IFAD’s engagement with Middle-Income Countries 2 nd March 2011 Executive Board Informal Seminar

Issues raised at the December Executive Board The December Executive Board discussed management’s paper “IFAD’s engagement with Middle-Income Countries” Issues raised :  IFAD’s approach to MICs;  Financing Modalities for MICs; and,  Approaches to graduation. 2

The need for differentiated services to MICs MIC members represent a very heterogeneous group; IFAD initiatives are country differentiated not differentiated by per capita income of country; IFAD projects are tailored to the rural poverty and hunger situation; MIC member countries confirm need for continued IFAD involvement to focus on rural poor; Upper income MICs want help to in transition from receivers of aid to donor status; and, Need for menu of options that suits the conditions of each MIC.

Demand-driven country-based approach IFAD has a menu of lending and knowledge products, some of which are being developed:  Financial products and projects;  Knowledge products and services;  Policy and advocacy services and products;  Support to national agricultural and rural development strategies; and,  South-South cooperation. All products are of interest to MICs, and to LICs.

Potential new Financial Products and Services Currency options; Different grace periods, maturities and interest rates; Mobilisation of additional external resources. BUT: Need to avoid duplication and seek complementarity with financing offered by other multilaterals; IFAD not become a bank nor issue bonds in the market.

Graduation Concerns that ‘classic’ graduation system could lead to a significant decline or decrease in IFAD’s development capacity and the achievement of its objectives. Current IFAD Graduation policy: a voluntary choice of the governments to cease borrowing E.G. Algeria & Macedonia have ‘self-graduated’; IFAD needs own threshold definition to launch a process and a discussion for graduation and on the nature of the relationship and engagement that IFAD has with the country; IFAD could mobilise non-replenishment funds for graduation countries.

Development of IFAD threshold Option 1: Use World Bank threshold (per capita income above $6995); Option 2: Create a unique definition for IFAD: Per capita income supplemented by other factors- value added per worker; crop yields per hectare; percentage of the population who are undernourished; the rate of agricultural growth; changes to agricultural productivity; the contribution of agriculture to GDP; employment in agriculture as a percentage of all employment, and, the percentage of the population who are rural.

Thank you