World Bank’s fund for the poorest gets almost $50 b in record funding

Brussels - A final agreement was reached last week on a US$49.3 billion funding package for the International Development Association (IDA), the World Bank’s fund for the poorest countries and a key actor in progress towards achieving the Millennium Development Goals.

Funding for the 16th IDA replenishment (IDA16) is up 18 percent on the previous round three years ago and follows pledges not only from traditional donors but also funding from within the World Bank Group and from current and former IDA borrowers.

“The funding pledges show support from an extraordinary global coalition of donors and borrowers which have come together to ensure that even in these difficult economic times we offer hope and opportunity to the world’s poor,” said World Bank Group President Robert B. Zoellick. “This strong level of support is a testimony to IDA’s relentless focus on results that bring improvements on the ground for poor people.”

The new compact is manifested in strong pledges from both traditional and new donors, contributions through pre-payments from countries that used to borrow interest-free loans from IDA and contributions from World Bank and IFC net income.  

 “With this robust IDA replenishment, we will have the ability to help immunise 200 million more children, extend health services to over 30 million people, give access to improved water sources to 80 million more people, help build 80,000 kilometers of roads and train and recruit over two million teachers,” Zoellick said.

The agreement marks the last opportunity for donors and poor countries to effectively use IDA funds to make more progress on reaching the Millennium Development Goals, which includes the internationally agreed target to halve poverty by 2015.  A total of 51 donors pledged to IDA16, which covers the period from July 2011 to June 2014.

 “This strong response by donors also signals that development funding should not be viewed just as aid, but rather as an investment in the future, as we need developing country growth to ignite global growth,” said Ngozi Okonjo-Iweala, World Bank Managing Director and Chairperson of the IDA16 negotiations. “IDA can help ensure that development dollars benefit both the developing and developed worlds.”

Over the next three years, IDA will help 79 of the world’s poorest countries boost growth and overcome poverty by financing infrastructure, improving health services, educating children, and combating climate change. Special focus will be given to addressing gender issues and helping fragile and conflict affected countries in their quest for peace and development.  As in the past, Sub-Saharan Africa will remain a major focus of IDA support.

“This is very good news for the poor across the world, particularly in Sub-Saharan Africa, where IDA’s long standing support has already helped to achieve concrete results. We applaud the sense of solidarity expressed by the donor community through this significant replenishment,” said H.E. Bingu wa Mutharika, President of Malawi and Chairman of the African Union.

Donors and partners also endorsed special crisis funding from within IDA to help low income countries deal with the impact of natural disasters and severe economic shocks. The new Crisis Response Window will include a special allocation for Haiti as it continues to recover from the 2010 earthquake.

The funding pledges came after a series of meetings, with the final two days of talks in Brussels, hosted by the Government of Belgium.  Belgian Minister of Finance, Didier Reynders, and Minister of Development Cooperation, Charles Michel welcomed the outcome of IDA’s 16th replenishment and praised the effort made by donor countries in a difficult financial and economic environment.  The ministers acknowledged that with the success of this replenishment IDA will continue to play a significant role in the achievement of the Millennium Development Goals by the poorest and most vulnerable countries.

During negotiations, delegates recognised IDA’s track record over the past 10 years in helping save 13 million lives, immunising over 310 million children, improving access to  water for more than 100 million people, and building or rehabilitating more than 100,000 kilometers of roads, helping poor people gain access to markets and services.

“These pledges will not only help improve the lives of 200 million people, they also represent a vote of confidence in IDA and its ability to maximise the development impact of scarce tax payers’ money,” said Axel van Trotsenburg, World Bank Vice President for Concessional Finance and Global Partnerships.

IDA provides an effective platform to coordinate donor efforts in poor countries and works in building capacity and institutions, which are essential for long term development.

The International Development Association (IDA) is one of the world’s largest sources of aid. IDA provides support for health and education, infrastructure and agriculture, and economic and institutional development to 79 of the least developed countries—39 of them in Africa.  About 20% of IDA funding is provided as grants, the rest is in the form of interest-free, long-term credits. Nearly all of IDA’s credits have no interest charge and repayments are stretched over 35 to 40 years, including a 10-year grace period.

Since its inception in 1960, IDA has provided more than US $220 billion in support to low-income countries, averaging US $14 billion a year in the last two years and directing the largest share, about 50 percent, to Africa. IDA supports country-led development with funds that are predictable and not “earmarked,” meaning more sustainable results. IDA is ever improving its rigorous results measurement system, in place since 2002. IDA is a global leader in transparency and undergoes the toughest independent evaluations of any international organisation. IDA puts a premium on efficiency and effectiveness and was ranked first in a recent evaluation of 40 multilateral and bilateral agencies. IDA is overseen by its 170 shareholder countries, creating opportunities for transfer of knowledge and expertise and ensuring a focus on results. IDA overheads are low; it is self-financed by a small service charge to clients.