IDA makes funding plea

03/10/2009 | Phil Thornton

The World Bank will push for an “ambitious” three-year round of funding from rich nations to help the world’s poorest countries – and may even call for a short-term cash injection this year, a senior Bank official has told Emerging Markets.

The Bank will hold a mid-term review of how it has spent the record $41.6 billion of funding that its low-income country (LICs) arm, the International Development Association (IDA), secured in 2007 for the 2009-2011 period.

Axel van Trotsenburg, Vice President for Concessional Finance, said the Bank has been “leaning forward quite pro-actively” to help LICs cope with the worst impacts from the financial crisis.

Concessional lending through the IDA increased by $2.8 billion to reach $14 billion in the fiscal year to June 2009, of which $2.6 billion was provided as grants.

“We expect that we will have an equally strong programme this year, particularly in the lowest income countries, and in Africa, where we have significantly scaled up our support programme to provide necessary support,” he said.

The financial crisis had not only had short-term impacts on unemployment that had hit all countries, but the slump in growth threatened progress towards the United Nations Millennium Development Goals (MDGs) that fall due in 2015.

“Potentially we may need to look outside [existing resources] and we are in the process of thinking this through, and consulting with the donors,” he said. He declined to reveal the size of the increase the IDA is considering.

If the Bank makes an appeal for new funding it would join a long list of international financial institutions looking for injections of fresh money, following the $750 billion increase in resources for the IMF.

Van Trotsenburg will spell out his views at a seminar on development finance in light of the crisis being held in the Istanbul Conference Centre this afternoon.

The launch of the next three-year round of IDA funding, known as IDA16, coincides with the 50th anniversary of the development body. IDA 16 will cover funding from 2012 to 2014, making it the last increase before the MDG deadline.

“IDA16 will be ambitious,” van Trotsenburg told Emerging Markets, “We have major challenges and the Bank wants to be a key player in helping our partner countries to achieve the MDGs. “We see this as our mission and ambition is part and parcel of it and I am sure that ambition will translate into something significant.”

He acknowledged that donor countries were under intense budget pressure because of the collapse of tax revenues and the volume of interventions that governments have implemented.

“If you are managing taxpayers’ money, then there are very special responsibilities to make it as effective as possible. It is important that we translate the needs of our low-income country partners clearly to donors,” he said.

The medium-term review in November comes just weeks ahead of the launch of the IDA16 negotiations in February.

Van Trotsenburg played down worries that major donors would withhold their contributions to IDA because of their criticism of the Bank’s record on transparency and corruption.

The UK withheld funding temporarily in 2005 over such concerns, and Barney Frank, chairman of the powerful House Financial Services Committee in the US Congress, has stated his intention to withhold any further money for the Bank until it becomes more accountable.

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