�: ��т� пч �^� :j г м � {_л tx: ..ri г�. п: �,С� у- � �� - � Л +i � ., - � , .,� �г ��-Э . ��` � �м �: � ���, , . ���� z �.,. � ��; � � w`' � ', :д у ;� �,х,�;='������ 0� ��, :-� ,��-� � у .� �� � ,� �� � х ;�4 - - r �' r -�- . �� � � д� � �л - �__. ' � � � � �� � оу � � � �, � � � _i �, � ° � , �`r"""". . z д Мм'Э '"� Г� /r `;� �� ,`� � ,�"� у � _ 3�, � _ г yg �'� � � �..�./ О � � _ � �� н � �i � М�_�' `���', л � l� 1 � �� � � а � О гn � �-�� � �' �� �_ b г � r r� � ° � - . �4 д"А� � �?� �' � м . _ '� � у �-Э `�-• � , - _ " �'` � � '� ' ° � �Э . `�-� _ � 細嗎 目 鳥 孤豪 鄂 吸J】匆、卢 口．户～-－一～ 膩，&) 一―一，開開 le -19 THE FIRST TWO DECADES OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION PUBLISHED FOR THE WORLD BANK El OXFORD UNIVERSITY PRESS Oxford University Press NEW YORK OXFORD LONDON GLASGOW TORONTO MELBOURNE WELLINGTON HONG KONG TOKYO KtALA LUMPEUR SINGAPORE JAKARTA DELHI BOMBAY CALCLTTA MADRAS KARACHI NAIROBI DAR ES SALAAM CAPE TOWN Copyright c 1982 by the International Bank for Reconstruction and Development / The World Bank 1818 H Street, N W, Washington, D.C 20433, USA. First printing August 1982 All rights resemved No part of this publication may be reproduced, stored in a retrieval sistem, or transmitted in any jbrm or b'y ani' means, electronic, mechanical photocopying, recording, or otherise, without the prior permission of Oxford Universiy lress Manufactured in the United States of America The lieus and intetpretations in thi book are the authors' and should not be attributed to 7he World Bank, to its affiliated organmzations, or to an, indi'idual acting in their behalf 7he map appearin,g in Chapter 3 w'as prepared exclusi 'el for readers of this book: the denominations used and the boundaries shown do not implL, on the part of 7he World Bank ani judgment on the legal status of any territor or an endorsement or acceptance of such boundaries All the photographs in this book illustrate projects supported by IDA credits. Photographs appearing at the openings of chapters are identified as follows: (Chapter 1) surveyor on the construction site of a dam in Pakistan; (Chapter 2) local mason constructs a school in the Yemen Arab Republic; Library of Congress Cataloging in Publication Data (Chapter 3) workers in a rice paddy on an irrigation project World Bank. in Sri Lanka; (Chapter 4) laborers compact the sides of an IDA in retrospect. irrigation canal in Upper Volta; (Chapter 5) workers build low-cost housing outside Calcutta, India; and (Chapter 6) 1. International Development Association. stacking wheat for storage in Ethiopia. World Bank photo- I. Title. graphs by Kay Chernush, cover, page 43, Yosef Hadar, page IG3881.W584 1982 332.1'53 82-14224 35; James Pickerell, page 57: Tomas Sennett, cover, pages 1, ISBN 0-19-520407-7 9, 19 70; and Ray Witlin, pages 40, 50, 61, 65. 74, 77. Isnx 0-19-520408-5 (pbk.) Foreword Established in 1960, the International Development allocation of credits to developing countries. Ques- Association (IDA) has been a major channel of con- tions have been raised about the quality of IDA's cessionary assistance to low-income developing projects, the terms of its loans, and its abilityto reach countries, This report describes IDA's origins and the poor. While recipients have generally welcomed its evolution, reviews its activities, and assesses its IDA's projects, they have often been unhappy with place in development finance. It is offered in re- long procedural delays in financing projects and sponse to the growing uncertainty about the future have disagreed at times with the technical and policy of TDA, and the feeling that IDA's record is not solutions proposed by IDA. Another purpose of IDA sufficiently known. in Retrospect, therefore, is to deal frankly with these This report was prepared by Bank staff working concerns, together with a number of outside contributors, The Reviewing IDA's history has proved a valuable team was asked to undertake a frank and objective experience. No institution is or could even hope to review of IDA's accomplishments and failures. The be perfect, Both IDA's shortcomings and achieve- report has been reviewed by a wide range of read ments are evident in various parts of this report. ers both inside and outside the Bank and from both What is most striking, however, is its record of solid the industrial and developing countries. Its pur- achievement and its ability to learn from past mis- pose, content, and conclusions were discussed in takes. In its 20-year life, IDA has become one of the four seminars held in Washington, Paris, London, strongest, most effective bodies for promoting de- and New York. These outside comments and views velopment. It stands as a symbol of multilateral co- are reflected in the text. The judgments expressed, operation and worldwide commitment to devel- however, do not necessarily reflect the views of the opment. While substantial progress has been made, Bank's Board of Directors or the governments they the poorest countries of the world remain in des- represent. perate need of further assistance. IDA now stands IDA is an integral part of The World Bank; it is in the front line of this struggle against world pov- therefore difficult to separate its work from that of erty: it continues to need the support of both tra- the Bank itself. A unique feature of IDA is that it is ditional and new donors. funded entirely by contributions by member gov- ernments. One purpose of this study, therefore, is to report to members on what these funds have achieved. As IDA has grown in size, it has naturally come under closer scrutiny. Donors have become in- A. W. CLAt'SEN creasingly concerned about the size of IDA, the al- president The WorclBank location of contributions aniong donors, and the July 1982 V This study was written by a team consisting of Norman Hicks (team leader), Robert Ayres (Overseas Development Council), Barbara Herz, Jeffrey Katz, Danny Leipziger, and Josefina Valeriano. Other World Bank staff members making major contributions include: Michel Beguerv, Ramesh Chander, Emmanuel D'Silva, Chandra Hardy, Kan- diah Kanagaratnam,Jos6 Olivares, Ossie Rahkonen, and Hans Rothenbuhler. The study was also assisted by Stephane Baile and Carol Rosen. Among the outside consultants contributing to the study were Robert Asher (independent consultant), Edward Fried (Brookings Institution), Robert Cassen (University of Sussex), and Paul Streeten (Boston University). The cooperation and assistance of various departments of the Bank is also acknowl- edged, including the Economic Analysis and Projections Department, the financial staff, and the staff of the various regional departments throughout the Bank. In addition, extensive use was made of the reports of the Operations Evaluation Department. The study was directed by a Steering Group comprising Shahid Javed Burki (chair- man), Percy Mistry, and Alexander Shakow. ontents Foreword by A. W Clausen v Definitions xi Summary xiii I History and Background 1 The Bretton Woods Agreements I The Build-up to IDA 2 The Establishment of IDA 4 The Replenishment of IDA 5 Burden Sharing 5 Voting Rights 6 Maintenance of Value 6 Procurement 7 Country Allocations 7 Procedural Dela1s 8 2 IDA in Perspective 9 Development and IDA 9 Aid and IDA 12 Trends in Multilateral Aid 14 Trends in Bilateral Aid 14 3 IDA Operations, 1961-82 19 The Financing of IDA 19 Subscriptions and Contributions 19 vii Transfers from the IBRD 20 Internal Funds 20 The Growth of Lending 21 Eligibility and Allocation 22 Per Capita Income 23 Creditworthiness 23 Performance 23 Project Availability 24 The Distribution of Lending 24 IDA and the IBRD 26 Terms of Lending 27 Patterns of Lending 28 Aid Coordination 30 Project Finance 31 4 Sector and Country Experience 35 Changes in Sectoral Lending 36 Agriculture 38 South Asia 40 Sub-Sabaran Africa 42 Infrastructure 46 Transport 46 Energy 48 Telecommunications 48 Water and Sewerage 49 Urban Development 49 Industry 51 Social Sectors 52 Education 52 Population and Family Planning 53 Program Lending 54 Policy Dialogue 56 5 Issues in Project Effectiveness 61 Rates of Return 61 Reasons for Project Variations 63 External Factors 64 Government Policies 65 Project Design 66 The Wider Impact of IDA 68 Cost Recovery 68 Institutional Development and Technical Assistance 69 Approaches to Alleviating Poverty 73 6 Conclusions & Outstanding Issues 77 Conclusions 77 Outstanding Issues 78 Capital Needs in IDA Countries 78 Political Support 79 Allocation 79 Terms 80 Burden Sharing 81 viii Statistical Annex 83 Contents 85 Tables 1-25 88-133 Technical Notes 134 Bibliography of Data Sources 141 Map: IDA Donor and Recipient Countries 26-27 Text Tables 1.1 Replenishment of IDA Resources, 1961-83 5 1.2 Shares for Major Donors, 1961-83 6 2.1 Balance of Payments of Low-income Countries, 1970 and 1980 11 2.2 IDA's 10 Largest Borrowers, 1961-81 11 2.3 Net Official Development Assistance, 1960-80 12 2.4 Official Development Assistance for Selected Countries 12 2.5 Net Disbursements of IDA and Bilateral Official Development Assistance by per Capita Income of Recipient 16 2.6 IDA and DAC Bilateral Aid Commitments by Sector 17 3.1 Resources Available to IDA for Commitment, 1961-82 20 3.2 Summary of IDA Operations, 1961-82 22 3.3 Status of IDA Credits at the End of Fiscal 1982 by Year of Approval 23 3.4 Former IDA Recipients 24 3.5 IDA Commitments by Region, 1961-82 25 3.6 IDA Commitments by Population of Recipient, 1979-81 26 3.7 IDA and IBRD Gross Disbursements and Net Transfer, 1965-82 28 3.8 Distribution of IDA and IBRD Commitments by per Capita Income of Recipient 30 3.9 IDA and IBRD Lending Operations by Sector, 1961-82 30 3.10 Cofinancing of IDA Projects, 1972-81 31 3.11 Time Spent on IDA Projects by Stage of the Project Cycle 31 3.12 Time Spent on IDA Projects by Sector 32 3.13 Cost Sharing of IDA Projects, 1972-81 34 3.14 Local Currency Costs and Recipient Shares of IDA Project Costs in Selected Sectors 34 4.1 IDA Commitments by Sector, 1961-82 37 4.2 IDA Commitments by Sector and Region, 1961-82 39 4.3 IDA Lending within the Agricultural Sector, 1961-81 39 5.1 Rates of Return for IBRD Loans and IDA Credits by Sector 63 5.2 Rates of Return for IDA Projects by Region 63 5.3 Audit and Appraisal Rates of Return for IDA Projects 64 6.1 Growth in per Capita Income, Actual and Projected 79 6.2 Country Shares in IDA Replenishments and Combined GNP, 1961-80 81 Text Figures 1.1 Composition of Contributions to IDA 5 2.1 Progress in Income, Health, and Education, 1950-80 10 2.2 Donor Shares of Aid, 1980 13 2.3 Aid Effort as a Percentage of GNP of the DAC Countries, 1960-80 14 2.4 Capital Flows to Developing Countries by Income Group, 1978 17 3.1 Sources and Recipients of IDA Funds, 1961-82 21 3.2 Current IDA and IBRD Recipients 29 3.3 IDA and Borrower Contributions to Project Costs in Foreign and Local Currency 34 ix 4.1 IDA Lending by Sector, 1961-82 36 6.1 Changes in Donor Shares between Initial Period and IDA-6 80 Boxes Voting Rights 7 Public Opinion 15 U.S. Treasury Study of the Multilateral Development Banks 16 Measuring the Concessionalitv of IDA Credits 28 The Project Cycle 32 Procurement Arrangements under IDA Credits 33- Fisheries 38 A Drainage and Health Program in Egypt 40 India and the Green Revolution 41 Supplement: South Asian Agriculture 43-46 African Highways 47 IDA and India's Cities 50 IDA and the Private Sector 51 Education in Swaziland 53 IDA and the Kenyan Population Program 54 Bangladesh Import Credits 55 IDA and Malawi 57 IDA and Indonesia 58 IDA and Sudan 59 Senegal's Agriculture 60 Project Analysis and the Rate of Return 62 How to Build on Success? The Problem in Papua New Guinea 65 Lake Alaotra: A Failure in the Paddy Fields 67 Cost Recovery Difficulties in Sri Lanka 70 IDA and Yemen Arab Republic 70 IDA's Role in Rehabilitating Public Tree-crop Production in Indonesia 71 Rural Development in Mali 74 Urban Development in Senegal 75 X DefinitiLons The principal country groups used in the text of * Least-developed countries are Afghanistan, this report are defined as follows: Bangladesh, Benin, Bhutan, Botswana, Burundi, Cape * Developing countries are divided into: low-in- Verde, Central African Republic, Chad, Comoros, come economies, with 1980 gross national product Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Lao (GNP) per person of $410 and below; and middle- People's Democratic Republic, Lesotho, Malawi, income economies, with 1980 GNP per person above Maldives, Mali, Nepal, Niger, Rwanda, Somalia, Su- $410. Developing countries are also divided into oil dan, Tanzania, Uganda, Upper Volta, Yemen Arab exporters and oil importers (see below). Republic, People's Democratic Republic of Yemen, . Oil exporters comprise Algeria, Angola, Bahrain, and Western Samoa. Bolivia, Brunei, People's Republic of the Congo, * DAC. The Development Assistance Committee Ecuador, Egypt, Gabon, Indonesia, Iran, Malaysia, of the OECD (see below) comprises Australia, Aus- Mexico, Nigeria, Oman, Peru, Syria, Trinidad and tria, Belgium, Canada, Denmark, Finland, France, Tobago, Tunisia, and Venezuela. Federal Republic of Germany, Italy, Japan, Nether- - Oil importers comprise all other developing lands, New Zealand, Norway, Sweden, Switzerland, countries not classified as oil exporters. United Kingdom, United States, and the Commis- , Industrial market economies are the members sion of the European Communities. of the Organisation for Economic Co-operation and * OECD. The Organisation for Economic Co- Development (OECD, see below) apart from Greece, operation and Development comprises Australia, Portugal, and Turkey, which are included among Austria, Belgium, Canada, Denmark, Finland, France, the developing economies. This group is commonly Federal Republic of Germany, Greece, Iceland, Ire- referred to in the text as industrial economies or land, Italy, Japan, Luxembourg, Netherlands, New industrial countries. Zealand, Norway, Portugal, Spain, Sweden, Switz- ,Nonmarket industrial economies include the erland, Turkey, United Kingdom, and United States. following developed European countries: USSR, * OPEC. The Organization of Petroleum Export- Bulgaria, Czechoslovakia, German Democratic Re- ing Countries comprises Algeria, Ecuador, Gabon, public, Hungary, and Poland. This group is some- Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, times referred to as nonmarket economies. Saudi Arabia, United Arab Emirates, and Venezuela. xi Other terms used throughout this report: Years used in this report are World Bank fiscal years IBRD means International Bank for Reconstruction when referring to data relating to the operations of and Development. the IBRD or IDA, and run from July to June of the calendar year, Fiscal 1982 ended on June 30, 1982. IDA means International Development Association. Economic and demiographic terms are defined in World Bank refers to the combination of the IBRD the technical notes to the Statistical Annex of this and IDA operating as a single institution, and often volume. referred to simply as "the Bank.' Billion is 1000 million. FAO means Food and Agriculture Organization. Tons are metric tons, equal to 1,000 kilograms or GDP means gross domestic product. 2,204.6 pounds. GAVP means gross national product. Growth rates are in real terms unless otherwise ILO means International Labour Organisation. stated. IlF means International Monetary Fund. Dollars are United States dollars unless otherwise ODA means official development assistance, some- specified. times referred to as foreign aid. Svmbols used in the text tables are as follows: SDR means special drawing right. (.) Less than half the unit shown. UANDP means United Nations Development Pro- Not applicable. gramme. All tables and figures are based on World Bank data WHO means World Health Organization. unless otherwise specified. xii S,ummar v The International Development Association (IDA) expand the Bank's role from that of a financial in- was established over 20 years ago to provide conces- stitution into a development agency as well. Without sional assistance to low-income countries. Its origins IDA, the Bank would not have been able to take the lay in the recognition that, for many of the poorest lead in coordinating aid to most low-income coun- countries, private capital and existing aid arrange- tries and in offering them resources and policy ad- ments were not adequate. The World Bank, which vice. It would have been unable to tackle some of had led the multilateral aid effort after World War the most critical development problems of the past II, could not lend to the poorest countries without two decades, in countries such as India, Indonesia, damaging its own credit position in international and Bangladesh. capital markets. Furthermore, the low-income coun- tries could ill afford to take on loans carrying high interest rates and short maturities to finance proj- ects with long payback periods and earning little or I DAk JMU AiCT no foreign exchange. India became a particular problem in the late 1950s, when its ambitious de- During the past 20 years the developing world has velopment plans were thwarted by a rising debt made tremendous progress, but the pace of devel- burden and growing food shortages. opment has been much slower in the low-income Donor governments agreed to the establishment countries, which constitute the bulk of IDA's current of IDA because, in its affiliation with the World Bank, recipients. These countries remain highly depend- they saw an assurance that concessional loans would ent on official development assistance (ODA) from be used to finance Bank-type projects. They also the industrial countries, and IDA is an important saw IDA as a body that could coordinate assistance part of this assistance. In 1980, ODA financed 65 among donors, encourage new donors, and help to percent of the deficits of the low-income countries, depoliticize foreign aid. While IDA did not emerge with IDA accounting for 16 percent of total ODA. as the large, independent, soft-loan agency sought By contrast, the middle-income countries are able by several countries, its establishment was a com- to rely much more heavily on private capital flows, promise that they all welcomed. IDA has helped to these financed 70 percent of their deficits in 1980 xiii (compared with only 9 percent in the low-income changed to reflect the changing economic circum- countries). stances of the donors. The combined share of the The level of aid flows has grown rapidly in the United States and the United Kingdom has declined past two decades, even allowing for inflation. In from 59 percent of the initial subscription to 37 1980 it equaled $36 billion, a real growth of about percent of the sixth replenishment (IDA-6), while 4 percent annually since 1960. About one-fifth of Germany, Japan, and Saudi Arabia have markedly ODA comes from OPEC countries, another fifth from increased their shares. About 6 percent of IDA's total the United States, while Europe and Japan together resources have come from profits transferred from provide most of the balance. The share of DAC as- the Bank itself. sistance channeled through the multilateral agen- cies has grown dramatically, from 13 percent in 1960 to 35 percent in 1980; about one-third went 7DA s Credits to IDA in 1980. The growth of multilateral aid agen- cies reflects the perception that they have certain During its first 22 years, IDA committed $27 billion comparative advantages in giving long-term devel- to finance 1,302 investment projects in 78 countries. opment assistance. Although IDA remains small compared with the IBRD Despite a worsening world situation, aid pro- (disbursements of $2.1 billion versus $6.4 billion vided by DAC countries remained a stable propor- in 1982, respectively), this is offset by the larger tion of their combined GNPs during the 1970s (about debt-service payments received by the IBRD on its 0.35 percent). A significant portion of the increase lending. Net of debt service, the IBRD and IDA trans- in ODA has come from the OPEC countries, whose fer about the same amount of resources (in 1982, aid exceeds 1 percent of their combined GNPs. $2.4 billion compared with $1.9 billion). Among the DAC countries, aid performance has de- While IDA's overall purpose to assist develop- clined in the United States and the United Kingdom, ment has remained unchanged, there have been but improved in some others, particularly the Neth- important shifts in its operations and the economic erlands, the Nordic countries, Japan, and the Federal background against which it operates. The needs of Republic of Germany. With the current world reces- the low-income countries for concessional finance sion and tight budgetary conditions prevailing in have remained sizable; since 1973 particularly, most countries, however, donors are taking a more changes in the international environment have made discriminating view of all types of aid. these needs even greater. Nevertheless, low-income countries have made real progress. Their per capita incomes have grown, albeit slowly; literacy and life IA. L SinncS expectancy have increased. Progress can be gauged by the fact that 27 countries have "graduated" from In the course of various replenishments, the money IDA, including such countries as the Republic of pledged to IDA has increased to a cumulative total Korea, Indonesia, Tunisia, and Turkey. As more of about $30 billion, of which $23 billion had ac- countries have graduated, IDA has been able to de- tually been paid in by the end of 1982. Contributions vote itself more to Sub-Saharan Africa and Asia and have taken the form of non-interest-bearing notes; has increasingly focused on the poorest developing as of June 1982, only $14 billion had actually been countries. In 1980, 80 percent of IDA's net disburse- drawn against these notes. IDA's replenishments have ments were to countries with per capita incomes never been easy to negotiate, and the problems they of less than $410, compared with 34 percent for have encountered often recur. The central issues bilateral programs. concern the size of replenishments and the way they Per capita income is only one of several criteria are shared among donor countries, the problem of that have determined the allocation of IDA lending. handling delays in contributions, and the eligibility Others include a country's lack of creditworthiness of recipients. Other questions, such as maintaining and access to commercial borrowing, its economic the value of contributions and procurement, have performance, population, and the availability of also been important. projects. Applying these criteria has required a con- As IDA has grown, so has the number of its do- siderable amount of judgment rather than the me- nors. The initial subscription involved 17 industrial chanical use of a formula. And, regardless of the countries; today there are 33 donors, including nine criteria, small countries (those with populations of developing countries. Over the years, shares have less than 2 million) tend to receive more on a per xiv capita basis than larger ones, India's share for IDA est in infrastructure, human capital, and agricultural has been held to 40 percent, even though it has had development. In addition, African agriculture is al- over half the population of IDA countries. most exclusively rainfed, so that workable packages for farmers are harder to devise and involve higher risks. Nevertheless there are countries where IDA's S >efforts have produced encouraging results, notably Malawi and Kenya. While the terms of IDA credits are soft, its projects IDA has increasingly been concerned with urban are generally identical in scope and rigor to IBRD poverty and employment problems. It has pi- projects. Because IDA countries are less developed, oneered programs to find affordable solutions to however, a larger proportion of IDA lending (37 urban shelter problems. Industrial lending has fa- percent, compared with 22 percent of IBRD lend- vored small and medium-size firms as a way of in- ing) has financed agriculture and rural develop- creasing employment. Water-supply projects have ment. IDA credits have tended to finance a larger increasingly stressed simpler systems. All these share (44 percent) of total project costs than IBRD changes are part of an effort to reach the poorest loans (35 percent), and this share has been higher people within poor countries and to design projects in the poorest countries. The remaining share of that will benefit them directly. Experience has shown total IDA project costs (56 percent) has been fi- that raising the productivity of the poor means more nanced partly by the recipients and partly by other than providing them with productive assets. It also donors. In general, about 30 percent of IDA credits means increasing their skills and strength through have gone to finance local costs-a larger share than education, health programs, and other services. IDA's in IBRD projects, because IDA projects typically in- education lending, for example, has given increased volve more local costs and because IDA finances a emphasis to primary schooling, as well as vocational higher share of total project costs. and technical training. At its inception, IDA concentrated on infrastruc- One way of measuring the effectiveness of proj- ture projects-transportation, power, ports, and the ects is by their rate of return. For several reasons- like. These projects account for about 30 percent weather, government policies, mistakes in project of total lending. As development thinking evolved design and operation-rates of return expected when during the 1960s, it was recognized that agriculture projects are appraised often differ markedly from was being comparatively neglected in many coun- final results. Overall, IDA's projects appear to have tries, resulting in food shortages and growing food about the same average rate of return as IBRD proj- imports. In the late 1960s, IDA therefore shifted to ects, about 18 percent in both cases. Rates of return a greater involvement in agriculture. In 1973, grow- vary widely among regions, however, averaging 14 ing more concerned about issues of employment percent in Africa and 22 percent in South Asia. There and income distribution, the Bank extended this is wide variation within these averages, however, emphasis