Role

International Development
Association of
International Development
Association (IDA
)(IDA)
 Roollee and Functions of IDA
 The International Development Association, IDA, is the World
Bank’s fund for the poorest countries.

 One of the world’s largest sources of aid

 IDA provides support for

o health
education
o infrastructure
agriculture
o economic and institutional development to the 82
countries—40 of them in Africa.
o
o
 Role and Functions of IDA
 IDA is critical to making progress toward the Millennium
2015 Development Goals and the post-2015 agenda.

 In 2013, IDA commitments totaled $16.3 billion

 About one-fifth of IDA funding is provided as grants; the rest is in the

form of interest-free, long-term credits.

 IDA is replenished every three years by both developed and developing

country donors. Two other World Bank agencies— the IBRD and IFC—
make contributions to IDA.

 52 countries contributed to the last IDA replenishment of $49.3 billion for

the period running from July 1, 2011-June 30, 2014. Former IDA
recipients like China, Egypt, Korea and Turkey are now IDA donors.

 IDA is an effective way to leverage additional resources from donors,

recipient governments, the private sector, and the World Bank Group,
helping to scale up results and impact, as well as reducing aid
fragmentation.
 Role and Functions of IDA

How IFC works with IDA

The world’s poorest countries face enormous demands for development

The world’s poorest countries face enormous demands for development
finance that simply cannot be met through public resources. They need urgent
finance that simply cannot be met through public resources. They need urgent
solutions that maximize the impact of private investment, driving powerful
solutions that maximize the impact of private investment, driving powerful
results in job creation, infrastructure, health, education, and other key areas.
results in job creation, infrastructure, health, education, and other key areas.
This is one of IFC’s most critical roles within the World Bank Group. They
This is one of IFC’s most critical roles within the World Bank Group. They
leverage private investment to support the work of the International
leverage private investment to support the work of the International
Development Association (IDA), whose concessional loans and grants in turn
Development Association (IDA), whose concessional loans and grants in turn
complement the institution’s original lending arm IBRD
complement the institution’s original lending arm IBRD
Since 2005, IFC investment in IDA countries has grown six fold, reaching nearly
Since 2005, IFC investment in IDA countries has grown six fold, reaching nearly
$6 billion in fiscal year 2012. IDA countries now account for nearly half of IFC’s
$6 billion in fiscal year 2012. IDA countries now account for nearly half of IFC’s
investment projects and 65 percent of advisory program expenditures. IFC
investment projects and 65 percent of advisory program expenditures. IFC
considers its record in these countries as impressive: for every $1 in equity that
considers its record in these countries as impressive: for every $1 in equity that
IFC invested, they received a return of $1.25. They further consider that this
IFC invested, they received a return of $1.25. They further consider that this
financial performance has allowed them to contribute a significant sum to IDA
financial performance has allowed them to contribute a significant sum to IDA
replenishments—$2.2 billion so far.
replenishments—$2.2 billion so far.
 Eligibility for IDA support
It depends first and foremost on
1. A country’s relative poverty,
 defined as GNI per capita below an established threshold
 updated annually
 in fiscal year 2014 it is fixed at $1,205

2. Non-access to private capital markets.

The second requirement for IDA eligibility is a lack of creditworthiness to
borrow on market terms, both from the IBRD and from private
creditors. In general, IDA defines creditworthiness as “the ability to
service new external debt at market interest rates over the long term”

3. Policy performance
The final criterion for IDA eligibility is a record of “good policy
performance,” defined by the Bank as “the implementation of
economic and social policies that promote growth and poverty
reduction”
 Eligibility for IDA support

There are some

exceptions:
 IDA also supports some countries, including several small island
economies, that are above the operational cutoff but lack the
creditworthiness needed to borrow from the International Bank for
Reconstruction and Development (IBRD).

 Some countries are IDA-eligible based on per capita income levels

and are also creditworthy for some IBRD borrowing. They are
referred to as “blend” countries.

 Altogether 82 IDA-eligible countries, 64 IDA-only countries and 18

Blend countries are getting assistance at present.

Total population of these countries is 2.8 billion (280 crores) half of

the total population of the developing world. An estimated 1.8 billion
(180 crores) people of these countries survive on incomes of $2 or less
a day.
 Eligibility for IDA support

Small island economies have been

granted
exceptions in maintainingtheir eligibility on
the
following
basis:
o small islands with less than 1.5 million people,

o significant vulnerability due to size and geography, and

o very limited credit-worthiness and financing options

 List to of Eligible Countries for IDA Assistance?

