FY20 World Bank Budget Text for Public Disclosure September 6, 2019 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE CONTENTS 1 1. OVERVIEW AND RECOMMENDATIONS .......................................................................................... 1 1.1 OVERVIEW ....................................................................................................................................... 1 1.2 FY20 BUDGET RECOMMENDATIONS ......................................................................................... 4 2. STRATEGIC DIRECTIONS AND BUSINESS OUTLOOK .................................................................. 5 2.1 STRATEGIC CONTEXT ................................................................................................................... 5 2.2 LENDING OUTLOOK ...................................................................................................................... 8 2.3 COST OF DOING BUSINESS......................................................................................................... 10 2.4 CONTINUED FOCUS ON EFFICIENCIES ................................................................................... 14 3. FY20-22 BUDGET FRAMEWORK ...................................................................................................... 18 3.1 AGGREGATE BANK BUDGET ..................................................................................................... 18 3.2 EXTERNAL FUNDS OUTLOOK ................................................................................................... 23 3.3 AGGREGATE BANK BUDGET AND EXTERNAL FUNDS TRAJECTORIES ......................... 26 4. FY20 ADMINISTRATIVE BUDGET ................................................................................................... 27 4.1 ADMINISTRATIVE BUDGET PROPOSAL .................................................................................. 27 4.2 ADJUSTMENTS TO THE BUDGET .............................................................................................. 27 4.3 STRATEGIC ALIGNMENT BY WORK PROGRAM ................................................................... 32 4.4 OPERATIONAL WORK PROGRAM ............................................................................................. 35 4.5 GRANT-MAKING FACILITIES ..................................................................................................... 45 4.6 IG&A UNITS.................................................................................................................................... 46 4.7 CENTRALLY-MANAGED ACCOUNTS....................................................................................... 50 4.8 EXPENSE FUNCTIONAL VIEW ................................................................................................... 51 5. FY20 CAPITAL BUDGET .................................................................................................................... 54 5.1 FACILITIES ..................................................................................................................................... 54 5.2 TECHNOLOGY AND SYSTEMS................................................................................................... 55 6. MITIGATING BUDGET-RELATED PLANNING UNCERTAINTIES .............................................. 56 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 FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE ANNEXES ANNEX I: PROGRAM COST SUMMARY.................................................................................................. 58 ANNEX II. INDICATORS OF BUDGET SUSTAINABILITY, STRATEGIC ALIGNMENT, AND BUDGET EFFICIENCY .............................................................................................................. 63 TABLES Table 2.1: FY18-20 IBRD and IDA Lending Scenarios (US$ billion).............................................................. 9 Table 3.1: Bank Budget (US$ million) ............................................................................................................ 18 Table 3.2: FY19 & FY20 Budget and External Funds Projections (US$ million) .......................................... 26 Table 4.1: FY19 & FY20 WB Budget (US$ million) ...................................................................................... 27 Table 4.2: Incremental Additions to the Budget (US$ million) ....................................................................... 30 Table 4.3: Incremental Claw-backs/Savings from the Budget (US$ million) ................................................. 31 Table 4.4: FY20 Emerging Bank Budget (US$ million) ................................................................................. 32 Table 4.5: FY19 & FY20 Budget by Work Program & Funding Source (US$ million) ................................. 33 Table 4.6: FY19 & FY20 Budget Share by Work Program and Funding Source............................................ 33 Table 4.7: FY19 & FY20 Operational Budget Envelopes (US$ million) ........................................................ 36 Table 4.8: Grant-Making Facilities Budgets (US$ million)............................................................................. 45 Table 4.9: FY19 & FY20 ED and IEG Budgets (US$ million) ....................................................................... 48 Table 4.10: FY19 & FY20 IG&A Budget Envelopes (US$ million)............................................................... 49 Table 4.11: Centrally-Managed Accounts (US$ million) ................................................................................ 51 Table 4.12: FY19 & FY20 Functional Expense View of Administrative Expenses (US$ million) ................ 52 Table I.1: FY19 & FY20 Funding for WB Work Program and Unit (US$ million) ....................................... 59 Table I.2: Overview of External Funds Projected Revenues FY19 & FY20 by Unit (US$ million)............... 62 FIGURES Figure 2.1: IBRD/IDA Supervision Portfolio .................................................................................................. 10 Figure 2.2: Costs of Doing Business................................................................................................................ 11 Figure 2.3: Cumulative Growth in IBRD/IDA Portfolio Volume vs. Admin. Budget since FY14 ................. 14 Figure 3.1: IBRD Budget Anchor .................................................................................................................... 19 Figure 3.2: IDA Budget Anchor ...................................................................................................................... 20 Figure 3.3: Total Administrative Budget per US$ Billion of Loans Approved ............................................... 21 ii WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 3.4: Total Administrative Budget per US$ Billion Portfolio under Supervision (US$ million) .......... 21 Figure 3.5: Total Administrative Budget per Lending Project Approved (FY19US$ million) ....................... 22 Figure 3.6: Total Administrative Budget per Project under Supervision......................................................... 22 Figure 3.7: Share of External Funds to All Funds ........................................................................................... 24 Figure 3.8: Cost Recovery from BETFs (US$ million) ................................................................................... 25 Figure 4.1: Operational Share of Unit Budgets................................................................................................ 34 Figure 4.2: Client Engagement Share of Operational Unit Budgets (including Country Engagement and Global Engagement) ..................................................................................................................... 34 Figure 4.3: Evolution of the Country Engagement Bank Budget by Region from FY19 to FY20 (US$ million) ......................................................................................................................................... 37 Figure 4.4: Country Engagement Bank Budget Allocations by Business Process for FY18-20 (US$ million) ......................................................................................................................................... 38 Figure 4.5: Country Engagement Allocation on Fiduciary and Safeguards for FY17-20 ............................... 39 Figure 4.6: Country Engagement Allocations by Practice Group for FY18-20 (US$ million) ....................... 40 Figure 4.7: Country Engagement Bank Budget Allocations for FCV and FCV at Risk Countries for FY17-20 (US$ million) ................................................................................................................ 41 Figure 4.8: Country Engagement Bank Budget Allocations to Small States for FY17-20 (US$ million) ...... 42 Figure 4.9: FY20 Global Engagement by Practice Group and Category (US$ million).................................. 43 Figure 4.10: IG&A Budget Allocations, FY15-19 (US$ million) ................................................................... 46 Figure 4.11: Full-time Bank Staff on Payroll (percentage growth since FY14) .............................................. 53 BOXES Box 2.1: IBRD Package – Efficiencies Monitoring Framework ..................................................................... 15 Box 4.1: Administrative Budget Definition ..................................................................................................... 35 iii WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE ACRONYMS AFR Africa Region AI Artificial Intelligence ASA Advisory Services and Analytics BB Bank Budget BETF Bank Executed Trust Fund CE Country Engagement CGIAR Consultative Group for International Agricultural Research CMA Centrally Managed Accounts CO Country Office CODE Committee on Development Effectiveness COGAM Committee on Governance and Executive Directors’ Administrative Matters CPF Country Partnership Framework DEC Development Economics DFI Development Finance EAP East Asia and Pacific Region ECA Europe and Central Asia Region EF External Funds EFO Externally Financed Output ER Expenditure Review ESF Environmental and Social Framework FCS Fragile and Conflict-Affected Situations FCV Fragility, Conflict and Violence FIF Financial Intermediary Funds FSF Financial Sustainability Framework GBV Gender-Based Violence GCI General Capital Increase GDI Graduation Discussion Income GE Global Engagement GMF Grant-Making Facilities GP Global Practice GPSA Global Partnership for Social Accountability HCP Human Capital Project HQ Headquarters HR Human Resources IBRD International Bank for Reconstruction and Development ICSID International Centre for Settlement of Investment Disputes IDA International Development Association IEG Independent Evaluation Group IFC International Finance Corporation IG&A Institutional, Governance, and Administrative Units IPF Investment Project Financing ITS Information and Technology Solutions iv WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE LCR Latin America and Caribbean Region LIC Low Income Countries LMIC Lower-Middle Income Countries MFD Maximizing Finance for Development MIC Middle Income Countries MIGA Multilateral Investment Guarantee Agency MNA Middle East and North Africa Region PforR Program-for-Results PG Practice Group PPM Program and Practice Management PSW Private Sector Window RAMP Reserves Advisory and Management Program RAS Reimbursable Advisory Service RETF Recipient-executed Trust Fund SALL-adj Buffer-adjusted Sustainable Annual Lending Limit SAR South Asia Region SBL Single Borrower Limit SEC Corporate Secretariat SPF State and Peace-Building Fund SSA Shared Service Agreement TF Trust Fund VPU Vice Presidential Unit WB World Bank WBG World Bank Group WPA Work Program Agreement YOY Year over Year v WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 1. OVERVIEW AND RECOMMENDATIONS This document presents the FY20 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. Shareholders endorsed In the Forward Look, shareholders and Management have agreed on the Forward Look in an approach to advance the 2030 development agenda as well as the 2016, which defines World Bank Group Twin Goals of ending poverty and boosting how the World Bank shared prosperity. The World Bank Group (WBG) is becoming Group will support its “bigger and better” with the clear focus to maximize development clients to achieve the impact. The IDA-18 Replenishment finalized in December 2016 and Twin Goals and the the capital package for IBRD and IFC agreed during the 2018 Spring 2030 Development Meetings have provided significant guidance on effectiveness and Agenda. additional funding capacity with which the WBG can support its clients and further its mission. The World Bank has made significant progress towards the implementation of the IDA-18 and Forward Look commitments. Updates on the implementation progress of the IDA-18 Replenishment and Forward Look commitments have been presented in detail to the Board and the Governors. Implementation of the capital package is also underway, with a view to achieving capital package commitments over the FY19-30 period. 2. The strategic planning During this year’s strategic planning process, Management and budgeting process identified key focus areas to support the delivery on the ensures alignment of commitments for becoming more effective. These focus areas resources with strategic inform the resource allocation and budgetary trajectories. priorities. 3. Based on the capital The IBRD capital increase and the IDA-18 replenishment will result package, and adding to in a more effective World Bank with sustainable lending limits the ongoing IDA scale above US$50 billion annually (with a crisis buffer set aside within up, the Bank will be IBRD). These increased lending levels also affect the size of the able to significantly stock of projects under supervision as the increased annual lending increase lending levels flow into the active portfolio year-on-year. volumes. 1 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4. Operating as a “bigger” Increasing the volumes of annual financing, with a rising share in and “better” Bank will low income and fragile states, as well as the resulting expansion of have implications not the portfolio will bring opportunities for greater development just for the scale of our impact. However, it will also result in increased risks, complexity business but also its and related cost pressures. The business mix is also shifting to more nature. complex and riskier operations. The Cost of Doing Business analysis in Section 2.3 looks at a range of sectors, country income groups, financing instruments, degree of riskiness and geographic locations. 5. As agreed in the capital The World Bank has been implementing initiatives to contain package, the World expenditure and increase efficiency and cost recovery, both in Bank is committed to operations and supporting units. Initiatives include the Expenditure additional cumulative Review (US$340 million annual savings); implementation of the savings from Trust Funds Cost Recovery Framework (US$100 million annual efficiencies and savings); offshoring to Chennai (estimated US$100 million annual economies of scale by savings); reducing Grant-Making Facilities (GMF) funding (US$80 2030. million annual savings); and other efficiency initiatives which have helped embed savings of over US$50 million in unit trajectories. The World Bank has agreed to achieve additional cumulative savings by FY30 which will stem from efficiency gains and from economies of scale. This will help contain and, to some extent, offset increased cost of doing business. A monitoring framework is being developed to track progress on efficiencies and economies of scale. On a yearly basis, the monitoring framework will track cumulative efficiencies and economies of scale savings from FY19 to FY30 using the FY18 budget as a baseline. Progress will be reported after each year-end throughout this period. 