to rural development. Projects have been and wide variation between expected and actual intended to raise the productivity of small farmers, rates. as a way of both reducing absolute poverty and Although these figures refer to only a limited increasing total agricultural output. sample of IDA's completed projects that have been Much of IDA's lending has helped to boost ag- audited and for which recalculated rates of return ricultural production in South Asia, spreading the are available, they indicate the risky nature of de- technologies of the "green revolution" and realiz- velopment projects in low-income countries, par- ing their true potential. As a result of these achieve- ticularly in Africa. Despite these risks, the high av- ments, India is now able to meet its own food needs erage return suggests a fairly successful record. for the first time in decades. IDA has been partic- Furthermore, in pioneering new approaches a cer- ularly active in financing irrigation facilities and ag- tain number of project failures are almost inevitable ricultural credit. Over the years, IDA has shifted before a successful design can be developed. And away from large irrigation works to privately owned the lessons learned from one region or country are wells and pumps, and to more emphasis on distri- often not suitable for immediate adoption in an- bution systems and on-farm water management. other country. Projects are also affected by factors The agricultural transformation that is occurring outside IDA's control, such as weather and political in South Asia is difficult to repeat in Sub-Saharan disruptions. Many projects experience difficulties Africa. Countries there are among the world's poor- because they have been insensitive to complex so- xV ciocultural situations in recipient countries. Other tifying and preparing projects. Similar discussions problems often result from the failure of govern- occur in the context of program and "structural ments to do their part in terms of price incentives, adjustment" lending, in which IDA credits are used procurement policies, or financial support. to support a general development program, rather Many IDA projects have important benefits that than particular projects. They are tied to particular are difficult to quantify. For instance, projects assist policy reforms designed to help the country adjust in developing local institutions, in establishing pro- to new circumstances and make better use of its cedures for cost recovery, and in improving effi- resources. Likewise, project lending gives an op- ciency and management. In many cases, IDA has portunity to discuss policy issues affecting a partic- supported institutions that are capable of taking over ular sector, such as public utility tariffs, institutional some of IDA's lending to individual projects; this reforms, and investment programs. Overall, it is dif- has allowed IDA to become more of a wholesaler ficult to judge the impact of IDA on policy changes of credits and has increased the ability of inter- through these discussions; often its influence is in- mediaries to play an independent role in devel- direct and takes place over a long period. opment. This has been particularly true of industrial and agricultural credit. Programs aimed at cost re- covery reduce price distortions and reduce the bur- n i den of operating expenditures that would fall on the recipient's budget. In the past decade, IDA proj- At least four conclusions emerge from this study: ects have been increasingly successful in improving First, IDA lending has been effective in pro- the productivity of the poor either directly or by moting development. This can be seen not only increasing their access to basic services, such as health and education. Experience suggests that these by the high rates of return on IDA projects, but 1,, from its impact on policy, reforms and the de- poverty focused" projects have been successful in fromt impaction I r er a t d reaching the poor without sacrificing the quality of vepmt of t o. ever tol projects. appear from a review of project experience that IDA's success is greater in South Asia than in Africa. But this does not mean that IDA was less Polici Th12JguUt effective in Africa; lower rates of return on proj- ects in Africa, for instance, reflect lower levels Despite its growth, IDA remains a relatively small of institutional development, relative shortages contribution to development finance in most coun- of trained manpower, and other factors. tries. Its loans have never exceeded 2 percent of Second, IDA has demonstrated a tremendous total investment in its recipient countries overall, capacity to grow, not only in size, but in under- although it is more important in some-particularly standing through learning by doing. It has grad- the small countries of Africa-and in certain sectors ually shifted its lending to the least developed within countries. But IDA's impact is not necessarily of the poor countries and to poor people within determined by its share of total investment. Its in- these countries; it has incorporated the lessons fluence is often related to the help it gives in build- learned from past mistakes into better project ing enduring development institutions and to the designs. advice it offers on macroeconomic and sector pol- Third, despite divergent levels of public sup- icies. Those activities, though hard to quantify, have port for aid in donor countries, IDA has been a much broader impact than even a series of suc- remarkably successful in attracting an increas- cessful projects. ing amount of financial support. But with its IDA can help to influence policv in a variety of growth, it has also become the subject of closer ways. Countries that receive IDA credits benefit from scrutiny and criticism. the World Bank's economic and sector assessments. Fourth, even though many countries have grad- These are designed to identify- development con- uated from IDA's rolls, the need for conces- straints and establish investment priorities. As eco- sional development assistance remains as great nomic and sector reports are prepared, IDA dis- as ever. IDA has a key role to play in laying the cusses the issues they raise with the government; groundwork for long-term development in the these reports in turn lay the groundwork for iden- poorest countries in the world. xvi 1 History and Background 1A- Ae-. The international Development Association (IDA) agreed to the creation of the international Bank for was created in 1960 as an affiliate of the World Bank, Reconstruction and Development (IB3RD), which to make concessional long-term loans to the world's became known as the World Bank, and the inter- poorest countries. The initial fund of just under $1 national Monetary Fund (IMF). billion has been replenished six times, making a Most of the developing countries were still col- total of about $30 billion by the end of 1980. To onies in 1944, so only a handful-mostly the in- those closely involved in negotiating IDA's replen- dependent nations of Latin America-had attended ishments and allocating its loans, its history has never the Bretton Woods conference. Even if more of them been smooth. But the creation of IDA was in at least had been there, the results would probably have three ways an important landmark in the history of been the same; the overriding concern was the re- international relations. it strengthened efforts to es- establishment of an open world economy and a tablish a multilateral system of world trade and pay- stable system of exchange rates, not the financing ments. it made poverty a major concern of the world's of development. Most of the discussion therefore richest countries. And, at the international level, it concerned the Fund rather than the Bank. institutionalized the giving of concessional finance By the time the Bank and Fund began operations to promote economic development. in 1946, it was clear that the reconstruction needs of Europe and Japan were more than either insti- tution could finance. The United States felt that The Bretton Woods Agreements growing international tensions demanded a rapid European recovery, and enacted the Marshall Plan In July 1944, the world's major countries assembled in 1947. Between 1948 and 1952 it provided aid to at Bretton Woods to agree on the principles of a Europe equivalent to 1 percent of America's GNP. postwar international financial system. The purpose Since no government could foresee how long re- of the conference was to prevent any repetition of coveryv would take, the aid was provided mostly as the anarchy and protectionism that had such dis- grants (about $47 billion in 1981 dollars). There astrous consequences between the first and second were few restrictions on where or how the grants world wars, To support this goal, the participants were to be spent; the needs were many and the 1 United States was the only country able to meet average income was three times higher than Eu- them. The United States did insist on a collective rope's, nine times higher than Japan's, and 50 times recovery program and not an uncoordinated series higher than incomes in the developing world. The of national programs. It also pushed strongly for United States therefore played a crucial part in all regional integration. new initiatives designed to promote development. Once European recovery was under way, more The success of the Marshall Plan and the tensions attention was paid to the question of development of the cold war encouraged the United States to set finance. The membership of the Bank was expand- up aid programs for the developing countries. Those ing to include the newly independent countries, so programs clearly had political, strategic, and mili- this new emphasis could no longer be delayed. The tan objectives, as well as economic ones. The first prevailing theory of development stressed that low- major effort, the so-called Point Four, was estab- income countries, having high population growth lished in 1951 by President Harry Truman. It made rates and low savings rates, could not invest at rates a major effort in technical assistance (through the sufficient to accelerate growth in per capita in- provision of advisers and training, for example), but comes. They needed foreign capital to supplement left the job of capital funding largely to private inves- domestic savings, to boost investment and hence tors and the Export-Import Bank. output. The Bretton Woods agreements supposed The deficiencies in this approach soon became that finance for development would come either apparent. In 1957, the United States set up the De- directly from private investors or via private capital velopment Loan Fund to provide concessional long- funneled through the World Bank to productive, term project and nonproject loans. Some European revenue-producing projects. The money was to be countries gradually established similar programs, spent on capital-goods imports and would be lim- initially aimed at assisting former colonies to make ited-it was believed-only by the availability of the transition to independence. Over the years, these sound projects. and other noncolonial powers developed aid pro- However, the developing countries needed to grams for countries with which they had close com- strengthen their infrastructure as well-and not only mercial, trade, and strategic links. For instance, in ports and railways, but also human skills and admin- 1950, the United Kingdom established the Colombo istration. The benefits of such investments would Plan to finance technical assistance and advice for be slow to mature and were not always going to the Commonwealth countries of South and South- produce revenues of their own. They were the kinds east Asia. By 1960, 40 percent of concessional aid of projects not attractive to private investors; poten- was being provided by Western Europe and Japan. tially, therefore, they should be financed by the World In the United Nations, the developing countries, Bank. However, many productive projects, such as their numbers bolstered by the newly independent in education, produced benefits that could not be former colonies, pressed their case for new sources exported and converted into the hard currency of international development finance under UN aus- needed to repay Bank loans. Furthermore, the Bank pices. The Bank, they argued, could not make a could not lend to countries that were deemed un- significant contribution to their massive investment creditworthy without jeopardizing its own ability to requirements; even if it could, the terms and con- borrow in capital markets. Many of the poorest ditions of its lending were restrictive. In 1949, a UN countries were therefore excluded from Bank lend- economic development agency funded by donors ing and needed concessional aid to develop. was proposed, which would make low-interest loans for a variety of development purposes. The United States replied that developing countries should look primarily to private investors, with the Bank assist- ing on projects that were less attractive to them. The The Build-up to IDA Bank's Board and senior staff concurred. In their view, the functions being proposed in the United Although Western Europe and Japan had regained Nations either were not needed or could be per- their prewar levels of production by the mid-1950s, formed by the Bank. Any softening of Bank terms the United States still dominated the world econ- would amount to intergovernmental grants, they omy. With only 6 percent of the world population, thought, and would change the financial character it produced 40 percent of world output, and its of the institution. 2 Throughout the 1950s academic and official cir- ensure the coordination of aid programs and cles actively studied and debated the financing of the monitoring of other countries' aid efforts. development. In the United States, a report to Pres- A growing feeling that aid should be channeled ident Truman in 1951 concluded that some impor- through multilateral agencies, so that it would tant projects could not be financed entirely by loans. become less political and more effective in pro- The report recommended the creation of an Inter- moting development. In 1959, the United States national Development Authority, managed by the became the main contributor to the establish- Bank and receiving and making grants. This view ment of the Inter-American Development Bank, gained considerable support in the United Nations, and later channeled a large amount of conces- which called for an Authority that could eventually sional aid through its Social Progress Trust Fund. make grants of $3 billion a year largely to finance A large American stockpile of the currencies of industrialization. Despite opposition, the idea con- developing countries prompted new ideas on tinued to be debated and refined, and reemerged how to use it. In 1954, a law (widely known as as a proposed Special United Nations Fund for Eco- PL480) was passed authorizing the United States nomic Development (SUNFED). For the most part, administration to dispose of surplus agricultural the Bank continued to resist these suggestions. Some production to developing countries and accept industrial countries supported the creation of a body repayment in the recipient's own currencies. like SUNFED, but were wary of its being controlled The Development Loan Fund could also accept directly by the United Nations. The search for al- repayment in local currencies. ternatives eventually led to the establishment of IDA. Support for a multilateral aid agency stemmed In February 1958, Senator Mike Monroney pro- from the growing recognition that a real problem posed that these and other resources, including existed, particularly in the Asian subcontinent. In contributions from other governments, should fi- India, the Second Plan, which emphasized rapid nance the creation of IDA. The new body's purpose industrialization, had failed to produce the ex- would be to make long-term loans at low rates of pected economic benefits. Food shortages reflected interest to the developing countries, operating as growing population and stagnating agricultural pro- an affiliate of the World Bank. Eugene Black, then duction. The growing size of its debt made India President of the World Bank, welcomed the pro- unable to borrow the funds for additional food im- posal, dropping his previous opposition to conces- ports, and there was little growth in export earnings sional loans. The Japanese supported the idea, as despite the industrialization effort. In 1958, the con- did most developing countries. The European re- cerned donors formed the India Aid Consortium, action, however, was mixed. Germany and the United chaired by the Bank, in order to establish a coop- Kingdom opposed the plan initially, on the grounds erative effort for international assistance, followed that it would undermine the Bank's credit standing. shortly by a similar effort for Pakistan. It was clear France felt it was already giving enough conces- that the situation could only be helped by a large sional aid on a bilateral basis. influx of concessional assistance. After some discussion and modification of the In the United States, there were three other fac- original Monroney proposal, the United States tors that continued to give impetus to the estab- Treasury proposed the establishment of IDA, and lishment of IDA: this was endorsed by the Bank's Governors at the Annual Meeting in October 1959. The Executive Di- A desire to share the "aid burden" more widely. rectors were given the task of drawing up Articles The United States felt that it was financing a of Agreement for the new institution, guided by the large proportion of defense spending that cov- American proposals, which envisaged a separate body ered the other countries of the West, in addition within the Bank. An alternative would have been to to providing the bulk of foreign aid. Rising bal- amend the Articles of Agreement of the Bank itself ance-of-payments deficits increased the Amer- to accommodate IDA, but there was a danger that ican determination to place more responsibility this would open the way for further amendments for both aid and defense on the reviving econo- which the United States and others wished to avoid. mies of Europe and Japan. In 1960, it initiated Although IDA was conceived as a separate legal en- the establishment within the OECD of the De- tity, it would operate under the Bank's management velopment Assistance Committee (DAC) to help and share the same staff and procedures. 3 The United States proposed an initial fund of $1 to those in the IBRD's Articles. As with the IBRD, billion, to be subscribed by the 68 members of the the staff was left free to interpret "special circum- Bank in proportion to their share of the Bank's stances" and "specific projects." The report by the capital, which had in turn been determined by their Executive Directors indicates, however, that IDA was relative shares of world trade and reserves in 1947.1 intended to be somewhat more flexible than the Although several European members felt that some IBRD about the types of projects it financed. The formula based on ability to pay would be fairer, the Association was to support anything of high devel- subscription formula prevailed. The Nordic coun- opmental priority "whether or not the project is tries and the Netherlands wanted an IDA that was revenue-producing or directly productive." Specific larger than $1 billion, that was open to countries mention is given to possible projects in such areas that were not Bank members, and that could give as water supply, sanitation, and housing, although grants. These suggestions were rejected, largely be- 'it is likely that a major part of the Association's cause the United States administration felt it would financing is likely to be for projects of the type be impossible to obtain congressional approval for financed by the Bank." a larger, more open institution. The Articles called for an initial capitalization of $1 billion, with $763 million coming from the in- dustrial countries. They were to pay 100 percent of The Establishment o)f I'A their subscription in convertible currency or gold, while the developing countries paid only 10 percent The final Articles of Agreement for IDA were com- in convertible currency and gold and the rest in pleted injanuary 1960 and became effective in Sep- local currency. All countries were given a minimum tember, when the agreement of 80 percent of the of 500 votes (0.25 percent of the total) regardless industrial-country members was attained. It is clear of their subscription. In this way, the developing that the new Association was intended as an integral countries acquired 31 percent of the voting rights part of a broader international framework. A ". . . without having to put in more than a token amount healthy development of the world economy and of hard currency. balanced growth of international trade," stated IDA's The Articles clearly foresaw the need for addi- Articles of Agreement, will be "conducive to the tional subscriptions, although they were expected maintenance of peace and world prosperity." The only once every five years. The Articles also allowed acceleration of economic development in the less- for the possibility of supplementary finance from developed areas was seen to be in the interest of members, and for IDA itself to borrow money and the international community as a whole. The role guarantee loans or securities. All developing coun- of the Association was to promote development tries that were members of IDA were eligible to through the provision of ". . . finance to meet their receive credits: there was no specific restriction to important development requirements on terms low-income countries, and the allocation of lending which are more flexible and bear less heavily on was left to the staff and the Executive Directors to the balance of payments than those of conventional work out. loans . thereby furthering the objectives of the Although IDA was financed by grants, its founders Bank itself. IDA had thus emerged as a facilit that felt that it should make loans rather than grants, allowed the Bank to make project loans in countries since this would ensure that the money would be not suitable for normal Bank borrowings and not used more productively and would tie IDA's op- having recourse to other sources of finance. erations more closely to the IBRD. However, the In other ways, including organization and mem- Association was allowed to "... provide financing bership, the Articles parallel those of the IBRD. Fi- in such form and on such terms as it may deem nance, for instance, shall ". . . except in special cir- appropriate." The Articles of Agreement did not cumstances, be for specific projects," wording similar specify repayment terms; indeed, they permitted repayment in local currency, which would have had 1 Although the United States' holdings of other currencies the effect of making a loan very much like a grant. had been instrumental in generating support for IDA, they could Concerned about accumulating large amounts of not be used to meet the capital subscription Special donations local currenc', however, the staff of IDA proposed of the currencies of other countries could he made with the approval of the issuing country and acceptance by IDA, but in terms that were repayable in foreign exchange but fact none have been accepted or offered extremely concessional. IDA credits, it was decided, 4 would have a 50-ear maturity and repayments would Figure 1.1. Composition of Contributions to IDA begin after a 10-year grace period. Loans would (percentage) carry no interest, but a service fee of 0.75 percent 100- ------- - Europe on the disbursed balance would be levied to cover United Kingdom IDA's administrative costs. Although IDA members Germany discussed the possibility of varying terms to suit France individual borrowers or certain projects, this was Rest of Europe not done-in part because it was recognized that 6o- more advanced low-income countries could receive 6"- - -" North America a "blend" of IDA and IBRD lending (discussed in - United States more detail in Chapter 3). 40 Canada -~~I l 'ters The Replenishment of IDA . ('an IDA officially came into being in September 1960. Initial Sixth By the end of its first fiscal year (June 1961), it had subscription replenishment made four loans-for highway development in Honduras, India, and Chile and for an irrigation project in Sudan. Fears that there would be a dearth GDP as they had provided in the previous replen- of adequately prepared projects proved groundless; ishment, thus tving the real growth in IDA to the the demand for IDA was so great that by 1962 it expected real growth in GDP. was clear that it would need more money much The replenishment process has never been easy, earlier than expected. Members therefore began being dogged by the problem of burden sharing negotiating a replenishment for the three fiscal years and by delays in payments by the United States. 1965-67, thus establishing the practice of preparing Other issues that have complicated replenishments replenishments at three-year intervals, include the adjustment of voting rights, the main- Since 1965, IDA has been replenished six times, tenance of the value of contributions against changes each time by enough to boost the real value of its in exchange rates, the balance-of-payments impact annual commitments (see Table 1.1). The objective of IDA contributions, and the allocation of IDA's of increasing the real value of IDA's finance has funds among the developing countries. always been widely shared, but accelerating infla- tion in recent years has meant that the real increase Burden Sharing has been less than what was intended. The size of each increase has often been the subject of intensive In general, IDA has followed the practice that do- bargaining, but no formula for deciding it has ever nors would more or less maintain their shares of been agreed on. For IDA-6, donors agreed to con- previous replenishments. Although requests for sig- tribute the same proportion (0.046 percent) of their nificantly smaller shares have generally been op- posed (since that would mean larger shares for the other donors), adjustments have been made for Tab 1.3 Rchanges in relative economic strength. Thus, on one 1961-83 (millions of dollars) hand, the U.S. share fell from 42 percent of the original subscription to 27 percent of IDA-6 (see cw1rent 1981 Table 1.2 and Figure 1.1), while the share for the dollars dollars United Kingdom declined from 17 percent to 10 Initial (1961-64) 757 3.128 percent. On the other hand, Japan's share has in- IDA-1 (1965-68) -45 2.844 creased from 4 percent to 15 percent over the same IDA-2 (1969-71) 1,2-1 3,466 IDA-3 (1972-74) 2,441 4,495 period, and the German share has risen from 7 IDA-4 (1975-77) 4,501 6.200 percent to 13 percent. (This issue is discussed fur- IDA-5 (1978-80) 7-32 8,688 ther in Chapter 6.) Over the years there have also IDA-6 (1981-83) 12.000 11,204 been voluntary increases and special contributions Total 29,i47 0,025 by several countries in excess of their normal shares. 