The International Development Association, IDA, is the World Bank's concessional lending window. It provides long-term loans at zero interest to the poorest of the developing countries. IDA helps build the human capital, policies, institutions, and physical infrastructure that these countries urgently need to achieve faster, environmentally sustainable growth. IDA's goal is to reduce disparities across and within countries, especially in access to primary education, basic health, and water supply and sanitation and to bring more people into the mainstream by raising their productivity. A major independent evaluation of IDA's performance in 1994-2000 has just been completed.

History

When the International Bank for Reconstruction and Development (IBRD), better known as the World Bank, was established in 1944, its first task was to help Europe recover from the devastation of World War II. Once Europe was rebuilt, the Bank turned its attention to the developing countries. As the 1950s progressed, it became clear that the poorest developing countries could not afford to borrow needed capital for development on the terms offered by the Bank. They required easier terms.

With the United States taking the initiative, a group of Bank member countries decided to set up an institution that could lend to very poor developing nations on highly concessional terms. They called it the International Development Association (IDA). Its founders saw IDA as a way for the "haves" of the world to help the "have-nots." But they also wanted IDA to be imbued with the discipline of a bank. For this reason, US President Dwight D. Eisenhower proposed, and other countries agreed, that IDA should be part of the World Bank.

IDA's Articles of Agreement became effective in 1960. The first IDA loans (known as credits) were approved in 1961, to Honduras, India, Sudan and Chile.

IBRD and IDA are run on the same lines. They share the same staff, the same headquarters, report to the same president and use the same rigorous standards when evaluating projects. IDA simply takes its money out of a different "drawer." A country must be a member of IBRD before it can join IDA; 162 countries are IDA members.

IDA's Borrowers

IDA lends to countries that have a per capita income in 2000 of less than $885 and lack the financial ability to borrow from IBRD.

At present, 79 countries are eligible to borrow from IDA. Together these countries are home to 2.5 billion people, comprising half of the total population of the developing countries. An estimated 1.1 billion people in IDA countries survive on incomes of less than $1 a day. Some countries, such as India and Indonesia, are eligible for IDA due to their low per capita incomes, but are also creditworthy for some IBRD borrowing. These countries are known as "Blend" borrowers.

IDA eligibility is a transitional arrangement, allowing the poorest countries access to substantial resources before they can obtain from the markets the financing they need in order to invest. As their economies grow, countries ?graduate? from eligibility. The re-payments (or reflows) they make on their loans they had obtained then help finance new IDA loans to the remaining poor countries. Over the years, twenty-two countries have seen their economies develop and grow beyond the IDA-eligibility threshold. These countries, that are now too prosperous to qualify for IDA funds include China, Costa Rica, Chile, Egypt, Morocco, Thailand, and Turkey.

IDA Lending

IDA credits have maturities of 35 or 40 years with a 10-year grace period on repayment of principal. There is no interest charge, but credits do carry a small service charge of 0.75 percent on disbursed balances. In fiscal year 2001 (which ended June 30, 2001), IDA commitments totaled $6.8 billion and disbursements were $5.5 billion.

Since 1960, IDA has lent $107 billion to 106 countries. It lends, on average, about $6-7 billion a year for different types of development projects (link to IDA's main page http://www.worldbank.org/ida), especially those that address peoples' basic needs, such as primary education, basic health services, and clean water and sanitation. IDA also funds projects that protect the environment, improve conditions for private business, build needed infrastructure, and support reforms aimed at liberalizing countries' economies. All these projects pave the way toward economic growth, job creation, higher incomes and a better quality of life.

IDA funds are allocated to the borrowing countries in relation to their income level and track record of success in managing their economies and their ongoing IDA projects. In the past fiscal year (FY01), a total of $6.8 billion was committed to IDA borrowers. These new credits comprised 134 new operations in 53 countries. One half

of new credits went to Sub Saharan Africa, 18 percent to South Asia, 15 percent to East Asia and the Pacific, 8 percent to Eastern Europe and Central Asia (ECA), and the remainder to poor countries in North Africa and in Latin America and the Caribbean. The countries receiving the largest new commitments in FY01 are listed in the table below:

FY 2001 Top Ten IDA Borrowers

Commitments to Country - Commitments in $millions

Ethiopia ----------- 667
Vietnam ----------- 629
India ---------------- 520
Pakistan ----------- 374
Uganda ------------ 358
Kenya -------------- 350
Bangladesh ------ 280
Madagascar ----- 268
Senegal ----------- 255

IDA Funding

Whereas IBRD raises most of its funds on the world's financial markets, IDA is funded largely by contributions from the governments of the richer member countries. Their cumulative contributions since IDA's beginning total US$109 billion. Additional funds come from IBRD's income and from IDA graduates' and borrowers' repayments of earlier IDA credits.

