IDA

International Development Association

Submitted by Arun Choudhary 11.MBA-10

Submitted to Prof. Amisha Gupta

Introduction

The International Development Association (IDA) is the part

of the World Bank that helps the worlds poorest countries.

Established in 1960, IDA aims to reduce poverty by providing interest-free credits and grants for programs that boost economic growth, reduce inequalities and improve peoples living conditions.

IDA complements the World Banks other lending arm.

International Bank for Reconstruction and Development

(IBRD)which serves middle-income countries with capital investment and advisory services.

IDA is one of the largest sources of assistance for the worlds 79 poorest countries,39 of which are in Africa.

It is the single largest source of donor funds for basic social

services in the poorest countries.

IDA lends money (known as credits) on concessional terms.

Membership

Members of the IDA are 170 of the UN members and Kosovo.

Non-members are: Andorra, Antigua and Barbuda, Bahrain, Belarus, Brunei, Bulgaria, Cuba, Jamaica, Liechtenstein, Malta, Monaco, Namibia, Nauru, Niue, North Korea, Qatar, Romania, San Marino, Seychelles, Suriname, Turkmenistan, Ugand a, Uruguay, Vatican City and Venezuela. The remaining non-members are states with limited recognition.

International Development Association member states

Funding

In addition to the funds received by the International Bank for Reconstruction and Development for the IDA's efforts of global aid, its more developed and economically sound member countries provide a substantial amount monetary resources. Approximately half of the IDA's resources come from the 45 donating countries. In its early years of establishment, the IDA received most of its replenishments from the United Kingdom and United States, but because they were not always reliable sources of funding during that time, other developed nations began to step in to fill the economic gaps not met by these two countries.

Contd..

Today, every three years, member nations that provide monetary funds to the IDA gather together to replenish the IDA's resources. These funds primarily come from well developed countries including the United States, Japan, France, Germany, and the United Kingdom; with 58% from the US, 22% from France, and 8% from the UK. Although the IDA's funds are now regularly replenished, this does not happen without some financial and political challenges for the donating countries

History

IBRD established in 1944 to help Europe recover -devastation of World War II

Success of that enterprise led the Bank, within a few years, to turn
its attention to developing countries

By the 1950s- poorest developing countries needed softer terms than those offered by the Bank-afford to borrow the capital they needed to grow. United States -initiative, a group of the Banks member countries decided to set up an agency that could lend to the poorest countries on the most favorable terms possible.

They called the agency the "International Development Association

Wanted IDA to be run with the discipline of a bank. (world bank) IDA's Articles of Agreement became effective in 1960. The first IDA loans, known as credits, were approved in 1961 to Chile, Honduras, India and Sudan.

IDA currently has 170 member countries

Members subscribe to IDAs -submitting necessary documentation make required payments under the replenishment arrangements.

35 countries have graduated from IDA throughout its history and some reentered

Eligibility for IDA support depends first and foremost on a countrys relative poverty, defined as GNI per capita below an established threshold and updated annually. (in fiscal year 2011: US$1,165)

IDA also supports some countries, including several small island economies, which are above the operational cutoff but lack the creditworthiness needed to borrow from IBRD.
Seventy-nine countries are currently eligible to receive IDA resources.

Top Ten IDA Borrowers

($million, includes regional projects)

India Vietnam Tanzania Ethiopia Nigeria Bangladesh Kenya Uganda Dem. Rep. Congo 2,578 1,429 943 890 890 828 614 480 460

New IDA Lending by Region:

Sub-Saharan Africa

49 %

South Asia
East Asia/Pacific Europe/Central Asia Latin America/Caribbean Middle East/North Africa

32 %
11 % 4% 2% 1%

IDA Lending by Sector:

Infrastructure Social sector 37 % 29 %

Industry
Public Admin and Law Agriculture Finance

2%
18 % 8% 5%

IDA lending's

IDA credits- maturities of 20, 35 or 40 years 10-year grace period

IDA funds are allocated to the borrowing countries relation income levels and record of success in managing their economies and ongoing IDA projects.

IDA credits have no interest charge but small service charge,

currently 0.75 percent on funds paid out.

IDA also provides grants, which are allocated to the countries that are at risk of debt distress.

In fiscal year 2010 IDA commitments totaled US$14.5 billion18% was provided on grant terms.

Since 1960, IDA has provided US$222 billion to 108 countries.

Annual commitments increased steadily and averaged about

US$13 billion over last 3 years.

IDA-financed operations address primary needs These projects pave the way toward economic growth, job creation, higher incomes and better living conditions.

IDA emphasizes broad-based growth, including:

Sound economic policies, rural development, private business and sustainable environmental practices Investment in people, in education and health, especially in the struggle against HIV/AIDS, malaria and TB Expansion of borrower capacity to provide basic services Recovery from civil trouble, armed conflict and natural disaster Promotion of trade and regional integration

IDA advises governments -broaden the base of economic growth and protect the poor from economic shocks.

IDA coordinates donor assistance to provide relief for poor countries that cannot manage their debt-service burden.

IDA developed a system for allocating grants based on countries risk of debt distress, designed to help countries ensure debt sustainability.

IBRD raises its funds on the world's financial markets, IDA is funded
largely by contributions from the governments of richer member countries.

Additional funds from IBRD's income and from borrowers' repayments

of earlier IDA credits.

Function of World Bank Groups organizations

The functions of the International Bank for Reconstruction and Development are: The assistance and development of territories of its members The promotion of a balanced growth in international trade The International Development Association seeks to: Promote world development, increase productivity and standards of leaving in the less developed countries of its membership Assist the International Bank for Reconstruction and Development

Introduction

Official Development Assistance (ODA) flows are a primary source of financing for low- income countries (LICs), and IDA continues to be their main source of multilateral ODA IDAs role in the international aid architecture - financing and knowledge service and support aid delivery platform In light of the growing complexity of the global aid architecture, IDAs role in supporting LICs has become even more important.

The country-based development model in a changing aid landscape

There is broad agreement that the country-based development model

However, some recent trends in ODA flows are potentially at odds

IDAs role at the country level

Client surveys indicate that IDAs core strengths reside in its financial resources - but also, in its global reach combined with local presence, its ability to operate on a multi-sectoral basis These core strengths enable IDA not only to provide direct support to client countries IDA brings greater strategic coherence in development assistance programs and plays a central role in enhancing alignment and harmonization as well as in achieving sustained results at the country level.

Challenges going forward and conclusion

Focuses on the main challenges going forward and how IDA is gearing up to address them.

IDA will have to adapt and intensify its efforts in four main areas: (i) strengthening complementarity with vertical approaches to aid delivery; (ii) ensuring appropriate sectoral funding; (iii) addressing critical global challenges with an increased priority given to climate change; (iv) and enhancing alignment and harmonization.

IDA is also in the process of reforming and modernizing its operational policies, designed to improve its operational effectiveness and thus its ability to meet the challenges outlined above.

THANK YOU