5 Table 1.2. Shares for Major IDA Donors, 1961-83 (percentage of total contributions) Initial IDA-I IDA-2 IDA-3 IDA-4 IDA-5 IDA-6 (1961-44) (1965-68) (1969-71) (1972-74) (1975-77) (1978-80) (1981-83) United States 42 42 38 39 33 31 27 United Kingdom 17 13 12 13 11 11 10 France 7 8 8 6 6 5 5 Fed. Rep. of Germany 7 10 9 10 11 11 13 Canada 5 6 6 6 6 6 4 Japan 4 6 5 6 11 10 15 Italy 2 4 4 4 4 4 4 Nordic group 4 4 10 7 7 7 6 OPEC 1 - - - 1 8 6 Others 11 7 8 9 10 7 10 Total 100 100 100 100 100 100 100 These special contributions have often helped to tially from their cumulative share of total contri- resolve disputes on burden sharing. Under IDA-2, butions. Members therefore agreed under IDA-3 for example, when some countries requested a re- that the voting rights of industrial countries would duction in their shares, five other countries-Can- be determined by their cumulative share of the total ada, Denmark, Finland, the Netherlands, and Swe- finance provided. To avoid a reduction in their vot- den--offered supplementary contributions totaling ing power, developing countries were also allowed $17.5 million. A special supplementary contribution to make additional subscriptions payable entirely of $5.8 million, not carrying voting rights, was made in their own currencies. The voting-rights system by Sweden and repeated in subsequent replenish- established in connection with IDA-3 has basically ments. Switzerland, which is not a member of the been followed ever since (see box on voting rights). Bank and is therefore not eligible for membership in IDA, made a SwF52 million interest-free loan to Maintenance of Value IDA-2 followed by a similar loan of SwF130 million under IDA-3. A proposed loan of SwF200 million For the first three replenishments, all contributions for IDA-4, however, was defeated by the Swiss elec- to IDA had been expressed in 1960 U.S. dollar torate in a special referendum, equivalents. After the devaluation of the dollar in Over time, a growing share of the burden has December 1971 (by 18 percent against the curren- been taken up by the more advanced developing cies of its major trading partners) and the switch to countries. Under IDA-3, Ireland, Spain, and Yugo- floating exchange rates, this system became increas- slavia agreed to make contributions in usable cur- ingly unwieldy. Under IDA-4, members therefore rencies totaling $10 million. Israel, Spain, and Yu- agreed that industrial countries would make their goslavia made supplementary contributions in contributions in a stated amount of their own cur- convertible currencies to IDA-4. In IDA-5, the Re- rencies, without any obligation to maintain the value public of Korea, Saudi Arabia, and the United Arab of these payments in the event of exchange-rate Emirates joined the ranks of hard-currency contrib- changes.' This system was maintained in IDA-5 and utors, and Kuwait increased its contribution in line IDA-6, but in the latter, donors were also allowed with the industrial countries. to express their contributions in dollars or SDRs. This has complicated the management of IDA's funds, R since changes in exchange rates can alter the amount Voting ights of money at IDA's disposal. The donors have agreed, To avoid adjusting voting rights, IDA-1 and IDA-2 had been replenished by supplementary contribu- tions (which did not carry voting rights) rather than 2. Actually donors negotiate their subscriptions in terms of U.S. dollars, and then convert their contributions back to their by increases in subscriptions. As a result, by 1971 own currencies using the exchange rates prevailing at some some countries' votes had come to differ substan- agreed date. 6 Voting Rights 10aIJ diludni th mvtig p.er t rh nijller 1i ll Jic%clo:pitig .:)unirr i memrih r e% r, miembe-rship iales r For their initial subscriptions, originallDAmembers receied J.ao ac.cried The nrl. 4eh &.unir i nernher hip %%-lei 500membershipvotes,plusoneadditionalsubscripti. n itoe tjtntiircJ ta 2 persent i i lp r.ul p-renial u .rip. for each $5,000 (1960dollars)they subscribed. This formiuli O.li 'tis. I a r-ill the niiber .-.t membership i.,Or meant that the distribution of voting rights in IDA nt, ip J,aillat'le e ,10 .unir. h.,, ri," r..-acd fr. -nihe rigil proximately the same as in the IBRD. But the voting p. .%cr 4.I.. cu,i I of smaller members, which had been diluted in the IBRE, N.m,rcalk hth indki,trt.il .ind ---u.ntrlie . MutrieC tet because of successive capital subscription increase,. 7; rheir .iddirorn.il ubncript..-n U. rii the Jrne rite Bult Je strengthened in IDA by giving members relative: h mor- cl..pin, t..-unirre, re iuth.ri.: d. nuke their C.r.i ub. membership votes,in comparisontothe totalvotesa.iabille 'ape... entru ri their .;n irrenc Frihernire in than was the case in the JBRD at that time. Jui. l pr.urne pni much haher ette.t prce per Under IDA-1 and IDA-2, members made supplemrentr. 1tut-:ripi..r hlC:aueC thetir Iuch lni.tr j.idii.-r.il .>ntri contributions not having voting rights. During neg rarirn -i iu..d. n.t -rrr. :nEtr nhr i ntler Iriv. 1-i r\.imple. for IDA-3, it was agreed thatthevoting rightsof the-ir,du%lril I. r each S2' rhni ihem 1..ne rr-mimizrip ttcn. it. countries should be adjusted to reflect the relative -i.:e -t i.e t .make ...ntri.io at sli n..i thai i.et n carri their cumulative contributions. Short of amending i, .rt.- a.. -m-np rhi cles of Agreement, the only way for effecting sud in id Fr-rn i pia.:al p.nt o .et .-vmc, richt; tiU. n`ot .em justment was to give additional votes to the donor, I: ju .11 thv imp.-rint lol r miater, are Juded b% o.i iien,iu thorizing them to make additional subscriptions to iD1 But id turnal t..ria ol ihe 1A E%e.:uti.e Direct..r; ire rrc this also raiseddifficulties. Under the Articles ofAgrceement. N. ..c' the c.npa.t..n ..t IDA K-.rJ ci Ee,ci C Eli developing-countrymembershadtobegivenanopp.iunn re.:c.tr, Jeped on mcmberh t rn!' nts. irn:e the ie..- toincreasetheir subscriptionssoas to maintaintheir reattle tiic Llirco.v. of rhie Bank are c\ -hici. the Fe.irt,e Di- voting power. These "preemptive rights" to make additi-nal rca.,r- IDi Hoeer the coniderahle ctfi rt- dte. subscriptions would indeed preserve the voting p .- Cr -t ;erun1l%Z tIp and reN ic ing ID.A elah.,riE. --omg-righi; , -tem thedevelopingcountries,butonlyifitcouldbedone - Mi.hut relet itr,; rmbot igifictice ii the ee f mcn. menher- substantial financial cost. i 1., t b At lin,n i d a .nperarre nturion. ir cr Accordingly, the voting power of industrial-count-. imrni rent s. ung i- reprcent ain ittnipt iu do ju4C:e tI b. 1h bets was adjusted to correspond (except for memter hip the,e characteriui. It c-nibine An ifeiper, ai eighied votes) to their respective shares of their combined Curtu 1ring ,tructire dependent in capiul co ntrtiiuun---a mi lative contributions. IDA-3 subscriptions carried addiii -ntl p riant pritciplc tor nun, Jnar-- lh eguard1 that tc. subscriptionvotes at the rateof one vote for each . i 0ti . lic- neeJ tor jll member, t..- e JJe.uaFel% repre- dollars) contributed. For IDA-4, IDA-5, and IDA-6, rht rate 'cnted inee inne Tible I t.-.r deuil1 in pa.t ind current was set at $25 (current dollars) per subscription vote i.ng righi, i however, that shortfalls in resources under one re- Country Allocations plenishment could be covered by contributions under subsequent replenishments. During IDA-2 negotiations, members raised the im- portant issue of the allocation of IDA's funds among Procurement countries. Although some early credits had gone to middle-income countries, chiefly in Latin America, Because of growing balance-of-payments deficits in members generally agreed that IDA should con- the 1960s, the U.S. administration requested that its centrate on the low-income countries (roughly, those contribution to IDA-2 should be tied to the amount with per capita incomes of less than $300 in 1968). of American goods and services bought as the result Above this level there would be a "strong pre- of IDA loans. Instead, it was finally agreed that the sumption against" further IDA lending, though not drawdown of the United States contribution would an absolute bar. Under the initial subscription and initially be limited to the amounts that American first replenishment, however, about 70 percent of suppliers would receive from IDA-connected pro- IDA's resources had been allocated to the two larg- curement; the other donors would make up the est borrowers, India and Pakistan. While this share difference in the form of increased drawdown on was not unreasonable considering the large pop- their contributions, with the United States then mak- ulations in these countries, there was considerable ing good its total subscription later. With the easing pressure to reduce it so as to favor others not as of U.S. balance-of-payments problems after 1971, well served by bilateral aid. Thus the management this arrangement did not have to be continued in recommended, and the donors agreed, to a limit of subsequent replenishments. 40 percent for India and 12.5 percent for Pakistan. 7 These guidelines were adjusted again after the feated in the House of Representatives, but this was emergence of Indonesia and Bangladesh as IDA later reversed after an intensive lobbying effort, and borrowers. IDA-4 was able to begin on time. The United States intended to spread its contribution over four years, Procedural Delays however, and payment of the United States contri- bution was not completed until 1981. Thus the United For each replenishment to become effective, coun- States began IDA-5 while still having to complete tries must commit a combined total equal to 80 payments on IDA-4, and this further complicated percent of the replenishment. Delays by the U.S. the approval of its IDA-5 contribution. While the Congress, which authorizes and appropriates the Carter administration succeeded in having Congress funds, can therefore hold up the entire replenish- pass the IDA-5 authorization on time, and also make ment process, because the United States has always good the arrears, the appropriation of the actual contributed more than 20 percent of each replen- funds was delayed. ishment. Unlike the European parliamentary sys- In an attempt to prevent delays over IDA-6, other tem, the U.S. executive branch does not automati- donors initially agreed to make their contributions cally receive the support of the majority party in the available in proportion to the share contributed by legislature. The authorizing legislation for IDA-1 was the United States. Indeed, the U.S. Congress did not voted down by the House of Representatives, and authorize the $3.24 billion that the administration the executive branch had to mount a major effort had originally pledged to contribute, nor did it ap- to restore it. As a result, the American contribution propriate the first installment by the time IDA-6 was was delayed, and the replenishment became effec- to become effective, in July 1980. Without this con- tive three months later than planned. tribution, IDA lending would have had to be inter- The protracted negotiations for IDA-2 and the rupted until fresh funds were made available. De- subsequent delay in obtaining congressional ap- spite their pro rata stipulation, many other donors proval of the U.S. contribution created a slowdown therefore agreed to pay their first installments in in IDA operations in 1968. Continuation of lending full so that IDA could continue its work. Neverthe- was accomplished through the willingness of most less, they agreed that the pro rata provisions would donors to put some or all of their contributions at apply to the second and third tranches. IDA's disposal, even though the replenishment was When the second American installment fell short not at the time legally effective and notification by of the expected contribution, the application of the the largest contributor was not ensured. As a result, pro rata rule limited IDA's commitment authority IDA commitments, which had been rising fairly in the 1982 fiscal year to $2.6 billion, about $1.5 steadily between 1961 and 1967, dropped from $354 billion short of the program earlier approved by million in the 1967 fiscal year to $107 million in the Board. The first two installments from the major fiscal 1968, and a number of projects were financed shareholders were thus only 60 percent of what had by IBRD loans instead of through IDA. Similar delays initially been agreed. Faced with this shortfall, some and advance contributions occurred under IDA-3. donors decided in 1982 to release their second in- The authorization bill for IDA-4 was initially de- stallments in full. 2 IDA in Perspective This chapter looks at IDA's role over the past two and where some 700 million people live in poverty, decades in the development efforts of low-income per capita income rose by about one-half, from $150 countries and the aid efforts of donors. In particular, (1980 dollars) in 1950 to $230 in 1980. This is a it considers how IDA has helped meet the devel- gain of only $80 per person in 30 years-though oping countries' needs for external resources and significant gains have been made in combating il- how it fits into the donor countries' programs of literacy, improving education and health, and low- bilateral and multilateral economic assistance. ering mortality and fertility (see Figure 2.1). The low-income oil-importing countries depend heavily on export earnings and foreign capital to Development and IDA finance their investment programs, and they have been seriously affected by the deterioriating inter- Independence came to much of the developing world national environment. Most export primary com- less than 20 years ago and economic development modities, for which demand has grown more slowly has been a formal goal for a relatively short time. than demand for manufactures. Thus, the volume Nevertheless, considerable progress has already been of their exports has grown at an annual rate of only made. Among today's middle-income countries, av- 4 percent since 1970, compared with 7 percent for erage per capita output rose almost two and a half the middle-income countries. Moreover, these times in real terms in the past 30 years, from some countries suffered a substantial deterioration in their $570 in 1950 (1980 dollars) to $1,400 in 1980. This terms of trade. While export prices rose at an annual is much better performance than industrial coun- rate of 11 percent after 1970, import prices rose at tries achieved in similar periods of their own de- an annual rate of 16 percent, thus offsetting the velopment. Many middle-income countries that have small gains in export volume. advanced rapidly in this period are former IDA re- These changes adversely affected the balance of cipients-countries such as Colombia, Indonesia, payments of low-income countries. Current account the Republic of Korea, Thailand, and Turkey. deficits of low-income oil importers rose from $1.7 But among today's low-income countries, where billion in 1970 to over $12 billion in 1980, a con- IDA commits more than 80 percent of its resources siderable real increase. These deficits represented 9 Figure 21. Progress in Income, Health, and Education, 1950-80 o000 11oP1 10/ 4.7 percent of GNP in 1980, compared with 1.9 per- Table 2,2. IDA's 10 Largest Borrowers, 1961-81 cent in 1970. A large current account deficit reflects availability IDA com- Gross IDA disbursements as a of funds but is an inadequate measure of needs. mitments, percentage of gross domestic 1961-81 investment While middle-income countries can rely on private (millions capital to finance 70 percent of their current account of dollars) 1970 1975 1980 deficits, private loans and direct investment cover India 9,5662 0.6 2.4 1.6 only 10 percent of these deficits of low-income Bangladesh 1,788.2 - 16.8 13.1 countries. They are thus more dependent on official Pakistan 1,446.9 1.7 1.5 1.8 Egypt 981.2 - 1.1 0.9 development assistance (ODA) from bilateral and Indonesia 931.8 0.8 1.6 0.3 multilateral sources. In 1970, ODA flows covered Tanzania 631.5 2.8 3.6 3.1 more than 90 percent of the current account deficits Sudan 595.5 (.) 2.2 3.6 of low-income countries, while in 1980-despite Sri Lanka 536.6 0.3 2.3 1.5 Kenva 458.3 1.6 1.8 1.5 increases in ODA-they covered only 65 percent. Ethiopia 443.1 2.0 7.6 7.9 IDA's own role expanded. In 1980, IDA represented IDA average 16 percent of ODA flows going to low-income coun- for all recipients - 0.8 1.4 1.1 tries, compared with 8 percent in 1970 (see Table 2.1). Thus IDA, which financed about 10 percent of the current account deficit, is an important element in the balance of payments of these countries, al- ports in the future, with a consequent reduction in though by no means the dominant or the most crit- output and growth. ical one. As IDA has grown, it has become a more impor- It is difficult to define the "needs" of the low- tant source of finance in recipient countries, not income countries for assistance. However, the fact only for the balance of payments, but also for total that in 1980 low-income countries drew down their investment. In aggregate terms, however, it has never foreign-exchange reserves by $2.6 billion to pay the constituted more than 2 percent of total investment higher cost of imports suggests that available fi- in these countries (see Table 2.2), although it has nancing was less than what was required. Drawing been relatively more important in the smaller coun- down reserves is, obviously, a short-term solution, tries. IDA inflows are a large share of total invest- Unless the low-income countries can find ways to ment, for example, in Burundi, Rwanda, Benin, Mali, accelerate export earnings or find new sources of the Gambia, Senegal, Guinea, the Central African concessional capital, they will have to reduce im- Republic, Nepal, and Haiti.' Of the countries in which IDA disbursements have exceeded 5 percent of do- mestic investment, almost all are designated as "least developed" and most are in Sub-Saharan Africa. But Contab e , 1. 7 ane of 0 Pof IDA's 10 largest recipients, only Bangladesh and (millions of d 7ollars) Ethiopia rely on IDA for more than 5 percent of ==-=--ttheir investment. 1970 1980 In particular sectors, such as agriculture, trans- Current account balance, -1,675 -12,115 port, and power, IDA has been a more important Direct private investment, net 142 154 source of finance, particularly in some of the smaller Private loans 1 1,010 countries. As shown in Chapters 4 and 5, however, official development assistance, it would be erroneous to judge IDA's impact by the net 1.570 9size of its contribution to investment financing. IDA's Of which: IDA 128 1,245 . Other capital 230 426 influence on policy reform, on creating viable de- Changes in reserves" -268 2.580 velopment institutions, and on general economic current account balance as and sector analysis is perhaps its most important a percentage of GNP 1.9 47 contribution to development in member countries. IDA as a percentage of ODA 8.1 157 Note: Excludes China. a Balance of trade in goods and services plus private transfers. 1. These IDA clients accounted for only $1.4 billion in total b. Negative sign indicates an increase. commitments (1961-81), however. 11 Table 2.3. Net Official Development Assistance, 1960-80 (billions of 1980 dollars) At,erage annual per- centage change 1960 1970 1980 1970-80 DAC countries 158 182 273 4.1 OPEC - 0.9 70 22 3 Others - 2.5 1.8 -30 Total 15.8 21.6 36 1 5.3 Amount of ODA to multilaterals 20 3.3 10.0 11.6 Amount of ODA to IDA 0.5 1.5 3.1 74 Percentage of ODA to multilaterals 12.6 15.5 28.1 Percentage of ODA to IDA 3.3 7.1 87 Note: Data are based on note deposit contributions to, not disbursements by, multilateral organizations. Source DAC .A>. anfl> II28 percent; IDA's share rose from about 3 percent to 9 percent, so that it accounted for roughly 30 Over the last 20 years the volume of official aid percent of all multilateral aid. flows has increased significantly, as has the number The United States and the OPEC countries each of countries giving aid and the share of aid going provided a fifth of all ODA in 1980;Japan, Germany, through multilateral channels. Official development and France each provided about half that much (see assistance more than doubled in real terms between Figure 2.2). This distribution reflects a major shift 1960 and 1980 (see Table 2.3). Of the $36 billion over the preceding two decades: although the United of assistance in 1980, 75 percent came from DAC States remains the single largest donor in absolute countries and 20 percent from OPEC countries. Over terms, its share of total ODA dropped from about the period, the share of ODA going through mul- 55 percent in 1960 to 20 percent in 1980, while the tilateral agencies rose sharply, from 13 percent to shares of Germany, Japan, and the OPEC countries Table 2.4. Official Development Assistance for Selected Countries Multilateral aid Total ODA ODA as a percentage qf GA1P a a percentage IDA as a percentage 1980 of ODA of ODA (millions of dollars) 1960 1970 1980 1980 1980 Australia 66- 0.3- 0.59 0 48 27.4 11.8 Belgium 595 0.88 046 0 50 24.0 - Canada 1,0_5 0.19 041 043 38.3 137 Denmark 4'4 0.09 0 38 073 45.9 9.4 France 4,162 1.35 (066 0 64 1`3 4.0 Fed. Rep. of Germany 3,56- 0.31 0 32 043 35.3 14.6 Italy 683 0.22 0.16 0 1 89.2 46.4 Japan 3,353 0.24 0.23 0.32 406 18.7 Netherlands 1,630 0.31 061 1 03 25.5 6.0 Norway 486 0.11 032 085 42.6 8.9 Sweden 962 0.05 038 079 268 - United Kingdom 1,851 0.56 041 0.35 448 22.8 United States -,138 0.53 032 0.2' 38.8 150 DAC total 2-,256 0 51 034 038 35.2 13.2 Kuwait 1.188 - 5.81 388 16.2 6.7 Saudi Arabia 3,040 5 02 2.60 26.1 15.2 OPEC total 6,98- 4 04 1.4- 19 2 0 Note Data in italic are for 199. a For aid-giving member. only. 12 Figure 2.2. Donor Shares of Aid, 1980 (percentage) Multilateral United Kingdom Germany France Nordics Italy United States Canada Japan OPEC Others Official development Multilateral IDAc assistance a official development assistance b a. Data represent net disbursements of DAC and OPEC countries. c. Data represent shares in the sixth replenishment of IDA as b. Data represent net disbursements of DAC and OPEC countries; negotiated, thus they are not strictly comparable with disbursements demand notes are recorded on the basis of date of issue. in the other parts of this figure. increased, Much of this shift reflects changes in rel- of DAC governments' budgets on average, ranging ative economic strength among donor countries (see from 0.3 percent in Italy to 2 percent in Canada, Chapter 6). Norway, and Sweden. Over the past 20 years, this Although ODA has increased substantially in the share has generally declined, with the notable ex- past two decades, GNP has also grown rapidly. As ception of the Nordic countries.2 a result, ODA declined in relative terms-from about Any government's capacity to increase its aid is 0.50 percent of GNP in the early 1960s to 0.35 per- determined partly by economic conditions and partly cent by 1970; it has fluctuated around 0.35 percent by public opinion. Seen in that light, the 1970s were during the past decade (see Table 2.4 and Figure not a propitious time for aid. Weak balance-of-pay- 2.3). The aid given by OPEC countries increased ments positions-particularly pronounced in the markedly in the late 1970s, averaging 1.47 percent United States and the United Kingdom-imposed of their GNP in 1980. For the Arab members, who constraints on some countries' willingness to ex- provided most of the OPEC aid, assistance exceeded pand their aid. Conversely, Japan's large external 2 percent of their GNP, surpluses were made an argument for increasing What is of concern to most governments is not assistance, an argument that the Japanese govern- the ratio of aid to GNP, but the level of aid in relation ment itself accepted. to their budgets. While there has been increased Even more fundamentally, slower growth and faster concern with the "affordability" of aid, it has re- mained a small share of most donor governments' 2. This ratio is also influenced by the variations in the size of expenditures. Aid now represents about 1 percent government expenditures over time and among countries 13 Figure 2.3. Aid Effort as a Percentage of GNP nated as a proportion of GNP (see Figure 2.3). The of the DAC Countries, 1960-80 share of ODA from DAC countries going through multilateral organizations, chiefly the multilateral 0.5 development banks (MDBs), climbed from 12 per- cent in the early 1960s to about 20 percent in the early 1970s and 34 percent in 1980. The share of OPEC aid going to multilateral organizations was de%elopme\n 12 percent in 1980, of which about 40 percent went to Arab- or OPEC-dominated organizations. In ab- solute terms, MDB support grew from $582 million -M in 1960 to about $10.0 billion in 1980. In part, this -0 Coniribuiion- to reflects the establishment of several new channels multiarer.l for multilateral assistance-the Asian Development deeelopmtent bankAe -0.1 Bank, the International Fund for Agricultural De- velopment, the African Development Fund-as well as the expansion of several existing banks. T i I i The rising share of multilateral aid in total as- 1965 1970 1975 sistance comes at a time of generally stable or de- Source: DAC. clining aid performance. Indeed, it is possible that the rise in allocations required to support the new multilateral institutions has helped to stabilize aid inflation put new strains on government budgets, performance during the past several years. The rise while unemployment increased spending required in popularity of multilateral institutions reflects the by social programs. The result was that foreign aid view that aid channeled through these institutions faced tough competition for funds. Governments can be particularly effective in promoting long-run naturally found it hard to run far ahead of public development (see box on U.S. Treasury study). From opinion, which in many countries favored cutting the viewpoint of recipients, multilateral aid is con- aid rather than other programs "closer to home" sidered somewhat more removed from shorter-term when economic conditions were difficult (see box political concerns that may color bilateral aid pro- on public opinion). Nonetheless, in many countries grams. The larger multilateral development banks, budgets for aid have been maintained or even including IDA, are considered able to engage in a increased. meaningful policy dialogue and help coordinate aid Looking toward the future, several countries, in- efforts among donors. cluding Canada, France, Germany, and the United But the emphasis donors place on multilateral Kingdom have announced their intention to move assistance varies, as Table 2.4 suggests. Four of the toward the UN's target that ODA should reach 0.7 five major donors-the United States, Germany, Ja- percent of GNP. Japan's target is to double its aid pan, and the United Kingdom-generally contribute in dollar terms in 1981-85 compared with the pre- at least the DAC average of one-third of ODA through vious five years. Italy, which gives much of its ODA multilateral development banks. Other donors, such funds to multilateral agencies, plans to increase its as France and the OPEC countries, have relied more previously modest levels of aid. The Nordic coun- heavily on bilateral assistance. tries and the Netherlands, whose performance ex- ceeds the UN target, seem intent on maintaining or even increasing their strong support for ODA, de- spite some economic difficulties and debate over the effectiveness of aid. Almost all donors maintain some bilateral aid pro- grams, no matter how high their multilateral share. Bilateral aid programs also offer certain advantages, particularly a visible political impact. Through bi- lateral programs, donors can also favor certain Multilateral assistance has increased sharply, espe- countries or sectors, which may not be so favored cially during the 1970s, when aid generally stag- by multilateral institutions. 