The World Bank: The International Development Association's 14th Replenishment (2006-2008)
The World Bank: The International
th
Development Association’s 14
Replenishment (2006-2008)
Martin A. Weiss
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade
Summary
On April 18, 2005, the Board of Governors of the International Development
Association (IDA) approved the fourteenth replenishment of IDA’s resources. The
World Bank’s concessional lending and grant making facility, IDA is funded by
transfers from World Bank resources and periodic replenishments from World Bank
donor countries.
The Bush Administration pursued and achieved a number of objectives at the IDA-
increasing the allocation of grants, implementing performance-based allocation,
increasing transparency of IDA decision-making, and promoting opportunities for
private sector development in the poorest countries. This report discusses key aspects
of the IDA-14 agreement and provides current appropriations information. It will be
updated as events warrant.
On April 18, 2005, the Board of Governors of the International Development1
Association (IDA) approved the fourteenth replenishment of IDA’s resources. IDA, the
World Bank’s concessional lending and grant-making facility, provides development
assistance to the world’s 81 poorest countries. Eligibility for IDA resources is determined
by a country’s level of poverty as measured by per capita income. In 2006, countries with
2005 annual per capita gross national income of up to $1,025 were eligible for IDA
assistance. IDA is funded annually by the United States and other donor governments,
with major agreements and funding strategies determined approximately every three
years.
In the World Bank’s FY2006 (which ended June 30, 2006), IDA made commitments
to its members totaling $9.5 billion. Half of these commitments are in Sub Saharan
Africa. South and East Asia received 38% of new commitments with the remainder
1 The World Bank, “Additions to IDA Resources: Fourteenth Replenishment,” available at
[http://siteresources.worldbank.org/ IDA/ Re sources/14th_Replenishment_Final.pdf].
scattered throughout South America and Eastern Europe. Pakistan was the largest IDA
borrower in 2006, receiving $1.18 billion in new assistance. Other large borrowers
(receiving $500 million in assistance or more) were Vietnam, Tanzania, Ethiopia, and
India.
The IDA Agreement
At the conclusion of the IDA-14 negotiations, IDA donors announced that at least
$34 billion in resources will be made available to the 81 IDA-eligible countries during the
three years of IDA-14 (2005-2008). Of the $34 billion, $18 billion will be in new
donations from the 40 contributor countries. The remaining $16 billion will come from
reflows (repayments on former IDA loans) and transfers from the International Bank for
Reconstruction and Development (IBRD), the World Bank’s market-rate lending facility.
The $34 billion in resources made available by IDA-14 is an $11.6 billion increase
from the total IDA-13 level of $22.8 billion. It includes an almost 40% increase in donor
contributions from $12.7 billion in IDA-13 to $20.7 billion in IDA-14.
The Bush Administration pledged $2.85 billion to IDA-14 to be split into three
payments of $950 million for fiscal years 2006, 2007, and 2008. For the United States,
this represents no real increase from the amount budgeted and requested for IDA-13. For
that replenishment, the Administration requested $2.55 billion annually over three years
($850 million per year, FY2003-FY2005) and $300 million in incentive agreements if the
World Bank met certain Treasury-specified performance targets ($100 million in FY2004
and $200 million in FY2005).
Since the total size of donor contributions to IDA has increased by 40% while the
U.S. contribution has remained constant, the U.S. share of IDA decreases to 13% in IDA-
14 from 21% in IDA-13. Whether this decrease in the U.S. IDA share will have any
effect on the ability of the United States to pursue future objectives at IDA has not yet
been determined. The decline in U.S. percentage contributions does not affect voting
share. However, since the European member countries combined hold a much larger
percentage of World Bank shares than the United States, as well as an increased share of
IDA contributions, some analysts argue that they could exert more force in IDA lending
decisions and/or future replenishment negotiations if they negotiate together.2
U.S. Objectives
The United States Government pursued many priorities at the IDA-14 negotiations.
Major U.S. objectives at IDA-14 were: implementing a results measurement framework,
increasing the allocation of grants, implementing performance-based allocation, and3
increasing World Bank transparency.
2 Current IDA voting status of all contributor countries is available at [http://web.worldbank.org/
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3 See Secretary of the Treasury John Snow, Remarks: IDA-14 Replenishment Meeting, February
Measuring Results. In recent years, many observers — both critics and
supporters of the multilateral development banks — have cited a need to better measure
the performance of World Bank projects. A criticism, often voiced by the U.S.
Administration, is that it is unclear what MDB assistance has accomplished due to vague
objectives and too much emphasis on outputs (volume of aid) rather than country
outcomes. Introducing stronger performance requirements thus became one of the
Administration’s most sought after goals at IDA.
The IDA-14 performance measurement system is two-fold, assessing both (1)
progress on aggregate country outcomes, and (2) IDA’s contribution to country outcomes.
