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July 10, 2024

A successful replenishment of IDA requires individual and collective efforts from the World Bank Group, donors and borrowing countries, and other domestic and external stakeholders. However, while a robust and strong replenishment of IDA21 is an imperative amid the global polycrisis, it is not a panacea. The IDA21 policy package and operational and financing framework must be consistent with the development needs and priorities of borrowing countries. Equally important is the effective implementation of the full IDA21 package, the conditions of which must be carefully identified and met.

As the replenishment process for IDA, the arm of the World Bank that provides concessional lending, is in full steam, the stakes are unsurprisingly high for Africa. This is partly because IDA provides grants and low-cost financing to 75 low-income countries, 39 of which are on the African continent. African nations comprise 8 of IDA’s top 10 borrowers and have typically benefited from more than 70 percent of IDA commitments. More pressingly, a robust replenishment would be much welcomed at a time when many countries have seen their fiscal space drastically eroded following their response to the overlapping shocks arising from climate change, conflict, food insecurity, and geopolitical tensions.

Hopes and misgivings ahead and in the aftermath of the Nepal meetings

IDA borrowers and donors expressed high expectations about the outcomes of the convenings prior to the recent IDA negotiating session in Kathmandu, Nepal. Statements from both sides suggested that a successful replenishment would be a necessary and central element of any policy response by the global community to the looming debt crisis in the Global South, particularly in African countries, which will pay about $90 billion in external debt service in 2024.

Although already the largest provider of climate adaptation finance in the lowest-income countries, IDA will require substantially more resources to match the unprecedented scale of needs arising from climate change. Estimates from the United Nations Environment Programme (UNEP) suggest that nature-based investment flows currently amount to $200 billion each year, only a third of what is needed to achieve climate, biodiversity, and land degradation targets by 2030.

Internally, the World Bank Group is under pressure to deliver an ambitious and historic IDA21 replenishment outcome, which may arguably be perceived as a litmus test of the Evolution Roadmap it recently rolled out. In discussions with civil society organizations this week in Cotonou, the institution has also reaffirmed that the IDA21 policy framework was developed with the aim of achieving greater impact and scale, but it is hard to see how these goals can be realized without an increase in the financing envelope compared with previous cycles.

Last April, on the margins of the IMF-World Bank Group Spring Meetings, ministers from IDA-eligible African countries advocated for a larger IDA financing envelope and closer alignment of the IDA policy package with their domestic priorities. A few days later, in Nairobi, African leaders set the bar high, calling for an unprecedented $120 billion target for IDA21.

Despite the stated intent for an ambitious replenishment and expressions of goodwill, daunting challenges stand in the way of a robust and strong IDA21 replenishment. The continuous downward trend of official development assistance (ODA) flows to low-income countries (LICs) bodes ill for the future of IDA. According to the IMF, total bilateral ODA from official donors to LICs declined for the second year in 2022, totaling about $72.9 billion, down from $76.3 billion in 2021. The shifting political landscape in many donor countries risks diluting their appetite and capacity for larger, no-strings-attached IDA contributions, given shrinking bilateral aid budgets. At the same time, available fiscal space has been eroded by intensifying budgetary pressures amid geopolitical tensions and the war in Ukraine.

Fortunately, the IDA21 road did not end in Kathmandu. While playing a critical role in the replenishment process, the Nepal meetings were only the third of the IDA21 replenishment cycle and will be followed by two more major convenings expected in October and December in Washington, D.C., and Seoul, respectively.

Getting the IDA21 financing and policy package right to manage expectations

The policy package of IDA21 is expected to beget unprecedented ambition; which must be matched by the ambition of its operational and financing framework. To achieve the target set by African heads of state, over $30 billion in donor contributions will need to be raised. In the United States —and for that matter many Western countries— this would be tantamount to wishful thinking unless Parliaments are supportive of larger financial contributions to IDA, thus reinforcing the urgency of bringing the US Congress on board.

Given this unprecedented scale of concessional financing need, non-traditional IDA donors clearly have to step up their game. African countries—five of which contributed to the last replenishment cycle—would be well-advised to lead by example, ensuring that their aggregate contributions top previous levels.

On the World Bank side, achieving IDA’s targeted outcomes in focus areas will be contingent on fulfilling leadership’s commitment to building a “Better Bank.” In addition, the Bank will not get this done unless it joins forces with other multilateral development banks, particularly the African Development Bank. The recently established Global Collaborative Co-Financing Platform provides a unique opportunity for these multilateral institutions to finally deliver on the overdue goal of working as a system.

Other domestic and external stakeholders such as civil society organizations and philanthropic organizations should play their roles in securing a robust IDA replenishment and ensuring greater accountability for the impact of IDA outcomes, including through advocacy and catalytic support. Finally, coordination among borrower representatives will need to be effective, mirroring what has typically been the case on the side of their donor counterparts.

Beyond the financing package

Successful replenishment of IDA is an imperative, but it is not a panacea. Sound formulation and implementation of the IDA21 policy package will ultimately be the only way to secure targeted outcomes. To this end, we firmly believe that the current replenishment cycle should be an opportunity for negotiators to build consensus on the following conditions and provisions.

First, there is a critical need to align IDA priorities with borrowers’ domestic policy priorities, while calibrating its policy package to support regional initiatives. Policy priorities that rank high on the development agenda of African countries include job creation, access to education, healthcare and electricity, water and food security, conflict resolution, and private sector development. On the regional front, trade integration under the African Continental Free Trade Agreement remains a top priority which must receive special attention from IDA.

Second, recent CGD research reports the mixed results of the Private Sector Window (PSW) which is meant to encourage private sector investment and de-risk high development impact projects in fragile markets. Unsurprisingly, the debate over the cost implications of the differential between perceived and actual risks in developing countries has raged on since the PSW was set up as part of the IDA18 replenishment. More progress will need to be made in this direction.

Third, it is difficult to overstate the importance of strengthening the IDA’s framework on vulnerability, including through increased focus on crisis preparedness and response. Thirty-three IDA countries feature the World Bank list of fragile and conflict-affected situations (FCS). Yet, IFC commitments to most fragile countries trended down, according to CGD work.

Fourth, while the stated intention to use the IDA21 Scorecard to report annually expected outcomes and results delivered is welcome, steps should be taken to develop “SMART” (i.e., specific, measurable, achievable, relevant, and time-bound) indicators and effective mechanisms to measure progress both within the same cycle and over different cycles. In addition, improving the timeliness of IDA reporting and its accessibility to borrowers is of essence. This will be facilitated by the systematic adoption of quantitative goals, specific and selective policy commitments, and clear time-bound goals, where relevant. For instance, commitments on job creation in IDA countries should clearly be quantified to ease reporting and ensure accountability.

Expectations are high among borrowers and the margins for maneuvering remain low for the World Bank Group. A historic IDA21 replenishment appears to be a long shot, but this is undoubtedly the shortest route toward a bigger, bolder, and better Bank, at least as far as many IDA borrowers are concerned.

Daouda Sembene is a distinguished non-resident fellow at the Center for Global Development, the founder and CEO of Africatalyst, and a former executive director at the International Monetary Fund.

Abdoul Salam Bello is the executive director of the World Bank for Africa Group II.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.

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