6. Management proposes Striving to maintain budget discipline and considering strategic a Bank administrative priorities, increasing costs of doing business, and savings derived budget of US$2,721 from efficiencies and economies of scale, Management proposes a million for FY20, as budget increase of 4.2 percent in nominal terms (1.8 percent in real part of a broader total terms) for FY20. funds estimate of The proposed FY20 budget will maintain budget sustainability and US$4,516 million. contribute to the Bank’s financial strengthening. As part of the capital package, new IBRD budget anchor targets have been agreed with shareholders. Management is aware that the agreed new anchor goals are challenging, but it is committed to remain within the agreed 2 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE target zones for each year until 2030. The proposed FY20 budget will result in the IBRD budget anchor being in line with the anchor target zone range agreed under the capital package for this period, and in the IDA budget anchor being below the 100 percent ceiling. Management is committed to further increase the share of resources allocated to operations and front-line services. As a result, the share of Bank Budget resources allocated to operations will increase from 59.1 percent in FY19 to 60.4 percent by FY20, or an increase of US$109 million. The Institutional, Governance and Administrative (IG&A) units budget will decline slightly in real terms. Staffing implications of the proposed budget will be reflected in revised Workforce Plans. 7. External Funds will The outlook for Recipient Executed Trust Funds (RETFs) is stable. continue to be an Bank Executed Trust Funds (BETFs) are expected to continue to important vehicle to grow, with a strong focus on regional and global work. The use of help support priority all External Funds for Bank-performed activities is expected to development issues. stabilize at around 40 percent of “All Funds”. Shifts in External Funds contributions, trends and patterns are taken into consideration as part of the planning and budgeting process. Progress continues to be made on trust funds cost recovery, with the BETF actual costs to revenue ratio dropping by 10 percentage points since FY15 to 112 percent in FY19. 8. The proposed capital Capital investment planning is an integral part of the World Bank’s budget for FY20 strategic planning and budgeting cycle. The FY20 Facilities Capital remains unchanged at Investment Plan is US$105 million. The FY20 IT Capital Investment US$190 million. Plan is US$85 million. Management is continuing its scrutiny of the annualized costs of the Bank’s investment plans. 3 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 1.2 FY20 BUDGET RECOMMENDATIONS 9. Management seeks Management seeks Board approval of the following FY20 Budget Board approval of the recommendations: FY20 Budget. • That the total administrative budget (Bank Budget) be set at US$2,721 million, managed within a range of +/- 2 percent. This includes: o An indicative budget of US$84.4 million for Executive Directors. This is subject to a separate endorsement process by COGAM. o US$30.2 million for the Independent Evaluation Group. This is subject to a separate endorsement process by CODE. • That the capital budget be set at US$190 million. 4 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 2. STRATEGIC DIRECTIONS AND BUSINESS OUTLOOK This section discusses the World Bank’s strategic context and business outlook for FY20. Lending and portfolio volumes are increasing for both IBRD and IDA. Costs of doing business are rising, especially as a result of increasing work in low and lower-middle income and fragile countries. Efficiency efforts across the World Bank continue and will partly offset these rising cost pressures. This section highlights these elements of the strategic context and business outlook which sets the stage for the FY20 budget to be presented in Sections 3-5. 2.1 STRATEGIC CONTEXT 10. The Forward Look, The Forward Look outlines the commitments between shareholders endorsed by and Management to advance the 2030 development agenda as well shareholders in 2016, as the World Bank Group Twin Goals of ending poverty and defines how the World boosting shared prosperity. 2 Bank Group will To maximize development impact, the WBG is pursuing a “bigger support its clients to and better” organization that will be more effective for achieve the Twin development. The IDA-18 Replenishment, finalized in December Goals and the 2030 2016, and the capital package for IBRD and IFC agreed during the Development Agenda. 2018 Spring Meetings have provided significant additional funding capacity with which the WBG can support its clients and further its mission. 11. The World Bank has Updates on the implementation progress of the IDA-18 made significant Replenishment 3 and Forward Look commitments have been progress towards presented in detail to the Board. Implementation of the IBRD-IFC implementing the capital package policy commitments is also underway, with a view Forward Look and the to achieving capital package targets over the FY19-30 period. IDA-18 and capital Regional and Practice Group updates to the Board also presented package commitments. key strategic directions. Key areas of progress are highlighted below. 2 See “Forward Look – A Vision for the World Bank Group in 2030 – Main Messages”, DC2016-0008, Sept. 20, 2016. 3 See “IDA18 Mid-Term Review: Implementation and Results Progress Report”, IDA/SecM2018-0231, Oct. 24, 2018. 5 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 12. Serving all clients: IDA-18 has enabled the Bank to expand its services for low income Significant progress is countries, double assistance to countries affected by fragility, being made to expand conflict and violence, significantly increase assistance to small Bank services and states, as well as expand IFC and MIGA services in these countries develop innovative through the Private Sector Window (PSW). IDA-18 implementation solutions across all is progressing well, with strong delivery reflected both in terms of client groups. record IDA lending and solid progress in delivering policy commitments, with increasing focus on work in countries affected by Fragility, Conflict and Violence (FCV), delivering IDA support in new and innovative ways, and mobilizing private investment to the most difficult markets. The successful introduction of IDA to capital markets with the issuance of IDA’s first bond in April 2018 added an important new funding channel for the world’s poorest countries. Sustaining this trend is a key priority for FY20 and related budget plan. The recently endorsed IBRD/IFC capital package will enable the WBG to channel more resources to countries at the lower to middle range of the client income spectrum while at the same time continuing to engage with all clients across the income spectrum. Significant policy reforms have already been undertaken to support these objectives. As of July 1, 2018, IBRD’s loan pricing and Single Borrower Limit (SBL) became differentiated based on borrower income. For clients above the IBRD Graduation Discussion Income (GDI), an enhanced approach to Country Partnership Frameworks (CPFs) has been implemented. Progress has also been made in increasing support to small states. The objective of serving our clients has been further strengthened by the recent realignment of the senior responsibilities within the Practice Groups (PGs) to strengthen links and cooperation between Global Practices (GPs) and regions. 13. Leading on global The World Bank is continuing to lead in promoting innovative issues: The Bank responses where coordinated global action is critical. A new set of continues to enhance climate targets for 2021-2025 and an Action Plan on Climate its engagement and Change Adaptation and Resilience have been introduced. The focus on issues that Human Capital Project (HCP) is being operationalized with transcend national enhanced support for measurement and research, country boundaries. engagement work and private solutions. 6 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE In FY20, the focus will be on corporate engagements including the Human Capital Project, the climate change agenda, gender, FCV, debt sustainability and transparency, and jobs (including digital transformation). 14. Creating markets: Implementation of the Maximizing Finance for Development WBG entities are (MFD) agenda and the “Cascade” approach continues to gain working in partnership momentum through investment-enabling WB upstream policy to mobilize financing operations and IFC market creation projects, aided by a more for development. strategic and systematic approach (including IFC Country Strategies and Business Plans), the deployment of innovative investment platforms and products, as well as new processes and tools (including private sector diagnostics, applying IFC’s Anticipated Impact Measurement and Monitoring framework to assess development impact of IFC projects ex-ante, and risk mitigation, and mobilization platforms). Organizational re- alignment to implement this approach is ongoing, including twelve joint WBG MFD Accelerator pods to address challenges and speed up program and project delivery at the country level; and new WBG-wide Sector Groups to coordinate Cascade priorities at the global sectoral level. In FY20, the focus will be on continuing to scale up this approach, through firmly anchoring the mobilization of finance in Country Partnership Frameworks, joint implementation plans and development of a comprehensive Results Measurement Framework to hardwire the Cascade approach into WBG operations. 15. Improving the business The World Bank continues to improve its financial sustainability model: The Bank will and enhance its efficiency, performance and agility. The continue to improve its implementation approach for IBRD’s new Financial Sustainability effectiveness by Framework (FSF) was approved by Executive Directors in promoting operational December 2018, with work under way on its implementation for agility and FY20 lending. While the institution is only a few months into the administrative implementation of the efficiency commitments under the capital simplification, and by package, significant progress has already been made. The revised enhancing its financial compensation methodology for HQ-appointed staff has been sustainability. implemented as of July 2018 and the revised Country Office- appointed staff compensation methodology, approved by Executive Directors in March 2019, will be implemented starting in FY20. Efficiency measures in the areas of corporate procurement, workforce structure, real estate and other measures are being 7 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE implemented. Productivity gains are also being sought through agile approaches, administrative simplification and the use of technology. 16. The strategic planning The annual strategy and planning process ensures the alignment of and budgeting process resources with World Bank goals and strategic priorities. In this ensures alignment of year’s process, Management identified five business priorities for resources with FY20 to support the delivery on the commitments for becoming a strategic priorities. “bigger and better” Bank: (i) the IBRD scale-up and implementation of capital package commitments; (ii) continued strong delivery of IDA (IDA-18 and beyond), with continued focus on fragile countries and small states; (iii) supervision of the portfolio and implementation of the new Environmental and Social Framework (ESF) and of the Gender-Based Violence Action Plan; (iv) prioritizing and strengthening support for key global priorities/public goods both at the global and country level; and (v) investments to strengthen institutional support for delivery. Management has identified three modalities to ensure alignment of the budget with new funding requirements under these business priorities: (i) reallocations within unit budget trajectories; (ii) efficiency measures and productivity gains; and (iii) incremental additions to unit budget trajectories with priority given to operational needs. These focus areas and budget adjustment modalities have informed the resource allocation and FY20 Budget, as discussed in more detail in Sections 3-5. 2.2 LENDING OUTLOOK 17. The World Bank will The IBRD capital increase and the IDA-18 replenishment will achieve a sustainable result in a “bigger” World Bank able to sustain lending levels financing volume above US$50 billion annually (with further capacity set aside as a surpassing US$50 crisis buffer). These increased lending levels also affect the size of billion annually. the stock of projects under supervision as the increased annual lending levels flow into the active portfolio year-on-year, increasingly already for IDA and shortly for IBRD. 8 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 18. The endorsed capital IBRD has started implementing the new financing package to package enables IBRD support the expected growth in lending. The package includes a to increase lending US$7.5 billion paid-in and US$52.6 billion callable capital volumes compared to increase, and internal measures (adjusted IBRD loan terms, pre-capital increase continued focus on budget efficiencies and balance sheet levels. optimization). IBRD lending projections underlying the FY20 budget reflect the sustainable annual lending level adjusted for a crisis buffer (SALL- adj.) as discussed with the Board in April 2019 and in line with the Management’s recommendation in June 2019. The projected FY20 IBRD lending shown in Table 2.1 represents an increase of US$8 billion compared to the ‘pre-capital increase’ scenario shown in last year’s Budget Document. 19. Combined IBRD and As set out in Table 2.1 below, IBRD and IDA lending combined is IDA lending is expected to grow by US$6 billion by FY20 compared with FY18 expected to grow from levels. More significantly, this is US$8 billion more per year in US$47 billion in FY18 FY20 than it would have been without the IBRD capital package to about US$53 billion (and hence US$8 billion more than assumed in our budget in FY20, with US$8 trajectory last year). billion more annual Table 2.1: FY18-20 IBRD and IDA Lending Scenarios (US$ billion) lending in FY20 than FY18 FY19 FY20 assumed for the pre- Actual Projection Projection capital increase IBRD Pre Capital Increase Scenario 23.0 22.0 20.0 scenario. IBRD Post Capital Increase Scenario 23.0 22.7 28.1 1 IDA 24.0 23.2 25.2 IBRD and IDA pre Capital Increase 47.0 45.2 45.2 IBRD and IDA post Capital Increase 47.0 45.9 53.3 Lending Increase Since Capital Increase N/A 0.7 8.1 Notes: 1 The IDA FY20 lending projection excludes the allocation to the Private Sector Window. 9 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 20. Continuing on the IBRD/IDA portfolio volume and project counts have grown since growth path that FY14. Continuing on this path, the IBRD lending scale-up and the started in FY14, continued focus on IDA delivery are expected to further increase IBRD/IDA portfolio the number of operations under implementation and the dollar size volume and project of the supervision portfolio of the World Bank. counts are expected to Figure 2.1: IBRD/IDA Supervision Portfolio further increase. 