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1 World Bank’s role (instruments and facilities) Presentation to Romanian Development Camp, Cheile Gradistei September 18, 2008.

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Presentation on theme: "1 World Bank’s role (instruments and facilities) Presentation to Romanian Development Camp, Cheile Gradistei September 18, 2008."— Presentation transcript:

1 1 World Bank’s role (instruments and facilities) Presentation to Romanian Development Camp, Cheile Gradistei September 18, 2008

2 2 Roadmap I.Development Challenges and The World Bank Group II.Selected instruments and facilities oThe International Development Association (IDA) oTrust Funds oKnowledge and research

3 3 The World Bank: Early days l The International Bank for Reconstruction and Development (IBRD, called “The World Bank”) was established in 1944 in Bretton Woods, New Hampshire l Its mission: To rebuild Europe after the Second World War l France was the first borrower for $250 million to finance post-war reconstruction in 1946 l Many leading donor countries today were also IBRD borrowers in the past, for example: Austria, Australia, Italy, Japan, and Korea

4 4 Development challenges: 60 years later l 1 billion people live on $1 a day, growing to 2.5 billion over next 25 years l The international community has identified key outcomes to be achieved by 2015 - the Millennium Development Goals. With seven years remaining, progress towards achieving these goals is uneven. l To support the MDGs, aid commitments were to increase by $50 billion between 2004-2010, and to double for Africa. Current global aid levels of some $110 billion in 2007 are below the target trajectory. l The aid architecture has become more complex thereby increasing transaction costs and potentially reducing the effectiveness of aid l Proliferation – increasing number of donors l Fragmentation – falling project size l Shift from production and infrastructure towards social sectors l Increase in the use of single purpose or “vertical” funds to help address urgent financing needs (such as HIV/AIDS programs) l Growing importance of “emerging” donors

5 5 World Bank’s vision and approach l World Bank Group Vision: To contribute to an inclusive and sustainable globalization – overcome poverty, enhance growth with care for environment, and create individual opportunity and hope l Six Strategic Themes  Helping to overcome poverty and spur sustainable growth in poorest countries, especially in Africa  Addressing special problems of states coming out of conflict or seeking to avoid breakdown of the state  A differentiated business model for middle-income countries (where 70 percent of the poor live)  Fostering regional and global public goods  Advancing development and opportunities in the Arab world  Knowledge and learning through applied experience

6 6 Structure of the World Bank Group International Bank for Reconstruction and Development (IBRD) International Development Association (IDA) International Finance Corporation (IFC) Multilateral Investment Guarantee Agency International Center for the Settlement of Investment Disputes The World Bank Group l Supports middle-income countries l Provides loans at AAA terms plus cost spread l Funded through bonds, backed by shareholder capital l Supports the world’s poorest countries l Provides soft- loans and grants plus debt relief l Replenished every 3 years by donors and through IBRD/ IFC income l Supports the private sector in developing countries l Provides loans and equity investments l Funded through bonds, backed by shareholder capital l Supports investors in developing countries l Provides political risk insurance l Backed by shareholder capital l Offers mediation and arbitration services for investors in developing countries

7 7 The World Bank Group today l In fiscal year 2007, the Bank Group committed $34.3 billion, including : l $12.8 billion in IBRD loans l $11.9 billion in IDA grants and interest free loans l $8.2 billion in IFC equity, loans, guarantees l $1.4 billion in MIGA guarantees l In addition - often as part of its financing package - the Bank Group provided: l Technical assistance l Extensive economic sector work and policy advice l Interest rate and currency risk management

8 8 Roadmap I.Development Challenges and The World Bank Group II.Selected instruments and facilities oThe International Development Association (IDA) oTrust Funds oKnowledge and research

9 9 IDA - A fund for the world’s poorest countries l IDA was established in 1960 as the concessional financing arm of the World Bank l A group of Bank member countries, l ed by the US, created an agency to lend to the poorest countries on the most favorable terms possible. l IDA was established as a revolving solidarity fund. Donor contributions are complemented by reflows from IDA’s credits. l IDA has 166 member countries today, including: l 80 recipients which are the world’s poorest countries (countries with a GNI per capita < $1,065) l 45 donor countries, including many former IDA recipients and middle income countries l Negotiations for the 15 th replenishment of IDA are completed: l Funds will finance new projects between July 2008 and June 2011 l Given long periods needed to implement projects, IDA15 will be among the last opportunities for donors to support the achievement of MDGs

10 10 IDA has grown substantially over time l Since inception in 1960, IDA credits and grants have totaled $161 billion l Total resources of IDA have grown by 10% per year in nominal terms. In real terms, total IDA resources have been about flat since IDA6. l IDA1 started with $1 billion from donors. IDA14 provides $32.5 billion over 3 years, or nearly $11 billion per year on average. IDA15 will provide $41.6 billion, or $14 billion per year. Size of IDA Replenishments, IDA1 – IDA15, $ million

