1 world bank’s role (instruments and facilities) presentation to romanian development camp, cheile...

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World Bank’s role(instruments and facilities)

Presentation to Romanian Development Camp,

Cheile Gradistei

September 18, 2008

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Roadmap

I. Development Challenges and The World Bank Group

II. Selected instruments and facilities

o The International Development Association (IDA)

o Trust Funds

o Knowledge and research

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The World Bank: Early days

The International Bank for Reconstruction and Development (IBRD, called “The World Bank”) was established in 1944 in Bretton Woods, New Hampshire

Its mission: To rebuild Europe after the Second World War

France was the first borrower for $250 million to finance post-war reconstruction in 1946

Many leading donor countries today were also IBRD borrowers in the past, for example: Austria, Australia, Italy, Japan, and Korea

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Development challenges: 60 years later

1 billion people live on $1 a day, growing to 2.5 billion over next 25 years

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.

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.

The aid architecture has become more complex thereby increasing transaction costs and potentially reducing the effectiveness of aid

Proliferation – increasing number of donors

Fragmentation – falling project size

Shift from production and infrastructure towards social sectors

Increase in the use of single purpose or “vertical” funds to help address urgent financing needs (such as HIV/AIDS programs)

Growing importance of “emerging” donors

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World Bank’s vision and approach

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

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

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Structure of the World Bank Group

International Bankfor Reconstruction

and Development (IBRD)

InternationalDevelopment

Association (IDA)

InternationalFinance

Corporation (IFC)

MultilateralInvestment

Guarantee Agency

International Centerfor the Settlement ofInvestment Disputes

The World Bank Group

Supports middle-income countries

Provides loans at AAA terms plus cost spread

Funded through bonds, backed by shareholder capital

Supports the world’s poorest countries

Provides soft-loans and grants plus debt relief

Replenished every 3 years by donors and through IBRD/ IFC income

Supports the private sector in developing countries

Provides loans and equity investments

Funded through bonds, backed by shareholder capital

Supports investors in developing countries

Provides political risk insurance

Backed by shareholder capital

Offers mediation and arbitration services for investors in developing countries

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The World Bank Group today

In fiscal year 2007, the Bank Group committed $34.3 billion, including :

$12.8 billion in IBRD loans

$11.9 billion in IDA grants and interest free loans

$8.2 billion in IFC equity, loans, guarantees

$1.4 billion in MIGA guarantees

In addition - often as part of its financing package - the Bank Group provided:

Technical assistance

Extensive economic sector work and policy advice

Interest rate and currency risk management

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Roadmap




o Trust Funds


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IDA - A fund for the world’s poorest countries

IDA was established in 1960 as the concessional financing arm of the World Bank A group of Bank member countries, led by the US, created an

agency to lend to the poorest countries on the most favorable terms possible.

IDA was established as a revolving solidarity fund. Donor contributions are complemented by reflows from IDA’s credits.

IDA has 166 member countries today, including: 80 recipients which are the world’s poorest countries (countries with a

GNI per capita < $1,065)

45 donor countries, including many former IDA recipients and middle income countries

Negotiations for the 15th replenishment of IDA are completed: Funds will finance new projects between July 2008 and June 2011

Given long periods needed to implement projects, IDA15 will be among the last opportunities for donors to support the achievement of MDGs

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IDA has grown substantially over time

Since inception in 1960, IDA credits and grants have totaled $161 billion

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.

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

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Internal andotherresources

Donorcontributions

Totalresources inreal terms

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IDA’s financing depends on donors and on repayments of earlier loans

Credit repayments revolve and complement donors’ resources Credit repayments finance one quarter of IDA’s disbursements today

IDA will continue to require periodic replenishment by donors since its capital base is being constantly eroded A regular IDA credit (40 years of maturity, including 10 years of grace,

zero interest) involves a 60% grant element

Debt relief and grants have increased IDA’s dependence on future donor contributions 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 1/3rd

Share of grants provided to countries (between 20-25 percent of total IDA commitments) further lowers future credit reflows

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IDA’ resource allocation is based on performance

Allocation system provides key selected exceptions Higher assistance to post-conflict countries for a period of 10 years

Regional integration emphasized with a special allocation for regional projects to supplement national country allocations