Africa
1 Angola Congo 24 Malawi 36 Sudan
2 11 Cote d'Ivoire 25 Mali 37 Tanzania
3 Benin Eritrea 26 Mauritania 38 Togo
12
4 Ethiopia 27 Mozambique 39 Uganda
Burkina Faso
5 13 Gambia, The 28 Niger 40 Zambia
6 Burundi Ghana 29 Nigeria 41 Zimbabwe
7 14 Guinea 30 Rwanda
8 Cameroon Guinea-Bissau 31 Sao Tome
9 15 Kenya 32 Senegal
Cape Verde
10 Lesotho 33 Sierra Leone
16
C.A.R.
17 Liberia 34 Somalia
Chad Madagascar 35 South Sudan
18
Comoros
19
 List to of Eligible Countries for IDA Assistance?

East Asia
1 Cambodia 5 Micronesia 9 Samoa 13Tuvalu
2 Kiribati 6 Mongolia 10 Solomon 14Vanuatu
3 Laos, PDR 7 Myanmar 11 Timor 15Vietnam
4 Marshall Islands 8 Papua 12 Tonga
New
Guinea
Europe and Central Asia 20 Kyrgyz Rep 22Tajikistan
16 Armenia 18
21 Moldova 23Uzbekistan
Georgia
17 Bosnia- 19
Kosovo Herzegovina
29 Haiti 31Nicaragua
Latin America and
Caribbean 30 Honduras 32St Lucia
24 Bolivia 27
Grenada
25 Dominica 28
Guyana
26 St Vincent
Middle East and North
Africa
33 Djibouti 34 Yemen
 List to of Eligible Countries for IDA Assistance?

South Asia
1 Afghanistan 3 Bhutan 4 Maldives 7 Pakistan
2 Bangladesh 4 India 6 Nepal 8 Sri Lanka
Blend countries: IDA-eligible but also creditworthy for some IBRD borrowing

Sl. No. Countries

1 Mongolia 8 Georgia
2 Papua New Guinea 9 Uzbekistan
3 Timor-Leste 10 India
4 Vietnam 11 Pakistan
5 Armenia 12 Sri Lanka
6 Bolivia 13 Zimbabwe
7 Bosnia-Herzegovina
Small Islands
14 Dominica
15 St Vincent
16 Grenada
17 Cape Verde
18 St Lucia
Lending Rates
IDA-16
IDA-16will
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endon
on30
30ththJune,
June,2014
2014and
andIDA-17
IDA-17will
willrun
runfrom
fromJuly
July1,1,2014
2014
to
toJune
June30,
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2017.

$52 Billion for World Bank’s fund for the poorest (IDA fund) is declared
for IDA-17
 IDA’
Performance-Based
s A location
System:
IDA’’s Performance—Based Allocation System:

According to the policy declaration of World

Bank, IDA resources are allocated to
countries through a formula that considers
country performance and characteristics,
such as population classification..
 Overview of
IDA’s Performance-
Based Allocation
System

The performance of IDA countries is assessed annually using

(a)the CPIA (Country Policy and Institutional Assessment)

(b)the ARPP (Annual Review of Portfolio Performance)
(c)The Governance factor.
 Overview of
IDA’s Performance-
Based Allocation
System
(a) The CPIA assesses each IDA
country’s
 present policy and
 institutional framework

for fostering poverty
 reduction, sustainable
 growth and
ability to effectively use of
development
The system now comprises assistance.
16 criteria grouped in four
equally weighted clusters:
 Overview of
IDA’ s Performance- Based
Allocation System
CPIA Criteria (agreed upon during the IDA14 deliberations) under 4 clusters – A,B,C,D

A. Economic Management
1. Macroeconomic Management
2. Fiscal Policy
3. Debt Policy
B. Structural Policies
4. Trade
5. Financial Sector
6. Business Regulatory Environment
C. Policies for Social Inclusion
7. Gender Equality
8. Equity of Public Resource Use
9. Building Human Resources
10. Social Protection and Labor
11. Policies and Institutions for
D. Environmental
Public Sector Management Sustainability
and Institutions
12. Property Rights and Rule-based Governance
13. Quality of Budgetary and Financial Management
14. Efficiency of Revenue Mobilization
15. Quality of Public Administration
16. Transparency, Accountability, and Corruption in
the Public Sector
 Overview of
IDA’ s Performance- Based
Allocation System

