This year, donor countries will decide on their financial contributions to the World Bank’s International Development Association (IDA) for 2011-2014. This replenishment of funds takes place every three years and allows IDA to make cheap loans and grants to low-income countries (see Update 55). This is the sixteenth round of replenishment, ‘IDA-16’. For the previous replenishment, donor countries provided 60 per cent of the total $42 billion allocated, with the remainder coming from loan repayments and the other arms of the World Bank (see Update 59).
Although replenishment contributions do not affect members’ voting shares at the Bank, the negotiations provide a key opportunity for donors to try to influence the World Bank by imposing themes or conditions on their commitments. Donors have agreed on a limited number of ‘special themes’ for the last two replenishments (see Update 55). For IDA-16, these will be climate change, gender, fragile states and aid effectiveness. At the end of the process, a set of ‘monitorable actions’ is decided for the Bank to report against. If donors are still unsatisfied, they may put conditions on part of their contribution. For example, in 2007, Norway withheld a quarter of the planned increase of its contribution, pending progress on conditionality. The process is also an important window for civil society organisations to raise critical issues (see Update 58).
The replenishment process
IDA replenishment is a key opportunity for donors and civil society to raise critical issues.
For IDA-16, negotiations will take place over four meetings between March and December. Three of these are expected to be held in Paris, Washington DC, and either South Africa or Egypt. At the table are Bank staff and countries’ IDA ‘deputies’ – senior civil servants from the ministries of development, finance or foreign affairs – including two deputies from each IDA region. Selected deputies from IDA countries present their perspectives on IDA at the first meeting before special themes are agreed. The second meeting, which is always held in an IDA country, addresses needs and develops the special themes. Subsequent meetings produce a report setting out priorities and policies for the next IDA. Donor countries’ pledges are finalised at the last meeting. This can be a non-event, as in the UK, where the IDA contribution is subsumed under parliamentary approval of an entire departmental comprehensive spending review. In contrast, in the US, the Treasury must secure resources from Congress to meet IDA replenishment commitments. Congress has, in the past, used these opportunities to try to influence US Treasury policy towards IDA.
Mid-term review and the Bank’s response to the financial crisis
IDA’s performance is subject to evaluation at the mid-point of each three-year period. The mid-term review for IDA-15 took place in November 2009. Bank staff drew attention to IDA’s increased commitments and front-loading (accelerated disbursements) in response to the financial crisis, and called for donors to raise their replenishment contributions accordingly. NGOs have questioned the extent to which IDA funding has increased, however (see Update 68).
Participants in the review also proposed a new Crisis Response Window (CRW), which was approved by the Bank’s executive board in December. To mitigate the effects of the financial crisis, the CRW will channel $1.3 billion in redeployed Bank funds to 56 non-oil-exporting IDA countries during the remainder of IDA-15. It will also be open to voluntary donor contributions.
IDA currently provides funds to 79 countries. The cut-off for IDA eligibility is decided by a measure of average income per person – $1,135 GNI per capita in 2010. The formula by which the IDA pot is divided amongst these countries is a complicated one. It factors in population and economic wealth, but is heavily weighted towards a ‘country performance’ rating. This rating is based both on the controversial Country Policy and Institutional Assessment scores (see Update 69) that the Bank gives to the quality of the country’s policies and on the performance of the Bank’s lending portfolio in the country.