WASHINGTON, August 11, 2006 – The World Bank Group today made a record transfer of $950 million from its income to finance development projects in the poorest countries as it urged donors to fulfill their promises of providing more aid to confront global poverty.
The sum committed almost doubled the amount originally pledged for this year and drew for the first time on the income of the Bank’s private sector arm. At the same time, the World Bank decided to improve the loan terms for credit-worthy poor and middle-income countries by fully waiving a fee charged to borrowers.
The decisions, approved by the Bank’s Board, transfer $950 million to the International Development Association (IDA), the World Bank affiliate which extends grants and interest-free credits to the world’s poorest countries.
The World Bank’s Board also approved fully waiving front-end fees charged on loans from the International Bank for Reconstruction and Development (IBRD), a World Bank unit which provides finance and technical advice to credit-worthy poor and middle income countries. The waiver, which fully eliminates a 100 basis point fee, is effective for all IBRD loans in fiscal 2007, which started on July 1.
Under the IDA 14 agreement struck in 2005, about $33 billion will be made available to the world’s poorest countries, with the bulk of the money coming from some 40 donor governments. Under the deal, the World Bank was slated to allocate $500 million of IBRD’s income in fiscal 2006. The $950 million transfer to IDA therefore represents an extra $450 million over the original commitment. This is also the largest transfer of World Bank Group income to IDA in the institution’s history.
The talks for IDA 15 begin next year. They are the first discussion of a replenishment of IDA since the G8 summit in Gleneagles in 2005 at which world leaders pledged to double the amount of aid to sub-Saharan Africa between 2004 and 2010 and to cancel the debt of the poorest countries. These pledges follow on from a commitment made at the 2002 Monterrey meeting to provide additional aid to help developing countries meet the Millennium Development Goals by 2015.
Referring to the transfer of income to IDA and the fee waiver, World Bank Group President Paul Wolfowitz said: “These actions reflect the World Bank Group’s priorities of directing more resources to help the very poorest countries, including many in Africa, while also improving our effectiveness in confronting extreme poverty in middle-income countries. While this record transfer of World Bank Group income is a positive step, it should be remembered that IDA is primarily dependent on contributions from donor governments. There is a large, unfulfilled need for aid in the developing world, which these significant transfers of World Bank income cannot meet alone. I look forward to a positive and strong engagement from donors when we address the regular IDA 15 replenishment next year.”
Thirty-nine out of the 81 countries eligible for IDA assistance are located in Africa and the number of poor on the sub-continent has doubled over the past two decades. Wolfowitz emphasized Africa as a development priority on becoming the World Bank Group’s president last year and returned last month from his second tour of the continent. He has identified education, health, infrastructure, energy and agriculture as areas where the World Bank Group could assist developing countries.
Wolfowitz said: “The needs of the developing world are enormous but so are the opportunities. So many poor countries are stepping up today to take on the challenge of development and they deserve to be supported”.
At $800 million, most of the $950 million for IDA comes from IBRD’s income. IBRD has annually designated a share of its income to IDA since 1964. Last year it set aside $400 million for this purpose. This year’s transfer of $800 million of IBRD income included $300 million which was drawn from a surplus account.
The $950 million for IDA also includes $150 million from the earnings of the International Finance Corporation (IFC), the World Bank affiliate which finances private sector development. This represents a special designation by IFC to IDA. The IFC money will be provided to IDA for use by IDA in the form of grants to further promote private sector development in countries that are both members of IDA and IFC.
Both IBRD and IFC were able to make these substantial transfers to IDA because the current financial position and the outlook for both institutions are sound, and the financial performance and the capital base for both were strong during FY06.