IDA looks to emerging economies for funds

07/10/2010 | Phil Thornton

The World Bank fund that lends to the poorest countries is asking emerging economies for more cash because the rich nations are short of it

The World Bank fund that lends to the poorest countries is asking emerging economies for more cash because the rich nations are short of it, a senior Bank official has said.

The International Development Agency (IDA) is seeking a big increase in its funding to meet the needs of poor countries in the wake of the financial crisis and to meet the

Millennium Development Goals targets for 2015.

Axel van Trotsenburg, the World Bank official overseeing the negotiations over IDA replenishment, told Emerging Markets that rich countries were clearly under domestic pressure to cut spending.

“Many donors face very difficult circumstances at home with tight budgets so while these countries remain very strongly committed to IDA, there is also a recognition that there is fiscal stress and one needs to find the appropriate balance,” he said.

The negotiations for what is known as IDA16, which cover a programme to lend to 79 countries in the three years from 2011 to 2014, are looking to put together a new financial framework that “really stresses global solidarity and a global contract for all”.

Van Trotsenburg said the new framework involves “actively seeking” support from new emerging donors and from countries that benefited from previous IDA grants.

“We are committed as the World Bank Group to a strong IDA”, he said. “It will require that every party will do his or her part, and really stress the global partnership that IDA constitutes.”

But van Trotsenburg declined to reveal how the burden would be split between up to 50 donor countries, saying that it would be “premature” to disclose percentages at this stage. The G7 alone contributed more than 56% of the 2007 IDA15 round.

The issue comes to a head next week in Washington, when delegates from donor and recipient countries meet for two days of talks to agree on IDA funding. A deal must be agreed this year.

The Bank has produced five alternative scenarios for replenishment. These range from a zero increase in real terms (5.72% in nominal terms) and four increases of 10%, 15%, 20% and 25% above IDA15’s record $41.6 billion.

At their June meeting in Mali, delegates proposed narrowing the options down to the three middle scenarios, i.e. a package ranging between ranging from $46.9 billion to $51.3 billion.

Van Trotsenburg, who is the Bank’s vice president for concessional finance, said there was a growing consensus on the need to shift the focus onto IDA programme’s results.

The World Bank will today publish an analysis of results that a decade of IDA-funded projects have brought over the last 10 years. The headline figures are:

• At least 13 million lives saved;

• 310 million children immunised against killer diseases;

• Access to water and sanitation provided to 177 million people; and

• More than 47 million people given access to health services.

Van Trotsenburg said: “The results are part and parcel of the IDA framework ... so that whatever is committed is most effectively being used.

“In the area of health, for example, IDA has been able to support countries that could in turn with these resources save 13 million lives.”

Related stories

  • CEE urged to tap Asia for DCM lessons

    The gap between infrastructure needs and investment in Central and Eastern Europe shows why the region needs to learn lessons from Asia on how to build deep debt capital markets, according to leading bankers

  • Making the bond markets work for CEE infrastructure

    If the central and eastern European countries’ vast infrastructure investment gap is ever to be bridged, then private capital via the bond markets will have to be harnessed

  • Ukraine taps private sector and Georgia to reform conflict ...

    President Petro Poroshenko and premier Arseniy Yatsenyuk have dipped into Georgia’s deep pool of reformist talent in an effort to rebuild Ukraine’s war-ravaged economy. However, even with a vast IMF package and other financial assistance, many have trouble seeing how Ukraine is ever going to return to growth while it is in conflict with the Russia-backed rebels in the east

  • Crisis ahead for Croatia without dramatic changes, warn ...

    A terrible cocktail of a vast debt pile, large fiscal deficit and lack of growth has pushed Croatia’s debt profile precariously close to unsustainable levels. Without comprehensive structural reforms, many believe the country’s economy will be in crisis by the end of the decade.

  • Romania to avert deflation threat as prices go negative

    With Romania set for inflation to fall below zero, its deputy central bank governor insists that it will prevent deflation, as it continues to foster economic growth


Editor's Picks


In Focus

  1. Georgian jewel shines bright against Russian darkness

  2. Ukraine taps private sector and Georgia to reform conflict-ravaged economy