20 February 2007
Representatives of donor countries, also known as IDA Deputies, met in Paris in early March to negotiate the amount of funding they will contribute to IDA's 15th replenishment. Find out more about the how the process works and what to expect.
What is IDA?
Please scroll down for an overview of the process and players.
The IDA-15 Timeline
The IDA Deputies will have at least four meetings during the negotiations process, the first scheduled for early March in Paris. Key issues and priorities are identified at this first meeting, based on IDA Deputy position papers that were to have been submitted to IDA-15 Chairman Philippe Hourer.
Funding levels for the replenishment will be debated at the second meeting, currently scheduled for June in Mozambique. This meeting will be a key intervention point for borrowing governments and civil society organizations. Priorities and funding will be debated during the third meeting, which will take place during the October WB Annual Meetings in Washington, DC. The fourth meeting, scheduled for the end of the calendar year, is to finalize any outstanding issues. Past replenishments have often required further meetings to iron out differences among IDA Deputies..
On the table
Hot topics expected to be addressed by IDA contributions include: conditionality, governance, extractive industries revenue and contract transparency, strengthening accountability mechanisms and climate change.
March 5-6, 2007 meeting
IDA Deputies selected the "special themes" that IDA15 discussions will focus on. Of over 75 themes initially proposed by the Deputies, three were selected at the March meeting: the financial architecture; aid effectiveness; and fragile states. The next Deputies meeting, scheduled to be held in Mozambique in June, will focus on fragile states.
What is IDA?
The International Development Association-the World Bank's "concessional," or low-cost lending arm, provides funding to the poorest member governments of the World Bank.
Since its inception in 1960, IDA has lent over US$142 billion, with over US$100 billion outstanding for repayment. Eighty-one countries are currently considered eligible to borrow from IDA. To be eligible, IDA borrowers must (a) lack sovereign creditworthiness, (b) have a per capita income of less than US$895, and (c) must meet certain "performance" criteria set by the World Bank. IDA is funded through three main sources: reflows from previous loans, transfers from IBRD net income, and contributions from IDA donors.
IDA lending flows to an immense array of programs and projects, from basic health and education provision to economy-wide adjustment operations, from water supply and sanitation to oil, gas, and mining projects. The bulk of IDA lending supports individual investment projects. In recent years IDA has become, according to the Bank, "the single largest source of donor funds for basic social services to the poorest countries."
What is replenishment?
The World Bank and other multilateral development banks (MDBs) require assistance from their member governments to finance their operations. Because many of their loans are low-interest or interest-free, and have long grace and repayment periods, the MDBs continually need to have money injected into their coffers. This periodic allocation of funds by donor governments is known as replenishment.
How it works
World Bank IDA replenishments occurs every three years, and includes two phases prior to commencement: donor government negotiations and national level appropriations. During negotiations, representatives from IDA donor governments (the IDA Deputies) meet with World Bank Management to determine appropriate sizes of replenishment, draft policy frameworks for identifying the particular types of projects that will receive replenishment resources, and negotiate equitable contributions from each donor government to the institution during the replenishment period. The US IDA Deputy is Kenneth Peel, Deputy Assistant Secretary of International Development Finance and Debt at the US Treasury.
Following these negotiations, appropriations take place at the national level, as donor governments work within their own legislative frameworks to allocate the necessary funds promised to the Bank during replenishment negotiations.
The Unites States and Replenishment
The US Treasury Department is the lead federal agency with responsibilities for the MDBs and thus negotiates for the US Government during replenishments. Treasury is also responsible for securing resources from Congress promised to the Bank during replenishment negotiations. Since Congress appropriates funds for foreign operations - including replenishment at the MDBs - during its annual Congressional Budget Cycle, it can influence US policy towards the MDBs.
Congress typically uses various types of legislation and strategies to promote reforms at the MDBs, in part during replenishment: reporting conditions, voting restrictions and policy guidance.
Reporting conditions:
Congress can attach reporting conditions to US replenishment funds which require US Treasury to provide public reports regarding MDB operations. For example, as part of the FY ’04 Appropriations Bill, US Treasury must now post on its website a chart on how the U.S. Executive Director to the MDBs votes on a range of MDB projects and programs.
Voting Restrictions:
Congress may require the US ED to abstain from voting in ways that contradict its MDB reform objectives. For example, the 1989 “Pelosi Amendment,” requires US EDs to abstain from any vote on loans to Category A projects - those which “would have significant impact on the environment,”- unless affected peoples are provided with environmental impact assessments 120 days prior to the vote. The “Pelosi Amendment” subsequently led to the adoption of environmental assessment policies at all of the MDBs.
Policy Guidance:
Congress also takes an active role in promoting US government policies and congressional findings as policy goals for the MDBs. While the US cannot single-handedly change policies at the MDBs, recommendations from Congress guide Treasury’s policy priorities at the institutions. For example, the US Congress has repeatedly required the Treasury to pursue a range of “policy goals” at the MDBs, such as greater transparency of the MDBs’ Board of Directors or strengthened anti-corruption and whistleblower policies.
Delay or witholding of funds:
Significantly, the US Congress may use the threat to delay or withhold funds to encourage the MDBs to adopt important institutional reforms. For example, the creation of the World Bank Inspection Panel as well as the World Bank’s Dosclosure of Information Policy emerged in part from Congress exerting this type of influence during an earlier replenishment.
Additional Resources
- Europeans Asked to Pull Strings at World Bank, by Emad Mekay, March 10, 2007 (IPS News website)
- Wolfowitz Urges Africa Aid to Prevent Terror `Breeding Ground', by William McQuillen, March 12, 2007 (Bloomberg News website)
- Embattled Wolfowitz seeks more cash, by Krishna Guha, March 5, 2007 (FT website)
- Wolfowitz pushes for new funds for World Bank, by Lesley Wroughton, March 2, 2007 (Mail and Guardian website)
World Bank documents and resources
- World Bank's IDA-15 website
- IDA-15 Replenishment Priorities: Proposed Special Themes, The World Bank, February 2007 (World Bank website)
- Aid architecture: An overview of the main trends in official development assistance flows, The World Bank, February 2007 (World Bank website)
- Selectivity and performance: IDA's country assessment and development effectiveness, The World Bank, February 2007 (World Bank website)
- IDA's long-term financial capacity, The World Bank, February 2007 (World Bank website)
- Multilateral Debt Relief Initiative (MDRI): Update on debt relief by IDA and donor financing to date, The World Bank, February 2007 (World Bank website)