Africa is on track to receive the lion’s share of a record $75bn refinancing of the International Development Association, the arm of the World Bank that works with its poorest country members, a senior Bank executive told GlobalMarkets.
Axel van Trotsenburg, vice president for development finance, said: “Africa could get $45bn of IDA resources during the next three years which is fantastic for a continent where we can engage not only at the country level but on regional programmes.”
Van Trotsenburg co-ordinated the negotiations between 54 donor countries, beneficiary nations, and the other parts of the World Bank that led to a $75bn three year deal that for the first time included plans to leverage private capital.
He said the replenishment, which was agreed in July but still needs to be signed off by the end of the year, was a “victory for multilateralism”. “It has shown that in today’s world we can still come to a very ambitious agreement getting all the interested parties around the table.”
For the first time, IDA is seeking to leverage its equity by blending donor contributions with internal resources and funds raised through debt markets thanks to the AAA credit rating that IDA this year secured from Standard & Poor’s and Moody’s.
Van Trotsenburg said he was confident the World Bank’s treasury would issue the first IDA bonds by the end of the first half of next year. “The first step is to get all the donors’ commitments firmed up and our treasury is in the process of preparing the first bond issue,” he said.
“It’s all on track but things are falling into place. There has been excellent co-ordination with donors, with our board, internally because a $75bn business requires a very disciplined approach towards implementation.”
The other innovative element is a new $2.5bn private sector window being introduced together with the Bank’s International Finance Corporation and Multilateral Investment Guarantee Agency (MIGA) to provide products such as first loss guarantees and local currency options to take some of the risk out of projects particularly in fragile states and so attract private finance.
He said that IFC and MIGA were working on a “host of projects” and he expected the first to come forward in the next couple of months.
Van Trotsenburg dismissed concerns by civil society groups that the entry of private sector groups would create risks in vulnerable countries. “The financialisation of essential services is quite troubling,” said Luiz Vieira, co-ordinator of the Bretton Woods Project.
Van Trotsenburg said the Bank was aware it needed to work carefully. “It is IDA that wants to push the frontier and tackle the hardest problem of creating jobs. It is one thing to sit on the side and watch things happen; it is another to take a proactive stance to see how we can bring wealth and solutions to these areas.”