The World Bank provided a record US$5.7 billion in credits and grants to sub-Sahara Africa in the last fiscal year (1 July 2006 – 30 June 2007) – up from US$4.7 billion in fiscal year 2006 – and has reiterated its commitment to maintain the continent as its top priority under the leadership of Robert Zoellick who took over last Saturday from Paul Wolfowitz..
The funding was provided by the International Development Association (IDA), the World Bank Group’s soft-lending arm, which provides grants and subsidized loans and is the largest source of financing for basic services and assistance for the world’s 82 poorest countries, 39 of which are in Africa.
Since its inception, IDA credits and grants have totaled US$161 billion, about 50 percent of which has gone to Africa.
IDA funding in fiscal year 2006 (1 July 2005 – 30 June 2006) of US$1.2 billion in grants and US$4 billion in credits represented a doubling of aid from fiscal 2000 and disbursements of US$3.5 billion in fiscal year 2006 represented an increase of more than 100 percent.
The record increase in credit- and grant-making in fiscal year ending 30 June 2007 was also observed with respect to lending to regional programs. The World Bank’s portfolio in this area is US$1.1 billion in value covering 11 projects – up from US$275 million in 2005 – with a pipeline of US$1.4 billion envisaged before end-2009.
IDA’s unique ability to work across boundaries and collaborate with other aid agencies ideally position it to support regional programs – key for unlocking the economic and development potential of the third of African countries that are completely landlocked. These countries are home to 40 percent of Africans; a significantly higher number compared to the global average of 4 percent of people living in landlocked countries.
IDA is often the first donor to provide quick and flexible support to countries in post conflict and post natural disaster circumstances, in addition to supporting African countries over the long haul, with relatively predictable aid flows and sustained advice.
The World Bank’s primary mission – poverty reduction – is conducted by channeling financial resources, and technical expertise, to benefit poor people in its member countries. Financial support is provided through loans and guarantees by the International Bank for Reconstruction and Development (IIBRD) and grants, credits, and guarantees from IDA.
The IBRD raises its funds through the international capital markets, while IDA is funded by direct contributions by wealthier nations. After contributing to reserve capital, IBRD allocates roughly 40% of its income to IDA as well as to the Heavily Indebted Poor Countries (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI).
Under HIPC and MDRI, IDA has provided US$54 billion in debt relief to poor countries, most of them in Africa.
A strong 15th replenishment of IDA – a major meeting of whose deputies held last June 29-30 in Maputo (Mozambique) – will allow this affiliate of the Bank to continue financing crucial programs and projects in Africa and other regions at a critical period for these countries to help them achieve the Millennium Development Goals.
IBRD’s clients are generally middle-income countries, and some of the larger low-income countries that are deemed creditworthy for borrowing. IDA’s clients are the poorest countries that usually cannot afford to borrow on commercial terms. IDA offers these countries grants and concessional, no-interest loans – called “development credits” – that are repayable in 35–40 years, with a ten-year grace period.
The World Bank lends to middle income countries on terms that are financially competitive when compared with other multilateral development banks.