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Finance

News

Donor contributions to IDA up record amount

Norway, civil society not satisfied

1 February 2008

Despite evidence that it has failed to end the practice of forcing policy reforms on recipient countries, the World Bank will collect a record $41.6 billion for its low-income arm, the International Development Association or IDA, for the period July 2008 to 2011. The amount is 30 per cent higher than the last replenishment of $32.1 billion in 2005. The total includes a 42 per cent increase in support from donor governments to $25.1 billion.

The Bank’s contribution of $16.5 billion is made up of $6 billion in donor country money replacing cancelled debt, repayments of past loans to IDA for debt that was not cancelled, and a doubling of the Bank’s ‘own’ contribution to $3.5 billion. The latter amount comes equally from the Bank’s middle-income lending arm (the International Bank for Reconstruction and Development) and from its private sector arm (the International Finance Corporation).

The last in a series of donor meetings was held in Berlin in December. Britain donated $4.3 billion, an increase of nearly 50 per cent over its last contribution, making it the largest single donor. As a result, the UK share of the fund grew from 13.2 to 16.7 per cent. The US, previously the largest donor, increased its pledge by 30 per cent to $3.7 billion, and will see its share rise from 13.8 to 14.7 per cent. Germany increased its donation by 18 per cent to $2.2 billion. The list of donors also includes first-timers China, Cyprus, Egypt and the three Baltic states.

Also for the first time, two private sector companies – Japanese banks whose identity can not be revealed until the process is complete – made pledges to IDA. The banks’ money (rumoured to be less than a half of a million dollars) may be processed before June 2008, which would mean that it would be counted under the previous funding round. The Bank’s board was insistent that before any private sector money could go to IDA 15, a framework needed to be devised. The paper on this is being written by the concessional finance unit and is due to go to the board end March.

Over 100 CSOs from across Europe had called on their governments to consider “redirecting funding away from the Bank through other mechanisms which respect country ownership and take the necessary leadership in addressing climate change”. UK NGOs were disappointed that their government had given so much and asked for so little by way of reform in return. Phil Bloomer of UK NGO Oxfam said that “billions of pounds of UK taxpayers’ money are being handed over to an institution that still pushes some policies on poor countries that destroy development opportunities for poor people.”

The only European government which took its responsibility for reform of the Bank seriously was Norway, which announced that it would be withholding 25 per cent, or $4.2 million, of a planned increase in financial support to the Bank. Norway’s deputy minister of development Håkon Arald Gundersen said “We are not completely satisfied with the progress the World Bank has made in living up to its principles on conditionality. Because of this we have chosen to reduce the increase in support.”

Norway commissioned an independent researcher to examine the claims and counterclaims made by the World Bank in its report on the use of conditionality and a parallel report by Brussels NGO Eurodad (see Update 58). Benedicte Bull, of the Centre for Development and the Environment at the University of Oslo, found:

  • “a certain ‘slack’ in the application of the definition to categorise policy conditionalities on the part of the World Bank”;
  • that the Bank “has not always been good at allowing ‘policy space’”; and
  • that Norway should advise the Bank to stop ‘bundling’ together critical and non-critical conditions as it “makes programmes less transparent”.

The final IDA report, which will include the all-important matrix of ‘monitorable indicators’ is scheduled to be discussed by the board end February. NGOs will be hoping that a silver lining may yet be found in the adoption of recommendations for an independent review of the use of conditionality and stronger commitment to the use of poverty and social impact assessment.