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December 13th 2010 By Nuria Molina and Nora Honkaniemi The 16th replenishment round of the World Bank's International Development Association (IDA) is drawing to a close. The replenishment of IDA funds takes place every three years and allows IDA to make concessional loans and grants to lowincome countries. The replenishment process takes a year and consists of four meetings, of which the fourth and final one is taking place in Brussels on 14-15 December 2010. At this meeting, an agreement will be made on the resources for the July 2011- June 2014 period. In November, the IDA deputies – who represent member countries in the IDA negotiations - issued a draft report for comments summarising the discussions so far and pointing out IDA 16’s priorities, special themes, review of results, issues of resource management and other financing matters for the coming three years. While we welcome IDA’s focus on the following issues - improving effectiveness: “increased and more effective aid remains critical”; stepping up efforts to deliver development results: “development results is the over-arching theme for IDA16”; and climate change: “climate change presents an urgent challenge to the well-being of all”; we are concerned that the document lacks specific commitments to ensure progress on these fronts. Increasing IDA’s effectiveness: country ownership and use of country systems The report states that: “IDA’s country-based development model helps countries align aid to their national development priorities. The CAS provides the strategic basis for IDA’s support to a country. It supports a country’s development strategy as outlined in its Poverty Reduction Strategy Paper (PRSP).” However, experience has shown that in the past the ways in which National Development Strategies (NDS) have been drafted have often allowed for a strong influence by the World Bank or Northern consultants in shaping national development strategies. The draft IDA report states that alignment to national development priorities will be ensured by the Bank’s Country Assistance Strategies (CAS). However, the World Bank CASs often contain details and indicators that go beyond the National Development Strategies, and it is unclear how the detailed indicators in the CAS are drawn from much broader priorities in NDSs. Eurodad therefore welcomes the additional commitment by IDA to align to developing country priorities. However, without specific proposals in the report of how this would be achieved, it is unclear how the Bank will ensure that it responds to genuine country priorities and how it will step up the use of country systems to disburse its grants and loans. To this effect, it will be important for IDA to strongly consider aid modalities such as budget support which ensure that country systems – instead of donors’ systems and parallel implementation units – are used. Eurodad therefore calls for lifting the 30% cap on IDA resources provided as budget support. Measuring results and results-based CAS The report states that “IDA has also been at the forefront of developing results concepts and frameworks for monitoring and assessing the impact of its efforts and continues to strive to strengthen its results focus to increase efficiency and accountability.” It also states that “They [participants] welcomed the mainstreaming of results-based CAS so that all CASs now have results frameworks to monitor the results of all IDA resources and programs and donor mapping information.”
the process of choosing outcome indicators must be much more inclusive and led by the recipient government in participation with civil society. Conditionality The report states that: “The World Bank is considered to be a front-runner in … its good practices on conditionality” In 2005. in order to create incentives for poverty reduction. rather than poverty reduction outcomes. However. This follows the line of Eurodad recommendations to the Bank in our research from 2008 entitled “Outcome Based Conditionality. This type of “results” and the corresponding indicators are all too often donor driven. rather than poverty reduction results. In addition. Besides poverty reduction outcomes. Climate financing should be fully additional and not detract from scarce aid resources. Therefore. to respond to calls from civil society to improve the GPPs and to ensure that all policy conditions are phased out. the paper fails to address IEG’s and civil society concerns. not enough attention is given in the report to ensuring that the GPPs are adhered to and independently monitored.” The recognition that climate proofing development will increase the costs of traditional development assistance is welcome. Eurodad is concerned that IDA prioritising climate may open the door to diverting aid towards financing climate needs. Eurodad welcomes the recognition that the share of IDA financing providing climate co-benefits should be better captured. A recent review by the Independent Evaluation Group (IEG) called for a thorough re-examination of the CPIA. Eurodad is concerned by the way “results” are defined in the document. the document seeks to include in IDA’s results framework targets such as the “reduction of regulatory obstacles to private sector development”. However.Eurodad welcomes this focus on measuring poverty reduction results. However. Climate change The report says: “Climate change presents an urgent challenge to the well-being of all countries and particularly to the poorest countries as it adds to the cost of achieving the MDGs. As outlined in the report “Outcome based conditionality – too good to be true?”