To assess country performance, the World Bank will monitor a set of 14 country
indicators for all IDA countries.4 To analyze IDA performance, the World Bank will
create output indicators measuring IDA’s contribution in the health, education, water
supply and transportation sectors. In addition to country performance and IDA
performance indicators, the World Bank will design country-level institutional indicators
and project-level indicators. The IDA-14 Agreement also stipulates that World Bank
management work to ensure that 100% of IDA investment projects and development
policy loans include indicators connected to a timeline with baseline data and periodic
assessments of project and program performance.
Performance-Based Allocation. Building on the new results measurement
system, the U.S. Administration would like to channel more IDA resources to the
strongest performing countries. Total IDA-14 allocations will be determined using a
formula that includes the IDA Country Performance Rating5, Gross National Income
(GNI) per capita, and population. The IDA Performance Rating is the dominant factor,
and higher performance can increase IDA allocations exponentially.
Grants. The United States has advocated for several years the use of grants rather
than loans at the MDBs concessional lending facilities. This view is a response to the
debt situation of many of the poorest countries, principally in sub-Saharan Africa.
Bilateral and multilateral debt of the poorest countries increased heavily between the
1970s and the present. It has become increasingly clear that the poorest countries are
unable to service their old loans let alone new loans. In 1996, the multilateral banks, the
4 Country indicators are: proportion of population below $1/day poverty line, under-5 child
mortality, HIV prevalency rate of women aged 15-24, proportion of births attended by skilled
health personnel, ratio of girls to boys in primary and secondary education, primary school
completion rate, proportion of population with sustainable access to an improved water source,
fixed lines and mobile telephone per 1,000 inhabitants, formal cost required for business start-up,
time required for business start-up, public expenditure management, GDP per capita, access of
rural population to an all-season road, household electrification rate.
5 The IDA country performance rating is determined by two World Bank ratings: the Country
Policy and Institutional Assessment (CPIA) and the Portfolio Performance Rating (ARPP). The
CPIA constitutes 80% of IDA’s country performance rating, and is a combined index of 16 pieces
of information evaluating economic management, structural policies, policies for social
inclusion/equity, and governance. The CPIA system was a U.S. initiative and was put in place
during the IDA negotiations in 1998. The ARPP assesses each country’s performance on
implementing prior programs, and accounts for 20% of the performance rating. The CPIA/ARPP
number is multiplied by a country measure of good governance to determine the IDA Country
Performance Rating.
International Monetary Fund, and the major creditor nations introduced the Heavily
Indebted Poor Countries (HIPC) initiative to reduce debt levels for the poorest countries.
Building on this initiative, President Bush, in 2001, introduced his proposal that the
World Bank shift its assistance to the poorest countries away from loans to grants.6
According to Bobby Pittman, Treasury Deputy Assistant Secretary for Multilateral
Development Banks, “grants can be useful for ending the lend-and-forgive cycle.”7 Other
donor countries agree with the concept of grants, yet note that without commensurate
increases in IDA funding, the bank’s financial strength may suffer. Some analysts note
that an unstated component of the long-term U.S. Administration policy-shift towards
increased MDB grants may be a shrinking of the institution. Barring additional donor
funds, the capacity to provide future assistance will decline because of fewer loan
repayments. Critics of grants also note that the World Bank’s IDA loans are already
provided on highly concessional terms, with little or no interest.
At IDA-14, deputies agreed on 30% of total IDA assistance in the form of grants, an
8% increase from IDA-13. Which IDA countries are eligible for grants depends on their
level of “debt distress.” Under the new “debt distress” framework, 47 countries are
projected to receive grant financing, 42 of which will receive 100% of their IDA
assistance in grants. Special dispensation will be given for HIV/AIDS grants to IDA-only
countries that would be ineligible for grant assistance under the new debt distress
criterion.
Transparency. Increasing transparency and public disclosure of World Bank
documents and policies has also been a longstanding U.S. priority at the World Bank.
Section 581 of the FY2004 Consolidated Appropriations Act (P.L. 108-199) directed the
Treasury Department to pursue policy goals related to transparency and accountability
across the MDBs.
These priorities influenced U.S. objectives at IDA-14. A major component of the
IDA-14 agreement is the World Bank’s commitment to full disclosure of the numerical
ratings for the Country Policy and Institutional Assessments (CPIA) ratings beginning in
Although the World Bank began disclosing the CPIA ratings in 2000, non-governmental
organizations argued that they were released in an aggregated format that did not reveal
anything about how country rating differed between countries and how the ratings were8
calculated.
6 “I propose that up to 50 percent of the funds provided by the development banks to the poorest
countries be provided as grants for education, health, nutrition, water supply, sanitation and other
human needs” President George Bush, speech to the World Bank, July 17, 2001. See also CRS
Report RL31136, World Bank: IDA Loans or IDA Grants?, by Jonathan E. Sanford.
