding GMFs (percent) Client Engagement Share of Operational Unit Share of Operational Budget (BB) Allocated to Strategic Alignment Unit Budgets Country Engagement (CE) and Global Engagement (GE) excluding GMFs (percent) FCV Share of Country CE (BB) budget share for Engagement Budgets FCV Countries over Total CE Envelope (percent) 89 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Indicator Definition Trend Bank Budget to Total Administrative Lending Volume Budget (BB) per US$ Ratio billion of commitments (US$ million) Administrative Budget Efficiency Bank Budget to Total Administrative Porfolio Volume Budget (BB) per US$ Ratio billion portfolio under supervision (US$ million) 90 WORLD BANK FY22 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Focus Indicator Definition Trend Bank Budget per Total Administrative Project Approved Budget (BB) per lending Ratio project approved (FY21 US$ million) Administrative Budget Efficiency (Cont'd.) Bank Budget per Total Administrative Project Supervision Budget (BB) per project Ratio under supervision (FY21 US$ million) 91