The World Bank's International Development Association (IDA)

Publication Date: April 2008

Publisher: Library of Congress. Congressional Research Service

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Research Area: Banking and finance

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Abstract:

The World Bank is a Multilateral Development Bank (MDB) that makes loans and grants to low and middle-income countries to reduce poverty and promote economic development. Both the World Bank and the International Monetary Fund (IMF) were founded at the Bretton Woods Conference in 1944. Two of the World Bank facilities, the International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) lend directly to governments to finance projects and programs.

IDA was established in 1960, 16 years after the creation of the World Bank to address concern that the poorest countries could not afford to borrow at the nearmarket rate terms offered by the IBRD. Consequently, IDA was established as a revolving fund, providing concessional loans to the poorest countries subsidized by donor contributions and transfers from the IBRD. IDA assistance is highly discounted, it is increasingly provided as grants, and only available to low-income member countries. Since IDA provides loans and grants to the poorest countries at subsidized rates, its resources must be periodically replenished. Donor nations have replenished IDA 14 times since its founding.

On March 5, 2007, donor nations began to discuss a possible fifteenth replenishment of funds for IDA. This is the first replenishment since the G8 summit at the Gleneagles Resort in Scotland in 2005 where world leaders proposed the creation of the Multilateral Debt Relief Initiative (MDRI). The MDRI cancels the remaining debt of the world's poorest countries and pledges to double the amount of aid to Sub-Saharan Africa between 2004 and 2010, primarily in the form of grantbased assistance.

At the March 5-6 kick-off meeting for the IDA-15 round, donor governments selected three themes for IDA-15: (1) IDA's role in the international foreign aid system, (2) the role of the World Bank in post-conflict reconstruction and fragile states, and (3) the need to improve the effectiveness of IDA assistance. This report provides brief background material on the World Bank's IDA, the U.S. role at the institution, and information on the status of the current IDA-14 replenishment. It then examines the negotiations for IDA-15, and analyzes the three core themes identified for IDA-15. The report will be updated as events warrant.