1,700 $300 1,650 $264 $252 1,600 $250 $230 $207 $213 1,550 Net Commitment Volume $192 $200 $183 1,500 No. of Projects (US$ billion) 1,497 1,450 $150 1,459 1,400 $100 1,402 1,398 1,386 1,350 1,300 $50 1,250 $0 1,200 FY14 FY15 FY16 FY17 FY18 FY19p FY20e IBRD/IDA Net Commitment (US$ billion) No. of IBRD/IDA Projects 2.3 COST OF DOING BUSINESS 21. Delivering as a Delivering larger lending volumes will result in an expansion of the “bigger” and “better” portfolio with a rising share of new lending in low and lower-middle Bank will have income countries and fragile states. This expansion will bring implications on the opportunities for greater development impact but will result in cost of doing business. increased risks, complexity and related cost pressures. Other operational trends are also contributing to increased cost of doing business, notably a rising number of operations in specific sectors and using some lending instruments reflecting client demand, increased presence on the ground to support clients, and the implementation of the Fiduciary and Safeguard Frameworks. Some of the policy commitments will also increase the costs of doing business, including for work on financial adequacy and sustainability frameworks. The detailed Cost of Doing Business analysis looks at a range of sectors, country income groups, financing instruments, degree of riskiness and geographic locations. The analysis provides further 10 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE information on the impact that shifts in the work program are having on costs. Four main business dynamics emerge from the cost of doing business analysis: (1) expansion of financing and the portfolio with a rising share in low and lower-middle income countries and fragile states where operating is more expensive; (2) the shift towards costlier and riskier operations; (3) implementation of the procurement framework and the new Environmental and Social Framework; and (4) the increased complexities of the hybrid IDA financial model and the capital package financial commitments. Figure 2.2: Costs of Doing Business Expansion of lending and the portfolio with rising share in low and lower- middle income countries Implementation of the and fragile states Procurement and Environmental and Social Frameworks requirements Increased complexity of IDA and IBRD financial model and related financial commitments Increased shift of a Continued growth in riskier projects lending to the Infrastructure & Sustainable Development sectors 22. Analyzing the cost of As the nature of the business changes, the underlying cost structure doing business is changes. Understanding and analyzing these emerging cost trends important to is the goal of the costs of doing business exercise. It is important to understand cost stress that how the World Bank is shaping its business is not based pressures resulting principally on associated costs, but on the expected development from the changing impact for total development dollars, of which the budget is a nature of our business. relatively small part. The choice of financing instrument, project location, sector and related degree of risks is based on 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 decide on the activities to be funded based on the Country Partnership Framework (CPF), which reflects national development priorities as well as Systematic 11 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Country Diagnostics and draws lessons from completion reporting experience, IEG work and other evaluations. 23. The Bank is Preparing operations in low and lower-middle income countries is significantly on average more expensive. This puts upward pressure on WB expanding its services administrative costs as the share of projects for these countries has to low and lower- increased in recent years (from 69 percent in FY15-16 to 73 percent middle income in FY17-18). The cost of preparing operations in the Africa (AFR), countries and to South Asia (SAR) and Middle East and North Africa (MNA) fragile states where the regions is also higher than in other regions, while their share of cost of doing business projects has increased from 54 percent in FY15-16 to 61 percent in is higher. FY17-18. In addition, the Bank is expanding its footprint in fragile and small states, where operating is more complex and riskier. The average cost of putting a staff in a fragile country is about 40 percent higher than in non-fragile countries – mainly due to related assignment benefits for staff decentralized to the field, and rising facilities and security needs. The tilt toward low and lower-middle income countries and to fragile states will continue as scaled-up IDA-18 lending in low income countries flows into the IDA portfolio and as IBRD capital package commitments to lend more in lower-middle income countries and recent IDA graduates are implemented. The World Bank is also looking into options to further enhance its presence on the ground to better support its clients, especially in fragile and lower income countries. 12 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 24. The Bank is pursuing Reflecting client demand, the Bank’s business mix has shifted more complex and towards Investment Project Financing (IPF) and Program-for- riskier operations Results (PforR) operations, which are costlier to prepare. Also, which are costlier to average preparation costs for operations in Agriculture, Water, prepare. Energy, Environment, Transport, Governance and Social Protection continue to be above the average, and client demand for many of these sectors continues to increase. The share of riskier operations (with high/substantial risks) also continues to rise, now representing about 80 percent of the projects delivered annually. Given their complexity, riskier projects have preparation costs which are 1.1 times the average. 25. Budget allocations for The implementation of the procurement reform and the new fiduciary and Environmental and Social Framework (ESF) is ongoing with safeguards work have increased resources provided to support the preparation of new increased in recent guidance and procedures, training of staff, familiarization of years. borrowers, and supporting infrastructure. Further, increased resources for the implementation of the new ESF are needed, including for enhanced quality control by the Environmental and Social management as well as for the retrofitting of projects to ensure that Gender-Based Violence (GBV) Action Plan is implemented. 26. The increased The Finance Units face additional responsibilities, including to complexities of the support the introduction of market leverage of the IDA balance hybrid IDA financial sheet, with changes to the IDA asset-liability management model and the capital framework and liquidity policy, the increased number and package financial complexity of IDA financing instruments, including the Private commitments generate Sector Window, the IDA Scale-up Facility and the transitional additional support for IDA graduates, and work on capital package financial responsibilities for the commitments such as Capital Adequacy Framework, and the Finance units. Financial Sustainability Framework. While some of these demands have been met with within-unit reallocations, others require increased resources. 13 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 2.4 CONTINUED FOCUS ON EFFICIENCIES 27. Since FY14, To balance increasing financing and supervision volumes as well as Management has rising costs of doing business, the World Bank has been consistently aggressively promoted and successfully implementing initiatives to contain expenditures budget efficiency and and increase efficiency and cost recovery, both in operations and process improvement supporting units. Initiatives include a wide range of measures, initiatives. among which are the Expenditure Review which resulted in US$340 million savings for the World Bank; implementation of the Trust Funds Cost Recovery Framework which has led to recovery of an additional US$100 million; offshoring to Chennai with an estimated annual savings of US$100 million; reducing Grant- Making Facilities funding (US$80 million annual savings); and other efficiency initiatives (including rationalization of workforce structure and compensation, organizational realignments, and business reviews of IG&A units) which have helped embed efficiency related savings of over US$50 million in unit trajectories. As a result, the Bank’s productivity has significantly increased as demonstrated by its ability to deliver a cumulative 26 percent growth of its IBRD/IDA active portfolio volume (net commitments) between FY14 and FY18 within a flat nominal budget (see Figure 2.3). Figure 2.3: Cumulative Growth in IBRD/IDA Portfolio Volume vs. Admin. Budget since FY14 30% 26% 25% 20% 16% 15% 13% 10% 5% 5% 0% 1% 0% 0% -1% -1% FY14 FY15 FY16 FY17 FY18 -5% Cumulative % Growth in Admin. Budget Cumulative % Growth in IBRD/IDA Net Commitment Linear (Cumulative % Growth in IBRD/IDA Net Commitment ) 14 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 28. As part of the capital As agreed in the capital package, the World Bank has committed to package, the World achieve additional cumulative savings by FY30 from efficiency Bank is committed to gains and from economies of scale. The latter will arise from further cumulative increased average project size and from containing overhead costs savings from as business expands. Over time, the increase in average project size efficiencies and will also impact the portfolio. economies of scale by 2030. 29. A monitoring The monitoring framework will track cumulative efficiencies and framework is being economies of scale from FY19 to FY30 using the FY18 budget as developed to track the baseline. Efficiencies and economies of scale will be tracked on progress on a yearly basis and will continue to inform the annual discussions efficiencies and around associated budget claw-backs and allocation decisions. economies of scale. Progress will be reported after each fiscal year-end throughout this period. Box 2.1: IBRD Package – Efficiencies Monitoring Framework DEFINITIONS: Efficiency savings: Funds that arise from not having to incur the cost of something anymore - typically as a result of efficiency measures or more cost-efficient behaviors – that are clawed back centrally (saved or redeployed elsewhere) or left in the units’ budget for internal redeployment. Economies of scale: Cost savings arising from increased average project size and from containing overhead costs as business expands. 30. Significant progress While only a few months into the implementation of this 12-year has already been made commitment, significant progress has already been made to achieve to achieve the capital the capital package commitment to accrue cumulative efficiencies’ package commitments. savings by FY30. Key measures include: • Real estate: Management is developing a Real Estate Strategy for Headquarters which has a two-phase approach: (i) phase 1 consisting of vacating leased spaces to reduce costs; and (ii) phase 2 introducing more efficient space standards in Bank- owned buildings, incorporating flexibility and adaptability to 15 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE support changing business needs, with the possible roll out to Country Offices. • Compensation: Changes introduced in the Headquarters and Country Office staff compensation methodologies will moderate structure adjustments in FY20. Management will conduct a study on the WBG competitiveness for salaries and benefits in FY22. • Workforce structure: Other workforce measures implemented include using attrition to control overall position count growth and optimizing grade mix. Performance management has been strengthened with an enhanced performance evaluation and feedback framework. • Corporate procurement: In FY19, Management enhanced efforts to achieve savings and cost avoidance in the procurement/negotiation of corporate contracts by benchmarking cost of goods and services, targeting savings at the contract level, clawing back savings targeted from budget units and setting up a monitoring mechanism. • Other measures: Management continues to exercise tight oversight of travel expenditures (including through oversight over travel exceptions, the introduction of a mandatory global travel card, the use of an external hotel vendor and tighter control over global participation in events and conferences), rationalization of external contractor use and oversight in discretionary spend on food services. Savings resulting from these efficiency measures were already clawed back from unit trajectories as detailed in the FY19 Budget Document 4 and additional efficiency measures have been identified for the FY20 budget and related budgetary claw-backs are presented in Section 4.2. 4 See “FY19 World Bank Budget – Text for Public Disclosure”, SecM2018-0271; September 11, 2018, Table 4.3. 16 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 31. Business Reviews have Following and building upon the successful implementation of the identified significant Expenditure Review, Business Reviews for twelve IG&A units savings, process have been completed to date. Business Reviews have identified improvements and significant savings, process improvements and organizational organizational realignments. Four remaining business reviews are expected to be realignments. completed soon and will be reported in the efficiency progress reporting after the fiscal year-end (see para. 29). 32. Agile approaches, Additional productivity gains are being sought through agile administrative initiatives and administrative simplification efforts. It is important simplification and the to note that these efforts involve continuous piloting, testing and use of technology are evaluation of ideas which have been generated by staff. pursued to achieve Furthermore, IG&As are reviewing three end-to-end processes additional productivity using value chain analysis, with the goal to identify opportunities gains. for process optimization, improved customer experience and cost savings. The processes analyzed are procure to pay, travel, and staff hire-to-retire. In addition, units across the Bank are piloting the use of innovative technologies to improve internal efficiencies, increase knowledge, and help identify and test technology enabled development solutions. ITS has reallocated resources towards the Technology and Innovation Unit; pilots on Robotic Process Automation (RPA), blockchain, artificial intelligence (AI) and machine learning are also ongoing. 17 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 3. FY20-22 BUDGET FRAMEWORK This section sets out the aggregate funding for the World Bank Budget and External Funds and demonstrates the consistency of this medium-term budget framework with the principles of financial sustainability and efficiency. 3.1 AGGREGATE BANK BUDGET 33. Management proposes Striving to maintain budget discipline and considering strategic a 4.2 percent Bank priorities, increasing costs of doing business, and savings derived Budget increase in from efficiencies and the impact of the revised compensation nominal terms (1.8 methodology, Management proposes a Bank Budget increase of 4.2 percent in real terms) percent in nominal terms and 1.8 percent in real terms for FY20 (See for FY20. Table 3.1). Table 3.1: Bank Budget (US$ million) FY19 FY20 Current Trajectory (FY19 and FY20 as per FY19 WB Budget Document) 2,611 2,669 Revision to Trajectory 52 Revised Trajectory (Nominal) 2,611 2,721 % Change YOY (Nominal) 4.2% Proposed FY20 Budget (in FY19$) 2,611 2,657 % Change YOY (Real in FY19$) 1.8% IBRD Anchor 79% 84% Available for IBRD net income retention/transfer 305 252 IDA Anchor 98% 85% Available for other uses of IDA income 24 245 34. The proposed FY20 As part of the capital package, new IBRD budget anchor targets have budget will maintain been agreed with shareholders. The new IBRD anchors are specified budget sustainability in the form of target zones identified for 3-year intervals from FY19 and contribute to the to FY30. Target zones rather than specific point targets were agreed Bank’s financial upon given that loan revenues may be affected by factors beyond strengthening. 