Financial Policy, Planning, and Budgeting

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Financial Policy, Planning, and Budgeting

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The financial policy, planning, and budgeting function of the World Bank Group is, alongside Resource Mobilization, Controller, and Office of the Treasurer, one of the four components of the Bank's Finance Complex. The financial policy, planning, and budgeting function includes: managing the Bank's strategic capital adequacy with respect to IBRD capital subscription; coordinating and reviewing the planning and programming of World Bank Group activities from a financial perspective; supporting management and resource allocation decisions at both senior management and departmental levels; and instituting and implementing procedures for World Bank wide budgetary controls.

Responsibility for these functions have most often been maintained in the various iterations of the Planning and Budgeting Department and the Financial Analysis Department. At different times these units were combined or reported to or alongside one another. For the majority of their existence these units reported to the Finance Vice President, Finance Senior Vice President, or Chief Financial Officer.

1967-1980

During the World Bank's first two decades, the Bank was small and centralized enough that the institution could essentially be managed from the President's Office or by the President's closest deputies. Planning and budgeting oversight and review were carried out in a variety of World Bank departments and Vice Presidencies, including the Administration Department (ADM) and Controller's (CTR) which in turn reported to the President's Office. However, as Bank operations and budgets grew throughout the 1960s, a unit that centralized activities of financial policy, planning, and budgetary control was deemed necessary. This resulted in the creation of the Program Evaluation and Control Department (PEC) in February 1967, the first unit responsible for the systematic programming and budgeting function. PEC was established to improve the President's control over the use of the Bank's manpower and financial resources and his ability to monitor the effectiveness of the Bank's programs. As such, PEC reported directly to the Office of the President (EXC). The Department's specific responsibilities included:


  • making continuous reviews of the effectiveness of the Bank's major functions;
  • analyzing financial and other implications in terms of human and material resources required;
  • monitoring the efficiency and economy of the Bank's organizational structure, its operating procedures, and use of manpower;
  • instituting procedures for effective budgetary control;
  • preparing the annual budgets for the World Bank Group; and
  • conducting internal audits and arranging external studies to determine whether accounts and records conform to established policies.

John H. Williams was named the Director of PECin 1967.

Following the appointment of Robert McNamara as World Bank Group President in 1968, PEC was terminated and replaced by the new Programming and Budgeting Department (PAB) and John H. Adler was named PAB Director. The focus of the new PAB was initially narrowed, as activities related to organizational structure monitoring were returned to ADM. However, PAB's remaining work was intensified, as it took on the responsibility for developing and evaluating the 5-year programs for the Bank as well as the review of Country Program Papers (CPPs), the Bank's annual country economic review and planning profile. And while the new PAB reported to the Finance Vice President Siam Alderwereld, it also became an important resource and tool of the new President, serving as a quasi-secretariat to the President and his Council.

During a significant reorganization of PAB in July 1971, the Department's activities relating to planning and financial policy were expanded considerably, as it was agreed that PAB should take the lead in modifying and improving the projection capabilities of the Bank. Most notably, some of the responsibilities of the Statistical Services Division (ECDSS) which had previously resided in the Economics Department (ECD), the Bank's research department, were transferred into PAB. ECDSS's Financial Projects Unit, which had been responsible for making projections of the Bank's cash flows and financial condition, became the new Financial Projections and Special Projects Division (PABFP) within PAB; Jean-Claude Dumoulin was named the first Chief of PABFP. ECDSS's other section, the External Debt Unit, was located for a short time in PAB as the Indebtedness Unit before being transferred to the Economic Programming Department (EPD) in the Bank's new research unit, the Development Policy Vice Presidency (VPD).

Following the 1971 reorganization, PAB consisted of formal divisions for the first time. In addition to PABFP, it consisted of: the Budget Division (PABBG); the Program and Operations Review Division (PABPO); and the nascent Operations Evaluation Department (OED, later the Independent Evaluation Group [IEG]).

In July 1973 the Operations Evaluation Division (PABOE) was terminated and its functions were reestablished in the new and independent Operations Evaluation Department (OED). In February 1974 the Program and Operations Review Division (PABPO) was split into a Country Program Review Division (PABCP) and an Operations Review Division (PABOR). In September of 1974 the new PABOR was terminated and its functions were integrated into the renamed Budget and Operations Review Division (PABBG).

