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Donor IDA pledges fall flat

17 February 2011

The World Bank gained a 12 per cent inflation-adjusted increase from the 16th fundraising round for its low-income country arm, the International Development Association (IDA), despite flat donor contributions and amid renewed criticism of its overall approach.
In December last year, the Bank announced that IDA 16 (see Update 73, 70, 69) pledges for the period July 2011 to June 2014 totalled $49.3 billion, up from $41.6 billion during the last round. Countries make commitments in national currencies, so it is hard to calculate the inflation-adjusted increase, but allowing for US dollar inflation gives a real boost of around 12 per cent. 

Donors pledged $26.4 billion, up from $25.1 billion, meaning no real increase when adjusted for inflation.  There were 51 donors, including some middle-income countries, but the overwhelming majority of the cash came from the richest countries, with the US displacing the UK as the largest donor. Other contributions came from donor subsidies for ongoing Bank debt relief under the Multilateral Debt Relief Initiative (see Update 49) and the Bank’s internal resources. However, a significant proportion also came from changing the terms of lending to middle-income countries that can also borrow from the International Bank for Reconstruction and Development (IBRD, the Bank’s middle-income lending arm) which include India and Vietnam, currently IDA’s top clients, and from accelerated repayments from former IDA countries, particularly China.

The Bank’s final report – which will detail what each donor pledged and how IDA will be assessed – will only be finalised by April.  The near-final November draft of this report sets out an expanded four tier monitoring framework for IDA. In addition to the existing two tiers, which focus on outcomes and outputs at country level, two further tiers have been added with indicators for the operational and organisational effectiveness of IDA itself. However, in a December response to a draft of the report, Brussels-based NGO Eurodad said it was “concerned by the way ‘results’ are defined”. Some indicators are in fact political policy choices such as the “reduction of regulatory obstacles to private sector development.” Eurodad concludes that this “could be interpreted as a way of exerting influence over developing countries economic policies”.

The Bank also places emphasis on country ownership, highlighting that country level priorities for IDA are “customised on the basis of a Country Assistance Strategy” (CAS, see Update 70). However, Eurodad argues that “the World Bank CASs often contain details and indicators that go beyond the national development strategies”, and that the Bank has in the past had a “strong influence” over how these national development strategies are drafted.  

Criticisms of the Bank’s impact on domestic policy making through the Poverty Reduction Strategy Process (PRSP, see Update 42, 41) were also made in November by Arne Ruckert of the University of Ottawa. He argues that “the introduction of the PRSP approach has significantly extended the scope and depth of World Bank interventions into the internal affairs of the developing world”. “Conditionalities have started to reach beyond the economic sphere” with increased conditionalities in social and governance policies, Ruckert argues, with the aim of “neutralising of potential disruptions … from unrest at the bottom” that could arise from the economic approach promoted by the Bank.

The Least Developed Countries Report 2010, from the United Nations Conference on Trade and Development also argues that “evidence shows that the way in which PRSPs are designed and implemented is still strongly influenced by donors’ policy conditionality, monitoring benchmarks and financing choices.”

The IDA 16 framework also develops indicators for its four special themes: crisis response, gender, climate, and conflict-afflicted countries. On gender, disaggregated indicators are promised, but only in the education, health and water sectors. The commitment that all CASs would have a gender assessment, initially due to be achieved by 2005 but still a long way off (see Update 72), is repeated, and annual reports on progress are promised.

The new IDA crisis response window has been approved, to provide protected funds for countries experiencing severe external shocks, such as natural disasters or regional or global economic crises. The amounts involved are capped at 5 per cent of total IDA resources, and emphasis is placed on this being available only “as part of a concerted international response [and] only accessed as a last resort.

IDA 16 promises more advice on climate, greater analysis of “projects in climate change sensitive sectors”, and better monitoring of the impacts of IDA funds on mitigation and adaptation. Emphasis is placed on “IDA’s ability to leverage additional climate finance” though the only examples given are linked to existing Bank-housed Climate Investment Funds (CIFs), currently funded by donor contributions (see Update 74).

Finally, the IDA mid-term review, due in 2012, promises special attention to gender, the subject of this autumn’s World Development Report (WDR), and on fragile and conflict affected countries, the subject of the delayed 2011 WDR, due in April.

In January, the Financial Times put the scale of the Bank’s lending into perspective, claiming that the China Development Bank and China Export-Import Bank loaned more to developing countries than the Bank’s middle-income country lending arm (IBRD) and its private sector arm (IFC) together.  However, Helmut Asche of the University of Leipzig cast doubt on the figures, saying “we don’t know how the Chinese loans are divided into categories that are comparable with the World Bank’s data.”