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. 18 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE The IBRD anchor (i.e., the ratio of IBRD expenses over IBRD loan spread income) for the proposed FY20 Budget is projected to be 84 percent (see Figure 3.1). This level is in line with the budget anchor target zone ranges agreed under the capital package for this period. Figure 3.1: IBRD Budget Anchor 1,800 189% 200% 176% 1,600 160% 158% Expenses/Revenues US$ million 155% 147% 148% 160% 1,400 135% Budget Anchor % 1,200 107% 120% 1,000 88% 84% 800 79% 80% 600 400 40% 200 0 0% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 IBRD Loan Spread Revenue IBRD-funded Expenses IBRD Budget Anchor IDA’s budget anchor (i.e., the ratio of IDA expenses over IDA net revenue) under the proposed budget trajectory is estimated to be 85 percent in FY20. The decline in the IDA anchor reflects the expected growth in revenues driven by the larger volume of IDA lending as well as growing revenue from less-concessional IDA windows. Despite the positive outlook, there is considerable uncertainty in the revenue projections and related IDA budget anchor due to the complexity of the new IDA-18 hybrid financial model and the sensitivity of the projections to assumptions of IDA lending terms and disbursements. 19 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 3.2: IDA Budget Anchor 1,800 120% 102% 102% 1,600 98% 96% 98% 100% 97% 98% Expenses/Revenue US$ million 93% 94% 100% 1,400 90% 85% Budget Anchor % 1,200 80% 1,000 60% 800 600 40% 400 20% 200 0 0% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 IDA Net Revenue IDA-funded expenses IDA Budget Anchor 35. The aggregate budget Two years ago, the World Bank introduced twelve indicators to track reflects the World the efficiency of resource use at the aggregate level by comparing Bank’s improved the total administrative budget of the World Bank to the size of productivity, despite the lending and portfolio, the largest driver of Bank costs, measured growing volume and both by dollar volume and by number of projects. These indicators increased scope and are used to measure total budget deployed per unit of produced complexity of work. output. As illustrated in Figures 3.3-3.6, the FY20 Budget compared with the expected commitments and the size of the portfolio, by dollar amount and project count, demonstrates 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). 20 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE • The total administrative budget per US$ billion of loans approved: This efficiency indicator decreases in FY20 as the rising cost of doing business is more than compensated by efficiency measures and economies of scale. The indicator is expected to decline by approximately 35 percent in FY20 compared to FY13. Figure 3.3: Total Administrative Budget per US$ Billion of Loans Approved (US$ million) 120 100 92 90 88 88 85 83 79 80 67 62 59 59 54 54 57 60 53 51 46 39 40 20 - FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 IBRD+IDA • The total administrative budget per US$ billion of portfolio under supervision: This indicator continues to decline as the administrative budget is growing more slowly than the portfolio. This indicator is expected to decline by 33 percent in FY20 compared to FY13. All of this is achieved in the context of a rising share of the portfolio in low and lower-middle income countries and fragile states with more difficult and riskier operating environments. Figure 3.4: Total Administrative Budget per US$ Billion Portfolio under Supervision (US$ million) 30 25 22 22 21 20 20 20 17 17 15 14 15 15 14 14 13 12 12 11 10 10 10 5 - FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 IBRD+IDA 21 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE • The total administrative budget per lending project approved: This indicator is projected to decrease in FY20 despite a growing pipeline with projects facing higher costs of doing business. As compared to FY12, this indicator is expected to decline by 45 percent in FY20. Figure 3.5: Total Administrative Budget per Lending Project Approved (FY19US$ million) 16 14 12 11 11 10 10 10 10 10 10 9 9 9 9 8 8 8 7 7 8 7 6 6 4 2 - FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 IBRD+IDA • The total administrative budget per project under supervision: This indicator is slightly declining in FY20 as the administrative budget will grow more slowly than the number of projects in the portfolio. This decline is achieved despite a rising share of the projects in low and lower-middle income countries and fragile states. Figure 3.6: Total Administrative Budget per Project under Supervision (FY19US$ million) 3.0 2.5 2.0 1.7 1.7 1.8 1.8 1.6 1.7 1.7 1.7 1.7 1.7 1.6 1.7 1.6 1.6 1.5 1.6 1.6 1.5 1.5 1.0 0.5 - FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 IBRD+IDA 22 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 3.2 EXTERNAL FUNDS OUTLOOK 36. Bank-Executed Trust External Funds support development activities as either: (i) funding Funds are expected to channeled to the Bank for Bank-performed activities (e.g., Bank- grow further, albeit at a Executed Trust Funds (BETFs), Reimbursable Advisory Services slower pace. (RASs), Externally Finance Outputs (EFOs), the Reserve Asset Management Program (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. The growth of BETFs use has slowed down, from 12 percent in FY18 to 5 percent in FY19 (YTD), with growth in FY20 estimated to be around 6 percent. Continued growth is underpinned by slightly improved BETF fund balances and growth in projected contributions under new Trust Fund agreements in FY19. More than half of BETF disbursements support country specific and global Advisory Services and Analytical (ASA) work, and around a quarter of total BETF disbursements are related to projects in the Africa region. Reimbursable Advisory Services (RAS) and Externally Financed Outputs (EFO), which combined account for 10 percent of all External Funds that directly fund the Bank, are growing by 15-20 percent in FY19, with continued strong growth projected for FY20. Inflows from RAS are expected to reach around US$140 million in FY20. As discussed under the capital package, clients’ demand for RAS tends to increase as their income rise and efforts are underway to better support this financing instrument, including centralized and standardized billing as well as a simplified accruals process. 37. The share of external Based on the above projections, total revenue from External Funds funds to total is expected to reach US$1.8 billion in FY20, with the part funding administrative spending operational activities reaching over US$1.5 billion (of which US$1.2 plans is envisaged to billion from BETFs and around US$140 million from RASs) stabilize at around 40 accounting for over 80 percent of total revenue from External Funds. percent. Management expects that the share of external funds for Bank- executed services will stabilize at around 40 percent of the Bank’s total administrative spending, following the significant growth in recent years (see Figure 3.7). 23 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 3.7: Share of External Funds to All Funds 50% 39% 40% 40% 36% 37% 35% 33% 34% 31% 31% 29% 30% 27% 20% 10% 0% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19P FY20P Actual Forecasted 38. Shifts, trends and In the environment outlined above, planning of BETFs and other patterns of External External Funds becomes critical. Forecasting of External Funds Funds contributions trends and usage and their alignment with the Bank’s strategic are taken into priorities are a part of the aggregate budget trajectory planning. Also, consideration as part of planning of BETFs and other external funds is increasingly the planning and integrated into operational plans during detailed work programming. budgeting process. There are two key priorities of the ongoing Trust Fund Reform which are expected to improve BETF projections in the future. First, fewer, larger trust funds are expected to lead to improved managerial oversight, better alignment with the strategic planning and budgeting process, and, therefore, greater predictability in terms of BETF projections required to deliver on key Bank priorities. Second, synchronizing trust fund allocations with strategic planning and budgeting process will help Bank Management get a better overview of stocks and flows of BETFs to meet the Bank’s current and future priorities. In addition, a revised set of directives and guidelines has been issued recently to equip the World Bank with a more flexible and responsive operational framework for RAS. A Global RAS unit has been set up to share best practice for achieving quality and impact, harmonize business development approach, prepare strategic guidance, provide training for staff, and enhance communications with stakeholders. 24 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 39. The trust funds cost In FY15, the Board endorsed the goal of increasing Trust Fund cost recovery reform has recovery by US$100 million annually. At the start of FY16, been implemented Management introduced a new cost recovery framework for Trust successfully and will Funds, endorsed by the Board. This framework specifies: (i) a tiered generate an additional fee scale on RETFs; (ii) a uniform indirect rate on staff and US$100 million consultants; (iii) benefits rates that reflect the actual cost of staff annually from FY19 benefits and pensions; and (iv) more standardized Administration onward. Agreements with development partners as well as report automations. As a result, satisfactory progress has been made towards the goal of achieving additional cost recovery of US$100 million by FY20, with the actual costs to revenue ratio dropping by 10 percentage points since FY15 to 112 percent in FY19 (see Figure 3.8). However, the World Bank administrative budget (and so implicitly from IDA and IBRD contributions) continues to subsidize the costs associated with activities financed by Trust Funds and other types of External Funds and Management is examining options for addressing this issue. Figure 3.8: Cost Recovery from BETFs (US$ million) 122% 121% 120% 1,500 114% 125% 112% 1,250 100% 1,000 75% 750 50% 500 25% 250 0 0% FY15 FY16 FY17 FY18 FY19 Revenue Cost Cost/Revenue 25 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 3.3 AGGREGATE BANK BUDGET AND EXTERNAL FUNDS TRAJECTORIES 40. An aggregate resource The “All Funds” trajectory for the sum of the Bank Budget (BB) and envelope for FY20 has External Funds (including BETFs, RASs and EFOs) shows a emerged from the nominal growth of 4.8 percent in FY20. discussion on the strategic framework Table 3.2: FY19 & FY20 Budget and External Funds Projections (US$ million) and the External Funds outlook. FY19 FY20 Nominal Bank Budget (BB) Trajectory 2,611 2,721 External Funds (EF) Projections1 1,697 1,795 Total (Nominal) 4,308 4,516 Y-o-Y Growth 4.8% Real (in FY19$) Bank Budget (BB) Trajectory 2,611 2,657 1 External Funds (EF) Projections 1,697 1,753 Total (Real in FY19$)2 4,308 4,410 Y-o-Y Growth 2.4% 1 FY19 EF projections as of Q3. 2 Deflator of 2.4% was applied. 26 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4. FY20 ADMINISTRATIVE BUDGET This section presents specific details of the FY20 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 FY20 is US$2,721 million proposing a Bank as set out in Table 4.1 below. The proposed budget represents an administrative budget of increase of 4.2 percent in nominal terms and 1.8 percent in real terms US$2,721 million for for FY20. FY20, as part of a Table 4.1: FY19 & FY20 WB Budget (US$ million) broader total funds estimate of US$4,516 FY19 FY20 million. Proposed FY20 Budget Trajectory (Nominal) 2,611 2,721 % Change YOY (Nominal) 4.2% Proposed FY20 Budget Trajectory (in FY19$) 2,611 2,657 % Change YOY (Real in FY19$) 1.8% 4.2 ADJUSTMENTS TO THE BUDGET 42. The business priorities Five business priorities have informed the sizing of the FY20 Budget and outlook discussed in and adjustments to allocations: the second section of • the IBRD scale-up and implementation of capital package this paper are shaping commitments; the FY20 Budget and how resources are • strong delivery of IDA (IDA-18 and beyond), with continued allocated. focus on fragile countries and small states; • supervision of the portfolio and implementation of the new Environmental and Social Framework (ESF) and of the work program on Gender-Based Violence; • prioritizing and strengthening support to key global priorities and public goods at the global and country level; and • investments to strengthen institutional support for delivery. Management has identified three modalities to adjust the budget presented in the FY19 Budget Document to ensure alignment with 27 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE funding requirements under these business priorities: (i) reallocations within unit budget trajectories; (ii) incremental additions to unit budget trajectories with priority given to operational needs; and (iii) efficiency measures, economies of scale and incremental cost recovery to free resources to partially fund these incremental additions. 43. The IBRD scale-up and The IBRD lending amounts underpinning the FY20 Budget are implementation of US$8 billion per year more than those anticipated in the FY19 capital package Budget (as presented in the FY19 Budget Document) which was commitments are key constructed on a pre-capital increase scenario. The IBRD scale-up priorities impacting the will require additional funding. In FY19, US$35 million was added FY20 Budget. through the flexibility band to unit trajectories to support the IBRD capital package implementation, especially for the re-building of the lending pipeline. This incremental funding will also be required for the following years, and will increase over time, as higher levels of lending flow through and increase the size of the IBRD portfolio. Incremental funding is also required to support the implementation of the capital package commitments – in particular, the additional financing for IBRD countries below the GDI level. Management is allocating additional resources of US$65 million in FY20 from the approximately 5 US$700 million of base IBRD operational budget initially allocated in FY19 before the start of the IBRD capital package implementation. 44. Resources will continue Significant resource increases for IDA scale up and delivery, to be prioritized for IDA including in FCVs, have already been reflected in the base budget delivery, including for trajectory in previous years. As part of the FY20 Budget, fragile countries. Management is making some further small increases resulting in gross resources allocated to IDA operations growing to approximately US$935 million in FY20. Incremental funding for FY20 has focused on strengthening risk management and supervision, enhanced field presence and increased security costs in IDA countries. 