On April 1, 1974 the Financial Projects and Special Studies Division (PABFP) was reorganized into the Financial Analysis Division (PABFA). Later that year, a new Loan Portfolio Analysis Unit (PABLP) was established in PAB to analyze the changing composition of the Bank's loan portfolio and the creditworthiness of borrowing countries and to determine effects on the Bank's financial position and standing in the financial markets.

A 1975 Organizational Manual Statement on the Programming and Budgeting Department (PAB) described the unit as "a support department responsible for coordinating and consolidating the plans, programs, and budgets of the Bank Group, and for providing related flows of information and analyses to the President, the President's Council and Departmental Managers."

In June of 1976, the various changes to the Programming and Budgeting Department (PAB) in previous years were clarified by the creation of two new Assistant Directors in the Department. John G. N. Blaxall, the new Assistant Director, Programming and Budgeting and CPP Review, was given responsibility for the Budget and Operations Review Division (PABBG) and the CPP Review Division (PABCP) as well as a Systems Development Unit and an Overseas Mission Unit. The responsibilities of these units included:


  • coordinating and consolidating the five-year plans, work programs, and administrative budgets of the Bank Group within the framework of Bank Group financial policies and constraints; and
  • undertaking such reviews and analyses as are necessary to ensure the effective and efficient execution of the Group's plans, work programs, and budgets.

D. Joseph Wood was named the new Assistant Director, Financial Analysis, and was made responsible for the Financial Analysis Division (PABFA) and the new Financial Studies Division (PABFS). The responsibilities of the PABFA included:


  • analyzing the Bank Group's financial position;
  • making appropriate medium- and long-term financial projects;
  • and preparing financial policy recommendations for review by senior management.

The PABFS's responsibilities included:


  • analyzing the implications of changes in the international financial environment of Bank Group financial policies and on the access to capital, both private and official, by the Bank and its borrowers;
  • recommending policies, programs, and strategies that will enable the Bank and its borrowers to secure the finances they require;
  • and providing related flows of information and analyses to the President, the President's Council and Departmental Managers.

The two Assistant Directors worked in close coordination on financial policy implications for Bank operating programs and budgets.
Note that, while the PABFA provided support for IDA replenishment negotiations since 1974 and were given greater responsibility in this area in 1976, this arrangement was temporary. In 1987, support of IDA replenishment negotiations was moved into the new Resource Mobilization Department (FRM). IDA replenishment support has since been grouped alongside trust fund and cofinancing support and administration as part of the Bank's Resource Mobilization function.

On January 1, 1977, K. Georg Gabriel took over as the Director of PAB for John H. Adler, who had served in the role for over eight years.

1980-1983

In 1980, the financial policy functions located in the Financial Analysis Division (PABFA) and the Financial Studies Division (PABFS) were removed from the Programming and Budgeting Department (PAB). A new independent unit, the Financial Policy and Analysis Department (FPA), was created and began reporting directly to the new Senior Vice President, Finance (SVPFI). This upgrade to an independent department was in response to the increased importance of the financial policy function in an environment of greater financial resource constraints. D.

Joseph Wood was named the first Director of the new FPA. As in its PAB iteration, the new FPA consisted of a Financial Analysis Division (FPAFA) and Financial Studies Division (FPAFS). Together their responsibilities included:


  • performing analytical work on Bank financial policies, and supporting the Senior Vice President, Finance in such key activities as IDA replenishment negotiations, IBRD capital increases, and analyzing the financial impacts of new initiatives;
  • producing long-term financial projections and plans beyond a one-year horizon;
  • assessing and managing financial risks; and
  • providing support to Operations in areas involving financial analysis.

The Programming and Budgeting Department (PAB) had, since its creation in 1968, reported directly to the Vice President, Finance (VPF). However, amidst the various organizational changes of 1980, PAB reported to the new Vice President, Programming and Budgeting, Pension Fund (PBPVP) which, in turn, reported to the Senior Vice President, Finance (SVPFI). For the next three years PAB reported to the PBPVP alongside the new Staff Retirement Plan Office (SRP). Heinz Vergin led the PAB during this period. PAB's 1980 reorganization was the beginning of a move towards decentralization of the programming and budgeting function, as the Bank's operational units and Accounting Department were given greater roles in determining and creating budgets; the overall effect for the central PAB unit was that it was significantly weakened.

