The International Development Association’s imminent entry into the capital markets will bring big opportunities for the institution and substantially expand its capacity to support the world’s poorest states, Arunma Oteh, treasurer of the World Bank, has told GlobalMarkets.
Speaking for the first time at length about the significance of this development for IDA, the World Bank Treasury and the World Bank as a whole, Oteh, who has been spearheading the plan, talked enthusiastically about the impact the released funds would have in countries where access to capital is most desperately needed. Of the prospect of making IDA a borrower on the international capital markets, Oteh said: “It’s just absolutely phenomenal.”
IDA, which is part of the World Bank and has been in existence since 1960, has never borrowed on the capital markets, relying instead exclusively on donations from its members. For that reason, its ability to financially support the countries it is designed to assist has been limited up till now.
Oteh thinks the borrowing programme will change all that. As it stands, the plan is to launch a first bond in the coming months and to raise $8bn in debt over the next three years. IDA will then lend that money on, at market rates, to countries that investors tend to shun because they are considered less likely to repay their debts.
This redirection of funds should enable a better accompaniment of countries through the various stages of their development, Oteh argued. “There is a continuum between a poor country [that falls in IDA’s remit] and then one that borrows from the IBRD and then no longer borrows and becomes a donor. And so we should make sure that there are products along the continuum that allow countries to graduate from one level to the other.”
The treasury has been working in recent months to ready IDA for its debut, making sure it obtained ratings — it is now rated Aaa/AAA by Moody’s and S&P — and the kinds of exemptions afforded to other parts of the World Bank which have long been active in the capital markets, such as the IBRD.