5 The references to IBRD and IDA budget in these bullets are notional approximations because the World Bank budget is approved and managed as an aggregate for IBRD and IDA combined, with actual expenses distributed between IBRD and IDA after the fact, based on a Board-approved methodology, primarily determined by actual expenses on IDA related and IBRD related work. Estimates for IBRD and IDA base operational budgets are shown net of claw backs discussed in subsequent paragraphs. 28 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 45. Additional funding has Funding for supervision of the portfolio and implementation of the been provided for the new ESF and the Gender-Based Violence Action Plan has been supervision of the increased. This reflects the Bank’s growing and riskier portfolio as portfolio and well as the implementation of the new ESF. Funding has increased implementation of the by 43 percent since FY17-19 to strengthen safeguards work and new Environmental and support the introduction of the new ESF, including for the Social Framework and preparation of new procedures, training of staff, and familiarization of the work program on of borrowers. Additional funding has been provided in FY20 for Gender-Based Violence. enhancing managerial quality control in the implementation of the new ESF, supporting changes recently introduced to strengthen accountability and compliance. Incremental funding in FY20 will also support the retrofitting of the project portfolio and further work related to the implementation of the Gender-Based Violence Action Plan. 46. Funding for work on A concerted effort has been made through this year’s planning and key global priorities and budgeting process to prioritize within the funding provided for public goods has been Global Engagement (GE), reduce fragmentation in tasks, and increased and, within enhance synergies with the work program and resources of that funding, efforts Development Economics (DEC). In addition, some incremental have been made to funding has been provided to support the delivery of corporate reduce fragmentation engagements as well as of global priorities/public goods work as and enhance synergies. detailed in the following section. The incremental funding for the IBRD scale-up and IDA delivery will also help to further integrate global priorities and public goods into country specific country engagements, both project and analytical work. 47. Management has Further institutional funding includes support to finance units for the identified some implementation of the capital package financial commitments; staff incremental funding health and safety; upgrading Bank capability for cyber-security risk; required to strengthen development of a risk appetite framework for Bank operations; institutional support for funding for the Data Privacy Office; and adjustments to central operational delivery. accounts. In addition, a small upfront investment is required to facilitate exit from leased spaces, as part of the first phase of a program of real estate realignment Management is implementing to rationalize use of leased space—with resulting savings increasing in follow up years. 29 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 48. Gross additions to unit Incremental funding for the corporate priorities described above trajectories total totals US$109 million in FY20. The largest cost driver is the IBRD US$109 million in scale-up and implementation of the capital package commitments FY20. (around 60 percent of the additions in FY20), with impact growing year-by-year as higher IBRD lending levels flow into the portfolio. Table 4.2: Incremental Additions to the Budget (US$ million) FY20 IBRD scale-up and capital package commitments 65 IDA delivery including FCVs 7 Supervision of the portfolio, ESF implementation and Gender 12 Based Violence action plan Support to global priorities and public goods 4 Institutional support for delivery 21 o/w Real Estate Realignment 3 Total Incremental Additions 109 49. To help address rising The FY19 budget presented in last year’s Budget Document already costs of doing business, included incremental efficiency measures and cost-recovery additional efficiency enhancements amounting to US$49 million in FY19 and US$71 measures, economies of million in FY20. 6 Additional efficiencies, economies of scale and scale and cost-recovery cost-recovery totaling US$46 million have been identified for FY20 enhancements totaling (see Table 4.3 below). These represent a strong start for the US$46 million have achievement of the capital package commitments in efficiencies and been identified in FY20. in economies of scale savings accumulating over the period FY19 to FY30. Key measures include: • Compensation: Changes introduced in the HQ staff compensation have resulted in budget adjustments reflected in the FY19 Budget. For FY20, the Board has also approved a new Country Office staff compensation methodology. • Economies of scale: Efforts have begun to achieve cumulative benefits by FY30, through the scale-up of average project size which will help reduce fragmentation whenever feasible as well 6The aggregate number excludes claw-backs for savings due to lower IBRD lending volumes as they will be effectively reversed as part of this year’s incremental funding for IBRD scale up. 30 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE as containment of overheads as business expands. Over time, the increase in average project size will influence the portfolio. • Savings from Executive Directors’ Budget: For FY20, the Executive Directors have decided to reduce their base budget trajectory by US$5 million, as reflected in the table below. • Real estate: The small upfront investments to support part of phase 1 (noted above) yield small savings in FY21-23 and larger savings from FY24 onward. • Other efficiencies resulting from workforce measures; corporate procurement; oversight over travel and food service spend; and rationalization of external contractor use. • Additional cost recovery from Shared Service Agreements (SSA) for services provided by the Bank to IFC and MIGA: a revised cost methodology has been agreed by the Bank, IFC and MIGA to more accurately estimate costs incurred for the delivery of shared services. Table 4.3: Incremental Claw-backs/Savings from the Budget (US$ million) FY19 FY20 (A) Efficiencies, economies of scale and cost recovery enhancements 49 71 presented in FY19 Budget Document Efficiencies and Economies of Scale Reduction from HQ staff Compensation Review 12 10 Savings from Board of Governors Budget 1 1 Savings from Executive Directors Budget 2 2 Other Savings and Efficiency Measures 25 50 Cost recovery enhancements IFC-MIGA full staff benefit cost recovery from SSAs 8 8 (B) New efficiencies, economies of scale and cost recovery 46 enhancements identified in FY20 Budget Document Efficiencies and Economies of Scale Economies of Scale savings 16 Reduction from CO Compensation Review 6 Savings from Executive Directors Budget 5 Other Savings and Efficiency Measures 12 Cost recovery enhancements IFC/MIGA additional receipts from methodological changes in SSAs 8 (C) Efficiency Savings Set Aside in FY19 Budget Document 11 (B+C) Total Availability for FY20 Budget 57 (A+B) Total efficiencies, economies of scale and cost recovery 49 117 enhancements since FY19 Budget Document 31 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 50. The FY20 Budget The following table shows at an aggregated level how the FY20 increase over FY19 has Bank Budget has been derived, starting with the FY19 budget three components: cost document amount of US$2,611 million. The proposed budget pressures included in trajectory adjustments include three components: FY19 Budget, emerging • Cost pressures already reflected in the FY19 Budget Document, priorities and claw- including an expanding IDA portfolio (see line “o/w increases backs. already in the FY19 Budget”); • Emerging priority areas requiring additional funding to selected unit budget trajectories (see Table 4.2); and • Claw-backs reflecting additional savings from unit budget trajectories (see Table 4.3) that help absorb part of the required gross funding needs detailed above. It should be noted that Vice Presidential units were requested to meet some of the gross incremental funding needs through internal reallocations and re-prioritization to repurpose some funding to new priorities and cost pressures (e.g., through renegotiation of vendor contracts). Table 4.4: FY20 Emerging Bank Budget (US$ million) FY19 FY20 Budget trajectory as per FY19 Budget Document 2,611 2,669 o/w increases already in the FY19 Budget 58 Emerging priority area requiring additional funding 109 Claw-backs and efficiency savings (57) Change compared to FY19 Bank Budget Trajectory 52 FY20 Budget Trajectory (Nominal) 2,611 2,721 % Change YOY (Nominal) 4.2% Proposed FY20 Budget Trajectory (in FY19$) 2,611 2,657 % Change YOY in real terms (in FY19$) 1.8% Deflator used 2.4% 4.3 STRATEGIC ALIGNMENT BY WORK PROGRAM 51. Management is The FY20 budget distribution reflects Management’s commitment directing most of the to continue to increase the share of resources going to operations incremental budget and front-line services. Operational Bank budget has grown since resources to the FY17, the year when operational budget funding started to be operations budget. injected to deliver the IDA-18 scale up. To support the IBRD scale- up, Management has increased the operational budget allocation by US$109 million in FY20 from FY19 pre-General Capital Increase 32 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE (GCI) levels, and by US$58 million compared to FY20 pre-GCI trajectory as set out in the FY19 Budget Document. Moreover, the share of Bank budget resources allocated to operations will increase from 59.1 percent in FY19 to 60.4 percent by FY20 (see Figure 4.1). Table 4.5: FY19 & FY20 Budget by Work Program & Funding Source (US$ million) BANK BUDGET ALL FUNDS INDICATIVE BUDGET TRAJECTORIES FY19 FY20 FY19 FY20 Client Engagement 871 958 1,888 2,107 Country Engagement 781 858 1,578 1,766 Global Engagement 90 100 310 341 Program & Practice Management 695 717 790 862 TOTAL OPERATIONAL UNITS 1,566 1,675 2,678 2,969 Grant Making Facilities 35 35 35 35 TOTAL OPERATIONS 1,601 1,710 2,713 3,004 Institutional Services 412 417 614 584 Governance Services 216 211 234 230 Administrative Services 456 469 562 595 TOTAL IG&A UNITS 1,084 1,097 1,410 1,410 TOTAL: ALL UNITS (excl. GMFs) 2,650 2,772 4,088 4,378 CENTRALLY MANAGED ACCOUNTS 103 102 103 103 o/w Corporate Contingency 10 10 10 10 TOTAL TRAJECTORY 2,788 2,909 4,226 4,516 o/w Funded by External Funds (177) (188) (1,616) (1,795) Net Trajectory Funded by IBRD/IDA 2,611 2,721 2,611 2,721 Table 4.6: FY19 & FY20 Budget Share by Work Program and Funding Source BANK BUDGET ALL FUNDS Share of Budget Trajectory FY19 FY20 FY19 FY20 Client Engagement 32.9% 34.6% 46.2% 48.1% Country Engagement 29.5% 31.0% 38.6% 40.3% Global Engagement 3.4% 3.6% 7.6% 7.8% Program & Practice Management 26.2% 25.9% 19.3% 19.7% TOTAL OPERATIONAL UNITS 59.1% 60.4% 65.5% 67.8% Institutional Services 15.5% 15.0% 15.0% 13.3% Governance Services 8.2% 7.6% 5.7% 5.3% Administrative Services 17.2% 16.9% 13.8% 13.6% TOTAL IG&A UNITS 40.9% 39.6% 34.5% 32.2% TOTAL: ALL UNITS (excl. GMFs) 100% 100% 100% 100% 33 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 4.1: Operational Share of Unit Budgets 75.0% 70.0% 67.8% 65.5% 64.2% 65.0% 62.8% 60.4% 60.4% 59.1% 60.0% 57.9% 56.8% 54.9% 55.0% 50.0% FY16 FY17 FY18 FY19 FY20P BB All Funds Note: Excludes GMFs Within the operational budget, the largest share of the incremental resources will be allocated to Client Engagement, which is planned to reach 57.2 percent in FY20 compared to 55.6 percent in FY19. On an “All Funds” basis, the share of Client Engagement in Operational unit trajectories will reach 71.0 percent in FY20 (see Figure 4.2 below). Figure 4.2: Client Engagement Share of Operational Unit Budgets (including Country Engagement and Global Engagement) 75.0% 70.5% 71.0% 69.6% 70.0% 67.4% 67.7% 65.0% 60.0% 57.2% 54.9% 55.6% 53.7% 54.1% 55.0% 50.0% FY16 FY17 FY18 FY19 FY20P BB All Funds Within the Client Engagement envelope, funding for work on Country Engagement (CE) will increase by 10 percent between FY19 and FY20 to support lending preparation and supervision work, knowledge services and convening services. The Global Engagement (GE) Bank Budget allocation will be increased by 11 34 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE percent over the same period to support global initiatives with enhanced prioritization of funding within this envelope. Resources for Program and Practice Management (PPM), which fund the management and overhead costs of running the operational work program, will increase by 3 percent between FY19 and FY20 to support strengthened risk management and quality control as the portfolio grows, invest in staff learning, and manage cost pressures on facilities. See additional explanation of definition of the Administrative Budget Envelopes in Box 4.1. Box 4.1: Administrative Budget Definition Administrative Bank Budget Envelopes Operational Institutional, Governance and Grant Making Centrally Managed Units Administrative (IG&A) Units Facilities Accounts Funding allocated across three Funding to cover mandate Funding for Board- Funding for expenses envelopes: and services for: mandated transfers to centrally administered external facilities and non-unit specific Country Engagement (CE) • Institutional units Client Engagement Funding for country and regional • State and Peace-building (e.g., depreciation, HQ work programs • Administrative units Fund (SPF) lease costs, staff Global Engagement (GE) benefits and certain Funding for global programs; • Governance units • Consultative Group for institutional programs) Global Public Goods; Global International Agriculture Knowledge Services; Global Research (CGIAR) Convening Services Program and Practice Management (PPM) Country Office running costs; field benefits; Regions & PGs management and support staff; staff learning; and quality assurance 4.4 OPERATIONAL WORK PROGRAM 52. Country Engagement Management has increased the Country Engagement budget by US$77 allocations to all million in FY20, with all Regions seeing an increase of more than 5 Regions have been percent of their FY19 allocations (see Table 4.7). This builds on the increased to support increases that were already factored into the FY17-FY19 Budget the IBRD scale-up and Documents focusing primarily on the two biggest IDA Regions, AFR capital package and SAR, for the IDA-18 delivery. implementation and to ensure IDA delivery. 35 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table 4.7: FY19 & FY20 Operational Budget Envelopes (US$ million) INDICATIVE BUDGET TRAJECTORIES BB ALL FUNDS FY19 FY20 FY19 FY20 AFR CE 286 317 528 586 PPM 123 129 127 136 Total 409 446 654 722 EAP CE 109 115 247 284 PPM 61 62 65 65 Total 171 177 312 349 ECA CE 87 94 194 226 PPM 55 55 56 56 Total 142 150 250 282 LCR CE 97 105 156 185 PPM 57 57 58 60 Total 154 162 213 245 MNA CE 61 67 189 198 PPM 36 37 38 39 Total 97 104 227 236 SAR CE 125 140 249 268 PPM 55 56 57 58 Total 180 196 306 326 Other Operational Units' Allocations1 CE 16 20 16 20 All Regions CE 781 858 1,578 1,766 PPM 387 395 400 414 Total for Regions 1,168 1,253 1,978 2,180 Practice Group GE Practice Group GE 90 100 310 341 Practice Group PPM Equitable Growth, Finance and Institutions 80 84 92 95 Human Development2 40 44 46 99 Infrastructure - 37 - 52 Sustainable Development 105 82 168 124 Other Operational Support3 64 75 64 78 Global Themes 18 - 19 - Total Practice Group PPM 308 322 390 448 Total for Practice Groups 398 422 700 789 Total Operational Units 1,566 1,675 2,678 2,969 1 CE funds for the retrofitting of the project portfolio and further work related to Gender-Based Violence (GBV), enhanced quality control and implementation efforts of the new Environment and Social framework, continued implementation of the lessons learned from supervision pilots in fragile countries, and other corporate priorities. 