1983-1987

In 1983, the financial policy unit and planning and budgeting unit were reunited. However, instead of a reporting relationship, the two now coexisted within the new Financial Policy, Planning and Budgeting Vice Presidency (FPBVP). The objective of reintegrating the activities of the Financial Policy and Analysis Department (FPA) and the Planning and Budgeting Department (PBD) under one senior manager was to strengthen the Bank's capacity for prospective analysis and to implement a Bank-wide strategic planning initiative and an even more decentralized planning and budgeting process. FPBVP was led by D. Joseph Wood and reported to the Senior Vice President, Finance (SVPFI).

At the point that the FPA began reporting to the new FPBVP in 1983, D. C. Rao was named D. Joseph Wood's replacement as Director of FPA. The FPA consisted of the Financial Analysis Division (FPAFA) and the Financial Studies Division (FPAFS). A Policy Analysis Division (FPAPA) was established soon after. In February 1984, the Financial Analysis Division (FPAFA) and the Policy Analysis Division (FPAPA) were replaced by the Financial Management and Analysis Division (FPAMA) and the Financial Policy and Planning Division (FPAPP), respectively.

During the 1983 reorganization the PBD underwent restructuring in order to implement the more decentralized programming and budgeting process envisioned by new Bank President Alden W. Clausen. The Department took on most of the functions of its prior iteration, but within a system that decentralized more programming and budgeting responsibilities to the Bank's individual vice presidencies, thus allowing PBD to focus more broadly on the Bank as a whole. As such, the Department was responsible for:


  • coordinating and supporting the Bank's planning and resource allocation processes, including the formulation of budgetary policies, to ensure the efficiency and effectiveness of resource utilization; and
  • monitoring and supporting the country assistance planning and programming process, including standards employed in the analyses of country creditworthiness and IBRD portfolio risk.

At the time of its establishment, the PBD consisted of the following divisions: the Programming and Budgeting Division (PBDPG); the Country Program Review Division (PBDCP), and the Management Systems Division (PBDMS). In April 1984, the Department was realigned. PBDMS was terminated and the division's staff were assigned to the newly-established Institutional Planning Division (PBDIP) and were charged with setting up a Bank-wide institutional planning process and providing staff support for the "Future Role of the Bank" exercise. At the same time, the Programming and Budgeting Division (PBDPG) was renamed the Budget Policy and Review Division (PBDBP). In August of 1984, an Institutional and Financial Systems Unit (PBDIF) was established in the Department's Front Office.

Heinz Vergin continued to lead PBD until 1984 when he was replaced by Shinji Asanuma.

1987-2003

A 1987 Bank-wide reorganization separated the financial policy function and the planning and budgeting function; they would not be reunited again until 2003. The history of each function is presented separately during this period.

Financial Policy (1987-2003)

As part of the 1987 reorganization, the Financial Policy, Planning and Budgeting Vice Presidency (FPBVP) that consisted of the Financial Policy and Analysis Department (FPA) and the Planning and Budgeting Department (PBD) was terminated. The Financial Management and Analysis Division (FPAMA) and the Financial Policy and Planning Division (FPAPP) of FPA were reorganized into the Risk Management and Financial Policy Department (FRS), which was led by D. C. Rao. The Financial Studies Division (FPAFS), which provided support for IDA replenishment negotiation, was absorbed by the new Resource Mobilization Department (FRM); note that FRM was responsible for overseeing policy development related to IBRD capital subscription during this period. Together the FRS and FRM reported to the new Vice President of Financial Policy and Risk Management (FPRVP), which reported to the new Senior Vice President of Finance (FINSV). D. Joseph Wood was named Vice President of the new FPRVP.

