Economics & Development

This report, prepared under the Board-approved policy changes to enhance the crisis preparedness and response toolkit of the International Bank for Reconstruction and Development and the International Development Association, provides information on the triggering of a Rapid Response Option (RRO) and the repurposing of funds through the Djibouti Contingent Emergency Response Project (CERP) in response to a severe shock arising from the deterioration of the security situation in the Middle East and the closure of the Strait of Hormuz on February 28, 2026. Following a rise in maritime freight costs between 54 and 72 percent, a 25 percent decline in port traffic, critical shortfalls in food stocks, and pharmaceutical supplies covering less than three months across several therapeutic categories, with approximately 225,000 people at risk of food insecurity, the Middle East, North Africa, Afghanistan and Pakistan (MENAAP) Division Director approved Djibouti’s request on August 4, 2026 to repurpose funds within the ten percent fiscal year limit of the undisbursed Investment Project Financing and Program for Results portfolio. The repurposed resources, disbursed via a sequenced approach during an activation period from August 4, 2026 to July 31, 2027, will finance the reconstitution of strategic food stocks, food assistance to vulnerable populations, and replenishment of essential medicines, using the CERP instrument rather than complementary financing to a Development Policy Financing Catastrophe Deferred Drawdown Option (DPF Cat DDO). The report confirms adherence to the revised operational policies by Management to share timely information on RRO triggers, types of crises, portfolio reallocations, and instruments used, and concludes that the repurposing will help stabilize food and medical supply chains, protect vulnerable households, and support macroeconomic resilience. The policy changes approved on February 1, 2024 are operationalized by this action, reinforcing a more agile, rules-based response framework that enables rapid reallocation within defined limits, clearer governance on instrument choice, and enhanced transparency to the Board.