Crisis Recovery Support Program
sector: Public Sector Management | country: Armenia
Lending Modality for Financial Crisis. ADB s Countercyclical Support Facility has been instrumental in supporting countries receiving loans financed out of ordinary capital resources. However, at present, ADB has no modality for a financial crisis response operation for Asian Development Fund eligible countries. The special program loan in the Program Lending Policy is limited to ordinary capital resources countries and can only used to address balance of payment crises. 21 Likewise, emergency assistance under the Disaster and Emergency Assistance Policy (DEAP) does not include financial crisis response. As such, the program had to use the standard program loan modality and develop the design of program actions to allow quick processing and disbursement. While program preparation was shorter than for typical program loans, preparation would have benefited from streamlined and abbreviated procedures similar to the countercyclical support facility and the DEAP, and would have been able to provide the support much earlier.
During crisis episodes, while policy reforms are important, the government has urgent needs to quickly stabilize the economy, such as, providing urgent fiscal support to counteract the financial crisis. As such, crisis response operations should focus more on immediate responses to the financial crisis, such as maintaining critical social and safety net expenditures. However, as crises open opportunities for reforms, policy dialogue can be initiated for follow-up operations. But this should not delay the financial crisis recovery support.
Success of a financial crisis response operation is highly contingent on the government s ability to quickly put together its own anti-crisis plan, which could be financed by ADB after exercising due diligence. In the case of Armenia, the government had an anti-crisis action plan and a crisis budget.
Program Monitoring to be Improved. The program monitoring system should be improved for similar programs in the future. The government s monitoring system did not capture and produce the required data on indicators performance. In particular, the executing agency collected the information from other government agencies (Ministry of Labor and Social Issues, Ministry of Finance,, government reports on anti-crisis measures progress, and other official statistics) to produce its own project completion report. However, a specific indicator on the number of jobs created by the interventions in the construction area was not properly monitored and reported.
Technical Assistance Support is Important for Crisis Programs. There was no technical assistance with the program. The absence made it difficult to monitor the outcome of the loan. A technical assistance (TA) would have been useful for monitoring budget execution in general, and monitoring of expenditures supported by the program in particular, including budget execution reports, expenditures in key programs for social protection (pension, family benefits, and unemployment insurance), social impact assessment, and financial flows and bank accounts related to regular and special safety-net programs. It would have helped track results and progress in achieving the targets and could have brought some advisory services to the government on fine-tuning the anti-crisis program as the implementation results emerged. The TA could have helped develop a second generation follow-up crisis recovery program in case the impact of the crisis had played out longer in the country.