2 The Global Partnership for Education (GPE) Secretariat has been remapped from Development Finance to Human Development. 3 Includes Global Mobility benefits for operational staff, funding to support the Agile Bank initiative, aspects of the work on FCV Supervision Pilot, GBV Action Plan, FCV Department, and Risk-Appetite Framework. 36 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 53. 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 largely showing increases across the board to process shows an support the IBRD capital package implementation and continuing increase in budget focus on IDA delivery. allocations for work Figure 4.3: Evolution of the Country Engagement Bank Budget by Region from on IBRD and IDA FY19 to FY20 (US$ million) countries in FY20. 317 286 30 28 140 115 125 287 109 105 258 94 97 87 47 67 42 62 61 60 65 70 77 85 49 54 83 93 49 53 22 24 20 20 12 14 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 AFR EAP ECA LCR MNA SAR IDA CE IBRD CE 54. Country Engagement The Country Engagement allocations have been calibrated to support allocations across the following: business processes are • The IBRD scale-up and implementation of the capital package reflective of strategic commitments and IDA delivery (IDA-18 and beyond). This priorities emerging includes a continued focus on fragile countries and small states from country dialogue — and in both IBRD and IDA countries supervision of a larger and corporate and riskier portfolio tilted towards countries with weaker commitments. institutional environments and integration of global priorities/public goods into country work. • Economies of scale. These are sought through increases in the average project size where feasible. This has resulted in a less fragmented pipeline and an increase in the average funding allocation per project under preparation (11 percent) and supervision (5 percent) to ensure resources are available to the front-lines for quality delivery. • Supervision of the portfolio and fiduciary and safeguards work for both project preparation and supervision (see Figures 4.4 and 4.5). The allocations for these categories continue to grow at the same pace as the CE trajectory. This reflects the Bank’s 37 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE growing and increasingly complex and riskier lending and portfolio, including the implementation of the new ESF. • Strengthening of Advisory Services and Analytics (ASA) and of country monitoring and policy dialogue to inform new lending preparation and technical assistance. This is the third successive annual increase in ASA allocations and reflects the Bank’s commitment to remain engaged in dialogue across all client groups, and underpins dialogue for future lending operations and integration of corporate priorities/public goods into country dialogue and work. Figure 4.4: Country Engagement Bank Budget Allocations by Business Process for FY18-20 (US$ million) 858 781 Lending 732 165 Supervision 132 144 Fiduciary Safeguards 261 252 ASA 227 Country Monitoring 73 70 Other 67 72 64 52 158 168 148 25 28 42 68 77 76 FY18 FY19 FY20 In addition to the Country Engagement allocations to the Regions, US$10 million is held for operations for FY20, and will be used during the fiscal year, similar to FY19, to fund retrofitting of the project portfolio and further work related to Gender-Based Violence (GBV) and for continued implementation of the lessons from supervision pilots in fragile countries. CE allocations also reflect strong demand for work on regional integration. The balance will be held for further distribution across the Regions, other corporate priorities being programmed, and unanticipated operational demands, including to respond to new country developments. 38 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 55. Fiduciary and The implementation of the Procurement Framework and Safeguards funding Environmental and Social Framework has been designed to ensure that allocations will Bank-financed projects are delivered to the highest standards. The increase for the fourth recently introduced Procurement Framework is designed to increase year in a row. the flexibility, efficiency and transparency of the procurement process, and the new ESF, which became operational in FY19, will enhance the sustainability of financing by protecting people and the environment from adverse impacts. Going beyond individual projects, the framework aims to strengthen national systems and institutions in client countries. As the Bank’s portfolio grows, and the Bank’s footprint expands into more challenging environments, Fiduciary and Safeguard allocations will increase by an additional 8 percent in FY20, or 43 percent since FY17. Allocations for Safeguards work will increase by 13 percent to US$72 million in FY20 following large increases in FY17 and FY18. After a significant increase in FY17 and FY18 to support the implementation of the new procurement framework and the IDA-18 scale up, resources for fiduciary work will stabilize at around US$73 million in FY20. Figure 4.5: Country Engagement Allocation on Fiduciary and Safeguards for FY17-20 +11m +8% +14m +12% 145 +18m 134 +18% 120 +43% 102 73 70 In $m 67 57 Fiduciary 72 64 52 Safeguards 45 FY17 FY18 FY19 FY20 39 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 56. Country Engagement FY20 WPAs, which are driven by client demands, have resulted in allocations across increased resources in all Practice Groups. FY20 CE allocations show Practice Groups Equitable Growth, Finance and Institutions holding the largest share, reflect strategic followed by Sustainable Development (including Safeguards priorities emerging funding), followed in turn by Human Development and Infrastructure. from country dialogue. In addition, Regions currently hold contingency funds (US$40 million) which will during the year be directed to the Practice Groups whose allocation will therefore increase accordingly. Figure 4.6: Country Engagement Allocations by Practice Group for FY18-20 (US$ million) +$12 +$10 262 255 250 245 238 227 +$12 +$16 123 113 104 112 95 97 GGEVP GGHVP GGIVP GGSVP FY18 FY19 FY20 57. Country Engagement As illustrated in Figure 4.7, the CE allocation to FCV and FCV at risk allocations for countries (IDA and IBRD) increased by US$17 million (11 percent) fragility, conflict, and from US$156 million in FY19 to US$173 million in FY20. The violence (FCV) increase in allocations to FCV and FCV at risk countries since FY17 affected countries will amounts to US$50 million or 40 percent, confirming the sustained increase by 11 percent focus on strengthening Bank’s engagement and impact in these in FY20, which is a 40 countries. percent increase since FY17. The Bank is on track to meet its target of increasing net staffing in IDA FCS countries by 150 during the IDA-18 three-year cycle ending in June 2020. The Bank also continues its commitment to fully support its staff working in fragile environments by strengthening its employment value proposition. As part of this effort, career elements have been further strengthened by: (1) defining FCV/FCS experience and identifying GE+ staff as of the end of FY19Q3 with such experience to assess availability for redeployment and to form the basis for talent management, development and career discussions and decisions; (2) encouraging managers to provide flexibility in assignment duration when deploying staff to FCV locations; and (3) 40 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE guaranteeing automatic shortlisting for up to three positions of staff choice at current grade. A series of customized learning programs have been developed and is being delivered to staff who work in FCVs. Finally, the WBG is developing an FCV strategy. The objective is to enhance Bank’s support to help address the drivers of fragility, conflict and violence in affected countries and their impact on vulnerable populations, with the ultimate goal of contributing to peace and stability. Once finalized, the strategy will serve as a comprehensive framework to guide the WBG’s engagement in these complex and challenging environments. To inform the development of the strategy, global consultations are taking place between April and September 2019, with a final strategy being presented to the Executive Directors in late 2019. Figure 4.7: Country Engagement Bank Budget Allocations for FCV and FCV at Risk Countries for FY17-20 (US$ million) +40% +11% $173m $156m $142m 21 +50m FCV-Risk $123m 19 19 15 FCV 136 152 123 108 FY17 FY18 FY19 FY20 58. Country Engagement As illustrated in Figure 4.8, the growth of Country Engagement allocations to Small allocation to Small States increased slightly by 2 percent from US$49 States will increase by million in FY19 to US$51 million in FY20. The increase in allocations 2 percent in FY20, to Small States since FY17 amounts to US$16 million or 45 percent. which is a 45 percent increase since FY17. 41 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Figure 4.8: Country Engagement Bank Budget Allocations to Small States for FY17-20 (US$ million) 59. Global Engagement The Bank’s Global Engagement (GE) work program supports non- funding from Bank country-specific priorities, including (i) fulfilling corporate Budget sources is commitments, (ii) supporting innovation and product development to expected to increase in support evidence-based policy making by developing global FY20 to US$100 databases, tools and evaluations and to maintain WBG leadership in million and is global public goods, (iii) sustaining partnerships and global complemented by engagements, and (iv) providing operational support to leverage external funds knowledge services and enable rapid and flexible operational provided by various response. The Global Engagement Bank budget allocation for FY20 partners. has been increased by US$10 million or 11 percent, in part to enhance Bank’s engagement for key global priorities/public goods and in part reflecting internal adjustments, e.g. incorporation of the Research Prospect group from DEC in EFI to enhance synergies. Management has also made a concerted effort to reduce fragmentation of global engagement work and enhance synergies with the work program and resources of Development Economics (DEC). Bank funding has been allocated based on the following categories: • Corporate Commitments (US$46 million). Priorities include work on the Human Capital Project (notably on furthering work on measurement, research and best practices), Jobs and Economic Transformation (JET), the Maximizing Finance for Development approach, Universal Financial Access, digital transformation and disruptive technologies. Other engagements 42 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE include work on debt sustainability and transparency, trade, twin goals and data, institutions and anti-corruption, the financial sector and accounting standard setters, and support to the G20 and other global partnerships. This category also includes contributions to the Global Partnership for Social Accountability (US$1.5 million) and Facility for Investment Climate Advisory Services (US$2 million). • Global Themes (US$31 million). This category supports the Bank’s efforts to better deliver on cross-cutting commitments that involve multiple Global Practices, and in many cases IBRD/IDA, IFC and MIGA. These commitments comprise FCV, Gender, Infrastructure/PPPs/Guarantees, Global Economic Prospects, as well as addressing key climate change mitigation and adaptation priorities and enabling delivery of the Climate Change Action Plan. • Operational Support (US$23 million). This includes allocations to Global Practices to support on-going and new strategic engagements, innovation, product development and partnerships, and to facilitate knowledge services. Engagements in FY20 are expected to include work on developing Government capacity to design and implement effective education policies; strengthening social protection and education systems and metrics; knowledge management to support energy transition; twin goals measurement; providing support to the 2020 Changing Wealth of Nations; improving access to land and tenure security; and sustainable water storage. Figure 4.9: FY20 Global Engagement by Practice Group and Category (US$ million) 5 3 12 5 26 4 8 8 3 6 7 7 6 - E FI HD INF SD FCV Corporate Commitments Operational Support Global Themes 43 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 60. The Program and The PPM budget for operational units will continue to fund the Practice Management management and support costs of the operational work program, (PPM) budget will including for priorities like decentralization, staff training/learning increase by 3 percent and country office space. The PPM allocation will be increased by 3 (see Table 4.7), with percent in FY20 to support (1) learning and capacity building of staff, units targeting including to maintain the global knowledge flow; (2) enhancing efficiencies to address quality control by the Environment and Social management for the rising cost pressures. implementation of the new ESF; (3) further decentralization of Practice Managers; and (4) the development of a risk appetite framework with a small dedicated team temporarily installed to support the work and engage with other units and external experts as necessary. Also, the increase will help address associated cost pressures related to facilities and security. Other rising PPM cost pressures will be offset through efficiency measures – keeping focus on how best to optimize organizational and management structure and grade mix, while applying agile and simplification approaches in our work. Continued attention towards span of control and, where feasible, consolidation of PPM functions (e.g. knowledge management within Practice Group VPUs) will also help contain cost pressures. 44 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4.5 GRANT-MAKING FACILITIES 61. Funding for the Grant- As part of the budget reforms in recent years, the Bank changed its Making Facilities will practice from funding Grant-Making Facilities (GMFs) “below the remain unchanged line” to allocating grant-making funds as part of the strategic compared to FY19. planning and budgeting process. In some cases, Bank funding has been phased 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 FY20, consistent with Executive Directors’ guidance in past years, funding for the SPF and the CGIAR will remain at US$5 million and US$30 million, respectively. Despite much effort on the part of the Agriculture Global Practice over many years, no additional external funding for the CGIAR has been forthcoming to replace World Bank funding. Table 4.8: Grant-Making Facilities Budgets (US$ million) FY14 FY15 FY16 FY17 FY18 FY19 FY20 State and Peace-Building Fund (SPF) - 25 21 14 5 5 5 Institutional Development Fund (IDF) 9 - - - - - - Development Grant Facility (DGF) 51 33 12 - - - - Global Partnership for Social 5 5 5 - - - - Accountability (GPSA) 1 Consultative Group for International 50 47 30 30 30 30 30 Agricultural Research (CGIAR) Total Operational Activities Related 115 110 68 44 35 35 35 to Grants 45 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4.6 IG&A UNITS 62. Institutional, Over the past years, Management has made continuous efforts to Governance and seek efficiencies, productivity improvements and cost avoidance in Administrative (IG&A) IG&A VPUs. The Expenditure Review and Business Reviews (see budgets have been section 2.4) have had a significant effect on the IG&A budgets, reduced since FY15. which have, despite the growing size of the business that they needed to support, been reduced by 11 percent in real terms and 3 percent in nominal terms between FY15 and FY19 (see Figure 4.10). In addition, the number of staff and share of GH staff in IG&A units have decreased since FY14, and work has been steadily offshored to Chennai since its inception in 2002. Figure 4.10: IG&A Budget Allocations, FY15-19 (US$ million) 63. IG&As have IG&A efforts have contributed to the Bank’s effectiveness through contributed increased financial capacity, improved risk management and significantly to a more technological agility. These efforts are related to supporting effective and efficient operational scale up (e.g., expansion of IBRD/IDA financial Bank. capacity, enhancement of risk management framework), technology (e.g., shift to cloud computing, simplification of IT architecture), organization (e.g., centralization of administrative functions, workforce rationalization) and processes and policies (e.g., implementation of Agile approach, procurement optimization, WBG cost sharing agreements, and compensation and benefits). 