The World Bank and the Triennial Tin Cup: The Donors Will Give, But What Will They Ask?

The FT notes that talks have begun for the IDA-15 replenishment round. This is the latest set of negotiations that take place every three years where the World Bank asks its shareholders for cash to provide grants or to buy down the interest rates for its lending to poor countries--and when the donors typically load up the Bank with new conditions. Although these talks are often tough, the donors almost always increase their contributions.But the FT suggests that things are especially cantankerous this year and that an increase is far from assured. Getting more money this year…

…with Nelson Mandela running the bank would be extremely difficult," said a senior bank official. With [World Bank President Paul] Wolfowitz at the helm, donors have to decide whether to commit more taxpayer money to a management team many have criticized in public or in private. Some bank insiders fear they will not.

CGD is making its own contribution to the negotiations through our IDA-15 Working Group. The group is already meeting and a release of its recommendations is expected later this spring. Like previous CGD Working Group reports the purpose is to provide independent advice to help make the multilateral system work better. The main issues identified by the group so far have been about performance measures, how to treat governance, what to do in fragile states, and the worrying tendency of donors to ask IDA to do too much.While tension between some of the shareholders and Bank management also seems a real sticking point, the two other concerns raised in the FT article seem to me to be non-issues:

1. Worries about the “enormous” loss of reflow income from debt relief appear mostly unfounded since the amounts are fairly small for the upcoming replenishment period (July 2008-June 2011) and, more importantly, the lost repayments are being netted out of the future IDA allocation for each beneficiary. There is thus no financial loss for the Bank--some shareholders are apparently just using this scare tactic as a reason to push for greater donations.
2. The supposed threat the Bank faces from “increased competition” from UN agencies, regional development banks, and new groups like The Global Fund also seems hollow. Although there is a lot of worry about ‘vertical funds,’ such vehicles can only work well if others are working on systemic issues (i.e., you can’t do much to fight HIV/AIDS if the national health system is broken). IDA is the key institution on getting these systems running better, and the donors know it. Similarly, it is hard to imagine that many donors really believe--whatever they think about Wolfowitz--that spending through UNDP or AfDB is a true substitute for IDA. That seems a bluff worth calling.