The World Bank is moving closer to securing commitments from donor countries for a record $75bn three year replenishment of the International Development Association, its fund for the poorest countries.
Representatives of donor countries will gather on Monday in Washington after the end of the World Bank’s annual meetings for a key summit ahead of a December deadline to secure a deal that kicks in next June.
An agreement that could deliver a 50% increase from the previous three year funding of $52bn would mark the first achievement for President Jim Yong Kim since he was handed a fresh five-year term after a controversial election process.
The negotiations are centered on three alternatives scenarios — base, low and high — under which volumes range from $65bn to $80bn.
Axel van Trotsenburg, the World Bank vice president who is co-ordinating the negotiations, told GlobalMarkets: “We think we have the engagement with our partner countries that justifies the most ambitious replenishment possible.
“Clearly the more we can get, the more we can translate that into a bigger package. But I am a realist … but I think it is good to gravitate towards $75bn although we are always open to do more.”
The next round of funding — known as IDA18 — is looking to be innovative both in terms of how the financing is arranged and the issues it is seeking to address.
The current proposals include a mechanism to use donor money to leverage private capital by a ratio of three to one, rather than two to one in IDA17. IDA was bolstered in its attempts to attract private capital last month when it received its first-ever public credit ratings of Aaa/AAA from ratings agencies Moody’s and S&P.
The Bank is also proposing the creation of a $2.5bn private sector window that will allow the bank’s private sector-focused arms, the International Finance Corporation and the Multilateral Investment Guarantee Agency, to undertake operations with the private sector using the IDA balance sheet.
PRIVATE SECTOR INPUT
But some NGOs have warned that IDA funds should not be diverted away from public sector lending. Oxfam urged the Bank to ensure that pro-poor development impacts were “prioritised above financial returns as investment choices are made”.
“The Bank should have clear criteria for selecting investments that will be backed by IDA funds,” it said in a position statement. “Such criteria should include, for example, that the investment will benefit the poorest within countries, and promote gender equality.”
But van Trotsenburg said the initiative was a way of promoting private sector investment in riskier environments. “We are trying to see how we can create jobs in difficult environments. The public sector will not be able to do this alone.”
He said in times when public sector finance was constrained that it was right to see what the private sector could do. “IDA has always benefited from a robust discussion of the development challenges. If there are differences [of opinion] let’s discuss [them].