IDA’s backbone is its resource allocation system, in use since 1977 and adopted by other IFIs and donors Volume of IDA resources is set annually, balancing country performance

with country needs (based on population and per capita income) Term of IDA assistance (grants vs. soft loans) is determined by debt

sustainability

Larger IDA allocations to countries with better policy and institutional outcomes – research shows that better policies lead to stronger development outcomes Performance: Country Policy and Institutional Assessment (CPIA) Allocations have a high weight for governance Performance ratings are publicly disclosed

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IDA is active in all economic sectors

Sector composition of IDA’s assistance, FY1990-2007

11%

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

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Sub-Saharan Africa is the core of IDA

Of 80 IDA-eligible recipient countries, 39 are in Africa

Over half of IDA’s resource allocations go to Africa

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

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IDA is the country-based platform for development

Country-based (vs. sector-based) development IDA’s assistance is aligned with a country’s own development strategy:

It varies greatly depending on country needs and circumstances IDA assistance is not pre-determined or earmarked: Recipients and

IDA agree on the sector composition of annual IDA’s assistance IDA aims to ensure its assistance is harmonized with other donors Closer to the client: Increased decentralization of staff and more

authority to country offices

Results focus IDA’s results measurement system is first among IFIs Working with governments to improve national monitoring and

evaluation/statistical capacity Strong Independent Evaluation Group that reports to Board Challenges: Attribution and difficulties in measuring outcomes.

Quantitative measures complemented by country case studies (=> IDA @ Work website).

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Long-term Investments in Human Development

15 million more children in school since 2002

50,000 classrooms built and rehabilitated

90,000 teachers trained

1.5 million pregnant women treated to prevent mother-child transmission of HIV/ AIDS

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Closing the Infrastructure Gap

1.7 million people with clean water

15,000 hectares of agricultural land irrigated

120,000 km of roads built, rehabilitated or maintained

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How does IDA measure results?Go to www.worldbank.org/ida to find out

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Another measure of results: Many countries have successfully graduated from IDA over time

32 countries have graduated from IDA throughout its history, ceasing to borrow from IDA 9 have since “reverse graduated,” or reentered IDA. 4 former IDA borrowers are now IDA donors: Egypt, China, Korea

and Turkey. Additional graduations in near future: Albania and Indonesia

Country Year of Year of Reverse- Country Year of Year of Reverse-Last IDA Credit Graduation to IDA Last IDA Credit Graduation to IDA

Chile FY61 Paraguay FY77Colombia FY62 Tunisia FY77Costa Rica FY62 Jordan FY78Nigeria FY65 FY89 Thailand FY79Cote d'Ivoire FY73 FY92 Honduras FY80 FY91Dominican Rep. FY73 Indonesia FY80 FY99Korea FY73 Cameroon FY81 FY94Turkey FY73 Nicaragua FY81 FY91Botswana FY74 Congo FY82 FY94Ecuador FY74 Papua New Guinea FY83 FY03Syria FY74 Zimbabwe FY83 FY92Mauritius FY75 Eq. Guinea FY93Morocco FY75 Philippines FY93Swaziland FY75 St. Kitts FY94El Salvador FY77 China FY99Paraguay FY77 Egypt FY99Tunisia FY77 Macedonia FYR FY02

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Against the backdrop of an increasingly complex aid architecture, donors focused on what makes IDA a distinctive channel for delivering aid

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

These areas resonate well with the six strategic themes for the World Bank Group currently under discussion

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IDA15 vs. IDA14

IDA14 IDA15 IDA14 IDA15

as agreed per Berlin Change as agreed per Berlin Change

Sources of Funds SDR millionSDR

million in % USD billionUSD

billion in %

New Donor Pledges 12,105 16,481 36% 17.7 25.1 42%

Compensation for MDRI Debt Forgiveness 2,585 4,148 3.8 6.3

Credit Reflows 6,115 4,132 -32% 9.0 6.3 -30%

Agreed IBRD/IFC Transfers 1,111 2,558 1.6 3.9

IDA Commitment Authority 21,916 27,319 25% 32.1 41.6 30%

Additional IBRD/IFC Transfers 307 0.4

Total actual IDA14 22,223 32.5

Note: Numbers may not add up due to rounding 1.46365 1.52448 USD/SDR

In US Dollar TermsIn SDR Terms

Financial outcome of IDA15

IDA15 is the largest replenishment in history (+30% in US dollar terms vs. IDA14)