14 Public Opinion aid as a moral obligation; two-thirds believed it preserves While public opinion on foreign aid varies from country to cultural and political ties with France; half thought it bene- country, some broad points of similarity emerge: most favor fited France generally; about two-fifths approved current aid helping poor people in poor countries but feel that current levels and would even increase aid; but about a third thought efforts are already sufficient or too large, and that problems the neediest may not benefit sufficiently. "at home" should take priority. They are skeptical about the Germany effectiveness of official agencies, less skeptical of private ones. in response to an opinion poll by the ministry of Economic The United States Cooperation in 1981, 67 percent of those questioned favored A detailed poll in 1972 showed about 80 percent of respon- development aid in principle (against 71 percent two years dents regarded assistance as "morally right" and about two- earlier), while 20 percent were fundamentally opposed (against thirds (up from half in the 1960s) favored development aid about 18 percent earlier). Although, in 1979, 53 percent ap- in principle, primarily on humanitarian grounds. But 43 per- proved the government's development policy, by 1981 only cent of those asked favored cutting aid programs; roughly 47 percent did. The ministry attributed this decline to a wors- three-quarters believed the United States was doing more ening economic situation-while only about 24 percent of than its "fair share" in aid compared with other wealthy those questioned in 1979 found the economic situation poor, countries, in the latest poll 74 percent found it to be so. Interestingly, In a 1979 poll covering 12 government programs, "foreign 40 percent thought German aid exceeded its exports (exports aid was not only one of the three items that the public feels were actually about DM70 billion, aid DM6 billion). In a 1974 we are spending too much on, it was an easy first. ... Sev- poll, about two-thirds of those asked had singled out aid as enteen times as many Americans (69 percent compared with something to cut if budget cuts were needed. Similar results 4 percent) feel we are spending too much as feel we are were reported in a 1977 poll, when only about a tenth of spending too little on foreian aid. - ." 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'..J Af*_14ir: t* t u d :rl vIl" ur . . r It. r% eT- 1111 l l le-: jl,% o l.n : . .*.ri,.crn t.1 .Iid - : I ar t..ur hr e . ...on r. h.. ii . -ki. to - ;* p. .11 r1- tr.-].l. 1-c " Jild pp .. Ittl .* is 15 U.S. Treasury Study of the Multilateral Private capital could not substitute entirely for MDB Development Banks assistance because poorer countries lack access to pri- vate capital and because MDB assistance involves sub- In 1981, the new administration asked the U.S. Treasury to stantial technical assistance and policy advice, as well as undertake an evaluation of the policies and operations of the the infusion of capital. multilateral development banks (MDBs). The resulting study' The MDBs generally allocate their resources on reason- focused on the World Bank, but also covered the Inter-Amer- able grounds, considering their financial and other cri- ican Development Bank, the Asian Development Bank, and teria. the African Development Bank. The MDBs, particularly the World Bank, have made ma- The study finds that "the value of the MDBs lies primarily jor efforts to reach the poor. in their cost-effective contribution to LDC economic growth The World Bank has generally not focused excessively and stability." The economic justification for the MDBs, in its on equity at the expense of growth; moreover, its rates view, rests particularly on their capacity "to play an effective of return on education, health, and other equity-on- role in situations which require government intervention to ented projects, while more difficult to estimate, gener- provide economic benefits that private investors would or ally match those on more traditional projects. could not generate." It emphasizes the particular importance The World Bank, including IDA, generally pursues pol- of MDB assistance to the poorer countries, who "tend to be icy reform with reasonable effectiveness in conjunction significantly dependent" on the MDBs. with structural adjustment loans. The study concludes that the MDBs have generally been tMDBs promote donor coordination. effective, citing average rates of return of 15-20 percent as MDB lending terms are generally appropriate. evidence that "the institutions are making positive contri- MDB projects are generally well prepared and well su- butions to economic development." It finds more vigorous pervised. efforts to influence policy, however, might have enhanced The study remains concerned about certain areas (such as effectiveness.2 It examines in detail some 19 criticisms re- evaluation and absorptive capacity in some countries) where cently leveled against the MDBs. Most of these it dismisses evidence is less conclusive. And it finds evidence for two as groundless or already remedied. Thus it finds: major criticisms: * The MDBs are a useful complement to bilateral pro- * An indication that in some instances there has been an grams and have particular strength in stimulating effi- overemphasis on loan quantity as opposed to quality, cient long-term economic growth. which may have eroded MDB influence over policy. * The vast bulk of MDB lending does not compete with "The strong indication that a more effective graduation/ or displace private activity maturation policy is needed" to focus scarce MDB re- sources more on the poorest countries. 1, United States Partipation in the Multilateral Development Banks The study concludes that "continued U.S. participation in in the 1980s (Washington, D.C.: U.S. Treasury, 1982). the MDBs is justified by a fundamental national interest in a 2. This point is discussed more fully in Chapter 4. more stable and secure world." Most bilateral donors have favored countries and Departments and Territories. The United Kingdom regions with which they have long-standing eco- has continued to direct a substantial bilateral aid to nomic, political, and cultural ties. More than 40 per- former territories in South Asia and Africa (above cent of France's aid in 1980 went to its Overseas all India, but also Bangladesh, Pakistan, Kenya, and Table 2.5. Net Disbursements of IDA and Bilateral Official Development Assistance by per Capita Income of Recipient (percentage) IDA" DAC bilateral aid OPEC bilateral aid Per capita income_______________ _______________ _________ of recipient' 1970 1975 1980 1970 1975 1980 1975 1980 $410 or less 72 71 80 41 41 34 24 20 $411-730 14 22 18 18 20 28 47 10 $731-1,275 5 2 1 12 11 8 2 11 $1,276-2,200 9 5 1 20 12 11 21 54 Over $2,200 - - - 9 16 19 6 5 Total (percentage) 100 100 100 100 100 100 100 100 Total (billions of dollars) 0.2 1.1 1.5 5.1 8.8 16.0 4.8 5.8 a. GNP per capita in 1980. b. Fiscal years. 16 Table 2.6. IDA and DAC Bilateral Aid Commitments by Sector (average percentage, 1979-80) Basic infra- Agri- structure Industry culture Social sectors Other" IDA" 24 12 43 13 8 DAC bilateral aid, total' 28 10 18 29 15 France 15 3 8 61 13 Fed. Rep. of Germany 36 20 15 22 7 United States 15 3 36 28 18 Japan 54 16 15 8 7 United Kingdom 25 6 10 18 41 Netherlands 30 7 27 29 7 Canada 38 5 16 8 33 Sweden 11 35 21 26 7 Others 18 13 17 19 33 a. Includes nonproject loans, technical assistance, and flows unspecified by sector. b. IDA figures based on fiscal 1980-81. c. Excludes commitments not allocable by sector. Source: DAC. Zambia). Germany provided about 14 percent of its donors on development. For instance, IDA devotes bilateral assistance to Turkey and substantial amounts 43 percent of its loans to agriculture, compared with to countries in Africa. In 1980, half of all OPEC aid only 18 percent of the bilateral aid of DAC countries went to Syria, Jordan, and Morocco. The United (see Table 2.6). The share of social sectors, partic- States has heavily assisted Israel, Egypt, and a num- ularly health, family planning, and education, was ber of other countries of key strategic interest. And far higher for bilateral aid than for IDA-29 percent about half of Japan's recent assistance has gone to as against 13 percent. The traditional areas of basic Asia, particularly East Asia. infrastructure absorbed about equal shares of IDA Most of these bilateral links are with the better- and bilateral aid as a whole. But IDA devoted a far off developing countries. Middle-income countries higher share of its resources to basic infrastructure with per capita incomes of more than $730 (1980) than did the United States, France, and Sweden, received about 38 percent of DAC bilateral aid in although notably less than Japan. 1980 (see Table 2.5), but almost nothing from IDA. If donors perceive that multilateral agencies have By contrast, 80 percent of IDA's lending in 1980 went to countries with per capita incomes of less than $410; these poorer countries received only a Figure 2.4. Capital Flows to Developing third of the bilateral aid from DAC donors (see Countries by Income Group, 1978 Figure 2.4). This contrast has grown over the years. Upper Lower E Low-income IDA's lending has been increasingly concentrated middle-income middle-income countries in low-income countries and, within that group, in coutries countries (percentage) countries designated as least developed (their share 20 40 60 80 rose from 16 percent in 1970 to 25 percent in 1980). During the same period, the share of DAC bilateral loans going to low-income countries has fallen. OPEC Other official development countries, which became important donors in the assistance mid-1970s, directed 20 percent of their bilateral as- Nonconcessional sistance to low-income countries in 1980. loans in addition, bilateral aid programs may have sec- Private toral priorities different from those of multilateral flowsL programs, reflecting in part the views of individual 17 a comparative advantage in a particular sector, they they can offer a different mix of technical assistance, may tend to concentrate their aid in other areas. training, and capital, their emphasis may suit their Over the years, the World Bank has earned a rep- comparative advantage. Most donors have increas- utation for undertaking sound infrastructure and ingly concentrated on reaching poor people, as well agricultural projects in low-income countries. It has as increasing food production. To the extent that not done as much, nor been as successful, in such governments see IDA successfully working toward areas as population, nutrition, and health. In some the same goals, they recognize its efforts as being areas, bilateral donors have moved to compensate complementary to, rather than in competition with, for these perceived deficiencies; to the extent that their own. 18 3 IDA Operations, 1961-82 444 AWA During its first 22 years, IDA approved 1,302 credits ing, the policies it uses to allocate funds, the patterns amounting to $26.7 billion to 78 developing coun- of its allocations, and the similarities and differences tries. Disbursements for these credits totaled $14.7 between IDA and the IBRD. billion. Throughout, IDA's purpose has remained unchanged: to support the economic development The Financing of IDA of low-income countries by providing finance on concessional terms. However, there have been im- As of June 1982, the cumulative resources available portant shifts in IDA's operations, in the sources to IDA exceeded $25 billion. These resources have and uses of its funds, and in its role compared with been provided by: other sources of finance for developing countries. *Subscriptions to its capital and contributions * The scale of IDA's lending, after remaining largely from member countries ($23.6 billion). unchanged in real terms during most of its first * Transfers of net income from the IBRD ($1.6 decade, rose by about 11 percent a year in the billion). 1970s. * Repayments of credits and IDA's own net in- * The sources of IDA's funds expanded as the come ($280 million). number of contributing countries rose from 18 in IDA-1 to 33 in IDA-6. In addition, Switzerland, which is not a member * IDA's recipients have changed, as 27 countries country, made two interest-free loans to IDA, in graduated to other sources of finance, while 1967 and in 1973. In 1981, these loans, equivalent 56 countries (most of them not sovereign na- to $51 million, were converted to grants (see Table tions when IDA was established) were added 3.1 and Figure 3.1). to the list of recipients. Only eight of IDA's cur- rent borrowers received credits during its ini- Subscriptions and Contributions tial operations in 196 1-64. At present, 33 countries contribute to IDA. While This chapter first reviews where IDA's funds have most of these are industrial countries, the list in- come from. It then discusses the growth of its lend- cludes some developing members of IDA-Brazil, 19 Table 3.1. Resources Available to IDA donors had deposited with IDA remained uncashed for Commitment, 1961-82 at the end of fiscal 1982, pending disbursement. (cumulative total in current dollars as of June 30, 1982) The large amount of uncashed contributions re- tillions Of flects the long lead time between IDA commitments dollars Percentage and disbursements, which postpones the ultimate Total subscriptions and supple- impact on the donors. mentarv resources from Until IDA-6, IDA's credit commitments to its bor- members 23,582' 92.6 rowers were in dollars. Since the elimination of United States 7,603 298 maintenance-of-value arrangements for donors' Japan 2,773 10.9 contributions after IDA-3, contributions (which in United Kingdom 2,766 10.9 most cases are made in national currencies) have Fed. Rep of Germany 2 706 10.6 at times diverged from the value of IDA's credits as France 1,231 4.8 Canada 1,230 48 a result of exchange-rate movements.' To reduce Sweden 800 3.2 the impact of currency fluctuations, credits under Italy '4 2.9 IDA-6 have been denominated in SDRs. Netherlands 699 2 8 Saudi Arabia 611 2.4 Australia 472 1 9 Tansfers from the IBRD Belgium 37O 1.5 Kuwait 365 1.4 Since 1964, IDA has received regular support from Denmark 264 1.0 the IBRD. The tBRD has decided annually to transfer Norway 257 1.0 Others 688 2.7 some of its net income to IDA following a general Contribution by Switzerland 51 02 policy that allows such transfers if the funds are not needed for the IBRD's own purposes and thus might Transfers from IBRD 1,564 6.1 otherwise be available for distribution as dividends. Other sources 280" 1 1 By the end of fiscal 1982, the IBRD had authorized Grand total 25,4- 1000 transfers to IDA of $1.6 billion (6 percent of IDA's total support), making the IBRD the fifth largest a Excludes S4,812 million of contributions to the sixth re- plenishment, and $211 million of Part II members subscriptions contributor to IDA. As with contributions from provided in their own currencies, that are not available for com- countries, actual cash drawings are made only when mitment For a definition of Part 11 members, see the technical IDA needs the money for disbursement. IBRD con- notes to Annex Table I tributions are drawn last, however, after the donor b Includes repayments of $250 million, and accumulated net income through fiscal 19,9 of $30 million Does not include contributions have been exhausted. Through fiscal accumulated deficits of $198 million incurred in fiscal 1980,1981. 1982, IDA had encashed $817 million of the funds and 1982 transferred from the IBRD. Greece, Mexico-as well as two former recipients- Internl Funds the Republic of Korea and Colombia.i Subscriptions and contributions (also referred to Since IDA credits are highly concessional, net in- as supplementary resources) provided 93 percent come and repayments have been only a minor source of the total resources available to IDA for commit- of funds. By the end of fiscal 1982, $250 million had ment between 1961 and 1982. As of the end of fiscal been repaid. Repayments are due to accelerate as 1982, $23 billion had been received from donors, IDA's portfolio matures-$519 million is to be re- including $5 billion of the $12 billion agreed to be paid between 1983 and 1987. Although repayments provided under IDA-6. Upon the completion of IDA- do not provide any extra resources to IDA's bor- 6. contributions will total $30 billion. rowers as a group, they allow lending to shift from Contributions have been paid largely as non-in- former to current borrowers. terest-bearing notes deposited with IDA. These are IDA's net income, after being in surplus through cashed only when money needs to be disbursed. As a result, almost $9 billion of the $23 billion that 2. As of June 30, 1982, the value of credits approved by IDA's Board ($26.7 billion) exceeded the value of its resources avail- able for commitment by $1.2 billion. This difference was largely due to the impact of exchange-rate movements on the dollar I A complete list of current contributors is in Annex Table 1. value of resources provided in other currencies. 20 Other countries Transfers from World Bank profits Figure 3.1. Sources and Recipients of IDA Funds, 1961-82 eicr sources .Fu , 8 veloping countries (percentage based on cumulative Japan / amounts in current dollars) ., United Kingdom Canada , Sources of IDA funds Germany France United States Bangladesh Other Asian Pakistan Lain America Recipients of IDA credits (commitments) India Sub-Saharan Africa Middle East its first 15 years, turned negative in fiscal 1976 and administrative expenses, in 1982 IDA began to charge has remained negative. The cumulative net loss was its borrowers a commitment fee of 0.5 percent per $168 million at the end ofJune 1982. Until the mid- year on the undisbursed balance of new credits. 1970s, IDA earned substantial income on donor contributions, which were held as investments pending disbursement. Income from this source The Growth of Lending declined after 1974 when donors' contributions be- gan to be made largely in the form of non-interest- IDA's growth has been determined by the size of bearing notes. Since that time, IDA's income has the contributions agreed among the donor coun- been derived almost entirely from the service charge tries. Between 1961 and 1968, IDA's annual com- of 0.75 percent a year it levies on the disbursed mitments fluctuated between $100 million and $360 outstanding balance of its credits. However, most million, and averaged $229 million a year. They then of IDA's expenses for a project are incurred just increased to an annual average of $525 million in before and after a commitment is made. This is 1969-71, and rose more than sixfold to $3.8 billion usually several years before the bulk of a credit is in 1980 (see Table 3.2). A large part of this growth disbursed and income from service charges is re- reflects inflation. In constant (1982) dollars, IDA's ceived. Although this mismatch in the timing of ex- annual commitments more than doubled between penses and fee income has existed throughout IDA's 1970 and 1980. So did the annual number of credits, history, it has only resulted in negative overall net which rose from 49 in 1969-71 to 114 in 1980. The income since IDA's other source of income largely average size of credits fluctuated around $30 million ended. (in 1982 dollars) during the 1970s, about half the IDA's expenses are entirely in the form of a man- average of the 1960s when nonproject lending was agement fee paid to the IBRD, representing IDA's more prevalent.3 share of the costs generated by the operations of Reflecting slower-than-anticipated contributions both institutions. As IDA is precluded by its Articles from IDA-6, lending declined in 1982 to a level 30 from borrowing funds from the IBRD, and it wanted to avoid using donors' contributions to meet its 3. Nonproject lending is discussed in detail in Chapter 4. 21 Table 3.2. Summary of IDA Operations, 1961-82 (millions of dollars) Average annual growth 1969-71 Annual average Total to 1980 1961-68 1969-71 1972-74 1975-77 1978-80 1980 1981 1982 1961-82 (%) Credit amounts Current dollars 229 525 1,151 1,513 3,057 3.838 3,482 2,686 26738 22.0 1982 dollars 976 1,523 2,277 2,257 3,656 4,396 3,728 2,686 43,362 11.2 Average size of credits Current dollars 14 11 14 19 28 34 30 26 21 11.9 1982 dollars 61 31 28 29 33 39 32 26 33 2.3 Disbursements Current dollars 192 211 488 1,192 1,232 1,411 1,878 2,067 14,657 20.9 1982 dollars 690 715 1,078 1,894 1,393 1,452 2,026 2,067 24,716 7.3 Number of credits 16 49 80 78 111 114 116 104 1,302 8.8 Note: Constant price data calculated using the Bank's commitment and disbursement deflators. Data for 1982 are preliminary. percent below that of 1980. This reduction was ac- Eligibility and Allocation commodated partly by substituting some IBRD funds and partly by scaling back projects. The average size In determining where to lend, IDA decided in its of IDA credits fell in 1982 to $26 million (in 1982 early years to allocate funds to countries on the basis dollars). of their characteristics, rather than on the particular IDA's funds are disbursed gradually, matching the features of a project or sector. It was also decided progress of the projects for which they are com- that the standards for IDA projects should be the mitted. Between 1961 and 1982, disbursements in same as those of the IBRD. Although some had ar- current dollars were just over half of commitments. gued that IDA funds should be used for non-reve- Some $9.2 billion had been fully disbursed for 608 nue-producing projects in a wide spectrum of coun- credits. The remaining credits were under disburse- tries, to do so would have disregarded the large ment as projects were being implemented; for these, differences of need among countries and the alter- disbursements had already totaled $5.4 billion, with natives available to them. Three principal criteria more than $11 billion committed but still undis- have been developed to determine eligibility for bursed (see Table 3.3). funds: The lag between commitments and disburse- The recipient's poverty, measured by per capita ments means that the level of disbursements in any income. one year reflects commitments made years earlier. . . The ratio of disbursements to commitments there- Thereiint imitede credilortess fore depends largely on how fast current commit- borrwin f convnionalrorce. ments are growing in relation to past commitments. The reciit' eom i perfoneounced When the growth of IDA's operations accelerated ing ts a bi t mk efetivle ofeso in 1969--74 and 1978-80, the ratio of disbursements to commitments fell to about 40 percent. Con- In addition to these criteria, IDA takes account of versely, the slowdown in the growth of IDA's com- population size when determining the allocation of mitments in 1975-77 raised that ratio to 80 percent. funds among countries, to avoid wide disparities in Over the 1970s, disbursements rose at an annual per capita lending levels. Thus in distributing the rate of 21 percent, or slightly slower than commit- resources available to it, IDA takes account of four ments, and continued to rise at that rate in 1980- main criteria-population size, poverty, economic 82, even as commitments were declining. performance, and creditworthiness. 