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Africa Policy Information Center, African NGOs on World Bank IDA Financing

A position paper of the Africa Policy Information Center, distributed by the InterAfrica Group NGO Networking Service
12 February 1995

The World Bank and African NGOs:
Policy Dialogue on IDA 11
From: InterAfrica Group NGO NETWORKING SERVICE
Contact: Vanessa Sayers, NNS Co-ordinator
(Vanessa_Sayers@p142.f1.n751.z5.gnfido.fidonet.org)
Feb. 12, 1995 What is IDA?

The International Development Association (IDA) is a branch of the International Bank for Reconstruction and Development (IBRD), better known as the World Bank. IDA was established in 1960 to lend funds to developing countries which cannot afford IBRD lending terms. While IBRD "loans" must be repaid with interest at market rates over 15 to 20 years, IDA "credits" (extended to governments only) have a 10 year grace period, and are for repayment over 35-40 years at virtually 0% interest. All of the countries of the Horn of Africa - Djibouti, Eritrea, Ethiopia, Somalia and Sudan are eligible to receive only IDA funds, because of their low GNP (although only Ethiopia borrowed funds in 1994).

IDA funds are raised from 35 donor governments, of which the United States, closely followed by Japan, is the largest contributor. IDA is replenished every three to four years and has been replenished ten times to date. There is currently much discussion around IDA in donor countries, among NGOs and developing country governments. This is because the decision making for the 11th replenishment of IDA which will run from mid 1996 to the 1999, takes place from January to September this year and was preceded by the 50th anniversary of the World Bank and International Monetary Fund (IMF). NGOs used this anniversary as an opportunity to discuss and lobby for reform of these institutions - including reforming IDA.

According to literature produced by the World Bank, poverty reduction has been IDA's "raison d'etre", particularly since the 1970's. However, the same literature states that only a maximum of 40% of IDA lending fulfils IDA's own criteria for having the potential to reduce poverty as set out under the'Programme of Targetted Interventions'. While there has been a shift towards investment in rural and human resource development since the early years when all investment focused on infrastructure, there is still concern about the level to which funds are positively (or otherwise) affecting the poorest sectors of society. Around one quarter of total IDA lending (48% in Sub-Saharan Africa) is presently given to national macro-economic reform programmes - often called 'structural adjustment'- in the form of balance of payments support and in some cases to help pay off old debts.

What are NGOs saying about IDA?

There is concern among NGOs and others that the effects of 'adjustment' on the poor have been harsh and given IDA's mandate of poverty reduction that there is a contradiction between funding adjustment programmes and reducing poverty. Some have gone as far as to argue that IDA and its lending should be entirely separate from the IBRD and its policies. The African NGO position attached deals with the likely reality that adjustment lending will continue and that, given this, there should be a decrease in the proportion of lending for adjustment and an expansion of human development lending, while the benefits from all lending - including adjustment - should flow "disproportionately to the poor and disadvantaged sectors of society".

At present the economic and political climate in the developed countries, particularly the United States, is raising concerns that budget cuts will lead to a substantial drop in contributions to IDA 11 this year. As IDA is the only source of large-scale development finance for nations which are not considered 'creditworthy' by the international markets, African NGOs want it to be retained at its present level, but to fulfil its mandate more effectively.

The African NGO consultation on IDA 11 took place in Addis Ababa on January 9-13, 1995. It is one of three consultations set up by the NGO Working Group on the World Bank. The others will be in Asia on March 20-24 and in Latin America on April 23 -27.

For other resources on IDA and NGO papers and reports on the World Bank and IDA, contact the NNS office at the email address above.

Recommendations of the Africa NGA Consultation on IDA11

Having considered the performance of IDA and the conditions in African countries where IDA programmes operate, we, African NGO's have concluded that it is essential for the IDA programme to continue.

1. We view the potential of future country programmes and their chances of success positively, given the right criteria and correct implementation. We draw important lessons from the past which informs the critique contained in this memorandum.
2. As regards IDA11, African NGO's believe that real funding levels should, as a minimum, be maintained at present levels and preferably be increased.

3. We express concern that the poorest were not deriving recognisable or adequate benefit from different country programmes which causes NGO's to argue that the focus of benefit to the poorest should be sharpened in regard to IDA11.

   IDA should therefore focus on redressing inequities created by the market. The benefits should flow disproportionately to the poor and disadvantaged sectors of society in all forms of IDA lending, including adjustment.

4. Poverty reduction depends on providing poor people with access to resources to do things for themselves. IDA needs to tackle the reasons that make poor people poor.

