U.S. Government Oversight

What is Multilateral Development Bank (MDB) Replenishment?

With annual lending portfolios totaling over $22 billion (1), the World Bank and other multilateral development banks (MDBs) require assistance from their member governments to help continue financing their operations.  Because many of these Bank loans to impoverished countries are low- or interest-free, have long grace periods and even longer repayment periods- sometimes up to 40 years, these banks continually need to have money injected into their coffers to fund projects that promote their institutional visions for sustainable development and poverty alleviation. This periodic allocation of funds by donor governments to the MDBs, known as replenishment, varies among the development banks and their member countries. 

(1) This reflects total lending for the World Bank only; see this page for details

How it works

Typically, replenishments occur every three to four years and include two phases prior to commencement: negotiations and appropriations.  During negotiations, representatives from donor governments meet with management from the different MDBs 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 MDB during the replenishment period. Often times these purviews for lending are vague and ill-defined.  For example, the International Development Association (IDA), the soft-lending arm of the World Bank that issues “concessional” loans to poor countries, defined two policy requirements for lending- “The Twin Pillars”- during its most recent fourteenth replenishment, IDA-14, as “fostering the climate and conditions for sustainable growth, investment and job creation that are inclusive of poor people [and] empowering poor people to participate in development and investing in them.” 

Following these negotiations, appropriations take place at the national level, where donor governments work within their own legislative frameworks to allocate the necessary funds promised to the MDBs during replenishment negotiations.  As the largest lending member government to the MDBs, the United States plays a significant role during the replenishment process. 

Table 1: Current MDB Replenishment Cycles and US Funding 

The United States and Replenishment

A number of federal agencies within the United States Government, most notably Congress and the Treasury Department, are involved in MDB replenishment.  The US Executive Directors (EDs) to the MDBs, who represent US interests and participate in the replenishment negotiations, report directly to the Secretary of the Treasury through the Assistant Secretary of International Affairs.  As such, the Treasury Department establishes US policy at the MDBs though recommendations and advising to the EDs.  Treasury is also then responsible for securing resources from Congress promised to the banks by the EDs during replenishment negotiations. Since Congress appropriates funds for foreign operations- including replenishment at the MDBs- during its annual Congressional Budget Cycle, Congress has capabilities to influence Treasury policy towards the MDBs.  Congress draws on a number of conditional legislative measures attached to the resources it allocates to Treasury for MDB replenishment. 

Congress typically uses three types of legislation to promote reforms at the MDBs, in part during replenishment:

• Funding Conditions Several reforms at the MDBs resulted from conditions attached by Congress to US replenishment funds.  For example, the creation of the World Bank Inspection Panel emerged in part from Congressional involvement during replenishment.  In 1993, the chairman of the House authorizing committee informed senior Bank officials that the US would not contribute to the 10th replenishment of IDA unless the Bank adopted a disclosure of information policy, which also contained mechanisms for the Inspection Panel.  The Bank responded slowly to these Congressional recommendations, but when Congress authorized only the first two years of a three-year replenishment commitment, the Bank acted- and by 1995, both measures were in place.
• Voting Restrictions This type of measure requires US EDs to abstain from votes that run contrary to the objectives of MDB reforms as outlined by Congress.  One notable example is the 1989 “Pelosi Amendment,” which 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 recommendations to policies at the MDBs that will be used as frameworks for funding criteria of replenishment resources.  One example is the 2006 Foreign Operations Appropriation Bill, which outlined restrictions on the allocation of funds to extractive industries projects that did not contain revenue transparency mechanisms, like the disclosure of Host country Agreements or other project bidding documents.

U.S. Executive Directors' Voting

• U.S Executive Directors' Voting Record on Multilateral Development Institutions loans (U.S. Treasury website)