22 Table 3.3. Status of IDA Credits at the End income limit, for projects already in progress. Even of Fiscal 1982 by Year of Approval though the ceiling is not absolute, it has ensured (billions of dollars) that countries graduate almost automatically from Year of approval Total IDA. This has served to minimize the scope for of61 T9a 1political influence in determining eligibility for IDA 1961- 1972- 1977- 1961- fnne 71 76 82 82 finance. Credits approved Number of credits 273 395 634 1,302 Creditworthiness Amount 3.23 6.86 16.65 26.74 IDA is intended to supplement, not substitute for, credits fully disbursed.' Number of credits 271 291 46 608 finance from conventional sources. Limited credit- Amount 3.12 4.93 1.18 9.23 worthiness-that is, a limited ability to service debt Credits disbursing in foreign currencies-has always been required Number of credits 2 104 588 694 for a country to be eligible for IDA loans. Under its Amount disbursed 0.01 1.45 3.96 5.42 Articles of Agreement, IDA is barred from providing Amount undisbursed (.) 0.38 10.86 11.24 assistance if financing is "available from private Credits canceled sources on terms which are reasonable for the re- Amount 0.10 0.10 0.09 0.29 cipient or could be provided by a loan of the type Note: Includes joint IBRD/IDA operations. The sum of dis- made by the Bank." bursed and undisbursed credits does not equal the amounts Assessments of a country's creditworthiness are approved at commitment because of the effect of exchange-rate necessarily judgmental and are based on long-term movements on the dollar value of credits made in SDRs. factors. Poverty itself places severe limits on a coun- try's ability to service debt. But while limited credit- A considerable amount of judgment has been in- worthiness can be a function of poverty, the two volved in applying these criteria. They do not always are not identical; an economy may be stronger or point in the same direction, and some are not read- weaker externally than it is domestically. Lack of ily quantifiable. One country may be relatively poor, creditworthiness has not enabled countries above but its economy may be well managed and it may the per capita income ceiling to receive IDA credits, be able to borrow commercially to meet its needs. because in such cases there is sufficient potential Another country with a higher GNP per capita may to gain creditworthiness over time by other means. have export earnings that fluctuate widely and hence Countries below the ceiling that were considered may be deemed a poor credit risk. Although IDA's creditworthy have usually received both IBRD loans staff has tried to quantify these criteria, it has found and IDA credits, with the more creditworthy coun- in weighing them that judgment must still be ap- tries receiving a higher proportion of IBRD funds. plied case by case. There have also been several instances in which countries that were below the ceiling received only IBRD loans. Indonesia is a case in point: though well below the per capita income limit, as a major From the beginning, though not without some con- exporter of oil it did not receive aid from IDA after troversy, IDA's Board felt that IDA should lend pri- the 1973-74 oil price rise and is not currently con- marily to the poorest countries. This view was for- sidered eligible. It did receive credits in 1978--80, malized in 1964, when the Board agreed to a strong however-illustrating that judgments about credit- presumption against lending to countries with per worthiness, although based on long-term consid- capita incomes above $250. Although 94 percent of erations, are not immutable. IDA funds had gone to countries below that level, this decision excluded four that had previously bor- rowed from IDA: Chile, Colombia, Costa Rica, and Performance Nicaragua. The income ceiling has remained largely IDA's Articles of Agreement require it to pay "due unchanged in real terms, although inflation adjust- attention to considerations of economy, efficiency, ments raised it to $730 in 1980. On occasion, credits and competitive international trade and without re- have been made to countries after they crossed the gard to political or other noneconomic influences 23 or considerations." Measuring performance, though assistance funded by the UNDP. In addition, a proj- inexact, has been assisted by quantitative indicators, ect-preparation facility was established by the Bank such as savings rates and GNP growth, as well as by in 1975. Nonetheless, projects have been difficult qualitative assessments of administration and eco- to develop in some countries, with the result that nomic management and the extent to which eco- they have received fewer credits than they would nomic growth is broad based. The speed and di- have otherwise. rection of change is as important as the level of performance. IDA also takes into account a govern- ment's willingness to listen to advice. The Distribution of Lending In evaluating performance, IDA has tried not to penalize a country for failings that are due to ex- As noted in Chapter 2, IDA's lending has been con- ternal circumstances, scarcity of resources and skills, centrated in the poorest countries. On a cumulative or even weak institutions; rather, the object is to basis, 81 percent of IDA's commitments were to alleviate these constraints. However, lending has countries that in 1980 had per capita incomes of been cut when a country's own willingness to make $410 or less; 98 percent has gone to countries with serious development efforts is seen to be deterio- incomes of $730 or less. rating. Even then some limited lending has usually IDA's list of clients has changed considerably over been continued-to preserve existing investments, the past 20 years. Some 56 countries were added to support particular institutions, to prevent further to the list of recipients after the initial subscription deterioration, or to provide a basis for continuing discussions on policy reform. Regulating lending on the basis of short-term events has not been considered feasible or desirable. IDA's Fiscal projects take years to plan and carry out; its whole (current dollars) year of focus is on long-term development. However, there last have been cases in which countries that might other- C 1964 1970 1980 IDA credit wise have qualified for IDA were considered inel- Chile' 450 720 2,150 1961 igible on performance grounds. Past examples have 0 340 1,180 1962 Costa Rica' 360 560 1,730 1962 included Haiti, Uganda, Guinea, Equatorial Guinea, Nigeria 100 120 1,010 1965 and the Central African Republic. In extreme cases- Dominican Republic 210 350 1,160 1973 civil unrest and warfare, for example-IDA has had Ivory Coast' 200 310 1,150 1973 to suspend even its existing operations. Afghanistan Korea, Rep. of 120 250 1,520 1973 tossen vnTurkey 240 310 1,470 1973 and Chad have recently been in this category. Botswana 65 110 910 1974 Ecuador 190 290 1,270 1974 Syrian Arab Republic 180 290 1,340 1974 Project Availability Mauritius 140 240 1,060 1975 Morocco 170 230 900 1975 IDA has always insisted on economically viable proj- Swaziland 80 180 680 1975 ects. In its early years, the fact that some countries El Salvador 260 300 660 1977 were better able to present projects of the right Paraguay 200 260 1,300 1977 standard affected the allocation of credits. This re- Jorda 220 250 1,420 1978 sult was criticized because it seemed to exclude Philippines 140 210 690 1979 some countries in obvious need. Members there- Thailand 110 200 670 1979 fore agreed that IDA should help in the preparation Bolivia 140 180 570 1980 Honduras 190 280 560 1980 of projects. Ultimate responsibility for project prep Indonesia 70 80 430 1980 aration remains with the borrower, since IDA has Cameroon 110 180 670 1981 wanted to preserve its discretion to turn down a Egypt 150 210 580 1981 project, or to require modifications before it is ap- Nicaragua 320 430 740 1981 proved. In some cases, pilot projects have included Congo, People's Rep. 140 300 900" 1982 proved.cin sompepases, pilotherandlrge projects. IDA eligibilty guide- financing for preparing other and larger projectS. line 250 375 730 Project preparation has also been assisted through the stalismen ofresdentBan misios, ar- a. Received one credit only, the establishment of resident Bank missions, par b. Revised subsequent to 1981 WorldBank Atlas, which showed ticularly in Africa, and through the use of technical $730. 24 Table 3.5. IDA Commitments by Region, 1961-82 Millions of dollars Percentage 1961-70 1971-76 1977-82 Total 1961-70 1971-76 1977-82 Total South Asia 1,786 3.992 9.957 15,735 63 55 60 59 India 1,271 2.855 6,341 10,467 45 39 38 39 Bangladesh - 655 1,524 2,179 - 9 9 8 Pakistan 490 224 904 1,618 17 3 6 6 Others 25 258 1,188 1,471 1 4 6 East Asia 216 566 921 1,703 8 8 5 6 Africa, south of the Sahara 461 1,781 4,367 6,609 16 24 26 25 North Africa and the Middle East 214 713 1,142 2,069 8 10 7 8 Latin America 145 216 261 622 5 3 2 2 Total 2,822 7,268 16,648 26,738 100 100 100 100 period, while 27 have "graduated" from IDA (see of South Asian graduates. The share of lending to Table 3.4), on the grounds that their prospective African countries doubled from 10 percent in the levels of development and creditworthiness justi- early 1960s to 20 percent in the second half of the fied a reasonable amount of debt on commercial decade, as former colonies became independent terms. and joined IDA. During the 1970s this share has In recent years countries have tended to graduate remained at about 25 percent. Latin America ac- before they reach the income ceiling, especially when counted for 5 percent of credits during 1961-70, oil exports have strengthened their creditworthi- but thereafter fell to 2 percent. With the exception ness. Nine of the IDA graduates are below the $730 of Haiti, all Latin American borrowers from IDA have limit, though only four are more than 10 percent become graduates. Two large borrowers in other below it. These four-Bolivia, Honduras, Indonesia, regions, Indonesia and Egypt, have recently grad- and Egypt-graduated within the last two years. uated (see map on next page). During the commitment period of IDA's initial As noted, the size of a country's population is one subscription (1961-64), 22 countries received cred- of the most important determinants of IDA alloca- its; of these only eight-India, Pakistan, Bangladesh, tions. While an attempt is made to keep per capita Ethiopia, Niger, Sudan, Tanzania, and Haiti-are still IDA lending roughly equal across countries, very eligible in 1982. In all, 78 countries have at one time small countries tend to receive more. IDA recipients or another received IDA credits, of which 51 are with populations of 2 million or less had an annual currently eligible. These 51 countries have received average of $6.30 per capita committed to them in 87 percent of IDA's total commitments.4 1979-81, compared with an overall average of $2.50. Lending has been increasingly concentrated in One reason for the higher per capita lending to South Asia and Sub-Saharan Africa (see Table 3.5 these small countries is that a minimum size and and Figure 3.1). Countries in South Asia have re- number of projects are considered necessary for ceived nearly $16 billion in commitments, 59 per- efficient operations. The average size of projects in cent of the total between 1961 and 1982. India, IDA's these countries was $9 million, compared with $32 largest single borrower, obtained $10.5 billion (39 million for all countries (see Table 3.6). percent of the total). While the share of credits to The counterpart of this "small-country bias" is South Asia fell to 55 percent in the early 1970s, the lower-than-average per capita lending to the largely to accommodate new borrowers in other populous countries of South Asia. During the first regions, it rose to 60 percent in the second half of four years of IDA, India received about 50 percent the decade. This rise reflects increased lending to of commitments and Pakistan about 23 percent. In countries other than India, as well as the absence 1968, during discussions about IDA-2, many mem- bers felt that these large countries were tending to 4. The amounts of credits received by each country are in dominate IDA's operations. It was therefore agreed Annex Table 5. In addition, three countries that have recently to limit their shares to 40 percent and 12/2 percent, joined IDA are eligible for credits and are expected to receive their first credit in the near future: Cape Verde, Sdo Tom6 and respectively, well below what their population size Principe, and Vanuatu. or other criteria would have indicated, particularly 25 in India's case. Reflecting this decision, India re- ceived an annual average of $2.00 per capita in 1979- 81, compared with an average of $3.00 for all other current recipients. In 1982, India's share in IDA's commitments fell to 34 percent, in light of the overall reduction of IDA's funds and India's stronger creditworthiness Canada than most other IDA recipients. The reduction in lending to India by IDA was largely accommodated by increased lending by the IBRD, from which India Uned Staes has been a longstanding borrower. For prudential reasons, however, the IBRD limits its exposure to any one country. Disbursed loans to India by the Mex,a IBRD were $1.2 billion at June 30, 1982 (4 percent anRepubbc of the IBRD portfolio); IDA disbursements totaled $6.0 billion. Had these IDA loans been provided by a . Cnata Ria the IBRD, India's share of the portfolio would have exceeded 20 percent, which would be well beyond Colombia the prudential limit. E Sawa IDA and the IBRD IDA is an integral part of the World Bank. In many Argentn respects-operational policies and procedures, the criteria used to appraise and approve projects, loan covenants, and staff-the IBRD and IDA are indis- tinguishable. Both share the work on project design and sector strategies, economic research, and the lessons learned from Bank operations. The main differences between them are the terms and pat- terns of their lending. Table 3.6. IDA Commitments by Population of Recipient, 1979-81 Average annual Total Average size of commitments commitments credit Population of Number of Population per capita (millions Number of (millions recipient countries (millions) (dollars) of dollars) projects of dollars)- Over 50 million 4 898 2 00 5,471 '9 69 10 1-50.0 million 11 217 3.10 2,009 -8 26 5.1-10 0 million 11 '0 4.40 922 62 15 2.1-5.0 million 9 31 4.-0 441 39 11 Less than 2.0 million 14 12 6.30 230 2- 9 Total 49 1,228 2.50 9,0-3 285 32 Note. Current recipients only. This table excludes China, which received one credit of $100 million in June 1981 If China were included, the average per capita commitment would be reduced from $2.50 to $1.40. a. Includes the IBRD component of joint IBRD/IDA projects 26 lell Luxernourg FranceA ID'Dno nda esen ama Recipient aCountriei ~ saU. *., - a -. ppineas w h er aelan d IDA Donor and 'Oe ..t;nrWastam Saoa_ Recipient CountriessI- DonorsY naRand nsrnsl Current recipientsAut.i j~UtO SoFormer recipients Note. (olomia and the Repubtic nfKora, which -r -onhndy donuts, are aso forme ewZaln ,o,ipients of IDA hinds C- -slrS The map reflects the status of countnes as of Jlne 1982 Terms of Lending These terms were designed to be as close as feasible The terms of IDA credits have remained essentiallv to the economic equivalent of grants, while retain- ing the form of repayable loans (see box on mea- unchanged since 1961. Credits have a 50-year final maturity and repayments begin 10 years after the suring the concessionality of IDA credits). For borrowers, the attractions of IDAts conces- credit is signed.5 The loans carry no interest rate, sional loans are considerable. The dynamics of debt although there is a service charge of 0.75 percent accumulation are such that, to maintain a given level a year on the disbursed balance. In January 1982, a of lending net of debt-service payments ("net trans- commitment fee of 0.5 percent a year on the un- ,g fer"), gross lending must grow faster than the in- disbursed balance was introduced to bring the tim- ing of IDA's income from credits more into line t ere at 4chrge.on , disbure e from withitsadmnisratve xpenes.as ote abve, IBRD were $6.4 billion, more than triple the $2.1 billion disbursements from IDA. Because of the debt 5. After this grace period, 1 percent of the credits is repaid in service on IBRD loans, however, the net transfer each of the next 10 years, and then 3 percent in each of the made by the IBRD, was only 25 percent higher than remaining 30 years. the $1.9 billion made by IDA. In terms of transfer- 27 Alca-;uring the ConiLlusionailin 0 IDA Crcdt done. In a number of countries, the Bank has been able to adjust the average terms of its lending by ..1it' K.1 c i-hIl..i rl..rrLl. .t siI l.dirr. 7cr: "blending" IBRD loans with IDA credits. -n b . t.._ .r I 1,, irn .n *,in. iller-T.r r e II li- r i _ I. ii f I I li l ir .i i : . . ' i- rr . 1c.. * T I h- .1 1 1- -1 ..t i. .. thr . . t , I i ,ra Iinrn hi . t-. Patterns of Lending [L.r .11 1. n. tn T I .-I1, .. Blended or not, the two institutions complement h.- l. Ill. t I-I. ..111.- [11.r ,i each other in their lending. Countries in the lowest .. I , Iit: ,I ll.,, t.ir, income group, which received 83 percent of IDA - 1. I -r r ..r Jil p,r..rr-i .r --1 r1 commitments in 1977-82, obtained only 8 percent . r ', .:i.....a'L r-c P_z I Ir-.Ir.- of IBRD lending; conversely, countries in the top 11, it It ILI.. ji.z . I r'Lr'. ni i' I Lthree income groups received 66 percent of IBRD ,,,,, , ., .ii. i .., loans but only 1 percent of IDA's credits (see Table I- .t I'' rIL.1 1- .1111P-I I c .r.1 3.8). Countries receiving a blend of IBRD loans and i. I cr tn .- 1,iIL , IDA credits have been concentrated in the $411- il ~ ~ ~ n 1| s - .i . _ . 1. 11,enfp-- ; . .r $730 range of per capita incomes, though six are 'LI-r ,rf,L I, e.,L. I I i 1.1...,,, in the lowest income group: Malawi, India, Sri Lanka, I I t.. -r , I i - i, -. i-'I1-,cd China, Pakistan, and Togo (see Figure 3.2). I 1.? I- r -I . , r - - b,'. I, Ln.q.I.~ I LnThe stability of the shares of each institution's 1 1. c rjl TIll.. I ILa TlIlr,.rn lending going to particular income groups disguises now be as high as 92 percent (see table). Thus, as IDA kept changes in the membership of these groups. The the terms of its credit constant while market interest rates 27 countries that have graduated from IDA are all rose, the concessionality of IDAs lending increased. now borrowers from the IBRD. Similarly, 26 coun- tries that used to receive loans from the IBRD are Grant Element of IDA Loans at Various Discount Rates no longer borrowers. While this group includes (percentage) nine industrial countries that received Bank loans after World War II, it also includes some developing Discount rate Grant element countries, such as Greece, Israel, Spain, and Ven- 6 72 ezuela, which are considered to have progressed 10 86 far enough to make IBRD assistance unnecessary. 12 89 15 92 The shifting focus of development lending over the past 20 years has affected both IDA and the IBRD, since they share the same policies. Nevertheless, ring resources to borrowers as a group, IDA is Table 3.7. IDA and IBRD Gross Disbursements therefore almost as important as the IBRD, even and Net Transfer, 1965-82 though its commitments and disbursements are much (millions of dollars) lower. In some years, indeed, IDA's net transfer was 1965 1970 1975 1980 1982 considerably larger than the IBRD's (see Table 3.7). Around the time IDAs terms were devised, there RD 6s754 1.995 4 6.3 IBRD 606 41 199 364 6 `4- was considerable discussion over whether it was IDA 222 143 1,026 1,411 2,06- better to provide aid as loans or as grants. Though Service payments' the intellectual debate was largely resolved in favor IBRD 544 813 1.3'5 2,984 3,960 of grants-and most donors have moved toward IDA 2 12 42 101 142 grants-IDA has persisted with loans largely on Net transfer' practical grounds. Some donors have believed loans IBRD 62 -59 620 1,380 2,414 to be more convenient or politically acceptable. Some IDA 220 131 985 1,310 1,925 have thought that loans, even when they are highly a. Repayments of principal and payments of interest and other concessional, are taken more seriously by recipi- charges. ents. Though IDA's Board has discussed the ques- b. Gross disbursements less sen-ice payments. Figures for 113RD include transactions with former borrowers, for current For- tion of whether IDA's terms should be hardened or rowers, IBRD net transfer figures were 120 in 1965. 135 in 19-0. differentiated among borrowers, this has not been -'02 in 195 1.665 in 1980: 1.929 in 1981: and 2.-4 in 1982 28 Figure 3.2. Current IDA and IBRD Recipients Per capita GNP IDA only IDA/IBRD blend IBRD only Over $2,200 yprus Bahamas Barbados Uruguay Yugoslavia Argentina Portugal Romania $1,276-2,200 Chilel Malaysia Mexico Korea Rep.* Brazil Turkey* Algeria Jordan* Fiji Syrian Arab Rep.* Costa Rica* Tunisia* Panama Paraguay* $11-1 .!S Papua Ncw (uinca ELuador' Nigeria Colonibia' (C1ngo Dormmnicdn J.plc Rep Rep 1 0 (uatemnala { aa NIiuriiius, IaUiflILUa $ - D,ifuinki,.6 Ll% a[n3 Philippines lih- -un Zimbabwe swaziland' 1;olomon Iands Zanihia Thailand' Nauritania Liberia (f3mtron' Yemen Arah Rep -tnegal El nalkador' Yemen. PDR Ken%.i Eg pi' Le,oEho Boli% ia' 6hana Hondura2' Indonesa' $ I'' "r 1ck Nudan Gambia Togo Madaga,car Zaire Pakistan Niger Upper 1olta China Benin Rwanda Sri Lanka Iganda Burundi India Comoro-; Iall Malawi -estern Viet Nan ;am-a Afghani'.ran Iquatorial Burnia Guinc:j Guine.-Bi...au Central Somnalia 1frLan Rep Nepal Guinea Ethiopia Taniania Ban,gade%h N,it Rork,s a ,inui.,.-ountr sierra Leone Chad .s 1lunie 31. 10.12 counurel-.ir Hami Laq PDR hq-d in mLind.ing .,rdt r ., iow MIaI di'e-cr cdpl[.L (,NP 29 Table 3.8. Distribution of IDA and IBRD Commitments by per Capita Income of Recipient (percentage of total commitments) Per capita income ID)A IBRD of recipient in 1980 1961-7 1972-76 1977-82 Total 1961-71 1972-76 1977-82 Total Below $410 71 78 83 81 13 7 8 8 $411-730 16 1' 16 1- 9 23 26 24 $731-1,7 4 2 1 1 16 13 71- $1276-2,200 9 4 0 1 32 43 36 36 Over $2,200 0 0 0 0 30 14 13 15 Total 100 100 100 100 100 100 100 100 Note: Data are based on amounts in 1982 dollars. the sectoral distribution of their lending does van, secretariat. Its lending through IDA has permitted because each is lending to a group of very different the Bank to continue in this role in aid groups for countries. Since low-income countries tend to be the poorest countries. The first of these aid groups heavily dependent on agriculture, IDA lending has emerged from a series of meetings in 1958-60, con- been more concentrated in agriculture than IBRD vened by Eugene Black, then the Bank's President, lending (37 percent of the total compared with 22 to discuss the foreign-exchange crisis in India, and percent). Even though resources are fungible in attended by that country's principal creditors and borrowing countries, in "blend" countries IBRD trading partners. The discussions broadened to con- money has tended to be used for projects where sider India's development needs over a longer pe- revenue is going to be raised-particularly in in- riod and to find ways of ensuring that enough ex- dustrv and public utilities---and IDA finds used where ternal finance would be available. A similar meeting benefits are longer term or more difficult to trans- was held to discuss Pakistan's request for assistance late into revenue, such as projects for education in 1960. The desire of donors to coordinate their and other human resources or rural development support for these countries' development pro- (see Table 3.9). grams, along with their recognition that aid re- quired long-term strategies, gave impetus to the Aid Coordination establishment of IDA as well as the DAC. During the 1960s, the number of aid groups in- The World Bank has often been placed in the role creased, as newly independent countries wanted of coordinating aid to particular countries. Aid con- more aid and the principal donor countries, partic- sortia and consultative groups have been set up for ularly the United States and the United Kingdom, this purpose, with the Bank serving as chair and were anxious to share the aid burden. Most of these new aid groups concentrated on a country's needs and the coordination-as opposed to commitment- Table 3.9. IDA and IBRD Lending Operations of aid. By 1970, there were 14 active aid groups with by Sector, 1961-82 22 countries attending as donors in one or another (percentage) - - group. All except two groups were sponsored by Total Blend the Bank. The others, for Indonesia and Turkey, comtnitments countries onli" were sponsored by the Netherlands and the OECD- 11RD IDA 1BRD IDA although the Bank has served as secretariat for them. .Agriculture and rural devel- Increasingly, aid groups became a forum for dis- opment 22 37 14 39 cussion between donors and recipients over eco- Basic infrastructure 42 30 4- 31 nomic policy. Industry 20 8 30 - There are now 21 active aid groups, of which 12 Human resource develop- are for countries eligible for IDA assistance. The ment 12 13 5 10 e Other' 4 12 4 13 groups have tended to be confined to countries receiving relatively large amounts of aid from many a. Countries currently eligible for resources from both the sources, where the expense of meeting arrang e- IBRD and IDA. For list, see Annex Table 4. Excludes former IDA recipients. ments has seemed justified. This has meant that for b Includes program lending and technical assistance. a number of smaller countries, particularly in Africa, 30 Table 3.10. Cofinancing of IDA Projects, 1972-81 1972-76 1977-82 Total Number of projects with cofinancing 116 266 382 Amount of cofinancing (millions of dollars) 1,103 4,814 5,917 Cofinancing as a percentage of project cost 22 27 26 Amount of IDA contribution (millions of dollars) 1,514 6,989 8,503 IDA contribution as a percentage of project cost 31 39 38 IDA credits with cofinancing As a percentage of total number of IDA credits 33 46 41 As a percentage of total amount of IDA credits 23 42 36 aid has not been coordinated among donors in this the IBRD or from IDA. Country and sector reviews fashion. provide the broad framework for the selection and IDA also has a coordinating role through co- development of the individual projects through which financing projects with other donors, an activity that a lending program is implemented. grew in importance in the 1970s. During 1972-82, IDA's involvement with a project lasts, on average, 382 credits totaling $8.5 billion and accounting for about 10 years, much the same as the IBRD's. The 41 percent of IDA's operations went to projects that project cycle has several stages (see box on the were cofinanced with other official agencies. The project cycle), which require varying amounts of money provided by these agencies covered 26 per- staff time (see Table 3.11). cent of the total cost of these projects (see Table The amount of staff involvement also varies greatly 3.10). Cofinancing from private sources, though im- by sector. It has been greatest in areas where the portant for projects financed by the IBRD, has been need to adapt to local conditions is greatest, such negligible for IDA projects because IDA countries as population and urbanization projects, and lower are not as creditworthy. Cofinancing has permitted for infrastructure projects, such as power and trans- IDA to be involved in more projects than would port, where design tends to be more standardized otherwise have been possible; however, the extent (see Table 3.12). These differences are also re- to which it has brought in extra financing overall is flected in the number of agencies involved in im- harder to tell. plementing a project. Based on a sample of projects in 1979 (including IBRD projects), 74 percent of Project Finance those in agriculture and rural development, edu- cation, urbanization, and population involved more The Articles of Agreement of the IBRD and IDA are than one executing agency, and 32 percent dealt identical in requiring each to make loans for specific with more than four agencies; in infrastructure proj- projects, except in special circumstances. Between ects, the figures were only 18 percent and 2 percent, 1961 and 1982, project finance accounted for 88 respectively. percent of all IDA's lending. The remaining 12 per- cent has been for nonproject or "program" loans, Table 3.11. Time Spent on IDA Projects which are discussed in Chapter 4. by Stage of the Project Cycle (years) Staff Involvement. The process of choosing proj- ects is identical for both IDA and IBRD operations. Staff Elapsed time time It begins with a staff analysis of a country's economy and the needs of the sectors where lending is con- Identification, selection, prepara- templated. The country's long-term development tion, and design 0.8 2.01 Appraisal 13 0.6 strategy is analyzed and discussed with the govern- Negotiation with borrower and ment-discussions that go on regularly in countries approval by Executive Directors 0.2 0.3 where operations have been established. Implementation and supervision 0.8 6.3 Bank staff also draw up regular economic reports Ex post evaluation 0.1 1.1 on each country. These help to determine the Bank's Total 3.2 10.3' strategy, the scale and focus of its lending, and the Vote: Data are based on experience for fiscal 1977-81. extent to which a country qualifies for lending from a. Estimated. 