According to the IDB’s own characterization of its work, the Bank assists its Latin American and Caribbean borrowing member countries in formulating development policies and provides financing and technical assistance to achieve environmentally sustainable economic growth and increase competitiveness, enhance social equity and fight poverty, modernize the state, and foster free trade and regional integration.
Recent lending amounts
The organization continues to be an important source of development assistance for the 26 countries that are considered borrowers; for example, its average annual lending over the last five years exceeds World Bank average lending to Latin America over the same period by 25 percent.
In the 2005 financial year (FY), the IDB approved $7.1 billion in loans and guarantees to finance projects involving a total investment of more than $15.5 billion. In cumulative terms, by the end of 2005, the Bank had approved $137.3 billion in loans and guarantees to finance projects with investments totaling $326 billion, as well as $2.1 billion in grants and contingent-recovery technical cooperation financing.
The Bank’s disbursements on approved loans amounted to $5.3 billion in FY2005, compared with $4.2 billion in 2004. As of December 31, 2005, cumulative disbursements, including exchange adjustments, totaled $117.6 billion, or 86 percent of the loan amounts approved by the Bank.
Trends
Just over 48 percent of the Bank’s lending in FY2005 has gone to operations in the “Social Development” sector, with 37 percent going to fund activities under “Competitiveness” and the remainder going to fund activities under “Reform and Modernization of the State.” This represents a steady and significant increase in funding for Social Development, considering the cumulative support that the institution has provided to this sector since the early 1960s.(1)
Another significant trend in financing by the IDB can be seen in its support for the private sector. For example, in FY2005 financing operations by the Inter-American Investment Corporation, a member of the IDB group that specializes in loans and investments to small and medium-sized businesses, more than doubled to reach $341.7 million. This is consistent with the objectives of a new lending framework approved by the Bank’s Board of Governors in 2005. As part of the drive to achieve a more “flexible” and “country-responsive” set of financial instruments, the ceiling on direct lending to the private sector was increased from $75 million to $200 million. In extraordinary operations the Bank can now lend up to $400 million for a private sector operation without government guarantees. Read the Proposal that discusses these changes, which was approved by the Board of Governors during the last Annual Meetings.
Another component of the IDB’s new lending framework can be seen in the expanded definition of who is eligible to receive financing. A recent trend suggests that the IDB will likely increase its lending to sub-national governments, including provincial, state, and municipal divisions.
(1) It should be noted, however, that the IDB includes activities relating to “Urban Development,” “Water and Sanitation,” and “Microenterprise,” in addition to those relating to the traditional Social sectors, as falling under “Social Development.”