7 Paul Blustein, “World Bank Plans to Shift to Grant Aid,” The Washington Post, January 14,
8 Jeff Powell, “The World Bank policy scorecard: The new conditionality?” The Bretton Woods
Project, November 22, 2004. Document is available at [http://www.brettonwoodsproject.org/
doc/knowledge/cpia.PDF].
In addition to releasing the CPIA indicators and their supporting data, the IDA-14
Agreement calls on the World Bank Executive Board to implement other important
transparency reforms. Specifically, the Agreement directs the Board to: (1) disclose
Board minutes; (2) strengthen procedures for documenting public consultation processes;
(3) make interim results of projects during their execution publicly available; and (4)
require an independent audit or assessment of internal management controls and
procedures for meeting operational objectives.
World Bank reports already available to the public include Country Assistance
Strategies, Project Appraisal Reports, Tranche Release Documents, Heavily Indebted Poor
Country (HIPC) initiative documents, Poverty Reduction Strategy Papers, Joint Staff
Assessments, and Implementation Completion Reports. In addition, as required by the
1989 Pelosi Amendment, all environmental assessment reports, resettlement instruments
and indigenous people’s development plans associated with projects that required the
preparation of these documents are to be disclosed to the public.9
IDA Authorization
Congressional authorization is required for U.S. participation in each IDA
replenishment agreement and appropriation of funds to meet the commitment over a
multi-year period.10 On May 26, 2005, the Development Bank Reform and Authorization
Act of 2005 (S. 1129), was introduced in the Senate. The bill passed out of the Senate
Foreign Relations Committee on July 26, 2005 with unanimous consent and was included
as an amendment in the FY2006 Foreign Operations appropriations bill (P.L. 109-102).
The FY2006 appropriations bill included full authorization for the United States to
participate in IDA-14, a total of $2.85 billion over three years.
FY2006 Appropriations
IDA appropriations are included in the annual Foreign Operations appropriations bill
in the House, and the State, Foreign Operations measure in the Senate. For FY2006, the
President requested $950 million, the first of three equal payments to fulfill the U.S.
contribution to IDA-14. On June 28, 2005, the House passed H.R. 3057 recommending
the full administration request. The Senate passed its version of H.R. 3057 on July 20,
2005 and recommended $900 million. The conference report, setting IDA appropriations
at the House level of $950 million for FY2006, was passed on November 4, 2005, and
signed into law (P.L. 109-102) by the President on November 14, 2005. Due to an across
the board recision of 0.1%, the enacted appropriations were $940,500,000.
Section 599D of the FY2006 appropriations measure added a provision that 20% of
the funds appropriated to IDA be withheld from disbursement until the Secretary of the
Treasury certifies to Congress that several anti-corruption measures (primarily relating to
World Bank procurement guidelines) are met.
9 See CRS Report 98-180, Mulilateral Development Banks’ Environmental Assessment and
Information Policies: Impact of the Pelosi Amendment, by Jonathan Sanford and Susan R.
Fletcher.
10 See also CRS Report RS22133, Multilateral Development Banks: Current Authorization
Requests, by Jonathan E. Sanford.
Treasury was unable to certify that the World Bank has met all of the required anti-
corruption provisions by the completion of the FY2007 spending measures.
Consequently, the Continuing Resolution for FY2007 appropriations (P.L. 110-5, as
amended) rescinded $31.35 million from the FY2006 appropriations. The CR also
mitigated the provision by changing the language from requiring Treasury certification
of World Bank compliance to Treasury now being required to report to Congress the
status of World Bank compliance.
FY2007 Appropriations
President Bush released his FY2007 budget request on February 6, 2006. The
president requested $950 million to fulfill the second U.S. contribution to the IDA-14
replenishment. This represents around 59% of the President’s FY2007 budget request for
U.S. contributions to the multilateral development banks.
On June 9, 2006, the House passed H.R. 5522, the FY2007 Foreign Operations
appropriations bill, which appropriated the full $950 million request. The Senate
Committee on Appropriations, in its report accompanying the Senate version of the Bill,
also recommended appropriating the full amount of the Presidential request (S.Rept. 109-
277). However, the full Senate did not take up the Foreign Operations appropriations bill
prior to the adjournment of the 109th Congress on December 9, 2006.
FY2007 IDA appropriations (and other Foreign Operations programs) are operating
under the terms of a Continuing Resolution (P.L. 110-5, as amended) which provides
funding at the FY2006 level or the House-passed FY2007 level, whichever is less. Thus,
IDA appropriations have been set at $940.5 million, equal to the FY2006 appropriations.
FY2008 Appropriations
For FY2008, the President has requested $1.06 billion: $950 million toward the third
annual U.S. contribution to IDA-14 and $110 million towards U.S. IDA arrears. Total
U.S. arrears to IDA are $377.9 million.