   Given the multicausal origins of poverty and its many manifestations in rural and urban areas, as well as across countries, poverty reduction will not be achieved through unitary economic strategies nor imposed models of human development. Targetted poverty reduction interventions mean not only effective ways of delivering resources to those most in need but a more precise understanding of the economic, social and political dynamics at work in impoverishing specific communities. Therefore, poverty reduction programes should emphasize the local understanding of the nature of poverty, enable locally-based initiatives to address this and expand opportunities for the poor to foster new mechanisms of social integration and support.

5. We are concerned at the number of IDA-eligible countries that in practice are not receiving IDA lending. About 40% of the population of IDA eligible countries lived in countries excluded from funding in 1994. Ways should be found in IDA11 to include poverty-focussed programmes in such countries.

6. The World Bank has made some progress as regards the importance of participation in its programmes. For IDA11 the principle and practice of participation needs to be deepened. This will provide the basic building blocks for effective targeting of IDA lending towards poverty alleviation. There should be full participation by governments, relevant civil society organisations (social proximity), including the beneficaries in sectoral fora to provide a relevant institutional framework. This participation refers to all the processes such as poverty assessment, public expenditure review, policy framework paper negotiations, country assistance strategy, project design, implementation and monitoring.

   In seeking solutions it is critical to start with the solutions that the poor themselves offer.

   We are concerned about the Head-quarter-centered, Washington consultant-centered and often government-centered decision making processes that currently inform IDA. Under IDA11 there is need to use local experience knowledge and experts.

7. The overhang of "debt" and the increasing levels of multilateral debt, particularly through the accumulation of arrears, is now pre-empting a large part of the available resources. Countries attempting to keep up with their debt service are seriously constraining their opportunities for growth. Countries not doing so accumulate further arrears and risk default.

   The use of IDA funds (particularly the "fifth dimension" funds) for debt management and debt reduction strategies of specific countries may be understandable but this should not be interpreted as providing a long-term and comprehensive solution to the problem of multilateral debt. A strategy, separate from IDA, but involving the World Bank, needs to be evolved to address this problem. In summary, there should be no recourse to IDA funds as a soft option to address the problem of the growing overhang of multilateral debt.

8. IDA lending should be skewed in favour of creating the essential components of an enabling and accountable state. The capacity of the state to implement effective poverty reduction strategies/programmes can only be enhanced, in this way.

   In advocating for unqualified liberaisation of markets, the Bank has not given due recognition to the positive role the state can play in African conditions in view of the fragile nature of the private sector. In particular the implementation of IMF stabilisation and World Bank adjustment programme risks curtailing the role and capacity of the state. Much needs to be done to strengthen the positive aspects of the state.

9. The present approach of relying on a modified version of "trickle down" and addressing the persistence of poverty as a short-term phenomenon corrected by instituting "safety nets" is very short-sighted and unsustainable.

   Poverty should form the focus of project/programme design and should be specifically targeted rather than as a short-term corrective necessity until "trickle down" growth filters through. Only in this way can a sustainable reduction in poverty be achieved.

10. World Bank figures* show that 48% of IDA lending in sub-saharan Africa is classed as "adjustment lending". As NGO's we express grave doubts about SAP and how it affects the situation of the poor.

    In IDA11 there should be a reduction of adjustment lending because of the negative consequences experienced currently in some cases. Therefore the uses or allocations of IDA11 should be restructured. Infra-structure and adjustment lending should not be more than 40%. Human development lending should constitute at least 60%. The latter includes: education, health, water and sanitation, agricultural research, extension services, nutrition as well as credits to make poor people agents of economic change and tackling what makes people poor, such as land reform, law reform etc.

11. In view of the aforegoing considerations, we call upon all African NGO's, voluntary development organisations and community-based organisations:
    • to substantially undertake the task of monitoring the impact of IDA on the poor;
    • to participate actively in the collecting of data bases that make such monitoring possible;
    • to conduct, to whatever extent possible, detailed micro-level studies on the impact IDA is having; and
    • to publicise and to specifically inform the World Bank, Governments and donors of the impact of IDA as perceived through the NGO experience.

Addis Ababa
11 January 1995

Note added by Africa Policy Information Center: Participants at the meeting, in addition to representatives from the World Bank, included representatives from CEVO, IAG, IARA, OXFAM USA and RADEV (all based in Ethiopia), FAVDO (Senegal & U.S.A.), Kagiso Trust and Foundation for Contemporary Research (South Africa), Swiss Coalition for Development, DENIVA (Uganda), Christian AID and TWN (UK), NGO Coordinating Committee (Zambia), and MWENGO (Zimbabwe).