(b) Annual Review of Portfolio Performance (ARPP)

The CPIA underpins IDA’s country performance ratings but is not its only
determinant. To capture the important dimension of quality of development
project and program management, the Bank’s Annual Report on Portfolio
Performance (ARPP) is used to determine a rating for each country’s
implementation performance. The portfolio ratings are based on the
percentage of IDA funded projects in the country that are considered at risk.
These percentages are translated into 1-6 scores with the help of a
conversion table.
 Overview of
IDA’ s Performance- Based
Allocation System

To calculate portfolio performance ratings the number of actual and

potential projects at risk in Country’s portfolio is taken:

Actual projects at risk are those for which Implementation Progress (IP) is
unsatisfactory or Development Objectives (DO) are not likely to be achieved.

Potential problem projects are those that, although rated as satisfactory for
both IP and DO, are affected by factors likely to bring about an eventual
unsatisfactory outcome. These projects are identified by criteria or “flags”.

This
Thisnumber
numberisisthen
thendivided
dividedbybythe
thetotal number
total number of of
projects in in
projects thethe
portfolio
portfolioofofcountry
countrytotoobtain
obtainpercent
percentofofprojects
projectsatatrisk.
risk.
 Overview of
IDA’ s Performance- Based
Allocation System

Conversion Table

Percent of Projects at Risk Rating

0% 6.0
1% 5.5
2% 5.0
3-4% 4.5
5-6% 4.0
7-10% 3.5
11-15% 3.0
16-32% 2.5
33-60% 2.0
61-99% 1.5
100% 1
 Overview of
IDA’ s Performance- Based
Allocation System

(c) Governance factor

The governance factor is derived from the five criteria in the CPIA’s
governance or public sector management and institutions (cluster D),
PLUS
the three-year moving average of portfolio rating from ARPP.

The average score of these six governance criteria is divided by

3.5 and an exponential of 1.5 is applied to this ratio.

Thus
Governance Factor = (average governance rating / 3.5)^1.5

The countrtry’s’s overaral lrraattiningisistthen multltipiplileied bytthisisffaacttor,r, resultltininginin

an inincrease orr decrease offtthe overaral lIDIDA countrtry perrfoformancerraattinings..
 Overview of
IDA’ s Performance- Based
Allocation System
Example
Gov. Criteria Country-1 Country-2
a 2 1
b 4 2
c 6 3
d 3 4
e 6 2
f 6 3
Total 27 15
Average 4.5 2.5
Average/3.5 1.28571429 0.71428571

(Average/3.5)^1.
5 1.45786297 0.60368161

ItItisiswhat
whatisisknown
knownas
asGovernance
GovernanceFactor
Factor
 Overview of
IDA’ s Performance- Based
Allocation System

Country performance ratings:

FIRST STEP:
A weighted average rating is calculated of the CPIA (80 percent) and the
portfolio rating ARPP (20 percent).

SECOND STEP:
This composite rating is multiplied by the “governance factor” to
produce the country’s IDA country performance ratings.

Calculation of the country performance rating

Country performance rating = (0.8*CPIA + 0. 2*Portfolio rating)*(governance factor)

Suppose for a country X, CPIA score=3.42, ARPP score = 3.5 and Governance factor =
2.9. Then
Country performance rating = [(0.8*3.42) + (0.2*3.5)]* (2.9 / 3.5)^1.5 = 2.65
 Overview of
IDA’ s Performance- Based
Allocation System

-2
Schematic Representation of IDA Country Performance Rating
Chart 1: IDA Country Performance
Rating

Country Policy and

Institutional Portfolio Performance
80% Rating (from ARPP)
Assessment
(CPIA) 20%

Weighte
d
5 governance Averag 1 governance
related related indicator
e
indicators from from ARPP
the CPIA

Governanc
e Factor

Country Performance Rating

 Overview of
IDA’ s Performance- Based
Allocation System

IDA’s resources are allocated on the basis of the IDA country performance
ratings, population, and GNI per capita:

IDA Country Allocation = function of ( Country Performance Ratings^ 2.0,

Pop^1.0, (GNI/Capita)^.-0.125 )
Thanks