Donors get together every three years to replenish IDA funds. The 12th replenishment finances projects over the three years starting July 1, 1999. Funding for the 12th replenishment allows IDA to lend about $20 billion, of which donors' contributions will provide a little over half. The remaining funds come largely from reflows of previous IDA credits, as well as other non-donor resources.

The largest pledges to IDA12 were made by the United States, Japan, Germany, France, United Kingdom, Italy and Canada. For example, the US is the largest donor, having pledged to contribute $803.4 million for each of the three years of the replenishment. Some less wealthy nations also contribute to IDA. Korea and Turkey, for example, once borrowers from IDA, are now donors. Countries currently eligible to borrow from IBRD -- Argentina, Brazil, Czech Republic, Hungary, Mexico, Poland, Russia, the Slovak Republic, and South Africa -- are also IDA12 donors. Other contributors to the 12th Replenishment include Australia, Austria, Barbados, Belgium, Denmark, Finland, Greece, Iceland, Ireland, Israel, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Saudi Arabia, Spain, Sweden, and Switzerland.

The Thirteenth Replenishment of IDA (IDA13)

Discussions on the 13th replenishment of IDA are underway in 2001-02, to provide the World Bank with resources to assist the world?s poorest countries in fiscal years 2003-05–the three-year period beginning on July 1, 2002. For the first time in IDA's history, these discussions have been opened up to IDA borrowers, whose representatives participate at all meetings. This is helping give increasing prominence to borrowers' views. To formulate IDA policies, donors and borrower representatives are also drawing upon the conclusions of the first major independent evaluation of IDA. A major policy proposal for the 13th replenishment is that IDA should give outright grants, instead of zero-interest loans with 40 years maturity and 10 years grace period). Click here for details on this and other policy discussions.

IDA's Impact on Poverty

IDA addresses poverty through its broad range of projects, including investment projects targeted at human resource development such as education, health, safety nets, and water supply and sanitation (43 percent in FY01), the provision of infrastructure (19 percent), and agriculture and rural development (16 percent).

While the bulk of IDA financing — over 72 percent in FY01 — is for investment projects, IDA also provides adjustment credits. These credits help governments finance their overall development expenditures — including teacher salaries, operations and maintenance of health centers, road rehabilitation, and agricultural extension — in the context of macroeconomic and sectoral reform programs. The development expenditures that made possible by IDA financing are necessary for growth and poverty reduction. To help governments put in place reform programs, IDA advises on the best policies for attaining broad-based economic growth and reducing the vulnerability of the poor to economic shocks.

IDA is now the single largest source of donor funds for basic social services in the poorest countries. Children–one billion of whom live in IDA recipient countries– are the main beneficiaries of the resulting investments in basic health, primary and literacy education and clean water.

Thanks to IDA:

Some 45,000 primary school classrooms were constructed or rehabilitated in African countries, which enabled approximately 1.8 million children to benefit from access to primary education.

In Asia, over 6,700 health care facilities were constructed or upgraded, then equipped and staffed to provide basic health care to rural populations.

The social investment fund projects in Latin America reached some 9.5 million beneficiaries. Activities supported by these projects generated almost a million person-months of employment.

In Africa, more than 5 million textbooks (mostly locally developed and produced) were supplied to primary schools.

In India, the National AIDS Control project supported training of 52,500 physicians and 60 percent of nursing staff in HIV/AIDS management topics.

In Yemen, the Taiz Flood Disaster Prevention and Municipal Development project prevented serious damage from the 1996 floods, benefiting 21,000 households directly and over half a million people indirectly.

Improvements in Haiti's devastated power sector have given users access to about 20-hours-per-day electricity service, contrasting with the previous situation of nearly 18 hours of blackouts daily.
Cumulative IDA Subscriptions and Contributions, as of June 30, 2001

Member Nation - Millions of dollars in Contributions - Percent of Total

United States ------------ 25,841.78 --------------- 23.77 percent
Japan ----------------------- 24,078.10 --------------- 22.15 percent
Germany ------------------ 12,308.95 --------------- 11.32 percent
United Kingdom ------- 8,013.06 ---------------- 7.37 percent
France ---------------------- 7,468.47 ----------------- 6.87 percent
Canada -------------------- 4,767.53 ----------------- 4.38 percent
Italy -------------------------- 4,409.98 ----------------- 4.06 percent
Netherlands -------------- 4,026.42 ----------------- 3.70 percent

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