The new FRS was responsible for identifying and managing financial risks to the World Bank in order to maintain and promote the Bank's financial viability to effectively serve the long-term development objectives of its members. It was also responsible for evaluating country creditworthiness, advising Senior Management on strategies for managing risk in individual countries, and analyzing the portfolio risk implications of Bank lending programs. FRS consisted of three divisions: Financial Policies and Projections (FRSFP); Risk Management and Financial Policy (FRSDR); and Country Creditworthiness (FRSCR). Note that from this point, risk management and assessment is a predominant aspect of the financial policy function. Activities supporting this function were undertaken over the course of the previous decades, but with the creation of the FPRVP, it was prioritized. The four major types of financial risk relevant to the Bank were: country credit risk, or loan portfolio risk; market risk (i.e. interest rate and exchange rate); liquidity risk; and operational risk.

FRS underwent no significant changes in its organization or reporting relationship until 1996. Everardus J. Stoutjesdijk took over as Director of FRS in 1990. Mieko Nishimizu replaced him in late 1991 or early 1992 and Brian Wilson replaced Nishimizu in 1995.

In 1996 the Vice President of Financial Policy and Risk Management (FPRVP) was terminated when the Resource Mobilization Department (FRM) was removed and combined with the Cofinancing and Project Finance Department to form the new Resource Mobilization and Cofinancing Vice Presidency (RMCVP). The financial policy and country creditworthiness and risk functions of the former Risk Management and Financial Policy Department (FRS) were relocated along with the Institutional Change and Strategy Department (ICD) into the new, but temporary, Financial Policy and Institutional Strategy Vice Presidency (FPIVP), the Bank's organizational planning unit.

In 1997 a new Vice Presidency, Financial Policy and Risk Management (FPRVP) was created. It maintained a divisional structure consistent with its recent predecessors, consisting of a Country Creditworthiness and Risk unit and a Financial Policy and Projects unit. FPRVP was led by Brian Wilson and reported to Managing Director Jessica Einhorn.

In 1999, responsibilities of the FPRVP were reorganized into the new Corporate Finance (FIN) unit that reported to the restored Senior Vice President and Chief Financial Officer (CFO) alongside the Offices of the Treasury (TRE) and Controller (CTR). The Corporate Finance unit temporarily consisted of four units: Corporate Finance (FINCF); Credit Risk (FINCR); Risk Management (FINRM); and Financial Products and Services. At some point towards the end of 2000 or beginning of 2001, the Financial Products and Services unit was removed.

Planning and Budgeting (1987-2003)

Following the termination of the Financial Policy, Planning and Budgeting Vice Presidency (FPBVP) in 1987, the Planning and Budgeting Department (PBD) was removed from the Finance Complex and transferred to the new Policy, Planning and Research Complex (PPRSV) alongside such vice presidencies and departments as the Development Economics Vice Presidency (DECVP), the Sector Policy and Research Vice Presidency (PREVP), and the Strategic Planning and Review Department (SPR). Robert Piciotto was named Director of the PBD. The aim of consolidating these various units beneath a single umbrella was to systematize and strengthen the Bank's strategic planning process by integrating the previously fragmented research, policy and strategic planning functions. The central planning and budgeting function of PBD was strengthened somewhat and its analytical functions began to recover.

Not all of PBD's functions were maintained following its transfer to the PPRSV. The Institutional and Financial Systems Unit (PBDIF) was transferred to the front office of the Senior Vice President, Finance (FINSV) and the activities of the Institutional Planning (PBDIP) and Country Program Review (PBDCP) Divisions were integrated with those of the new Strategic Planning and Review Department (SPR). PBD emerged from the 1987 reorganization with divisions for Budget Policy and Review (PBDPR) and Budget Planning and Systems (PBDPS). In September 1988, these two remaining divisions were restructured into the Budget Formulation and Review (PBDFR) and the Budget Planning and Policy (PBDPP) Divisions, respectively.

Significant change again occurred with regard to the Bank's Planning and Budgeting function in January 1990. The Planning and Budgeting Department (PBD) was terminated and its functions were subordinated to the new Vice President, Corporate Planning and Budgeting (CPBVP), which reported directly to the Office of the President (EXC). The CPBVP also consisted of an Organization Planning Staff unit (ORG) and the Internal Auditing Department (IAD). Robert Piciotto was elevated to CPB Vice President; PBD did not have a Director for the following year.