46 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 64. Continued efforts by Delivering as a “Bigger Bank” requires IG&As to support scale up IG&A units to pursue of operational delivery within a resource constrained environment; institutional leverage innovation and support implementation of policy transformation will be commitments to enhance IBRD/IDA financial capacity and critical to deliver a strategic trust fund mobilization; manage partner relations in a Bigger and Better shifting international context; and ensure greater integration of Bank. synergies between DEC research and Practice Group analytical work. IG&A transformation is an important element of the “Better Bank” and helps improve the way we work. Support includes rethinking how we manage risk in an increasing complex environment, supporting increased field presence in FCVs and efforts on decentralization, with implications for HR policies, real estate realignment and security costs, using innovative technologies, including robotics, blockchain, Artificial Intelligence and Machine Learning, and implementing end-to-end/value chain process optimization. 65. The overall allocation IG&A units are expected to achieve additional savings to support to IG&A units will new and expanded mandates through agile and administrative further decline in real simplification, grade mix and corporate procurement efficiencies. terms, with some Management has also decided on gross targeted budget increases targeted incremental (US$18 million in FY20) for specific IG&A units to meet allocations for specific institutional priorities. These include: units to meet • Support IBRD scale up and capital package financial institutional priorities. commitments: The Finance Units face additional responsibilities related to the new Financial Sustainability Framework (see also paragraphs above). • Staff Health and Safety: The new Occupational Health and Safety Program is mandated by a WBG Directive. Expanded field presence of integrated Health and Safety teams will support a better coordination of health services in the field. • Manage Cyber Security Risk: ITS continues to strengthen the WBG security infrastructure, ensuring that it is adaptive, resilient and dynamically responsive to growing cybersecurity threats. The rapid evolution of WBG business needs (e.g., the adoption of emerging and disruptive technologies and the growth of cloud services) requires up to date security. 47 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE • Data Privacy Office: The Compliance Vice Presidency (CMPVP) has been established in FY19 to house the Data Privacy Office. The Data Privacy Office will oversee the Bank’s privacy program and play a key role in the WBG’s digital transformation strategy. • SAP Transition Preparation: Preparation for the transition from the current SAP platform to a new Enterprise Resource Planning system including exploring opportunities to modernize our systems, streamline our processes and create efficiencies. Overall, the IG&A unit budget declines in real terms by about 3 percent between FY19 and FY20. See Table 4.10 for budget trajectory by IG&A VPU. 66. The FY20 WBG budget The FY20 budgets for the Executive Directors Offices (EDs) and for the Executive the Independent Evaluation Group (IEG) amount to US$115 Directors and IEG million – with a US$3 million 7 reduction in the budget of Executive amount to US$115 Directors. million. Although the Bank’s share of these budgets is authorized as part of this document, and included in the total administrative budget approval, the sizing of these budgets is not determined by Management. Table 4.9: FY19 & FY20 ED and IEG Budgets (US$ million) FY19 FY20 Executive Directors (EDs) 87 84 IEG 30 30 Total 117 115 7The budget decrease is US$5 million compared to the FY20 budget trajectory of US$89 million as laid out in the FY19 Budget Document. 48 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table 4.10: FY19 & FY20 IG&A Budget Envelopes (US$ million) INDICATIVE BUDGET TRAJECTORIES BB All Funds FY19 FY20 FY19 FY20 1.0 Institutional Services 1.1 Budget, Performance & Strategy 76 78 76 78 1 1.2 Financing for Development 1 - 1 - 1.3 Chief Risk Office 16 18 17 19 1.4 Development Economics 52 55 106 105 1.5 Development Finance2,4 24 25 65 34 1.6 External & Corporate Relations 54 53 57 58 1.7 Global Environment Fund - - 37 37 1.8 ICSID - - - - 1.9 Legal Services 39 38 41 41 1.10 CMP - Data Privacy Office - 1 - 1 1.11 Operational Policy & Country Services 58 55 58 56 1.12 Strategy, Performance, and Admin. 11 11 14 14 1.13 Treasury 36 35 89 87 1.14 WBG Finance & Accounting 46 47 53 56 Sub-Total 412 417 614 584 2.0 Governance Services 2.1 Administrative Tribunal 2 2 2 3 2.2 Executive Directors 87 84 87 84 2.3 Board of Governors 6 6 6 6 2.4 DC Secretariat 2 2 2 2 2.5 Internal Justice Services 5 5 6 6 2.6 Corporate Secretariat 16 16 17 17 2.7 Independent Evaluation Group 30 30 39 39 2.8 Integrity Vice Presidency 21 21 21 22 2.9 Internal Audit 9 9 11 12 2.10 Inspection Panel 4 4 4 4 2.11 Office of Ethics and Business Conduct 7 6 9 9 2.12 Office of the President 7 5 7 5 2.13 Office of Suspension & Debarment 2 2 2 2 2.14 Office of the CEO 4 4 4 4 2.15 Office of the MD and CAO 3 3 3 3 2.16 Office of the MD and CFO 3 3 3 3 2.17 Office of the SVPMM3 6 6 6 6 2.18 Sanctions Board 2 2 2 2 2.19 Strategic Initiatives Unit 1 1 1 1 Sub-Total 216 211 234 230 3.0 Administrative Services 3.1 Global Corporate Solutions 152 155 192 194 3.2 Human Resources4 63 57 78 84 3.3 Health and Safety Development5 - 7 - 10 3.4 Information & Technology Solutions 241 250 292 307 Sub-Total 456 469 562 595 TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN. 1,084 1,097 1,410 1,410 1 Financing for Development reorganized under Development Finance and the Office of the MDCFO. 2 The Global Partnership for Education (GPE) Secretariat has been remapped from Development Finance to Human Development. 3 Office of the SVPMM includes New York and Geneva Offices. 4 Donor Financed Staffing Program (DFSP) has been remapped from Development Finance to Human Resources with full effect from FY20. 5 Reorganization of Health and Safety Development - originally mapped under Human Resources. 49 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 4.7 CENTRALLY-MANAGED ACCOUNTS 67. Centrally-Managed Centrally Managed Accounts (CMAs) contain funding for Accounts (CMAs) will expenses that are either not easily attributed to specific units, or remain broadly flat in institutional programs that are managed by units but for which FY20. Management maintains discretion over the budget. The budget will remain broadly flat for the CMAs between FY19 and FY20. • Depreciation is expected to increase by US$10 million (9 percent) over FY19 principally due to past increases in investments in IT systems. • Corporate Contingency is set at US$10 million in FY20 to support unforeseen priorities and cost pressures (the same amount as FY19). • Funding for Institutional Programs will increase in FY20 by US$3 million to fund the costs of real estate realignment. • Staff Benefits and Allowances are estimated at US$957 million in FY20 and budgeted at US$5 million (net of an estimated US$952 million of recoveries from units and external funds). • Other Budget Recoveries comprise the recovery of indirect costs from BETFs and other external funds as well miscellaneous rebates and internal recoveries. The increase of US$14 million in this category is principally due to an anticipated increase in recoveries. 68. The Post-Retirement The Bank’s contributions to the staff post-retirement benefit plans Contribution Reserve remain at the established 35 percent of net salaries, which is higher Fund (PCRF) was than the FY20 contribution rate of 29.77 percent calculated by established in FY13 actuaries. The excess is added to the PCRF to build up the Reserve with the objective of Fund. reducing budget volatility resulting from the Bank’s contributions to the staff post-retirement plans. 50 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table 4.11: Centrally-Managed Accounts (US$ million) FY19 WB FY20 $ Change % Change Budget A B C=(B-A) (C/A) Depreciation 114 124 10 9% Corporate Contingency 10 10 0 0% Institutional Programs 59 62 3 5% Net Staff Benefits & Allowances 4 5 1 19% Gross Staff Benefits & Allowances 918 957 39 4% Institutional Benefits Recovery (914) (952) (38) 4% Other Budget Recoveries (85) (99) (14) 16% Total 103 102 (1) -1% 4.8 EXPENSE FUNCTIONAL VIEW 69. The Bank follows a The Bank does not set specific budgets by expense category, for dollar budget approach example, staff salaries, short term consultants or travel. which allows budget Accordingly, the functional expense line view presented in Table holders flexibility to 4.12 below is an illustrative decomposition of the administrative vary inputs as long as budget by expense line item. Nevertheless, as the shares of the they stay within expense items have remained relatively stable over the years, the workforce planning estimates below represent the current view of the most likely affordability outcome. The actual outcome may differ because work programs parameters and their vary during the year, and decisions are made to respond to authorized budgets. changing business needs that may entail trade-offs between different expense categories. 51 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table 4.12: FY19 & FY20 Functional Expense View of Administrative Expenses (US$ million) FY19 FY20 Expenses by Type of Expense Projections Projections BB+Reimb. All Funds BB+Reimb. All Funds % of % of % of % of US$m US$m US$m US$m Total Total Total Total Fixed Expenses 2,386 77% 2,870 67% 2,444 75% 2,959 66% Of which: Sta ff Sa l a ri es a nd Benefi ts 1,995 64% 2,403 56% 2,033 62% 2,468 55% 1/ Other Fi xed Expens es 391 13% 466 11% 412 13% 491 11% Variable Expenses 729 23% 1,394 33% 811 25% 1,522 34% Of which: ST Cons ul ta nts & Tempora ri es 206 7% 663 16% 234 7% 714 16% ET Cons ul ta nts & Tempora ri es 6 0% 9 0% 35 1% 53 1% Tra vel Cos ts 246 8% 387 9% 259 8% 408 9% Contra ctua l Servi ces 217 7% 269 6% 226 7% 279 6% 2/ Other Va ri a bl e Expens es 55 2% 66 2% 57 2% 68 2% Total Unit Gross Expenses 3,116 100% 4,263 100% 3,255 100% 4,481 100% Grant Making Facilities (GMFs) 35 45 35 35 3/ Total Gross Admin Expenses (incl. GMFs) 3,151 4,308 3,290 4,516 Rei mburs a bl e Revenues a nd Fee i ncome (540) (569) Total Net Admin Expenses (incl. GMFs) - BB Only 2,611 2,721 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. 70. The functional expense Staffing will continue to be the main expense category representing view shows staff costs about 55 percent of total unit gross expenses on an All Funds view will continue to be the (62 percent of Bank Budget). The relative share of staff costs is main expense category. projected to slightly decrease on both Bank Budget and all sources of funds by end FY20, compared with end FY19 (2 and 1 percent, respectively) with continued tight management of staffing levels and action on grade mix. 71. Staff costs projections Staff costs across all funds are projected to increase by 2.7 percent take into account the (US$65 million) in FY20. This also assumes a projected one 2019 Review of Staff percent increase in overall headcounts by end FY20, largely in Compensation paper country offices. Management considers the projected increase in approved by the Board. staff costs to be affordable and manageable within the overall budget framework. 52 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 72. Bank Budget-funded In terms of staff count, the number of full-time Bank staff by end staffing counts are FY19 is projected to be around 1.2 percent above that at end FY18. below FY14 levels. From a longer term perspective, Bank Budget-funded FTE staff is 5 percent below the level in FY14 (or at the same level on an all funds view), despite the significantly increased IBRD/IDA portfolio (38 percent over FY14) with a declining real budget over the same period (see Figure 4.11 below). Figure 4.11: Full-time Bank Staff on Payroll (percentage growth since FY14) 37.6% 35% 25.6% 25% 16.0% 15% 13.2% 4.8% 5% -1.1% 0.0% 0.2% -4.9% -1.0% -5% -7.0% -3.5% -7.1% -5.2% -3.3% -2.1% -7.4% -8.4% -8.4% -11.3% -8.3% -15% FY14 FY15 FY16 FY17 FY18 FY19 Proj % Growth in IBRD/IDA Net Commit ($b) % Growth in Real Admin. Budget (BB) $m % Growth in Full-time WB Staff Count on Payroll (All Funds) % Growth in Estimated Full-time Equiv. (FTE) WB Staff Count on Payroll (BB+) * FY14 and FY15 Staff Counts include ETC/ETTs, a category that was then classified as Staff prior to being phased out in FY16. and reinstated under variables in FY19. 73. With staff costs In terms of other expense categories, FY20 projections reflect a contained, the share of stable share of major line items to total costs, driven by the needs variable expenses are of operational units, principally on Short Term and Extended Term estimated to grow Consultants as well as on travel. slightly to 34 percent as a share of all funds expenses. 53 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 5. FY20 CAPITAL BUDGET This section outlines the Bank’s FY20 Capital Budget. 5.1 FACILITIES 74. The proposed Facilities The proposed FY20 Facilities investment of US$105 million Capital Budget for comprises: FY20 is US$105 • Country office construction, purchases, relocations and upgrades million. (US$49 million or 47 percent). These investments aim to accommodate an increasing presence in the field, prioritize FCV needs, reconstruct aged infrastructure and move from expensive leasehold properties to Bank owned properties in selected locations. • HQ facilities repairs, renovations and upgrades (US$30 million or 28 percent) also include efforts to increase efficiency of space usage and terminate selected locations in Washington, DC. Key investments in this cycle include more efficient lighting system and air handling unit replacements, roof replacements, chiller plant replacement, replacements of overaged, worn, and damaged carpeting, cyclical replacement of video conferencing equipment and development of in-house conference space to accommodate large meetings currently held externally. • Security in HQ and Country Offices (US$26 million or 25 percent) mainly for Country Office relocation, security equipment upgrades in medium and high threat locations, integrating and upgrading country office access systems, fire alarm system upgrades, and replacement exterior doors. The investments in security reflect the Bank’s expanded footprint in more challenging and less secure environments, as well as the deterioration in the global security environment generally. 