11 11 IDA’s financing depends on donors and on repayments of earlier loans l Credit repayments revolve and complement donors’ resources l Credit repayments finance one quarter of IDA’s disbursements today l IDA will continue to require periodic replenishment by donors since its capital base is being constantly eroded l A regular IDA credit (40 years of maturity, including 10 years of grace, zero interest) involves a 60% grant element l Debt relief and grants have increased IDA’s dependence on future donor contributions l Debt relief provided under the Highly Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI) will reduce credit reflows by $54 billion, lowering IDA’s assets by about 1/3 rd l Share of grants provided to countries (between 20-25 percent of total IDA commitments) further lowers future credit reflows

12 12 IDA’ resource allocation is based on performance l Allocation system provides key selected exceptions l Higher assistance to post-conflict countries for a period of 10 years l Regional integration emphasized with a special allocation for regional projects to supplement national country allocations l IDA’s backbone is its resource allocation system, in use since 1977 and adopted by other IFIs and donors l Volume of IDA resources is set annually, balancing country performance with country needs (based on population and per capita income) l Term of IDA assistance (grants vs. soft loans) is determined by debt sustainability l Larger IDA allocations to countries with better policy and institutional outcomes – research shows that better policies lead to stronger development outcomes l Performance: Country Policy and Institutional Assessment (CPIA) l Allocations have a high weight for governance l Performance ratings are publicly disclosed

13 13 IDA is active in all economic sectors Sector composition of IDA’s assistance, FY1990-2007 11% 8% 6% 15% 8% 1% 21% 12% 7% Agriculture, Fishery & Forestry Education Energy & Mining Finance Health & Other Social Services Industry & Trade ICT Law, Justice & Public Administr. Transportation Water, San. & Flood Protection

14 14 Sub-Saharan Africa is the core of IDA l Of 80 IDA-eligible recipient countries, 39 are in Africa l Over half of IDA’s resource allocations go to Africa l Decentralization to 35 World Bank Country Offices in Africa  58% of staff posted in the field  By end-08, all 11 Country Directors posted in the field Cameroon, The Gambia, Mauritania, Niger, Nigeria, Sao Tome And Principe, Sierra Leone, Zambia 15 High Performers 16 Fragile States Others Angola, Burundi, Central African Republic, Chad, Comoros, Congo, Cote d'Ivoire, DR Congo, Eritrea, Guinea, Guinea- Bissau, Liberia, Somalia, Sudan, Togo, Zimbabwe Benin, Burkina Faso, Cape Verde, Ethiopia, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mali, Mozambique, Rwanda, Senegal, Tanzania, Uganda

15 15 IDA is the country-based platform for development l Country-based (vs. sector-based) development l IDA’s assistance is aligned with a country’s own development strategy: It varies greatly depending on country needs and circumstances l IDA assistance is not pre-determined or earmarked: Recipients and IDA agree on the sector composition of annual IDA’s assistance l IDA aims to ensure its assistance is harmonized with other donors l Closer to the client: Increased decentralization of staff and more authority to country offices l Results focus l IDA’s results measurement system is first among IFIs l Working with governments to improve national monitoring and evaluation/statistical capacity l Strong Independent Evaluation Group that reports to Board l Challenges: Attribution and difficulties in measuring outcomes. Quantitative measures complemented by country case studies (=> IDA @ Work website).

16 16 Long-term Investments in Human Development l 15 million more children in school since 2002 l 50,000 classrooms built and rehabilitated l 90,000 teachers trained l 1.5 million pregnant women treated to prevent mother-child transmission of HIV/ AIDS

17 17 Closing the Infrastructure Gap l 1.7 million people with clean water l 15,000 hectares of agricultural land irrigated l 120,000 km of roads built, rehabilitated or maintained

18 18 How does IDA measure results? Go to to find

19 19 Another measure of results: Many countries have successfully graduated from IDA over time l 32 countries have graduated from IDA throughout its history, ceasing to borrow from IDA l 9 have since “reverse graduated,” or reentered IDA. l 4 former IDA borrowers are now IDA donors: Egypt, China, Korea and Turkey. l Additional graduations in near future: Albania and Indonesia

20 20 l Against the backdrop of an increasingly complex aid architecture, donors focused on what makes IDA a distinctive channel for delivering aid l Policy discussions focused on three key areas:  IDA’s role at the national, regional, and global levels  IDA’s role in ensuring country-level effectiveness  IDA’s role in fragile states Policy discussions and agreements in IDA15 l These areas resonate well with the six strategic themes for the World Bank Group currently under discussion

21 21 Financial outcome of IDA15 l IDA15 is the largest replenishment in history (+30% in US dollar terms vs. IDA14) l Donor pledges have risen (+42%) while credit reflows have fallen further (-30%) due to debt relief