In June of 1990, the Planning and Budgeting Department (PBD) was reconstituted within CPBVP. At this point it regained responsibilities for program review and institutional planning. The functions of the reorganized PBD included:


  • designing and operating a collaborative and integrated process of setting goals, priorities, programs and budgets throughout the Bank;
  • producing annual plans and budget documents submitted to the Board for review and approval;
  • advising senior management on resource allocation issues;
  • supporting other Bank units in preparing plans, programs, and budgets and in evaluating performance; and
  • identifying opportunities for improvement in Bank-wide planning, budgeting and implementation processes, enhancing transparency, effectiveness, and efficiency of resource allocation processes, and monitoring of resource use.

In 1991 Richard B. Lynn was named Director of the Planning and Budgeting Department (PBD).

In the summer of 1992, the CPBVP was terminated and the Planning and Budgeting Department (PBD) was returned to the Financial Complex (FINSV). However, it was placed in the Vice President and Controller (CTRVP) alongside its Accounting (ACT), Loan (LOA), and, later, Internal Auditing (IAD) departments. PBD's responsibilities did not change significantly, as reflected in the title of its three divisions: Budget Policy and Systems; Corporate and Budget Planning; and Program and Budget Review. However, PBD's role during this period was essentially subsumed within the Controller's function of financial administration, as it oversaw budget processes and served as a data manager, while program and budget decisions were made by executive fiat based on PBD analysis.

The organizational components and reporting relationship of PBD remained unchanged from 1992 until 1996 when it was removed from the CTRVP. It appears that, through 1996 and early 1997, PBD reported directly to the Office of the President (EXC). In 1997 it was placed in the new Strategy and Resource Management Vice Presidency (SRMVP) along with the Strategy, Change and Partnership Groups that had previously been located in the Financial Policy and Institutional Strategy Vice Presidency (FPIVP). The SRMVP reported to Managing Director Sven Sandstrom. This reorganization was motivated by a need for a top-down review and change program focusing on the Bank's budget; this undertaking took the form of the Strategic Compact (1997-1999). The Strategic Compact, a senior management review, focusedon: strategic priorities and selected efficiencies based largely on PBD advice; the Bank's top-down resource allocation and business planning process; and analytical capabilities with an emphasis on productivity.

Achim von Heynitz replaced Richard B. Lynn as Director of the Planning and Budgeting Department (PBD) in 1997. In 1998 the Planning and Budgeting Department was renamed the Corporate Resource Management Group (CRM). The SRMVP was led first by Mark Baird from 1997 to 1999 and then by Anil Sood from 1999 to 2003.

2003-2006

In 2003 the financial policy and planning and budget functions were reunited in the form of the Strategy, Finance, and Risk Management Vice Presidency (SFRVP). The reunion of these functions acknowledged the dependency between those responsible for articulating the Bank's strategy and programming and those responsible for ensuring that proposed business models are funded sustainably. It was also acknowledged that, while the units of the new SFRVP support and work closely with units throughout the Bank, such as operations, organizational planning, and treasury, they also had a strong business reason to remain independent from them.

SFRVP's functions were carried out in four departments. The Corporate Strategy and Integrated Risk Management Department (SFRSI) provided independent, Bank-wide perspective on the strategic and financial aspects of the Bank's business, combining the elements of corporate strategy, risk management, financial policy, and budget management. The Corporate Resource Management Department (SFRRM), or budget department, aligned resources to strategy, operations, and other programming. The Corporate Finance Department (SFRCF) supported the Bank's senior management, the Board, and the institution as a whole by providing review of capital deployment and ensuring the Bank's standing as a AAA-rated institution. Finally, the Credit Risk Department (SFRCR) analyzed and managed the Bank's credit risk exposure.

John Wilton was named Vice President of SFR.

