10.1 Summary of the World Bank Group’s instruments

• Project preparation, including compliance with environmental and social safeguards • Fiscal risk management processes and reporting, including processes for the provision of fiscal support and assessment of fiscal commitments and contingent liabilities • capital market development and support • Transaction structuring, including procurement • Maximization of sector funding mechanisms • capacity building.

TABLE 10.1 Summary of the World Bank Group’s instruments

ADVISORY INSTRUMENTS (NONFINANCIAL)

IBRD, IDA, and IFC technical assistance and reimbursable advisory service:a help to structure the project to optimize risk allocation, ensure bankability, prepare draft contracts, and plan and manage the competitive procurement process

INSTRUMENTS TO MOBILIZE CAPITAL (FINANCIAL)

IFC partial credit guarantee: cover lenders on debt instruments issued by the project’s organization, such that the IFC will pay shortfalls of principal or interest payments up to a predetermined amount

IBRD and IDA guarantee: cover project lenders against project company debt service defaults due to adverse government action or inaction; also includes guarantees for (a) scaling up existing infrastructure asset recycling programs and similar plans that will allow the governments to invest in new infrastructure without significantly adding to the fiscal burden and (b) leveraging resources from the cash flow generated by existing public assets in order to access a broader set of international financiers through newly created financial platforms MIGA’s political risk insurance and credit enhancement: mitigate the risks of cross-border investors and lenders by providing cover for both equity and debt instruments against four specific political risks

INSTRUMENTS TO CLOSE THE VIABILITY GAP (FINANCIAL) IDA grant: where grants are possible, offset some of the up-front public funding required, such as for the construction of fixed infrastructure, viability gap funding, or studies to advance projects

IBRD and IDA loan: finance fixed infrastructure, provide fare subsidies, or pay the ticket and fare operator; can also be used to make availability payments to the infrastructure contractor

IFC equity: lend credibility to the project and induce a “crowding-in” effect with other investors becoming more comfortable to participating IFC loan: help to address currency risk that arises due to the mismatch between farebox revenues and financing and repayment in another currency IFC risk-sharing facility: extended to local commercial banks providing loans to bus companies; has the potential to crowd in additional financing

Source: Pulido 2019. Note: IBRD = International Bank for Reconstruction and Development. IDA = International Development Association. IFC = International Finance Corporation. MIGA = Multilateral Investment Guarantee Agency. a. Technical assistance and reimbursable advisory service are similar in essence. Technical assistance is nonrefundable and focuses on advice that supports legal, policy, management, governance, and other country reforms. Reimbursable advisory service is a customized form of technical assistance that either is a stand-alone program or complements an existing program and is conducted on a reimbursable basis if the World Bank Group cannot fund the entire cost within the existing budget envelope.