Donor pledges have risen (+42%) while credit reflows have fallen further (-30%) due to debt relief

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G7 COUNTRY CONTRIBUTIONS

IDA14 IDA15 Change

USD bn USD bn USD bn IDA14 IDA15 Change

United Kingdom 2.73 4.27 1.54 15.1% 17.0% 1.9%United States 2.85 3.70 0.85 15.8% 14.8% -1.1%Japan 2.53 3.04 0.51 14.1% 12.1% -2.0%Germany 1.70 2.14 0.44 9.4% 8.7% -0.8%France 1.47 1.98 0.51 8.2% 7.9% -0.3%Canada 0.78 1.21 0.43 4.3% 4.8% 0.5%Italy 0.79 1.16 0.37 4.4% 4.6% 0.2%

TOTAL G7 Countries 10.80 17.50 6.70 71.3% 69.8% -1.5%

EUROPEAN DONOR CONTRIBUTIONS

IDA14 IDA15 Change

USD bn USD bn USD bn IDA14 IDA15 Change

EU Member Countries 9.8 14.2 4.4 54.4% 56.7% 2.3%Other European Countries 1.0 1.1 0.1 5.6% 4.8% -0.8%

TOTAL European Countries 10.8 15.3 4.5 60.0% 61.5% 1.5%

Effective Share of Donor Total

Effective Share of Donor Total

Trends in donor contributions, IDA15 vs. IDA14

45 donors, the highest number ever. 6 new donors in IDA15: China, Cyprus, Egypt, Estonia, Latvia and Lithuania

UK became the largest donor; US and Japan also increased their contributions despite weak currencies and fiscal issues at home

European donors’ share rose to 61.5% in IDA15 (IDA13: 50%)

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Most European Union new members stateshave become IDA donors by now

European Donor Contributions Currency of

Donors Share SDR mill NC mill Donation

Austria 1.52% 303.8 332.2 EUR

Belgium 1.57% 312.5 350.5 EUR

Cyprus 0.02% 4.0 2.6 CYP

Czech Republic 0.06% 11.2 320.9 CZK

Denmark 1.09% 217.8 1,819.0 DKK

Estonia 0.01% 2.0 2.2 EUR

Finland 0.91% 180.7 200.0 EUR

France 6.50% 1,296.4 1,796.5 USD

Germany 7.05% 1,406.0 1,379.2 SDR

Greece 0.23% 45.5 51.1 EUR

Hungary 0.06% 12.2 3,413.0 HUF

Iceland 0.04% 8.0 772.4 ISK

Ireland 0.44% 88.3 90.0 EUR

Italy 3.80% 757.8 849.9 EUR

IDA15European Donor Contributions Currency of

Donors Share SDR mill NC mill Donation

Latvia 0.01% 2.0 2.2 EUR

Lithuania 0.01% 2.0 2.2 EUR

Luxembourg 0.18% 36.8 40.3 EUR

Netherlands 2.99% 595.5 667.8 EUR

Norway 1.48% 295.6 2,658.5 NOK

Poland 0.03% 6.0 6.0 SDR

Portugal 0.20% 40.3 45.2 EUR

Russia 0.35% 70.0 70.0 SDR

Slovak Republic 0.01% 2.0 75.1 SKK

Slovenia 0.03% 5.6 6.3 EUR

Spain 3.12% 622.8 646.8 EUR

Sweden 2.95% 588.8 6,116.8 SEK

Switzerland 2.01% 401.0 611.3 USD

Turkey 0.05% 10.0 20.1 TRY

United Kingdom 14.05% 2,802.3 2,134.0 GBP

IDA15

“Notional” IDA burden shares are calculated from the size of a donor’s economy (total GNI) and relative wealth (GNI per capita)

Final IDA contribution amounts are determined by each donor country

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Roadmap




o Trust Funds


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Overview of Trust Funds

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]

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]

By FY06, over 4% of total ODA was channeled in the form of Bank Group administered TFs.

[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] Multilateral TF contributions also include those from multilateral institutions themselves (for example, IBRD).

[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.

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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.

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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

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Roadmap




o Trust Funds


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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.

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Examples of Research produced by the World Bank

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

1 world bank’s role (instruments and facilities) presentation to romanian development camp, cheile...

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