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23rd August, 2020

What is an Emergency Contingency Fund?


Topic
Health Budget Advocacy


Around the world, countries are moving quickly to mobilize resources to respond to COVID-19.  In GFF countries, civil society colleagues have been reporting hearing about emergency contingency fund linked to the GFF and World Bank. Here, we take a deeper look at what it is about.   
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What is an Emergency Contingency Fund?

Written by

Suzanna Dennis Senior Advisor, Health Financing, PAI & Alternate Civil Society Representative to the GFF Investors Group  

Around the world, countries are moving quickly to mobilize resources to respond to COVID-19.  In GFF countries, civil society colleagues have been reporting hearing about emergency contingency fund linked to the GFF and World Bank. Here, we take a deeper look at what it is about.   

Q: What is emergency contingency fund? 

Many projects funded by the World Bank include a Contingency Emergency Response Component (CERC), which is an agreement in the original grant/credit/loan document that allows the borrower country to reallocate a certain amount of funds from the existing project to address emergency response needs.  This contingency is designed to be move funds which are uncommitted to help respond to an emergency, with the intention that the World Bank will fill the funding gap in the original project in time.

Some IDA and IBRD funded projects are designed with CERC at the outset. This is clearly stated in the Project Appraisal Document (PAD).  For example, the PAD for Malawi’s Investing in Early Years for Growth and Productivity Project includes a CERC to “allow for rapid reallocation of project proceeds in the event of a future natural or man-made disaster or crisis that has caused or is likely to imminently cause a major adverse economic and/or social impact during the life of the project.”  While there is no funding earmarked for the contingent component, the government has the option to request the World Bank to reallocate financing from other components to cover emergencies (see page 25). 

Q: Why is the CERC mechanism important?

The CERC concerns available resources in a project that have not been utilized and are available to be programmed rapidly to address a crisis.  Because these funds are already approved they can be re-allocated quickly within the scope of the project (ie to support the attainment of the Project Development Objective, such as improving the availability of quality health services) without the relatively long time that can be required to obtain the approval of the Board of Directors.

Q: What triggers the CERC/How do countries access this funding?

This is funding that is reallocated from within the existing approved budget of the project which has already been approved by the Board of the World Bank.  The CERC is activated upon request from the government which is responsible for the project.

Q: How is it related to the GFF?

Under the GFF partnership, participating governments access a grant, loan or credit from the World Bank, in addition to a grant from the GFF Trust Fund. The funding from the World Bank either comes from the International Development Association (IDA) that caters to low-income countries, or the International Bank for Reconstruction and Development (IBRD) for middle income countries.  The IDA or IBRD financing often includes a Contingency Emergency Response Component. 

The CERC has been accessed for at least one GFF Trust-funded project in Uganda. In April, civil society organizations in the country expressed concern about the government reallocating $15 million of funds from the Uganda Reproductive, Maternal and Child Health Services Improvement Project to COVID-19 response, and expressed a desire to shape how the funds would be used. 

After funds are moved through a CERC to respond to an emergency, the government must decide on whether or not and how to replace any money that has been used, and make a request to the World Bank for additional financing through the same processes that are followed for any other financing. 

Q: How can I find out if my government plans to access these funds?

To be eligible for a CERC, it must have been built into a project design from the start.  Most but not all projects have CERCs.  You can contact your GFF focal point or government contact to find out find out if there are discussions on accessing the CERC. 

 

Around the world, countries are moving quickly to mobilize resources to respond to COVID-19.  In GFF countries, civil society colleagues have been reporting hearing about emergency contingency fund.