54 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 5.2 TECHNOLOGY AND SYSTEMS 75. The proposed Capital The FY20 Technology and Systems investment plan of US$85 Budget for Technology million is aligned with the IT Strategic Priorities of Excelling at the and Systems in FY20 is Basics, Value for Money, and Solutions for Business. The plan of US$85 million. US$85 million includes US$26 million in WBG investments for which IFC will contribute US$7 million. Investments for FY20 are spread across the following domains: • Information Technology investments (US$30.9 million or 37 percent) to support infrastructure, security, global network and essential workplace devices. • Operations and Corporate investments (US$11.6 million or 14 percent) to support Operations Trust Funds reform and other corporate requirements. • Risk Management investments (US$10.5 million or 12 percent) to support liquidity management, valuation and financial reporting capabilities, and credit risk reporting. • Treasury investments (US$9.1 million or 11 percent) to support investment management and compliance. • Data and Analytics investments (US$7.4 million or 9 percent) to support data governance and analytics, including machine learning and artificial intelligence tools. • Finance, Accounting and Budget (US$4.8 million or 5 percent) to support finance and accounting processes, reporting, and compliance. • Digital Workplace investments (US$4.5 million or 5 percent) to support mobile-responsive intranet, knowledge flow, institutional document repositories, external communications, and compliance with information management requirements. • Human Resources investments (US$3.7 million or 4 percent) to support HR processes and data-driven decision making. • Global Corporate and Health Services investments (US$2.4 million or 3 percent) to support service desks capability and corporate procurement processes. 55 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 6. MITIGATING BUDGET-RELATED PLANNING UNCERTAINTIES The FY20 Budget incorporates available information and underlying business plans as of May 2019. The Bank has established several mechanisms to deal with unexpected funding needs within a fiscal year. Additional potential budget pressures beyond FY20, and for which decisions have not been made, will be discussed with the Board before implementation, inclusive of their potential budgetary impact. 76. The Bank has VPUs, units or programs within the World Bank regularly face established several unexpected funding needs within a Fiscal Year. The Bank has mechanisms to deal established several mechanisms to address these in-year pressures. with unexpected Most unexpected funding needs will be absorbed within a country funding needs in-year. program’s budget through redeployments. If a crisis hits a specific Region or building up the regional lending pipeline needs significant unexpected additional resources, and these cannot be absorbed, there are regional contingencies which can be released during the Fiscal Year. If Regional contingencies are insufficient, a corporate contingency (US$10 million) 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. Regional and corporate contingencies are expected to be largely or fully released during any given fiscal year. Lastly, 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). 77. Planning uncertainties Every business plan involves some degree of uncertainty. The FY20 related to outer years budget envelope incorporates available information and underlying are dealt with as part of business plans as of May 2019. Potential future decisions are not the Bank’s planning incorporated, as this would preempt discussions between and budgeting process. Management, clients and the Board. Any significant decision with budgetary impact will be discussed with the Board before implementation. Any policy option presented to the Board will be accompanied by a presentation of expected benefits, indicative 56 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE implementation costs and measures to balance incremental resource needs, including trade-offs. 57 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE ANNEX I: PROGRAM COST SUMMARY 1. Table I.1 Program Cost Summary (PCS) shows the FY20 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 was done 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 Services Department 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 process as they are no longer linked to the revenue earned. 58 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table I.1: FY19 & FY20 Funding for WB Work Program and Unit (US$ million) INDICATIVE BUDGET TRAJECTORIES BB External Funds All Funds FY19 FY20 FY19 FY20 FY19 FY20 1.0 Country Engagement 1.1 AFRVP 286.0 317.0 241.5 269.1 527.5 586.1 1.2 EAPVP 109.3 115.1 137.3 168.7 246.6 283.8 1.3 ECAVP 87.1 94.1 107.0 131.9 194.1 226.0 1.4 LCRVP 97.0 104.7 58.8 79.9 155.8 184.6 1.5 MNAVP 60.6 67.0 128.4 130.6 189.0 197.6 1.6 SARVP 125.3 140.2 123.7 127.6 249.0 267.9 1.7 Other Operational Units' Allocations1 15.8 19.9 - - 15.8 19.9 Sub-Total 781.2 858.1 796.8 907.8 1,578.0 1,765.9 2.0 Global Engagement 2.1 Practice Group GE 89.6 99.8 220.7 241.0 310.3 340.8 Sub-Total 89.6 99.8 220.7 241.0 310.3 340.8 A TOTAL CLIENT ENGAGEMENT 870.8 957.9 1,017.5 1,148.8 1,888.3 2,106.7 3.0 Region PPM 3.1 AFRVP 122.9 128.6 3.7 7.3 126.6 135.8 3.2 EAPVP 61.3 61.7 3.7 3.5 65.0 65.1 3.3 ECAVP 55.1 55.4 1.0 0.7 56.1 56.1 3.4 LCRVP 56.6 56.9 1.0 3.4 57.6 60.3 3.5 MNAVP 36.2 36.5 1.5 2.2 37.7 38.7 3.6 SARVP 54.9 55.7 2.3 2.2 57.2 57.9 Sub-Total 387.0 394.7 13.2 19.2 400.2 413.9 4.0 Practice Group PPM 4.1 Equitable Growth, Finance and Institutions 79.8 84.0 12.6 10.6 92.4 94.6 4.2 Human Development2 40.4 43.6 5.7 55.1 46.1 98.7 4.3 Infrastructure - 37.1 - 15.2 - 52.3 4.4 Sustainable Development 105.4 82.5 62.1 41.6 167.5 124.1 4.5 Other Operational Support3 64.4 75.1 - 3.2 64.4 78.3 4.6 Global Themes 17.9 - 1.2 - 19.1 - Sub-Total 307.9 322.3 81.6 125.8 389.5 448.1 B TOTAL PROGRAM & PRACTICE MGMT. 694.9 717.0 94.8 145.0 789.8 862.1 C TOTAL OPERATIONAL UNITS 1,565.7 1,674.9 1,112.3 1,293.9 2,678.1 2,968.8 5.0 Operational Grant Making Facilities 5.1 CGIAR 30.0 30.0 - - 30.0 30.0 5.2 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 1,600.7 1,709.9 1,112.3 1,293.9 2,713.1 3,003.8 59 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table I.1: FY19 & FY20 Funding for WB Work Program and Unit (US$ million) (Cont’d.) / 2 of 3 INDICATIVE BUDGET TRAJECTORIES BB External Funds All Funds FY19 FY20 FY19 FY20 FY19 FY20 6.0 Institutional Services 6.1 Budget, Performance & Strategy 76.1 77.6 - - 76.1 77.6 6.2 Financing for Development 0.9 - - - 0.9 - 6.3 Chief Risk Office 16.2 17.8 0.9 0.7 17.1 18.5 6.4 Development Economics 52.0 54.7 54.2 49.8 106.2 104.5 6.5 Development Finance 2,5 23.6 25.3 41.0 8.5 64.6 33.8 6.6 External & Corporate Relations 53.5 53.5 3.7 4.1 57.2 57.6 6.7 Global Environment Fund - - 36.6 36.6 36.6 36.6 6.8 ICSID - - - - - - 6.9 Legal Services 39.2 38.5 1.7 2.1 40.9 40.6 6.10 CMP - Data Privacy Office - 1.4 - - - 1.4 6.11 Operational Policy & Country Services 57.9 55.3 0.5 0.5 58.4 55.8 6.12 Strategy, Performance, and Admin. 10.5 10.7 3.2 3.3 13.7 14.0 6.13 Treasury 35.5 34.7 53.8 52.5 89.3 87.2 6.14 WBG Finance & Accounting 46.2 47.0 7.1 9.4 53.3 56.4 Sub-Total 411.6 416.6 202.8 167.5 614.4 584.1 7.0 Governance Services 7.1 Administrative Tribunal 1.9 1.9 0.5 0.6 2.4 2.5 7.2 Executive Directors 87.4 84.4 - - 87.4 84.4 7.3 Board of Governors 6.2 6.3 - - 6.2 6.3 7.4 DC Secretariat 1.8 1.8 - - 1.8 1.8 7.5 Internal Justice Services 4.5 4.6 1.5 1.6 6.0 6.2 7.6 Corporate Secretariat 15.8 15.7 1.4 1.4 17.2 17.1 7.7 Independent Evaluation Group 29.7 30.2 8.9 9.0 38.6 39.2 7.8 Integrity Vice Presidency 20.9 21.4 0.4 0.6 21.3 22.0 7.9 Internal Audit 8.6 8.8 2.8 3.1 11.4 11.9 7.10 Inspection Panel 4.1 4.1 - - 4.1 4.1 7.11 Office of Ethics and Business Conduct 6.8 6.4 2.1 2.4 8.9 8.8 7.12 Office of the President 7.2 5.5 - - 7.2 5.5 7.13 Office of Suspension & Debarment 1.8 1.8 - - 1.8 1.8 7.14 Office of the CEO 4.1 4.2 - - 4.1 4.2 7.15 Office of the MD and CAO 2.8 2.9 - - 2.8 2.9 7.16 Office of the MD and CFO 3.3 2.9 - - 3.3 2.9 7.17 Office of the SVPMM4 6.4 5.7 0.0 0.2 6.4 5.9 7.18 Sanctions Board 1.9 1.8 - - 1.9 1.8 7.19 Strategic Initiatives Unit 1.0 1.0 - - 1.0 1.0 Sub-Total 216.1 211.4 17.5 18.9 233.7 230.2 60 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table I.1: FY19 & FY20 Funding for WB Work Program and Unit (US$ million) (Cont’d) / 3 of 3 INDICATIVE BUDGET TRAJECTORIES BB External Funds All Funds FY19 FY20 FY19 FY20 FY19 FY20 8.0 Administrative Services 8.1 Global Corporate Solutions 151.7 154.9 40.2 39.5 191.9 194.3 8.2 Human Resources5 63.4 56.7 14.7 27.5 78.1 84.3 8.3 Health and Safety Development - 7.3 - 2.4 - 9.7 8.4 Information & Technology Solutions 241.3 249.9 50.9 57.2 292.2 307.1 Sub-Total 456.4 468.8 105.8 126.6 562.2 595.4 E TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN. 1,084.2 1,096.8 326.1 312.9 1,410.3 1,409.7 F TOTAL: ALL UNITS (Excl. GMFs) 2,649.9 2,771.7 1,438.4 1,606.8 4,088.4 4,378.5 9.0 Centrally Managed Accounts & Programs 9.1 Budget recovery6 (999.5) (1,051.1) - - (999.5) (1,051.1) 9.2 Corporate Contingency 10.0 10.0 - - 10.0 10.0 9.3 Depreciation 114.4 124.2 - - 114.4 124.2 9.4 Institutional Programs7 59.3 62.1 0.5 0.6 59.8 62.6 7 9.5 Staff Benefits & Retirement 918.4 957.2 - - 918.4 957.2 Sub-Total 102.6 102.3 0.5 0.6 103.1 102.9 G TOTAL ALL FUNDS EXPENDITURE ENVELOPE 2,787.6 2,909.0 1,438.9 1,607.3 4,226.5 4,516.3 H o/w Funded by External Funds DRR (176.6) (188.0) - (176.6) (188.0) I o/w Funded by External Funds CRR - - (357.3) (381.1) (357.3) (381.1) J o/w Funded by External Funds BETF - - (1,081.6) (1,226.3) (1,081.6) (1,226.3) K o/w Admin Budget Funded by IBRD/IDA 2,611.0 2,721.0 - - 2,611.0 2,721.0 1 CE funds for the retrofitting of the project portfolio and further work related to Gender-Based Violence (GBV), enhanced quality control and implementation efforts of the new Environment and Social framework, continued implementation of the lessons learned from supervision pilots in fragile countries, and other corporate priorities. 2 The Global Partnership for Education (GPE) Secretariat has been remapped from Development Finance to Human Development. 3 Includes Global Mobility benefits for operational staff, funding to support the Agile Bank initiative, aspects of the work on FCV Supervision Pilot, GBV Action Plan, FCV Department, and Risk-Appetite Framework. 4 Office of the SVPMM includes New York and Geneva Offices. 5 Donor Financed Staffing Program (DFSP) has been remapped from Development Finance to Human Resources with full effect from FY20. 6 Includes staff benefits recoveries from internal transfer pricing, rebates, TF recoveries, and Corporate Services. 7 Some Institutional Programs have been reclassifed as part of Staff Benefits & Retirement in FY20 and reflected ex-post in FY19. 61 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Table I.2: Overview of External Funds Projected Revenues FY19 & FY20 by Unit (US$ million) Coupled Reimbursable Bank Executed Trust External Funds Funds (CRR) Funds (BETF) FY19 FY19 FY19 FY20 FY20 FY20 WB Budget WB Budget WB Budget 1.0 Country Engagement 1.1 AFRVP 18.1 22.1 223.4 247.0 241.5 269.1 1.2 EAPVP 4.4 8.9 133.0 159.8 137.3 168.7 1.3 ECAVP 30.0 41.4 77.1 90.5 107.0 131.9 1.4 LCRVP 8.7 6.1 50.1 73.8 58.8 79.9 1.5 MNAVP 69.2 67.8 59.2 62.8 128.4 130.6 1.6 SARVP 4.4 4.4 119.3 123.3 123.7 127.6 Sub-Total 134.7 150.7 662.0 757.1 796.8 907.8 2.0 Global Engagement 2.1 Pra cti ce Group GE 13.5 9.9 207.2 231.0 220.7 241.0 Sub-Total 13.5 9.9 207.2 231.0 220.7 241.0 A TOTAL CLIENT ENGAGEMENT 148.2 160.7 869.2 988.1 1,017.5 1,148.8 3.0 Region PPM 3.1 AFRVP 1.6 1.1 2.1 6.1 3.7 7.3 3.2 EAPVP 2.0 1.5 1.8 2.0 3.7 3.5 3.3 ECAVP 1.0 0.5 0.0 0.2 1.0 0.7 3.4 LCRVP 0.2 0.5 0.8 2.9 1.0 3.4 3.5 MNAVP 0.6 0.4 1.0 1.8 1.5 2.2 3.6 SARVP 0.6 0.8 1.7 1.5 2.3 2.2 Sub-Total 5.9 4.8 7.4 14.4 13.2 19.2 4.0 Practice Group PPM 4.1 Equi ta bl e Growth, Fi na nce a nd Ins ti tuti ons 2.2 2.8 10.4 7.8 12.6 10.6 4.2 Huma n Devel opment1 0.8 1.2 5.0 54.0 5.7 55.1 4.3 Sus ta i na bl e Devel opment 3.9 2.8 58.2 38.8 62.1 41.6 4.4 Infra s tructure - 1.4 - 13.8 - 15.2 4.5 Other Opera ti ona l Support - 2.5 - 0.7 - 3.2 4.6 Gl oba l Themes 0.8 - 0.4 - 1.2 - Sub-Total 7.6 10.7 74.0 115.1 81.6 125.8 B TOTAL PROGRAM & PRACTICE MGMT. 13.5 15.6 81.3 129.5 94.8 145.0 C TOTAL OPERATIONS 161.7 176.3 950.6 1,117.6 1,112.3 1,293.9 5.0 Institutional Services 5.1 Chi ef Ri s k Offi ce 0.9 0.7 - - 0.9 0.7 5.2 Devel opment Economi cs 1.4 2.8 52.8 47.0 54.2 49.8 5.3 Devel opment Fi na nce 6.0 7.0 35.0 1.5 41.0 8.5 5.4 Externa l & Corpora te Rel a ti ons 1.1 1.5 2.6 2.6 3.7 4.1 5.5 Gl oba l Envi ronment Fund - - 36.6 36.6 36.6 36.6 5.6 Lega l Servi ces 1.7 2.1 - - 1.7 2.1 5.7 Opera ti ona l Pol i cy & Country Servi ces - - 0.5 0.5 0.5 0.5 5.8 Stra tegy, Performa nce, a nd Admi n. 3.2 3.3 - - 3.2 3.3 5.9 Trea s ury 52.3 51.0 1.5 1.5 53.8 52.5 5.10 WBG Fi na nce & Accounti ng 7.1 9.4 - - 7.1 9.4 Sub-Total 73.8 77.8 129.0 89.7 202.8 167.5 6.0 Governance Services 6.1 Admi ni s tra ti ve Tri buna l 0.5 0.6 - - 0.5 0.6 6.2 Corpora te Secreta ri a t - 1.4 1.4 1.4 1.4 6.3 Interna l Jus ti ce Servi ces 1.5 1.6 - - 1.5 1.6 6.4 Independent Eva l ua ti on Group 8.5 8.6 0.4 0.4 8.9 9.0 6.5 Integri ty Vi ce Pres i dency 0.4 0.6 - - 0.4 0.6 6.6 Interna l Audi t 2.8 3.1 - - 2.8 3.1 6.7 Offi ce of the SVPMM - - - 0.2 - 0.2 6.8 Offi ce of Ethi cs a nd Bus i nes s Conduct 2.1 2.4 - - 2.1 2.4 Sub-Total 15.8 16.9 1.8 2.0 17.5 18.9 7.0 Administrative Services 7.1 Gl oba l Corpora te Sol uti ons 40.2 39.5 - - 40.2 39.5 7.2 Huma n Res ources 14.4 10.5 0.3 17.0 14.7 27.5 7.3 Hea l th a nd Sa fety Devel opment 2 - 2.4 - - - 2.4 7.4 Informa ti on & Technol ogy Sol uti ons 50.9 57.2 - - 50.9 57.2 Sub-Total 105.5 109.6 0.3 17.0 105.8 126.6 D TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN 195.1 204.2 131.0 108.7 326.1 312.9 E TOTAL: ALL UNITS 356.8 380.5 1,081.6 1,226.3 1,438.4 1,606.8 8.0 Centrally Managed Accounts & Programs 8.1 Other Centra l l y Ma na ged Accounts 0.5 0.6 - - 0.5 0.6 Total Centrally-Managed Accounts & Programs 0.5 0.6 - - 0.5 0.6 F TOTAL EXTERNAL FUNDS 357.3 381.1 1,081.6 1,226.3 1,438.9 1,607.3 1 Includes BETF projections for Global partnership for Education. 2 Includes BETF projections for the Donor Funded Staffing Program (DFSP) moved from DFI to HRD VPU. 62 WORLD BANK FY20 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) Budget Sustainability (percent) IDA Anchor Administrative expenses as a share of operational revenues (IDA net loan revenues) (percent) External Funds Ratio External funds as a share of total administrative spending plans (percent) 63 WORLD BANK FY20 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 Strategic Alignment Share of Operational Budget (BB) Allocated to Unit Budgets Country Engagement (CE) and Global Engagement (GE) excluding GMFs (percent) FCV Share of Country CE (BB) budget share for Engagement Budgets FCV and FCV at Risk Countries over Total CE Envelope (percent) 64 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE Focus Indicator Definition Trend Bank Budget to Total Administrative Lending Volume Budget (BB) per US$ Ratio billion of loans approved (US$ million) Administrative Budget Efficiency Bank Budget to Total Administrative Porfolio Volume Budget (BB) per US$ Ratio billion portfolio under supervision (US$ million) 65 WORLD BANK FY20 BUDGET DOCUMENT – TEXT FOR PUBLIC DISCLOSURE 66