31 Table 3.12. Time Spent on IDA Projects by IChe Pruicer Lycle Sector . 1. urrl.'L.m:-' 4.I t. r lie..rr.: pr .s... i. e . . : Staff Elapsed . r ir. I ic Ft . k i -I ei. ill -r..i r,,,c,j.,r - tine t ne Th . .k r r.jr.. pir- .l i n :i . .1 ..i -ra.[.i_.. Nonproject lending 1 6 3.4 iii~.i- f. Telecommunications 1 9 o 1 cr, -ir .1' It_ A r, ' T-. 11 In Development finance companies" 2.1 . r i i I, i it- -Energ, 2 4 73 I. Iir..rru el "' ilu LI * le tr .I;r(tr i, ll. . 4f - hreli.; Ir- S ITWater supply and sewerage 2.6 11 6 I-.11 IL-%.. thi- 1, .1 . Transport 27 8.1 t,.',. *I---,. * I. .. r i n r - rh - I. .r.- r Industry 28 83 if .u.. .. n r*- ' - 1 rL.. .l.' .. -.1,. I. Education 10.0 Agriculture and rural . . nr_ .. r. .r6 .- el..j n t - -.i- n.) cA r.c - irl, development 39 8- IDA's view of development priorities. These projects are then Urbanization 4.8 85 incorporated into the lending program of the Bank for a Population, health, particular country, and nutrition -5 8- Preparation. The borrowing country or agency examines Total IDA projects 3.2 8 3 the technical, institutional, economic, and financial aspects Total IBRD projects 3.0 S 2 of the proposed project. IDA staff provide guidance and may offer financial assistance for preparation or help borrowers Note. Data are based on experience for fiscal 19-81. obtain assistance from other sources. Often this assistance a. Excludes time prior to appraisal comes from other United Nations agencies, including UNDP, b. Includes small-scale enterprises. FAO, or WHO. The preparation stage may take as long as two years to complete. Appraisal IDA staff undertake to review comprehensively Complexity increases when projects involve dif- and systematically all aspects of the project. This may take ferent components-as is the case with rural and three to five weeks in the field and covers four major aspects: urban development projects, for example. The dif- technical, institutional, economic, and financial. An appraisal report is prepared and reviewed by staff at headquarters. ficulties of supervising and carrying out these proj- This report serves eventually as a basis for negotiations on ects have stimulated a move toward closer review outstanding issues with the borrower. of this aspect of project design. The issue is to de- Negotiations. Representatives of the borrower come to termine when the benefits of mutually reinforcing Washington to discuss the necessary measures that must be undertaken to ensure the success of the project. Many of the components are outweighed by the risks of over- measures that are reviewed and agreed at this time become loading the institutional capabilities both of the re- covenants in the loan documents. Some covenants stipulate cipient and of IDA. steps that must be taken before the credit becomes effective. IDA's procedures for appraising and implement- The project is then presented to the Executive Directors of IDA for approval, after which the loan documents are signed. ing projects have been intended to ensure that funds Implementation and supertision. The borrower is re- are used well (for example, see box on procure- sponsible for implementation of the project that has been ment). However, recipient countries have often been agreed. IDA is responsible, however, for supervising that critical of the delays these procedures can entail. In implementation, through progress reports from the borrow- ers and periodic field visits. An annual review by the Bank addition, countries with very limited administrative of its experience in supervising all projects under way serves resources have often found these procedures to to improve policies and procedures. Procurement of goods represent a real burden. While recognizing these and works for the project must follow World Bank guidelines complaints, IDA has been unable to reduce this for efficiency and economy. An average IDA credit takes about seven years to disburse and will require supervision during burden without sacrificing project quality. This all of that time. On average, less than 20 percent of a credit problem is more acute for first credits to a country is disbursed during the first two years following commitment; or sector before working relationships have be- it takes four and a half years for half of a credit to be dis- come established. bursed. Evaluation. After the project is completed, a completion Cost Sharing. Generally, the Bank does not fi- report is prepared by the operational staff of IDA. This report nance the entire cost of a project. The financial is reviewed by the Operations Evaluation Department, which prepares its own independent audit of the project. This eval- involvement of the borrowing country itself is thought uation emphasizes the lessons learned from the project, which desirable to ensure a project's success. Conversely, can be incorporated into the project cycle of subsequent if it is to have a real influence on a project and- projects. through its lending-on the country the Bank needs 32 Procurement Arrangements under IDA Credits .-- I 11'. Ict-Ip..r. -...,r ar-c.I. Ii.. II..r In supervising projects, IDA insists that goods and services .T be obtained economically and efficiently. Although the bor- I I C it 11 1 i -' 1 I - rower is ultimately responsible for the award and adminis- Ir. tration of contracts, IDA establishes the basic rules for pro- curement. The procedures that have been developed for procurement, which are identical to those of the IBRD, are designed to ensure that money is used well and that qualified rI I`-.' ri r- r I.I I rIII I i I,- ir firmsinallofitsmembercountrieshaveanequalopportunity _ I i r.1 -I n..I rh..u b i r i..:mr.,-r l ..pr.. i Jri1 1..r to provide the goods and services needed. They are also intended to encourage the development of local manufac- ... n I r h Ir li alt r i : .q*1 -- - - 1 iR -rc I i I .. .- II l. - Ii h e .- turers and contractors in the borrowing country. In reviewing the specifications, bidding procedures, evaluation of bids, t i . -r - _. I. r .I il * .*. To . ii and proposed awards, IDA ensures that procurement con- forms to the agreement with the borrower. Most procurement under IDA projects has taken place under Contribution and Procurement Shares of international competitive bidding (ICB), which serves as a safeguard against waste, corruption, and discrimination in (percentage) procurement. Generally, under ICB, timely notification must be provided to prospective bidders. No bidder may be dis- qualified for reasons unrelated to its capacity to supply the 30- goods and works in question, and bids must be opened in Contribution share Procurement share public. In order to encourage the development of local industry, a margin of preference equal to the level of import duties 20- in the recipient country, up to a maximum of 15 percent, has been allowed for local suppliers of goods since 1965. Countries with per capita income below $370 in 1980 dollars have also been allowed a preference of 7% percent on civil works contracts since 1974 10- In a variety of circumstances, IDA has found ICB not to be the most efficient method of procurement. This is particularly true in projects such as those in rural development, whicb do not involve large-scale civil works or machinery and equipment that must be imported. In these situations, IDA has developed guidelines for alternative procedures to let United Germany Japan United France Nordic contracts. States Kingdom groupa Because investment capital is so scarce in poor countries, a. Includes Denmark, Finland, Iceland, Norway, and Sweden. some IDA money is ised for local costs-buying goods and to finance a significant proportion of project costs. If there are many good projects available in sectors The proportion of a project's cost that is financed in which IDA wishes to concentrate, it may finance varies considerably by country, being higher in the a smaller proportion of each project's cost. Doing poorest countries. They face the greatest difficulties so, however, runs the risk of overextending the in raising domestic finance and have the smallest government in the recipient country, which not only chance of borrowing from other foreign lenders. has to provide its share of the project cost, but also In the very poorest countries, IDA is often willing finance the recurring costs of the project after it is to finance between 60 percent and 90 percent of completed. project costs. The degree of cost sharing for IDA projects re- Over the past decade, IDA provided an average flects these considerations as well as the availability of 44 percent of the total financial cost of projects of other sources of funds. Thus, borrowers in Africa it supported (compared with 35 percent for the provided 28 percent of the total costs of the projects IBRD). Recipient countries themselves contributed in which IDA was involved over the past decade, 45 percent, while other official agencies provided while South Asian countries contributed 48 percent 11 percent through cofinancing arrangements (see from their own resources. Cofinancing met 26 per- Table 3.13). The degree of cost sharing also depends cent of project costs in Africa, 6 percent in South on the objectives IDA wishes to achieve in a country. Asia. IDA (including the IBRD in joint projects) fi- 33 Table 3.13. Cost Sharing of IDA Projects, Table 3.14. Local Currency Costs and Recipient 1972-81 Shares of IDA Project Costs in Selected Sectors (percentage of total project costs) Foreign Local exchange currency Total Local- Recipient currency share Total project cost costs of total (billions of dollars) 18.9 24.9 43 8 Percentage financed by: Development finance companies 35 27 IDA contribution 74 21 44 Transport 38 36 Education 46 31 Domestic contribution 5s75 4555 50 Cofinancing 21 4 11 Population, health, and nutrition 72 39 Total 100 100 100 Water supply and sewerage 63 42 Agriculture and rural development 65 42 Note: Data are based on estimates at appraisal. Energy 65 52 Telecommunications 72 73 Urbanization 76 47 nanced an average of 46 percent of project costs in Note: Data are based on experience for fiscal 1977 -81 each of these regions. While the Articles of Agreement permit IDA to use foreign exchange to finance local expenditures agriculture, and urbanization, recipient shares are in "special cases," in fact the funding of local costs has not been a real obstacle. The bulk of the bor- rowers' contribution is in local currency. IDA often Because many of the areas that have been at the finances some local costs, though the larger pro- core of IDA's attempts to reach the poorest people portion of its finance is for foreign exchange (see have tended to require relatively little foreign ex- Figure 3.3). This proportion depends, in part, on change, the financing of local costs has accounted the percentage of the total project IDA wishes to for almost 30 percent of IDA credits in the past decade, and this share has been rising. By compar- finance. There is still a tendency, however, for IDA ison only 7 percent of IBRD lending covered local to finance a larger proportion of projects having a costs, largely because its borrowers are better able high foreign-exchange component. Conversely, re- . to meet local expenses themselves. Overall, IDA cipients tend to finance a larger percentage of proj- . credits financed 74 percent of the foreign-exchange ects having a high local-cost component (see Table costs of the projects it was involved in, but only 21 3.14), although in some sectors, notably population, percent of the local costs. In its first two decades, IDA has had to adapt the techniques of the Bank to the particular needs of Figure 3.3. IDA and Borrower Contributions the poorest developing countries. At the same time, to Project Costs in Foreign and Local Currency the lessons learned from IDA's operations have con- tributed to the Bank's ability to assist middle-income countries. The concessionality of IDA's loans has enabled it to play a significant role in countries that could not have borrowed over a sustained period from the IBRD or from private financial institutions. However, many of IDA's former clients are now able to do so. By concentrating its resources in the poor- est countries, IDA has become the single largest Foreign source of assistance to these countries, even though Local exchange it accounts for only about 3 percent of the total currency official assistance to developing countries. Combin- ing the IBRD and IDA, the World Bank has become , -a center of understanding about development. Its broad membership has helped it to serve as a focal point for coordination among aid donors and for IDA communication between donors and recipients. 34 4 Sector and Country Experience A'A IDA's ultimate goal is not merely to ensure the suc- agement at every level-project, sector, and econ- cess of its projects, but to improve the overall eco- omywide-can determine how much of a contri- nomic performance of its borrowers. Of course, no bution to progress IDA lending will make. For this one project or series of projects can determine an reason, IDA's influence on policy, and on building economy's fortunes; however, they do provide a up effective policy-making bodies, is critical to its means of dealing with specific development con- achievements in particular sectors. straints and a basis from which IDA and its clients Although IDA operates only in the poorest coun- can develop a long-term plan of action. tries, where institutions are weakest and risks are Projects are linked to broader issues by IDA's greatest, much has indeed been accomplished. economic and sector work. In collaboration with Progress has been neither uniform nor rapid, how- borrowing countries, IDA staff review the perfor- ever, largely because of differences in overall eco- mance of particular sectors and the economy as a nomic management, including trade and exchange- whole, identify bottlenecks and priorities, and es- rate policy, public finance, and approaches to in- tablish a lending program. Countries benefit from vestment. Nevertheless, IDA has played a construc- the lessons that IDA has learned in the past 20 years: tive role in advising clients on investment priorities, the kind of technological adaptations that will work, sector policies, and overall development strategy. the sectoral planning and institutions that are needed, Precisely what achievements are due to that role the policies that have been associated with past suc- is hard to pin down. No mechanistic relationship cesses and failures. These discussions are a two-way can capture the value of sector planning in educa- process, because IDA is constantly having to adapt tion or policy advice in agriculture or of a well- its experience to new realities and to the circum- functioning public utility or agricultural extension stances of particular countries. system. Even in terms of physical infrastructure, such Reflecting changes in development thinking, IDA as roads and power plants, quantification is mis- has become more concerned with finding ways to leading. Roads are not only constructed; procedures ensure that the benefits of growth reach the poorest for maintaining them are established. Power sta- people. This concern with equity has not reduced tions are not merely erected; tariff charges are de- IDA's emphasis on efficiency. Indeed efficient man- termined and distribution systems are planned, all 35 Figure 4.1. IDA Lending by Sector, 1961-82 (percentage of total lending) Industry Human development and related infrastructure 10-7 of which will profoundly affect the worth of the lending and IDA's policy dialogue with govern- stations themselves. In the social services, it is even ments, both at the sector and the national level. more difficult to measure the overall impact of Finally, Chapter 5 deals with the effectiveness of changed policies. Trained workers produce more, IDA's projects and the reasons for success and fail- educated mothers feed their children better, and ure in project work. literate individuals can absorb and then use more of the advances in technology and science. A countrys economic prospects seldom change Changes in Sectoral Lending cataclysmically. Most improvements are the result of patient endeavor and policy reforms. Few proj- IDA's lending pattern has changed over time in re- ects manage to achieve all their goals. Similarly, not sponse to the needs of its clients and changes in all of the sectoral assistance from a body like IDA development thinking (see Figure 4.1). In IDA's early leads to sustainable progress. There are setbacks, years, accelerating growth was the main objective, caused by world events, domestic politics, and mis- and it was assumed that growth would follow once takes. But development in poor countries is a risky an economy's basic infrastructure was in place. Thus business, and progress can only be expected to oc- IDA concentrated largely on investments ranging cur slowly and incrementally. from railways and roads to ports and power plants. It is within this context that the next two chapters It was also assumed that poverty would be reduced look at IDA's impact at the national, sector, and and income disparities narrowed in the wake of project level. Chapter 4 attempts to trace IDA's in- industrialization. volvement in sectors and to show how its lending Both sets of assumptions proved too simplistic. and policy advice have assisted its borrowers. The Early efforts at industrialization failed to generate first section describes the overall shifts in IDA's sec- sufficient employment and resulted in a neglect of toral lending, and this is followed by a more de- agriculture. As food deficits increased and payments tailed discussion of what IDA has attempted in var- imbalances mounted, it became clear that agricul- ious sectors. The last sections discuss program tural production was indeed a key development 36 Table 4.1. IDA Commitments by Sector, 1961-82 Millions of dollars Percentage 1961-70 1971-76 1977-82 Total 1961-70 1971-76 1977-82 Total Agriculture and rural development 633 2,341 6,978 9,952 23 32 42 37 Basic infrastructure 1,164 2,167 4,855 8,186 41 30 29 - 30 Energy 167 615 2,742 3,524 6 8 16 13 Transport 861 1,218 1,594 3,673 30 17 10 13 Telecommunications 136 334 519 989 5 5 3 4 Industry 107 688 1,301 2,096 4 10 8 8 Other infrastructure 80 309 1,145 1,534 3 4 7 6 Water supply and sewerage 80 211 766 1,057 3 3 5 4 Urbanization 98 379 477 0 1 2 2 Human resource development 179 461 1,187 1,827 6 6 7 7 Education 179 390 951 1,520 6 5 6 6 Population, health, and nutrition - 71 236 307 - 1 1 1 Nonproject lendingb 659 1,302 1,182 3,143 23 18 7 12 Total 2,822 7,268 16,648 26,738 100 100 100 100 a. Includes development finance companies, industry, small-scale enterprises, and tourism. b. Includes technical assistance. priority. In response, IDA increased its agricultural Although technical packages could be designed lending, which rose from 23 percent of total com- to increase the productivity of small farmers and mitments in 1961-70 to 32 percent in 1971-76. Much entrepreneurs, these kinds of projects were less of this increase reflected IDA's support for South suited to the rural landless and the urban poor, who Asian agriculture and included substantial lending had few productive assets. Increasingly it was rec- for irrigation. At the same time, the share of IDA ognized that increases in the productivity of the commitments devoted to transport fell from 30 per- poor required investments in human capital, such cent to 17 percent (see Table 4.1). as primary education, basic health and nutrition, By the early 1970s, it was recognized that the safe water, and sanitation. Thus IDA modified its benefits of economic growth would not automati- approach in lending for education and water supply, cally "trickle down" to the poor. Action was nec- for instance, to emphasize primary education and essary to prevent growth from widening income village water supply systems. Lending has also been disparities. The World Bank was among the leaders expanded in recent years for population, health, and in making equitable distribution of income growth nutrition programs. an explicit objective of development. Although de- IDA has also increased its lending for energy proj- velopment strategies had been aimed at boosting ects. With rising oil prices, such projects have high employment, their focus shifted toward raising the priority in many IDA countries. IDA has financed productivity and income of the large numbers of feasibility studies for private-sector investment in 'working poor," particularly in rural areas. energy, forestry projects designed to meet the fuel- In 1973, the Bank announced a major expansion wood crisis, and other innovative approaches. in its lending for rural development,' through proj- Finally IDA has increased its nonproject lending. ects that would combine to assist small farmers to Worsening economic conditions after 1973 height- increase their production and income. As a result, ened the need for assistance to facilitate broad struc- substantial resources were provided for small-scale tural changes in many IDA borrowers. In 1980, irrigation, rural roads, and agricultural credit pro- structural adjustment lending was initiated. It is grams. This "poverty focus" was later extended to available to countries that agree to a major program towns and cities, with special emphasis on small- of long-term reforms. scale industrial development and economical hous- IDA's sectoral emphases are borne out in the ing and infrastructure. regional pattern of its lending. South Asia and Sub- Saharan Africa together account for 84 percent of 1. Rural development projects are those in which 50 percent Ia's to te wtout Asi alon tk or more of the project benefits go to persons below the poverty IDA's total commitments, with South Asia alone tak- line in rural areas. ing 59 percent ($15.7 billion). During the 1970s, 37 Sub-Saharan Africa became the second largest bor- ments, agricultural lending almost doubled be- rower, commanding a quarter of IDA's resources. tween 1961-68 and 1977-82. Since 1974 alone, IDA In both regions lending is concentrated on agri- has reached an estimated 100 million poor people. culture. In Africa IDA is also attempting to ease Most have been in South Asia, which received $5.8 specific bottlenecks in transport and education, while billion in 1961-82, 58 percent of IDA's total agri- its involvement in South Asia spans a wide range of cultural credits. Of this, almost $4 billion was com- activities, including major programs in power, tel- mitted in India alone, with $2.7 billion going to ecommunications, fertilizers, and nonproject lend- irrigation and drainage. ing (see Table 4.2). The main shift in IDA's agricultural lending has India is IDA's largest borrower, followed by Ban- been geared to raising the productivity and income gladesh and Pakistan. Egypt and Indonesia have also of small farmers (those typically farming less than borrowed heavily, though both are now IDA grad- a few hectares). This has involved more work on uates. In Africa, IDA's largest clients are Tanzania, water control-secondar\ and tertiary canals, and Sudan, Kenya, and Ethiopia. drainage schemes-and more training and exten- IDA s 10 largest borrowers have received ap- sion services. In addition, IDA has continued to pro- proximately three-quarters of its lending. In only mote agricultural credit as a way of helping farmers one of these countries, Bangladesh, are IDA flows acquire tubewells and pumps. Combined with new a major share of gross domestic investment. In many seeds and fertilizer, they have boosted output dra- of the least-developed countries, especially those in matically in South Asia. Africa, IDA plays a relatively larger role (although The focus of irrigation projects has changed from the absolute amount of lending is small). If policy dams and major canals to complete systems, in- influence were solely a function of the relative im- cluding not only water sources, but distribution net- portance of IDA credits, that influence might be works and on-farm facilities. IDA has financed expected to have been most successful in Sub- tubewell irrigation to utilize groundwater. In sali- Saharan Africa. This has not been IDA's experience, nated areas, such as in Egypt and Pakistan, the use however, as will be discussed in the final section of underground tile drainage has been financed. of this chapter. More lending for agricultural research and ex- tension has taken place in recent years (see Table 'Agriculture 43). It reflects the need to create agencies capable of generating, adapting, and disseminating infor- Over the past two decades, IDA has invested almost mation directly to farmers, especially smallholders $10 billion in agriculture, in activities ranging from IDA pioneered the "training and visit" (T&V) ex- the financing of irrigation pumps in Bangladesh to tension system in India. Fieldworkers keep in close fertilizer distribution in Zaire and research facilities contact with farmers, advising them on technolog- in Pakistan. As a proportion of total IDA commit- ical adaptations and basic farming techniques. At an Fisheries culties). After initial negative rates of return, new man- Fisheries projects have been a small part of IDA lending. agement is turning the project around. Between 1964 and 1981, IDA lent $135 million to 17 projects. In Tunisia, the demand for new motorized boats was The basic objectives of early projects were to increase catches overestimated, so that most were sold to inexperienced and boost export earnings. Approximately 60 percent of lend- fishermen. ing was for building boats and port facilities. Such capital- In the People's Democratic Republic of Yemen, project intensive schemes ran into difficulties, partly because their design overestimated the availability of skilled labor and appraisal and design was poor, partly because they were local equipment. Although some local fishermen wel- badly carried out. Taking four examples between 1969 and comed the new boats and improved their productivity, 1973: production was again overestimated. * In Ghana, only 10 of the 40 planned boats were built, Since these early days, IDA has learned a great deal about as a result of inappropriate engine selection, delays, and fisheries. Rather than relying on large, expensive boats (and higher-than-appraised costs. Catches were disappoint- ignoring ancillary industries and marketing), IDA is sup- ing, and the rate of return at audit was only 10 percent. porting more small projects. These aim to increase the pro- * In Indonesia, problems included poor-quality boats, bad ductivity and income of fishermen and to improve nutrition, design and construction of shore facilities, and ineffec- Coastal fisheries increase the benefits for rural populations, tive management (exacerbated by local cultural diffi- as do inland schemes-a small but expanding area of lending. 