. To this end the Bank has since made progress in reducing the number of conditions per loan and appears to be using fewer harmful economic policy conditions. either. Often results are defined as economic policy or structural reforms. Further. the World Bank continues to influence policies in low-income countries through the use of the Country Policy and Institutional Assessment (CPIA) to determine allocations of grants and loans. measured and reported on. too good to be true?”. This is concerning as this could be interpreted as a way of exerting influence over developing countries economic policies by measuring policy reform results. This gives more weight to economic and governance reforms than to poverty eradication. when “results” are understood as poverty reduction outcomes in line with internationally agreed poverty reduction commitments such as the MDGs. No progress is made. what is crucial is how results are defined and who defines them. the Bank made commendable progress on reducing the harmful impact of conditionality by introducing the Good Practice Principles (GPPs) on Conditionality. However. The most effective way to assist IDA countries is to support them in their efforts to build resilience to climate change in their social and economic development programs. global civil society does not support the World Bank having any role in managing 2 . In addition.
European governments have a unique opportunity to demonstrate that they are serious about using their financing to deliver poverty reduction by pressuring the Bank to agree upon a concrete plan of action to implement the reforms outlined above. “Development diverted: How the IFC fails to reach the poor”. climate credibility and ensuring the successful outcome of the international climate negotiations.” The draft report largely emphasises the role of the private sector in driving development and leveraging more funds for development and climate finance. It also fails to prioritise development effectiveness as the overriding criteria when choosing projects in which to invest. by creating decent jobs and mobilising domestic resources for development. Not enough emphasis is placed ensuring that the private sector that is supported by IDA delivers positive development outcomes. transparency. which IDA partners with. In March this year. Eurodad and members questioned IDA’s development results and challenged European donors to not channel additional funds to IDA without first ensuring significant reform at the World Bank. Despite IFC and IDA’s development mandates. Moreover. An IEG report from 2007 demonstrated that the IFC.specific climate funds for reasons of legitimacy.” Therefore. the impact and process of blending and leveraging the financing instruments used and measuring results. has a track record of not delivering development results through its private sector investments. which may hinder the effectiveness of IDA grants and loans and may pose a serious reputational risk to IDA. Therefore. More than two thirds of IFC’s portfolio for LICs supports big transnational companies from rich countries. On the occasion of the 16th replenishment of the World Bank’s International Development Association (IDA). Eurodad research found that the IFC fails to show how it aligns its investment decisions with developing countries investment priorities. the IDA/IFC Secretariat will continue to support “private sector development in IDA recipients by increasing joint advisory activities and jointly finance projects. eligibility and allocation. This is worrying for several reasons. A recent report by Eurodad. Private sector development The report states: “Private Sector Development (PSD) is central to sustained economic growth and poverty reduction in IDA countries. Until failure to ensure positive development outcomes by the IFC is properly addressed. Moreover. these investments in fact to a large extent support multinational companies investing in the South. analysing IFC lending and investments in lowincome countries (LICs) found that only 16% of IFC’s lending and investments in LICs is actually channelled to companies from poor countries. and on real commitments to climate including ending all lending that supports the production and use of fossil fuels. ranging from governance. IDA contributions (donations from governments to deliver development results) should under no circumstances co-finance the CIFs that are riddled by multiple contradictions and have no proven results to date. ending the practice of conditionality and conditionality in other guises. 3 . there are many controversies surrounding the Climate Investment Funds (CIFs). Further. IDA should stop any “joint advisory activities and jointly financed projects”. such as the use of Country Policy and Institutional Assessment (CPIA) to allocate IDA resources. Eurodad and members made demands and recommendations for European donors to IDA on rapid governance reform.