22 22 Trends in donor contributions, IDA15 vs. IDA14 l 45 donors, the highest number ever. 6 new donors in IDA15: China, Cyprus, Egypt, Estonia, Latvia and Lithuania l UK became the largest donor; US and Japan also increased their contributions despite weak currencies and fiscal issues at home l European donors’ share rose to 61.5% in IDA15 (IDA13: 50%)

23 23 Most European Union new members states have become IDA donors by now l “Notional” IDA burden shares are calculated from the size of a donor’s economy (total GNI) and relative wealth (GNI per capita) l Final IDA contribution amounts are determined by each donor country

24 24 Roadmap I.Development Challenges and The World Bank Group II.Selected instruments and facilities oThe International Development Association (IDA) oTrust Funds oKnowledge and research

25 25 Overview of Trust Funds l Over the past five years, TFs have emerged as an important vehicle for channeling Official Development Assistance (ODA) as well as other sources of finance to lower and middle-income countries.  The proportion of ODA channeled through TFs rose dramatically from five percent in FY02 to 11 percent in FY06. The bulk of this comprises multi-bilateral contributions or “voluntary external assistance from donors for a multilateral agency which is supplementary to core membership contributions and which is earmarked for specific purposes.”[1] In addition, a small portion of trust-funded ODA is appropriated as multilateral aid.[2][1][2]  Several multilateral agencies including the World Bank Group provide TF administration services to donors. Overall, the Bank and UN funds, programs and agencies accounted for some 95 percent of TF disbursements in FY04.  Aggregate donor contributions to Bank Group-administered TFs grew at an average of 18 percent annually in the five years FY02-06.[3][3]  By FY06, over 4% of total ODA was channeled in the form of Bank Group administered TFs. [1][1] OECD DAC (2005). Managing Aid. Also see: World Bank. Aid Architecture: An Overview of the Main Trends in Official Development Assistance Flows. IDA 15 Paper, February 2007. [2][2] Multilateral TF contributions also include those from multilateral institutions themselves (for example, IBRD). [3][3] TFs are financed by external donors and by the Bank itself. External donors provided more than 90 percent of TF resources over the FY02-06 period. The Bank contributed mainly to debt relief initiatives and technical assistance.

26 26 Overview of WB administered Trust Funds Trust Funds are financial and administrative arrangements between the World Bank Group and external donors under which donors entrust funds to the Bank for specific development activities.  Donors include many Bank member countries, the private sector, foundations, and international NGOs.  The World Bank Group also contributes to select Trust Funds from its own administrative resources. Trust Funds are used for the following purposes:  Recipient-executed activities such as pre-investment or feasibility studies, project preparation, capacity building, sector studies, or training.  Bank-executed activities, including operational work, research, policy and program analysis, economic and sector studies, training, and secondment of national staff to the Bank on temporary assignments.

27 27

28 28 Example of Country Focused MDTF: Technical Assistance Support to Public Administration Reform in Moldova  Trust Fund development objectives: help the Government of Moldova to strengthen the institutional capacity of the public administration for better policy-making, implementation and efficient use of public resources.  Technical assistance will be provided through the TF in the areas of • (i) institutional reform (streamlining organizational structures and improving accountability) • (ii) optimizing government decision-making and building policy development capacity in line ministries; • (iii) implementing systems and procedures for merit based competitive civil service selection and improved performance management of civil servants; • (iv) strengthening links between policies and budget planning; • (v) improving training possibilities for civil servants and developing policy development and management skills through training: • (vi) involving civil society organizations in design, implementation and monitoring reforms.  Expected benefits of TF activities: (i) public administration aligned with Government policy framework and operates to EU accepted principles; (ii) strengthened policy-development systems, policy coherence and compliance with resource planning; (iii) improved civil service professionalism; (iv) modern legal framework for civil service and public administration; (v) improved accountability and performance of public administration.  Donors: DFID (UK), SIDA (Sweden), The Netherlands  TF Amount: USD 7,096,676

29 29 Roadmap I.Development Challenges and The World Bank Group II.Selected instruments and facilities oThe International Development Association (IDA) oTrust Funds oKnowledge and research

30 30 Knowledge and Research  DEC Research Group - main research areas: Poverty and Equity Human Development and Service Delivery Infrastructure, Environment and Rural/Urban Development Finance and Private Sector Trade and Migration Growth and Macroeconomics  About 25% of research in the World Bank also takes place in Regions and Networks (i.e., in Operational Vice Presidencies) —in charge of lending and ESW— under the responsibility of an Operational Vice President and typically supervised by a Regional Chief Economist.

31 31 Examples of Research produced by the World Bank l Counting the poor (living below US$1 a day) l Living Standard Measurement Surveys (LSMS) l Public Expenditure Tracking Surveys l Investment Climate Surveys l General equilibrium models (CGEs; 1-2-3, etc) l Poverty Mapping l Public Disclosure of Industrial Pollution l Randomized evaluation of policy impact l World development indicators l “ Doing Business ” reports

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