38 Table 4.2. IDA Commitments by Sector and Region, 1961-82 Sub-Sabaran Africa South Asia Other Total Millions Millions Millions Millions of Percent- of Percent- of Percent- of Percent- dollars age dollars age dollars age dollars age Agriculture and rural develop- ment 2,400 36 5,824 37 1,728 39 9,952 37 Basic infrastructure 2,228 34 4,775 30 1,183 27 8,186 30 Energy 343 5 2,631 16 550 12 3,524 13 Transport 1,761 27 1,375 9 537 12 3,673 13 Telecommunications 124 2 769 5 96 3 989 4 Industry 408 6 1,335 9 353 8 2,096 8 Development finance companies 254 4 236 2 140 3 630 2 Other 154 2 1,099 7 213 5 1,466 6 Water supply, sewerage, and urbanization 273 4 932 6 329 8 1,534 6 Human resource development 776 12 339 2 712 16 1,827 7 Nonproject lendingb 525 8 2,529 16 89 2 3,143 12 Total 6,610 100 15,734 100 4,394 100 26,738 100 a. Includes development finance companies, industry, small-scale enterprises, and tourism. h. Includes technical assistance. annual cost of about $1 per hectare, programs have problems simultaneously. But the integrated ap- succeeded in raising yields by as much as 50 percent proach has often proved too complicated for coun- in the course of a few years. To be efficient, T&V tries to administer successfully. In Nepal, for ex- work requires strong organizations and heavy con- ample, an initially successful effort broke down centrations of farmers. It is therefore not immedi- because frequent policy changes in the role of the ately applicable in all IDA countries, although Burma, coordinating agency led to inadequate local super- Nepal, and Sri Lanka have begun to adopt it. vision and execution. Area development is a relatively new activity for Lessons have also been learned in other parts of IDA, and it accounted for 15 percent of agricultural agriculture. In fisheries, for example, IDA projects lending in 1975-81. It combines different pro- were initially beset by problems. In part these were grams-new farming methods and extension ser- due to inadequate appraisal and poor procedures vices along with rural road building and marketing, for carrying out the schemes. Early fisheries projects for example-under some form of overall govern- concentrated too much on construction of vessels ment administration. An integrated approach to ru- and neglected price incentives, management, and ral development therefore has ambitious goals and marketing aspects (see box on fisheries). involves a large number of programs. Its record has South Asia and Sub-Saharan Africa received about been mixed: where administrative support has been 83 percent of IDA's total agricultural commitments. strong, it has managed to build on the benefits The following sections look at those two regions in achieved by individual programs. In Africa, IDA has particular, but should not obscure IDA's role in considerably expanded its area development work other regions, such as the Middle East (see box on as an effective way of tackling several development Egypt), East Asia, and Central America. Table 4.3. IDA Lending within the Agricultural Sector, 1961-81 (percentage of sectoral total) Irrigation Agricul- Livestock Peren- Research Area and tural and nial and Agro- develop- drainage credit fisheries crops extension industry ment Forestry 1961-68 61 2 17.1 4.2 2.6 - 6.3 8.7 - 1969-74 34.4 25.4 137 12.0 - 3.3 10.2 - 1975-81 38.0 13 7 72 5.3 5.9 6.9 15.4 3.9 39 A Drainage and Health Program in Egypt that drainage is helping to produce significantly higher yields. Eg,pts agriculture has for centuries been nurtured by the Increases in production of about 10 percent were achieved within two to three years, with the best results in rice and Nile. The antiquated flooding and drainage system has grad- cotton. ually raised the water table, increased salinity, and reduced cot e t productivity. In a series of credits totaling $130 million during D the se il aepemnts, the nerbne the past decade, IDA is financing a significant part of one of of'te prograill dee on ow w e n de system is maintained. Effective means must be found to de- weed, desilt, and reshape open drains and to inspect and flush buried pipes. To help in this task, the government established a public drainage authority. With the assistance of the Dutch government, this drainage authority has been strengthened. Associated with the drainage scheme is a joint effort by the Egyptian government, IDA, and other donors to control bilharzia (schistosomiasis). This debilitating disease is trans- mitted through water snails, which come into contact with Shuman excreta in canals and drainage ditches, and then pass the disease back to humans who use or wade in the infected water. Bilharzia affects young children in particular: it lingers in its victims, and is difficult and expensive to treat. It ex- acerbates malnutrition and leads to other more severe ill- nesses. In the mid-1970s between 27 percent and 43 percent of the population was affected in parts of rural Egypt. Past irrigation schemes, such as the Aswan Dam, ended up spread- ing the disease more widely, because no attempt was made to tackle it. To control bilharzia, those infected must be treated and the snails must be neutralized; improvements in sanitation are the ultimate solution. As part of the drainage program in Jlolluscicide to control bilhar.za is spraied on a canal in the Middle and Upper Egypt, where 8.5 million people live, IDA Bet Suef region of Ekpt has supported bilharzia control since 1977. The effort is or- ganized by snail control inspections in 48 districts, 104 con- the world's largest drainage programs, covering 1.15 million trol centers, and over 400 control units in the Ministry of hectares in the Nile Delta and Upper Egypt. The program Health. Village surveys show a marked reduction (often up includes 22 pumping stations and related power transmission to 50 percent) of the incidence of disease as a result of control lines, 6,500 kilometers of open drains, and workshops and programs. These results are encouraging; as with drainage soil laboratories. When fully completed, it will improve the maintenance, however, long-run success will depend on the productivity and income of 780,000 farming families. Sample government's ability to finance the programs and manage surveys comparing "drained" and "undrained" villages show them effectively. South Asia rely on it for employment and income. In most If IDA can be said to have concentrated on a par- countries, agricultural development has therefore become the main objective of policy. ticular sector or region, it is agriculture in South eliable irain isjusuallyo a prco n Asia. And for good reason: the region includes half telne methodsiof in us echi ieng oftewrl' bolt r' 2n mroeet the new methods of farming that use high-yielding of te wrld' abolue por,2andimprvemnts seeds and fertilizers. Irrigation is expensive, how- in science and technology have dramatically in- ever, and South Asian countries have depended in creased yields there. In India, particularly, IDA has eve .a o n cones ave depene in helped to transform agriculture. India is now able go m e on conce d o in ane it to meet its own food needs for the first time in Since 1970, IDA-supported irrigation investments in recent history. Although IDA borrowers in South India alon helped o n or ov rrian systems serving 6 million hectares of farmland, af- Asia have managed to reduce their dependence on agriculture from half of GDP (1960) to just over a fecting 2.4 million families. The effects can be strik- ing. Although only 32 percent of South Asian pacdy, third (1979), 720 million people in the region still fields are irrigated, for example, those fields pro- duced 62 percent of the increase in rice output between 1961 and 1980. As for wheat (the second 2. Excluding China most important foodgrain), irrigated lands-67 per- 40 cent of the total acreage-accounted for 91 percent been impressive: for example, production since the of the increase in wheat production. early 1960s has increased fourfold for dry-season Views on irrigation have changed with experi- rice and twentyfold for wheat as a result of drainage ence. IDA-supported irrigation projects have in- and flood-control investments, installation of pumps creasingly concentrated on improving the perform- and tubewells, almost complete adoption of high- ance of existing systems, making water deliveries yield variety seeds, and extensive use of fertilizer more dependable and irrigation systems more ef- and pesticides. ficient. More attention is now paid to secondary and However, 90 percent of rice growing still de- tertiary distribution of water and to the farmer's pends on capricious monsoons. Thus, improve- actual use of water on the farm. IDA has also in- ments in drainage and flood control must parallel creasingly financed groundwater development changes in cropping techniques. These are quasi- schemes that give farmers better control of on-farm public investments, beyond the resources of indi- water supplies through the use of private tubewells. vidual farmers, and governments therefore need to An example demonstrates the impact of tubewell take the lead. Subsequent improvements can effec- irrigation. In Bangladesh, a $10 million investment tively involve the private sector. For example, in in shallow tubewells irrigates 35,000-40,000 hec- Bangladesh pesticide distribution was turned over tares and produces about 90,000-100,000 tons of to the private sector two years ago, and greater additional grain every year. In the past five years reliance is being placed on private markets for the alone, with IDA assistance, the Bangladesh govern- retailing of fertilizer. To allow farmers to borrow ment financed 50,000 shallow tubewells, 7,000 deep necessary capital, IDA and other donors are assisting tubewells, and 20,000 low-lift pumps. IDA has di- local agricultural credit institutions. It is important rectly financed about 15 percent of all public in- that their loans be on market terms, so as not to vestment in Bangladesh's agricultural sector in re- create a permanent budgetary drain or change the cent years. Improvements on irrigated lands have behavior of farmers and suppliers. InidIu and tilt (Prec in - Ilti . n 1.I1....ini. r i . .1i i iRt..rA I. : fli.n ' - It .* III. *I *17.., 1. r,s l .I ua . s Id I . r I,r .. n iil .. r - I i , c_ ir1 i : .I p r ir . - . h.._1 I - I . 1 lin 11 il J * J _rsI.I d- 0h 1.1111t I. . . l t . 1 . 11 ,, 1 m ~ Ir I n w . 1. II. ** . 1 ,Il 1 - t-. *I ) *r l r it I (Ih I I . -C 1 I- I - J -] I. r Ii i h hC .1s 1ir ..1 x : 1 ...1 I I I l I 1i * r * 1 : I.-h ir rI.e -i . - ra l ,ie - ' 1 - r- . : I - I f I. _I -. h. - u ri r. - . . 'h1 rn - . r I ... - ._ 11 1. . 0 . f- l r .. . i I _ 1 I * .1il i * *1 ll s1.*: .10. if 1J In- 1 . . .I nti. . _1 1 . .r I ' I t ii' V Nr lc i I. rr Ir P .4 th . Ir r. I II. -. I I it: h - 3 11: . -: r .1. 1 ( .l s r. i 1,-_ . ri i t u .1 It: 1- . 1 L Cr. CW .i . .I l l . 1 -J I 1 .1 r r- r h 0 ff ! _ 1i _r t II I I I-I IT . I [ I II IIC* ' I .L wi d ;H [ - - 11 .1.II T I- Ill1 7 ri , n i1 * II , 1 -1 1 1.11U 1) C I I. v_ r 1r .r- . r * r I c rl. v rfl - I eIr.. . -I,-: r1 . i ... I..i . In 1 I _ rdlii .1 -- II 11.1 . I ul* I- .ir l r i i .r. . I I n r.. . . l 1 r i .f i i I . thr , - - I I I I. it [C . r Ir. I I _r u l "L r.... . . , . L I -is:r r. :1.[ .1 it-. 1 . Il - F 1 l. 1 L l. it .1 10 . l. l.. r1 1- iir I i iii If I[ " _1s I fr %_if l c I : v 1 l i e . . l l h e 1 . f e t l. - i r k .. :n. 1. e1 1 i . It n *11 .- r . 3 . m I l a. . 1 : a i . ia . I t . h~~ eJl%e L.e lr1 0 . eI) . r r-, t a r I lr 'L if in' -I Vl_ * ln -t-l -I I T I . *.-u . j I . . . . .ll uI al *. * 1 .1 .... .( .e. Ii I. 11 its hn . ). . . 1 - *. * i 1 r.- i l = f i I *. T r 1 I1 I* 1 - 0 i C , * *1 1 1l 'l l1 *iiy. . . I- th b l rl . ar il . _. I I n . i I I I I J I r . 1 1 , 1!-1 1 1 1 1 I II r- I- 11 , I - I L 1 1 1 C - I. . 1 4 1 In most of South Asia, progress has come chiefly The challenges facing IDA in Sub-Saharan Africa from cultivating existing land more intensively, not are therefore enormous. The continent is more di- from bringing more land under the plough. Only verse than South Asia, agriculture is almost exclu- in Nepal and Sri Lanka have virgin lands been cul- sively rainfed, and droughts are common. Good tivated on any significant scale, although in Nepal technical packages of seeds and fertilizers are harder the output on existing cropland has declined. For to devise. Losses after harvest are considerable be- the region as a whole, 12 percent of the increase cause of poor infrastructure and storage; inappro- in agricultural production was due to the net ex- priate pricing policies provide few incentives for pansion of cultivated acreage, 19 percent to an in- farmers to produce more. Extension services are crease in multiple cropping, and 69 percent to pro- often inadequate because of weak local institutions ductivity gains. and a widely dispersed population. The most spectacular gains have occurred in In- Nonetheless, there are countries where IDA's in- dian agriculture, the largest IDA program. Between volvement has produced encouraging results, no- 1969 and 1980, for example, more than $3.0 billion tably Malawi and Kenya. By and large, the countries of IDA funds were committed to improving Indian that do best are those with good management, plus agricultural production. IDA has contributed only the best natural advantages of weather and soil, and about 3 percent on average to total annual capital a national commitment to agricultural development. formation in the sector. Indian experts believe, This is generally reflected in less control over inputs however, that these aggregate figures understate IDA's and marketing and less intervention to suppress real importance in financing some critical elements producer prices in the hope of keeping food cheap. of their agricultural development (see box on India Various lessons can be derived from IDA's agri- and the green revolution). cultural experience in Sub-Saharan Africa. The first During the past two decades, 25 million hectares is that price distortions, irregular and unreliable have been brought under irrigation, and between supplies of inputs, and marketing problems are sig- 1966 and 1979, fertilizer consumption increased more nificant impediments to success. Policy reform is than sixfold to over 5 million tons a year. India's therefore essential. Second, greater flexibility must rapidly rising grain production, averaging gains of be exercised in project design and greater efforts almost 3 percent a year during the 1970s, enabled made in project supervision to compensate for the it virtually to cease foodgrain imports, to build up continent's deficiencies, particularly in the devel- stocks to unprecedented levels, and to spread these opment of human capital. Third, revenues must be benefits throughout the economy (see supplement increased to support agricultural development, par- on South Asian agriculture). ticularly because the recurrent costs-local wages, maintenance expenses, and so on-are rising as a Sub-Saharan Africa result of newly implemented projects, and govern- ment budgets are already strained. Finally, macro- IDA's involvement in African agriculture increased economic policies matter a great deal. What hap- sharply during the 1970s. Commitments have to- pens in one area of the economy affects other areas, taled $2.3 billion since 1969, of which $1.1 billion for better or worse. has been disbursed. Most countries in Sub-Saharan Efforts in agriculture can therefore be comple- Africa are among the world's poorest, and progress mented by training and education, adapting science has been slow; in the 1970s, the region's agricultural and technology to suit the environment, and help- output increased by only 1.3 percent a year, while ing to develop better management. IDA has had to the population grew at an average annual rate of design simpler projects and concentrate more on 2.7 percent. This poor performance was influenced training programs. Drawing on the Bank's study of by many factors-sharp rises in the price of petro- Sub-Saharan Africa,3 IDA is paving closer heed to leum and petroleum-based products, drought in the overall sectoral and macroeconomic policies as well Sahel, wars, civil strife, frequent changes in govern- as sociocultural factors. Recurrent costs, and the ments, and injudicious agricultural policies in many budgetar problems they create, are receiving greater countries. Where output increased, it was due largely attention. To promote overall adjustment, clearer to expanded acreage, very little to increased yields. And parts of Sub-Saharan Africa are losing ground- 3, AcceleratedDevelopment in Sub-Sabaran Africa (Washing- they are less productive now than they were in 1961. ton, D c World Bank, 1981). 42 (Text continues on page 46) Supplement: South Asian Agriculture Terai, the extension of the Gangetic Plain in southern Nepal. In Pakistan, after years of virtual stagnation, policy changes One-fifth of the world's population lives in South Asia and in the late 1950s and early 1960s helped to accelerate agri- about half of the absolute poor. Some 80 percent of the cultural growth, from less than 1 percent a year between subcontinent's 900 million people live in rural areas, where 1948 and 1955 to 2.7 percent a year in 1960-65. there is an average of one hectare of cultivated land for every Despite this progress, food shortages increased, and food three people and average per capita incomes are below the imports placed a serious burden on the balance of payments. regional norm of $230 a year. Yet South Asia popularized the In the early 1960s, Pakistan imported about 1 million tons term "the green revolution," and has made tremendous prog- of grain a year; India's food imports averaged 5 million tons ress in the battle against hunger. a year in the 1960s, but in bad years reached twice that level. IDA has been closely associated with South Asia's agricul- in the early 1970s, Bangladesh found that it had to import tural development. It has lent $5.2 billion to support 163 nearly 2 million tons of grain. Even countries that were tra- agriculture and rural development projects in seven coun- ditional food exporters were affected. Nepal's exportable sur- tries.' These credits, which constituted 58 percent of all IDA's pluses declined substantially and some imports increased. commitments to agriculture and rural development, were Burma, which had been the largest exporter of rice in the spent mainly on irrigation, drainage, and flood control (41 world before World War II, saw its exports dwindle from a percent) and on agricultural credit (25 percent). Other ac- high of 3 million tons in the late 1930s to an all-time low of tivities included area development (10 percent), food storage 0.2 million tons in 1974. and processing (7 percent), and research and extension work South Asia had the land, the labor, and the climate to feed (6 percent). itself But four things were missing: schemes for water con- trol; new farming technology and methods; adequate support services to help farmers apply these new methods; and suf- ficient capital. And these changes had to be nurtured and led by the right government policies. - '* In India as well as Pakistan, governments had deliberately depressed farm prices to provide the politically important - -. -urban population with cheap food, even though this dis- couraged farmers from producing more, In Sri Lanka heavy taxation held back the growth of production and exports of tree crops, particularly tea, rubber, and coconut. In Burma during the 1960s and early 1970s, the government had been lcll.. tn h - Cl. '111-l'n', 1111-. 21h `-iJ, --r. a .. i. .rnii- . . . . ul i - tIr..- .rl r cu p thel l1 p rc u - i ai f li , 11 c .t.ic .1irc a ,I,%1i 'I cl.rII. - a re a r E e .. o I t -ij ...iiic.. irrhar..-1 ......ilr cirr- iv tlm - . I. IS I **. I% tli s : ir ., ) 2.ll.n. il7 711 - 1ii i- I- i - I_c .f I-[_-f I - il. 1** :11 0 Illif | I - t , J , J 0 1. 11 - 1,- J l1 11 I I h N, I jd- V 1,9-c9 l r1ir.1 I-' R it t . -I r lit I,-i t - lk I I.i iii . 't I l ic . . I - . .. r, I.. l II .. . I . .. 43 콱 44 IDA prov"sded credits totaling $262 mifEion for fcзur projects projects so profгtabte in bo[h India and Pakistan, have no[ to соnцо7 salinity, improve drainage, and prдvide irrigation. been easily adapted со toca} conditions in other countries. Subsequent studies provoked IDA zo lепд more to rehabi- Оп1у now is progress being таде in Sri Lanka anд Burma. litate canals and improve watercourses and drainages, as we11 Extension аад Other Lending as support servIces like research, eкtension, and water тап- agementn One important ingredlent oF rlзе success of the green revo- lицоп is the training and support that farme>'s receive from ID,•�'с .��ricukurэl Гredit Prгrgram ,_•,г.-i,.i,.r� ..,,,,4.�г. 1r� 1•�-; Ii ьq г,Пс�f 1,���1�1iпс п�• ге•с7г.г� 11,�.���cг�c.I.,;r." ,г��llпiг,�lь�1м_Г]гп��г• 1пвь�п�1} \•�1��� 1'п 5 �г1•�сVс-г1•1�•ri .cr1�c• 1�irfь.i11.u1'. n11i}ьL.i J.11rCc �__ riil п�гllсь�гп��л.ufF''�nг••1'.74г.�лп1�•гг]n�.�iln,r.71�г,-,1ц 11�г, 1п�i�-nс.,гпlцl:сJ.г.,гrhr 6ir„�,.д-.�г6 \•гг,.гl���rr�;rcn ^,i: г�����л��-1 h\ fhгcc П1�.гс_ 1'�г,_��с..г• in F•ihi.rui �n.1 1а п� .i„n.�"г,ьс �.i•ii��гУ�сгг.иг"nr�•��7п,_1.iнг �1-.F.rr�7ь.h�'.ь��1сr.Сг.7 - 1г�1г� г�,�..,1 гп�:гг��[.,i�,r.71n�.�,rг1f-,�11�ь�г� �ь•пь.�г[r�,г.J,:rc.lrl h jj"�� ��, iri�lгi г� n�r.rc rtгc,n с гг� �пг,�ггl�iГгL tarn�cr.,,r �.1•,�i rrl��i�, f�1'.: ���г�.%;д гГ. •�г.iс••fuI �г� с`.1'�.iг�.11п� j'�г,. f�1._ 1д:•г f�,1��nr:il �1сlс���1�г7��спг.: \1у.{ П"i��YC 1с•с,гь.f"� �1I� •Ъп:гг� �r� ь-N r11r 1 t 1r��jг,u� ��1icf.iU• •�i• 1' Fь i' с ilгг t,J1 f•.сtг'� hc г�•.�ипссl ь"� �,1� �du, с 1 i�.�rdir��,1. ��i• •гг�ап� ��г Пс .-•. lсь.h .��П'�Fьlcir�-�1 Jпi1 с" ,Iu.,h'J гF�с�г гис ��г гсп.пп f�.t•, 7 сг.гс�ь1 пг�иьГ•[1и[^.гI1,-�ь:r�lii,11. uiil'�г•г.� �.�ilhc�.uгrcnr��_rn:г,гь�п ' i-��rr...nf 1�hc�d1l� 1�4,i•rri�E�r."���.г.:.,г1,F�1с[с�)а�7•1:ьilьг� .�1hiJfr,кl�jп�ц•гГiсПс� [i7�1i.:liiгьc:чп,il,rrc•�Г��}г•"i1F�rcil .1fr,1 i. �It.il, г,. �Iг�1,_1.г г�гс „г Гс[игП,.г ,�i �.ь•Г�.с��[ 111Г•.�c,�h� 11� �11��:г •..У„4,. 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' it•..:f�:�;111 .1'.�_.,Г ���url5 n.�I�,klc� FС�:гггJ.г�?сг.1[Рп�� hь�±i��f Fr.P,_e,1YП7.,fLr.��].UF�. 4,гЭ� .г£П•.Lrlrclfr� ���Сь��1и•a���r� ыГг�л _.�ьrf�.clif ] 5г_.П i•rc •[anusl рь�гпь�г� �;( 1r.пь1!п� tььг .п7�11 t.7n�trr, 1г� .гJс1�сл:�п. и r.iF�1r •.�n гп�1г, �,1�а1 ь.,.�,n.tn 1••-rt� �rn,.tnь_с i 1п ггг,,t �.,.•��nn к. Yi1, rrrr.c�j ьj,ltlicllr 1ь.� r.j?П1IП дпд •U��Iы.�П .ikfЧ.[r1r��fJ1 •:гсь11l 1l fь.1� ��ьсс�lь:�1 пр Ric,�r�\ �11rf i•?