2006-2009

In 2005 a Budget Reform process was initiated in order to make the budget process more efficient, less complex, and more results- and performance-based. One of the results of this Reform was the 2006 termination of the SFRVP and the separation of financial policy and risk management functions from the planning and budgeting functions. Functions related to the former were placed in the Office of the Chief Financial Officer; units included the Corporate Finance Department (FINCF) and the Credit Risk Department (FINCR). Planning and budgeting activities related to strategic allocation of resources were once again placed alongside the Bank's Accounting and Loan Departments in the new Controllers, Strategy and Resource Management Vice Presidency (CSRVP). As in its previous iteration within the Controller Vice Presidency (1992-1996), the planning and budgeting function was reduced in scope, as it appears to have provided only budget process supervision and support. Fayezul Choudhury led the CSRVP.

2009-2016

With the creation of the Corporate Finance and Risk Management Vice Presidency (CFRVP) in 2009, the model for finance management from 2003 to 2006, including policy, risk management, and budget planning, was restored. The objective was that, by restoring the higher level of management, oversight of risk management and supervision of financial activities would be strengthened. Three departments similar to those that made up the earlier Strategy, Finance, and Risk Management Vice President (SFRVP) were created: Corporate Planning and Analysis Department (CFRPA); Corporate Finance Department (CFRCF); and Credit Risk Department (CFRCR). The priorities of the department were, as they were from 2003 to 2006, to manage risk from the balance sheet perspective, maintain a sustainable financial framework, and manage administrative expenditures. CFR Vice President Fayezul Choudhury reported to the Chief Financial Officer (CFO).

In 2010 the World Bank President announced the creation of the World Bank Group Chief Risk Officer (CRO). Reporting to the Chief Financial Officer (CFO) and supplementing the risk management work of the FINCR, the CRO was responsible for:


  • assessing risks across the World Bank Group including possible interactions among types of risk;
  • benchmarking existing risk management practices against major financial institutions;
  • ensuring consistency of World Bank Group risk management activities with best practice; and
  • considering unique risks that are specific to multilateral development banks and international financial institutions.

Robert Kopech was named the first Chief Risk Officer in January 2011. Kopech was replaced by Lakshmi Shyam-Sunder in 2014; she continues to report to the World Bank Group Chief Financial Officer (CFO) as of 2016.

In 2013 Managing Director and Chief Financial Officer (CFO) Bertrand Badre reorganized the various policy, risk management, and budget planning functions within the Bank's Finance Complex. A new Budget, Strategic Planning, and Performance Review Vice Presidency (BSPVP) was created which included the Budget Department as well as the Resource Management Network and General Services Department. Pedro Alba was named Vice President for BSPVP. The BSPVP is still operational as of 2016.

Also in 2013, a new Financial Strategy Group (FSG) was created that pulled together corporate finance, organizational modeling, and financial analytics functions from across the World Bank Group, including the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). FSG was responsible for developing a business model and identifying options for strengthening the financial sustainability and delivery capacity of the IBRD, IDA, IFC, and MIGA. FSG was co-led by Lisa Finneran and Avi Hofman.

The following year, the Financial Strategy Group (FSG) joined the Concessional Finance and Global Partnerships Vice Presidency (CFPVP), formerly responsible for IDA replenishment, trust fund, and cofinancing related functions, to form the Development Finance Vice Presidency (DFiVP) led by Joachim von Amsberg. Financial management-related activities formerly located in the FSG were placed in the IBRD Corporate Finance Department (DFiCF) alongside the World Bank Trust Funds and Partnerships Department (DFPTF), IDA Resource Mobilization (DFIRM), and Development Partner Relations Department (DFDPR). DFiCF supports senior management and the World Bank Board in IBRD's financial management by recommending and facilitating policies and strategies related to medium-term capital planning, overall balance sheet management, and annual decisions on loan terms and income allocation. Activities include:


  • monitoring the Bank's income and balance sheet variables and key sensitivities over the near-term and the medium-term;
  • managing the Bank's strategic capital adequacy and developing strategies for optimal use of capital;
  • determining balance sheet management approaches that support the development mission and the institution's financial strength; and
  • assuring capacity to understand and resolve issues of income allocation, financial product pricing, and capital structure and adequacy.

Axel van Trotsenburg replaced Joachim von Amsberg as Vice President of the Development Finance Vice Presidency (DFiVP). The Vice Presidency continues to report to the World Bank Group Chief Finance Officer (CFO) as of 2016.

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