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CGD research explores how international financial institutions such as the International Monetary Fund, World Bank, multilateral development banks, and other international development agencies can become more responsive to the needs of developing countries. The Center’s work concerns itself with the future of these institutions, all of which are facing shifts in demand for their traditional services, the emergence of new institutions, and reform of their leadership selection processes.
The International Development Association (IDA) is the World Bank’s arm that provides highly concessional loans and grants to the world’s poorest countries. IDA is one of the largest sources of assistance for these countries – of which, half are located in Sub-Saharan Africa. And, it is the single largest source of donor funding for basic social services in the poorest countries. In FY10, the largest IDA recipients included India, Vietnam, Tanzania, Ethiopia, Nigeria, Bangladesh, Kenya, and Uganda.
According to the Center’s Quality of Official Development Assistance (QuODA) assessment, IDA is the only multilateral aid agency that scores in the top ten across all four sub-indices (maximizing efficiency, fostering institutions, reducing burden, and transparency and accountability).
The majority of IDA’s funding comes from contributions by roughly 45 donor governments. Every three years, these governments gather to replenish IDA’s coffers. The so-called replenishment negotiations provide an opportunity for shareholders and stakeholders to influence IDA’s institutional and programmatic objectives. The largest pledges to previous replenishment (IDA-15) were made by the United Kingdom, the United States, Japan, Germany, France, Canada, Italy and Spain. Additional funds come from the World Bank’s net income and from borrower countries' repayments of earlier IDA loans (i.e., “reflows”).
In mid-December 2010, donor governments will meet in Brussels to conclude the IDA-16 Replenishment agreement. This will be the last full IDA replenishment until the Millennium Development Goals (MDGs) deadline in 2015. The IDA-16 agreement largely will focus on several key themes, including: fragile states, gender, crises response, and climate change. World Bank management has proposed an overall IDA-16 financial envelope of $47 billion – of which, donor governments would provide roughly $33 billion. This would essentially entail flat donor contributions in real terms compared to the previous IDA-15 replenishment. However, it would mean a roughly 15 percent increase overall due to usage of the World Bank’s internal resources (i.e., IDA credit reflows, IBRD net income transfers, etc).
The Center has produced several proposals and analytical papers dealing with IDA’s operations. These include:
Leveraging World Bank Resources for the Poorest: IDA Blended Financing Facility Proposal. Research Fellow Ben Leo proposes a new World Bank financing model for creditworthy emerging economies, such as India and Vietnam. By doing so, IDA could free up to $7.5 billion worth of additional assistance for the world’s poorest, most vulnerable countries.
How Can Donors Create Incentives for Results and Flexibility for Fragile States? A Proposal for IDA. Senior Fellow Alan Gelb offers a concrete proposal for how IDA can: (i) rebalance incentives to increase attention on delivering results and to the frameworks for monitoring and evaluating them; and (ii) supplement performance-based allocations to fragile states through a performance fund to enable well-performing projects to be scaled up.
Inside the World Bank's Black Box Allocation System: How Well Does IDA Allocate Resources to the Neediest and Most Vulnerable Countries? In this paper, Research Fellow Ben Leo explores just how well IDA’s existing performance-based allocation system addresses the unique needs in the world’s most vulnerable countries.
The World Bank's Work in the Poorest Countries: Five Recommendations for a New IDA. This CGD report argues that donor governments should focus on five key actions: (i) affirming IDA's centrality in the international aid system; (ii) allowing IDA to concentrate on its core competencies; (iii) stop holding IDA hostage to broader geo-political battles; (iv) pushing IDA to find the right incentives for dealing with fragile states; and (v) sharpening the incentives for performance.