г1с� ��1 �..,1 гти1�:' Iгь fhc �,г� qсь:г� и, nc� �m111rr >,,шh ,�Ч 7г� ..ь п,пгпс� Th�'гс аГе п',�; с.,г 1, i� �-п. Г.tгi.la,Jc•[7 �.,�гь.ггlг�гс г, гь r�. 4r. ,г.nik �1гг;fагь 1-.�,,.,1�1с rre.,,п, г,.�г д��г• Fint �иь ь.r.>•fu1 сгссlи :J7en,r:• .�:сг , Е,rгь �:п[ .г ьt,г �ть �_ 1� �-,, hunru hг 1г.п1 h'.с (с�.� �fJ гс•�ь,1гс i�[.ih1r.I'�c�j JПьj С[leifг\г Jri�n,:rr_� n� :,ir 1� 1П[сг I1.7г.r•г. 1П � г,.� �. 111 •,F�qc �.д •r���nc� и1[ ГrЕЬ.�Пд �Ji��'�lrlric+ п,ь-,Jг 7пс• гп [1,с f�ь,rr, г^ г�iд� ь.. ы„ип�• �пс1 In '' i -c'.lid pr te. i rClII!k.it jnd .p ritio-'n il pi I.c- im..i.:mI ,tn iN- rir -o, u o i Fr- Ird lc for hi. c.:pan-ii andI in rit.*.0-1.. 6 n ., 1.-1i g t c tid dic thrdblch I i rn iricj Ind [hu p'r..-r.iC- dim lriTuri t u.l- i -.i 1** i, (hc r-r i - ini t 1tc :. ur i **I L q u C .r idn r, Fir. .I i ri: n .1h 1 1 d tr i u) ill .) 1-ri qu dir Lia t fiu*. 1h*r [ i nl Ihu T,lrn i,ul I-I ,v, . 1-u J l inil. ih> - i z:-. P1 it ii **% h i t .*ini ic c 1 - E -.in1 e 'J B up- [llc "' . .ind hId 4citce.ed thc r .1 A s.c -r'1d.1rric- IOiJere ihc f--nchi . Ti rd.ir. cf,urd .ii ni-1-JO1!1 1 0. - . urrI, and ''.i.uld 11it jri Rd io% ..i r. r rhci rc hiJh improved teaching facilities, and better trained be a way of ensuring the survival of a certain num- teachers. ber of offspring. Improvements in maternal and child The long-term success of IDA's educational lend- health care to combat infant mortality are therefore ing depends on the development of effective, coun- essential; so are better educational opportunities for try-specific education strategies and on the ability women. of countries to manage their public expenditure. IDA has been associated with a successful pro- Since spending on education involves primarily lo- gram in Indonesia, where the National Family Plan- cal costs-often accounting for anywhere from 10 ning Coordinating Board (NFPCB) was set up in percent to 30 percent of public expenditure-and 1970 to oversee family-planning services. IDA and since these costs recur every year, IDA has become the UN Fund for Population Activities financed much more aware that education projects have to fit into of the NFPCB's establishment, including provincial a country's overall budgetary plan if they are to be training centers, midwifery schools, and mobile in- maintained after the IDA credit has ceased. formation units. These have been combined with an effective system for reaching villages and towns, initially involving fieldworkers but shifting to com- munity-based distribution centers, and assisted by other donors such as the U.S. Agency for Interna- Population programs are a small and comparatively tional Development. The government of Indonesia recent area of IDA lending: some $110 million was is now running a successful nationwide population actually lent between 1975 and 1982. The impor- program, the results of which are seen in signifi- tance of supplying safe, cheap, and effective family- cantly lower birth rates. planning services, especially in rural areas, is now IDA also offered technical assistance to Bangla- well recognized; family planning is no longer seen desh to build a family-planning program into its as a mere adjunct of medical care. Like other insti- first five-year plan. With strong political support, a tutions, IDA has also had to learn that family-plan- $15 million IDA credit, and $25 million from other ning programs require strong government support donors, the project was begun. It funded a staff of and a credible strategy for providing information 4,000, increased the distribution of contraceptives, and services. Acceptance of family planning is not and boosted education and information efforts. a one-time event. Reductions in fertility require a Among married women, use of contraception rose sustained demand for family planning. Parents often from 10 percent in 1975 to 20 percent in 1981. want many children for practical economic reasons: Despite changes in governments, political support because of high mortality, high fertility is seen to has remained firm. The importance of government 53 ning information and services, When the $39 million program IDA and the Kenyan Population Program got started, however, it was realized that the level of support Kenya's population growth rate is among the highest in the for family planning varied among the principal interest groups. world. While the number of births per 1,000 has remained The government was interested primarily in rural health care fairly constant, the number of child deaths has fallen by al- and saw family planning as only a small part of that effort. most 50 percent since 1960. The net result is a pThe people themselves have traditionally favored many chil- mos 50perentsine 160.Thenetreslt s apopulation. growth rate of 4 percent a year. In part, parents want children dren-eight per family, according to one survey. Health workers, reflecting the mood in the country, were unwilling for economic reasons; they will eventually have fewer as they to give family planning any priority. realize that offsprings' chances of survival have improved. In Lack ing anyspport ye part, however, there are cultural reasons for large families-only Kenya's fertility rate is the highest in Africa. limited demographic impact. The population growth rate did not fall as expected; indeed, it actually increased by the end By 1971, the pressure on arable land was severe, with 80 of the program in 1979. Only 5 percent of the reproductive percent of the population living on 18 percent of the land. a percentrofete re uctive Spending on social services accounted for 43 percent of the The project aimed for 650,000 new acceptors, but only 310,000 government budget (compared with 24 percent in 1964), and adults ied fmily-plannn cedrn bt o, and 25 prcet o th labr frcewasuneployd. nly45 er- adults visited family-planning centers during the period, and 25 percent of the labor force was unemployed. Only 45 per- thaculnmeofog-nceprsintkow.I the actual number of long-run acceptors is not known. In cent of the population was supporting the 55 percent who contrast, maternal and child health, which had stronger sup- were below 15 or above 60 years of age. These disturbing port from the government, did much better: between 65 trends prompted the government into action. negotiationsi percent and 75 percent of all pregnant women were reached From late 1969 to 1973, IDA participated in negotiations by this part of the program. with the government and seven international donors to de- The Kenyan government has given IDA good marks for the velop a five-year program, costing $39 million (of which IDA quality of its technical assistance and for closely supervising contributed $12 million). The program was very ambitious, the progress of the project. Others have faulted IDA for pay- calling for: ing too much attention to the technical and quantifiable ele- * The introduction of maternal and child health care, com- ments of the project; putting too little emphasis on its insti- bined with family-planning services, in over 400 gov- tutional limitations and management problems; concentrat- ernment health centers. ing more on supplying family-planning services and less on * An extension of those services, through the use of 17 disseminating information; and agreeing to an expensive health mobile teams, to 190 other facilities where staff had not program under the guise of family planning. been formally trained in family planning. The Bank's project staff came to the view that the family- * The establishment of eight community nursing schools, planning program was far too ambitious considering existing 30 associated rural health centers, and the training of a cultural norms and the weak political support the program new class of supervisors for 600 nurses, enjoyed. Some of the lessons learned from the program- * The introduction and training of a new class of field- the first population project in Sub-Saharan Africa-have been workers, family-health field educators, and their super- incorporated into the second population project now under visors. way. Key government ministries and private organizations * A provision for the Ministry of Health to produce more are now involved. A clearer distinction between family plan- health education material. ning and health has been drawn. And more is being done - The establishment of a new organization, the National to educate people about family-planning services. Perhaps Family Welfare Center, to plan and support the activities most important of all, the establishment of the National Coun- of the program. cil of Population Development in the Vice President's Office The idea of combining family planning with health care has sent out a clear signal of political commitment to family was deliberate, to provide people easy access to family-plan- planning. commitment can be seen in Kenya, a country where encouraging GNP growth is being eroded by ex- tremely rapid population growth (see box on the About $2.9 billion-or more than a tenth of IDA's Kenyan population program). lending in 1961-81-was not tied to particular proj- IDA's long-run success in promoting economic ects.6 These "program credits" can be disbursed development, especially in Africa, will in large mea- rapidly and are intended to ease severe foreign- sure be affected by progress made in social sectors. exchange constraints. They have generally been ac- Population growth rates above 2.5 percent a year companied by policy advice aimed at improving a are offsetting GNP growth and creating food and country's overall performance. In some cases, pro- nutrition problems. Combined with a dearth of hu- gram lending has been used for major reconstruc- man skills and suitable institutions, population growth is therefore hindering the task of development in 6. This does not include small amounts of nonproject tech- Sub-Saharan Africa. nical assistance. 54 tion. During the past two decades, program lending primarv purpose was to help bridge chronic current went largely to countries in South Asia. India re- account deficits.¯ In the early 1970s, this approach ceived 50 percent of the total ($1.3 billion) between was altered to allow more imports for industry; in 1964 and 1976, in the form of 11 industrial import the final two IIP credits, in 1975 and 1976, foreign programs (IIP). Another $715 million was used to exchange was earmarked for certain vital capital- finance imports of agricultural inputs and industrial goods industries, where a shortage of imports was raw materials for Bangladesh (see box on Bangla- curtailing production. These two credits accounted desh import credits). for almost 20 percent of total nonproject assistance In the case of India, credits were initially provided with the objective of making capital available to the private sector; subsequently, in the late 1960s, the 7. IMF programs were also in place during this period. 'J tl. .ri1icu u'.J .:ri._uru il e... .- i h.rr.i 1)hu., [liv -L, Banglade,h import (?redits t ~ei, 1'v tu 'N -, l:j nj . hiu .iIr,rI wi'c! år,r !i-' '' i -, r -r-K i ,. Ir uJeCd. l-iln Ir 11._q r l i. W 1, r i rij. a r i.. . r. I t . ' .I' ulj -~ i- | . . r li t. ire i ..r i iur , '~1¯ ' .- . uu- i ir'u. I .,' JÄ hiïr i,. -r 1 . l1. i i,_r.n uL'- . 'er ' Jr, b ij -r.. .. r äär i .i-ir..k J IiL] d.i , 1r . r \\ h il- 1 ciA .-l..hi !!i . cll.li- b. dr.. i'i 1. . l1i- i -. 'ir . nu i , ., I.ir - n- . . ir j' r it -.I:'i '. IIi -.uI¯. r u 1 ju..: l. ' 'J . e i Cu .I . . r . _ f ,, i:r.-1 . ý v u, ti rr. i',r i *. ..1i, r.i jir 1, 1i..r 11 r'I 11. ~rgc ty''ei l - 6 *' ..ii. ' url -li -c rri . ïr . j i . . I p.ir r I n t. u..nu I.i._||u:h' i..' . il.. jr i:,.i-.l. . ..:rn u .. _r.i n.j i. .. . i¿ r . . . . i _ n,lul ur r ¡ j .r u i. j ri. .n i r 1li 1 r-tr 'i. ri' . r . r . r Su ri i,.r n jri. n i : r r .. . . tt- - '. .. j in .. 1 1 u . . r J r.h ': 'ïc..'b.. . ur i . .i. ii.-. I ,.1 urur ii r- n fru'' ir; , r.. - . .i . i r .. . . ii r. li, i . .u r ...r 1 il .i. n r i i r . '- . ' Ir ' jri ' l.Jn -- ~' ' ui.. .i'. r l Lil - r. ; '. n . n ..- r I . i i.n ' jc' r- - . . . - r ,. I . . r.-- ..i,. bn. h r,: r ' r. .-,J._r_. -i i...r r u r' i ,1il. . . r i ..n a . ri h1 ur , ..rlrh u ,. r. i l i j ... ... r . ti:, ii rl, r . i r, i i . .i , - å. , ii! r ir : • -r '.;1r.'. i r. il r,. "i , . ri-r , rhi . IL... u lr -Ji . r- ri ..Ji . r. .ii..l1',r 'Ti i, c -i, Iin,...v .]- .:. . l.1 .i.r i . ii l r i.- r j. i .i r, j - r .: .L. · . kl l. T. n n l e . l.(, ï [ . u. r- . 1- i - ..1 1 - i l r l..- t uri ci.' i.. . .. lu, r,.. .r [1i iFre -i r in .. - '. ii . t i -rr u .. .ji' . '.I uu-ïr. , rh .. . n - r.r ..'jurol :: . u - lr. .! ur: u t u ri .j r' *h i r . 1i Iei. r . ¯ u.. ri i o- .u. -.- . n i r ..l . . i e ''. ir r h'. . . --. -a i t i~ T ,... l l .n . l-. .': _1 -1 r 1.r 4 - j. Il il a s [ljr I-f _ [Fli P 4 - 1 ~ 1: -1 li l --1 ! 1- -l e il- n.1 i, ll _ i . i F r - . . i . . i rtii 'u: .' Iir , : , n l . . l i t i 1 un , l,l1- . .1 r .il r i_ i . u .. p i a c -i. r .h r _: 1 t11 i i. . 1 1 lu n _ i . : u r bil. l · . i: :_ ... u , 1 } a ,- . r . n r f t -1 p : ï . r I:. p [l ._ , l p- 1 3: . . r ir. -i il, r. .r si I . I I r l . .- -_- c . L l1_ jn u ,. i C 1 ~ . ll j . s . [ n a n . , i i a T h .r - -. - . j i l'-- i i -i .ir a j j r . la 6-- i --il ,i. .. ,... g . r r . . I . r . ,. m . l. -u p I .. rr,,h t. r .. _ i i n , . i -r..; ii r . Ju - : l h rl..1 -1i LIi a,- . r . t ,u .h a. t r i r a n j r r r,r- .. - . r: 1 ..u._ '. rr . . .. .. . Jir 1 i. .r: h r rr - . i h a - r i n r- 'r_ ._ r.. 1, i - i i : r r - -! fi l .- 1.. 5 r1 _ r h [..r h n ii. q | r .r. ...r l i . r..i H r iv, j 1.. , n -. -i : .i il .p f.r ,:in.sj i . - e n . i i , i ir- li. i: , .1 I iip1 l r r. .uia - i.ri i ,: . ': ... . r. ~ -1 l lrp . r ei 1 • . 1 11 : . , rh _- I. nr .- .i i. F-1 n. r. ··· i .n -i i' ¯ -h -,_ irr j-,r r- nr. .rt... ol . , ï . .jed , ip.1 Ji l ... i r . j t e r M [1 r i- f,r. i .i. . n je i i r . p r e - Li iri a &' ~ ' r .. ,!. a r . In - _ . r-ï h t . a s h a ) o a r . .] i.t. .1. r 1g..r rn_ I_ .n s ii %i . .r- A|rni in h .i i- ... p, n n il . i e -.. i ii . i i. r .i .j n -p f l r i r l . . . o i . i i- . n - i .ru c i i i i i r e .1 . . j • 1 - ¡ . r , år l a 0 ,rr e u _ . . i ..1 il_-_ . r l .n-!io i - rb r . .j p ,r. Tl .:lao - n j n . I n c - na- r ja.g 1, n - p . 1 ._ il-, .: i li ri,s . . r,_u [1i-p1j. rr . . . ri I h ar, 1.-g . i r, im ..r - . , lic f. ili , ..[ ,- _ id- ., åï r J r o .- - r .l., l . _r i.. ,_-- 1... in - i [.. . ir.. 1 v. ~ -inr . ï [ . . . in r,il irl..-i .ï. j a i o c J i i i . .. .._ rh - ll Lc o .i p io r- . ,o . .,i i ii. ib i i c,- i i r i . u n ., i ,1 i i. r , frp . t, i . lu -rrie . - -in iiJ . r ir. i : ih. . .I r . .iei i -ii in- i h c ...n i i ..jir[ ýj r i- n r. i - f. i .- . . l h . _ ï a j .- : r . r.l , - ]- rl: t il .H -r Ji e i i . r · f I " i r - uf r . 11 p .. . i . r .,. p _ f. f r -. i .i.J u ii1 P1 1 , ji . - irl i r - i. .-if . . . f_ r i l g ¡_j ° fi n r [frj iv l 1 . -r 1r_ 1r 1 1, FrI: ·1 3 1. r - l rl. .r bl - s r | i r . •-. -r '. p- f...tar j . - i n rP ib: . i , . i- i . r i u ,- h -i r ,i n ii: r n l ri i. 1 ,.. r rl ir l ii mo i . s iï. rri ... ..-in i di c,i rp. if. r. 55 and financed approximately 18 percent of India's tranches until it is confident that satisfactory prog- imports (other than oil) at the time. ress is made. All IIPs involved policy discussions as well as Nonproject lending-including program aid and money, to ensure that the credits were used to the general technical assistance-is a valuable instru- best possible effect. During the period of the 1975 ment in dealing with overall policy reform and eco- and 1976 credits, the government of India em- nomic management. A strong argument can he made barked on a series of policy reforms aimed at easing for this kind of lending before countries reach an import restrictions and expanding exports. A economic crisis. Too often, however, necessary re- succession of good harvests, increased remittances, forms are delayed too long and a serious compres- and improved exports helped India out of its bal- sion ensues. IDA has at times been associated with ance-of-payments difficulties. By providing a sizable successful recovery efforts (see box on Indonesia). portion of the foreign-exchange requirements of While program lending had been relatively mod- Indian industry, IDA is credited for its role in main- est in the late 1970s, it is now seen as a more im- taining production levels. The IIPs did not become portant sector of lending for IDA in view of the a vehicle for reforms in specific industries, despite difficulties that low-income developing countries attempts to improve the dialogue on industrial pol- have had adjusting to higher oil prices and slower icy. But they did help support some broader policy world growth. Program lending provides a more shifts, including import-licensing reform, improved direct focus for macroeconomic reforms, but it is export promotion policies, and general antiinfla- only one of the approaches that IDA takes to these tionarv macroeconomic policies. issues. As for other program loans, in 1975 IDA took the view that further program assistance to Sri Lanka - would not be justified, since the government's pol- icy reforms fell far short of what was required. In Quite apart from its role in project financing, some Pakistan, a good deal of the intended reform mea- of IDA's most important contributions to develop- sures were carried out, but Pakistan's external def- ment have been made through the discussions it icit was not significantly narrowed as a result of the has with governments on a broad range of policy IDA credit. The results of program lending have issues. Considerable time is spent on general eco- therefore been mixed, in part because it was ex- nomic and sector work before any actual project pected to provide both urgently needed finance and lending takes place. Economic reports survey a basis for basic sectoral reforms. It is difficult to macroeconomic conditions and the main sectors- do both. To improve the effectiveness of program agriculture, industry, and energy. They tend to study lending, the Bank therefore decided to deal more the key issues of investment and savings; public explicitly with macroeconomic reforms. finances; the balance of payments, particularly the It has done so, since 1980, by offering some mem- performance of exports; and overall prospects for bers structural adjustment credits. IDA funds were growth. They act as the starting point for discussions used for such credits to Kenya and Senegal as com- with governments on the nature and severity of their plements to formal adjustment programs, with development constraints, and on the policies and drawings made conditional on actual reforms. Ken- resources needed to overcome them. Sector reports ya's quantitative restrictions on imports have been go into more detail on sectoral developments- reduced as a first step toward improving its trade specific bottlenecks, investment programs, and gov- regime; in Malawi, the government has begun to ernment policies-and set the stage for project review agricultural prices and to take steps to im- identification. These reports are valued not only by prove the position of key public-sector enterprises, the borrowing country but also by other donors However, budgetary problems have remained in- and institutions, since they are usually the most tractable. Malawi is an important case because its comprehensive and up-to-date assessment of the excellent overall development performance-real country's economic prospects and development GDP growth exceeded 6 percent a year in the 1970s- strategy. The fact that detailed reports are produced is being threatened by adjustment problems (see periodically for each country underlines IDA's be- box on Malawi). Where policy measures are con- lief that each economy is unique and changing. While sidered inadequate, IDA has blocked the release of IDA recognizes that even- government has its own 56 」：，긷 57 economic philosophy and is free to choose its own will work. They will not be persuaded by threats to development goals, it does point out distortions and reduce lending, for example. And IDA is not always inefficiencies that hinder resource mobilization. right. Its solutions may not suit the political or social Macroeconomic and sectoral policies are natu- conditions of particular countries, and it has learned rally interrelated, and they often have a direct bear- many lessons from recipient governments. Knowing ing on the success or failure of individual projects. this, IDA prefers to make governments aware of it is difficult to sustain a good project in an unfa- problems, then to suggest solutions, listen to alter- vorable environment. Furthermore, fruitful policy natives, and support government policies that seem dialogue can do more to influence a countn,-'s de- headed in the right direction. velopment than even a series of good projects. Some Even when policies have become a serious im- critics maintain, however, that IDA devotes too much pediment to operations, IDA has sometimes chosen effort to promoting projects and too little effort to to maintain a residual influence rather than to cut changing the policies that hinder development. But off lending altogether. That is viewed as the last there is a limit to how much influence IDA actually resort in circumstances that have become untena- has in anv countrv. Governments respond best when ble. Preciseh, because the Bank attempts to work they are convinced that policy advice is correct and with governments, despite imperfections in poli- IDA and Indonesia its irrigation program, with four IDA credits (followed by IDA assistance to Indonesia began in the mid-1960s, at a time eight IBRD loans). Between 1968 and 1978, 5.3 million hec- of severe economic disruption, institutional fragmentation, tares came under cultivation. Irrigation investments have had and disorder in the wake of the Sukarno era. The country a substantial impact on rice production. Whereas in 1968 was struggling to launch a rehabilitation program that re- Indonesia was producing only 12 million tons of rice and quired a large amount of external resources. Inflation ran at was the world's largest rice importer, bv 1978 Indonesia was 650 percent in 1965, and foreign reserves were dwindling producing 17.5 million tons, almost eno ugh to meet its stead- rapidly. By the late 1960s, Indonesia's external debt amounted ily expanding demand. to $2.1 billion, 20 percent of GDP. After three partial mor- IDA has also played a leading role in electrical power. atoriums in 1966-68, the Paris Club agreed in 1970 to a long- Since 1969, it has helped to reform the Indonesian power term rescheduling of Indonesia's external public debt. authority, provided credits for rehabilitating Jakarta's elec- IDA assumed a leading role in mobilizing and coordinating tricitv distribution system, and begun the development of the aid through the intergovernmental Group on Indonesia (IGGI), Java grid (to be completed with the help of IBRD power established in 1966. IGGI is chaired by the Dutch government projects). Power generation has increased by 150 percent and consists of all major donor countries; the Bank serves since 1974; supply is reliable, and the power authority is as its secretariat. In 1970, half of Indonesia's development generating enough money to continue its program. spending was financed by foreign aid, all on concessional From 1968 until 1974, all lending to Indonesia was made terms, through IDA. The country's creditworthiness then improved In the early years of IDA involvement, special attention as a result of the commodity and oil price boom. Virtually was given to meeting Indonesia's shortage of skilled labor all of the Bank's lending since 19,4 has been through IBRD and its rehabilitation requirements. In addition to five tech- loans. A modest amount of lending continued to come from nical assistance credits amounting to $25 million, IDA pro- IDA, as Indonesia's per capita GNP was well below the IDA vided advice and financed training activities. Recognizing the ceiling. Given Indonesia's much improved balance of pay- urgent need for institutional reforms, most IDA projects took ments, however, IDA lending was discontinued in 1980. steps to reorganize project authorities, including drafting Indonesia has received 48 IDA credits totaling $932 mil- charters, assisting in preparing legislation, and financing sub- lion, and 59 1BRD loans amounting to $3.8 billion. IFC in- stantial organizational analyses and managerial and technical vestments have totaled $133 million. By 1980, only 24 percent upgrading. of the development budget was externally financed, To develop skilled workers, IDA aimed at strengthening IDA has been only one element in Indonesia's rapid de- and creating new educational and training institutions, as- velopment. After a disastrous phase in the 1960s, the country sisting the Ministry of Education in its planning and educa- has benefited from good macroeconomic management and tional management. Two IDA credits and two IBRD loans a rapidly expanding corps of qualified people. However, in helped the government to upgrade senior secondary agri- the absence of IDA assistance-financing, technical assis- cultural schools and service centers. They also established a tance, and institutional support for key sectors-it is hard to new agency for coordinating and administering middle-level see how such development efforts would have progressed agricultural training, and a successful national agricultural as rapidly as they did. Moreover, when Indonesia's oil rev- extension program. enues emerged in the mid-1970s, it could use these funds Given agriculture's key role, its rehabilitation was a prior- effectiveh, because it had the institutions and management itv. IDA has assisted the water authority to design and execute capacities already in place. 58 IDA and Iudan r-.=.-fr.El ~ ~ ~ ~ 4 11-- 1 vi ii. . 1- -..u . . lld Ih._A I.0 1r. It rl ' it uJ i I C- ; U.--'iI- r C I T 1C -r1 1 r- I rn I: - i 1 i r uh:-r. ft._ in I n i illi pr. :t I. * 11r O P l i f,d ri-in i prl..c, I' pt r*:c . .[ 4 1 -1- I1 - . * 01I flicDF: IjuniI._1 .1Il ji,Vi i III-.*il l** *rlin .. ric r -ur nc s . .i- in**ul 'i.j,1rl 11.. '. 1111.1- 100C i.. 0.