Answering the World Bank’s $75 Billion Question

Next week in Zambia, donors to the World Bank’s financing window for low-income countries, the International Development Association (IDA), meet to discuss IDA’s future. This “mid-term review” is both a stocktaking session and a teeing up of the next round of fundraising for the world’s largest concessional lending fund. Formal negotiations will commence next year, but the meetings in Zambia set the scene for those negotiations. The last funding round, which was the 18^th in IDA’s history (“IDA-18”), allocated $75 billion for the World Bank’s work across a range of sectors, initiatives, and themes in low-income client countries.

When it comes to this type of funding (heavily subsidized, low-interest loans) for this type of country (very low per capita income and low or no credit rating), IDA’s $75 billion is a considerable sum. And as IDA’s resources have grown—thanks to steady donor contributions, a growing volume of loan repayments from IDA’s many decades of lending, and recent decisions to issue IDA bonds in the marketplace in order to further leverage these resources—so has interest in how IDA spends its money.

In short, the stakes are pretty high for how the IDA donors, World Bank management, and IDA’s borrowing countries jointly decide how to spend the next round of money during their “IDA-19” negotiations next year.

Certainly, questions around how to spend IDA’s money have not escaped CGD’s notice. In September, we convened many of the key IDA actors in a private roundtable to discuss IDA’s future in the context of the wider landscape of concessional financing. For that discussion, we mapped key trends that are shaping this landscaping.

More recently, CGD senior fellows Amanda Glassman, Cindy Huang, and Charles Kenny have each put forward proposals for how IDA can better spend its considerable resources:

• Glassman argues that the World Bank, and IDA in particular, has a critical role to play in pandemic preparedness. But this role requires a shift in thinking from crisis response to preparedness.
• Huang and colleagues call on IDA to re-up and build on the IDA-18 refugee “sub-window,” which allocated some of IDA’s regional projects financing to support countries that are hosting large refugee populations. She identifies five areas of reform for an IDA-19 refugee sub-window.
• Kenny calls out the design of IDA’s private sector window, arguing that it has not been structured to effectively allocate IDA’s scarce grant resources as subsidies to the private sector. He argues for a better design that relies on competition to allocate these funds.

It’s an uncomfortable truth that many development policy discussions are pretty far removed from actual spending decisions. The Sustainable Development Goals agenda itself, with all its aspirations, has no direct financing mechanism. This is what makes IDA replenishment negotiations different and compelling. The IDA-19 discussions are quite simply about how to spend IDA’s money. IDA’s donors will hear a lot from World Bank management on this question in the months ahead. They would also do well to seek outside sources of advice and ideas, including those put forward by my CGD colleagues.