International Development Association and its role is discussed. This is one of five members of World Bank Group. This association claims that they provide financial assistance to the poorest countries for reducing poverty and hunger.

1. Role
of
International Development Association
(IDA)
Role
of
International Development Association
(IDA)
Department of Commerce
Group: Finance Special
UNIVERSITY OF NORTH BENGAL
2014
Prof. Ajit Kumar Ray

2.  The International Development Association, IDA, is the World
Bank’s fund for the poorest countries.
 One of the world’s largest sources of aid
 IDA provides support for
o health
o education
o infrastructure
o agriculture
o economic and institutional development to the 82
countries—40 of them in Africa.
Role and Functions of IDARole and Functions of IDA
Prof. Ajit Kumar Ray

3.  IDA is critical to making progress toward the 2015 Millennium
Development Goals and the post-2015 agenda.
 In 2013, IDA commitments totaled $16.3 billion
 About one-fifth of IDA funding is provided as grants; the rest is in the
form of interest-free, long-term credits.
 IDA is replenished every three years by both developed and developing
country donors. Two other World Bank agencies— the IBRD and IFC—
make contributions to IDA.
 52 countries contributed to the last IDA replenishment of $49.3 billion for
the period running from July 1, 2011-June 30, 2014. Former IDA
recipients like China, Egypt, Korea and Turkey are now IDA donors.
 IDA is an effective way to leverage additional resources from donors,
recipient governments, the private sector, and the World Bank Group,
helping to scale up results and impact, as well as reducing aid
fragmentation.
Role and Functions of IDARole and Functions of IDA
Prof. Ajit Kumar Ray

4. The world’s poorest countries face enormous demands for development
finance that simply cannot be met through public resources. They need urgent
solutions that maximize the impact of private investment, driving powerful
results in job creation, infrastructure, health, education, and other key areas.
The world’s poorest countries face enormous demands for development
finance that simply cannot be met through public resources. They need urgent
solutions that maximize the impact of private investment, driving powerful
results in job creation, infrastructure, health, education, and other key areas.
How IFC works with IDAHow IFC works with IDA
Role and Functions of IDARole and Functions of IDA
This is one of IFC’s most critical roles within the World Bank Group. They
leverage private investment to support the work of the International
Development Association (IDA), whose concessional loans and grants in turn
complement the institution’s original lending arm IBRD
Since 2005, IFC investment in IDA countries has grown six fold, reaching nearly
$6 billion in fiscal year 2012. IDA countries now account for nearly half of IFC’s
investment projects and 65 percent of advisory program expenditures. IFC
considers its record in these countries as impressive: for every $1 in equity that
IFC invested, they received a return of $1.25. They further consider that this
financial performance has allowed them to contribute a significant sum to IDA
replenishments—$2.2 billion so far.
This is one of IFC’s most critical roles within the World Bank Group. They
leverage private investment to support the work of the International
Development Association (IDA), whose concessional loans and grants in turn
complement the institution’s original lending arm IBRD
Since 2005, IFC investment in IDA countries has grown six fold, reaching nearly
$6 billion in fiscal year 2012. IDA countries now account for nearly half of IFC’s
investment projects and 65 percent of advisory program expenditures. IFC
considers its record in these countries as impressive: for every $1 in equity that
IFC invested, they received a return of $1.25. They further consider that this
financial performance has allowed them to contribute a significant sum to IDA
replenishments—$2.2 billion so far.
Prof. Ajit Kumar Ray

5. It depends first and foremost on
1. A country’s relative poverty,
 defined as GNI per capita below an established threshold
 updated annually
 in fiscal year 2014 it is fixed at $1,205
Eligibility for IDA supportEligibility for IDA support
3. Policy performance
The final criterion for IDA eligibility is a record of “good policy
performance,” defined by the Bank as “the implementation of
economic and social policies that promote growth and poverty
reduction”
2. Non-access to private capital markets.
The second requirement for IDA eligibility is a lack of creditworthiness to
borrow on market terms, both from the IBRD and from private
creditors. In general, IDA defines creditworthiness as “the ability to
service new external debt at market interest rates over the long term”
Prof. Ajit Kumar Ray

6. There are some exceptions:
 IDA also supports some countries, including several small island
economies, that are above the operational cutoff but lack the
creditworthiness needed to borrow from the International Bank
for Reconstruction and Development (IBRD).
 Some countries are IDA-eligible based on per capita income
levels and are also creditworthy for some IBRD borrowing. They
are referred to as “blend” countries.
 Altogether 82 IDA-eligible countries, 64 IDA-only countries and
18 Blend countries are getting assistance at present.
Total population of these countries is 2.8 billion (280 crores)
half of the total population of the developing world. An
estimated 1.8 billion (180 crores) people of these countries
survive on incomes of $2 or less a day.
Eligibility for IDA supportEligibility for IDA support
Prof. Ajit Kumar Ray

7. Small island economies have been granted
exceptions in maintaining their eligibility on the
following basis:
o small islands with less than 1.5 million people,
o significant vulnerability due to size and geography, and
o very limited credit-worthiness and financing options
Small island economies have been granted
exceptions in maintaining their eligibility on the
following basis:
o small islands with less than 1.5 million people,
o significant vulnerability due to size and geography, and
o very limited credit-worthiness and financing options
Eligibility for IDA supportEligibility for IDA support
Prof. Ajit Kumar Ray

8. Africa
1 Angola 11 Congo 24 Malawi 36 Sudan
2 Benin 12 Cote d'Ivoire 25 Mali 37 Tanzania
3 Burkina Faso 13 Eritrea 26 Mauritania 38 Togo
4 Burundi 14 Ethiopia 27 Mozambique 39 Uganda
5 Cameroon 15 Gambia, The 28 Niger 40 Zambia
6 Cape Verde 16 Ghana 29 Nigeria 41 Zimbabwe
7 C.A.R. 17 Guinea 30 Rwanda
8 Chad 18 Guinea-Bissau 31 Sao Tome
9 Comoros 19 Kenya 32 Senegal
10 Congo(formerly
Zaire)
20 Lesotho 33 Sierra Leone
21 Liberia 34 Somalia
22 Madagascar 35 South Sudan
List of Eligible Countries for IDA Assistance?List of Eligible Countries for IDA Assistance?
Prof. Ajit Kumar Ray

9. East Asia
1 Cambodia 5 Micronesia 9 Samoa 13Tuvalu
2 Kiribati 6 Mongolia 10 Solomon 14Vanuatu
3 Laos, PDR 7 Myanmar 11 Timor 15Vietnam
4 Marshall Islands 8 Papua New
Guinea
12 Tonga
Europe and Central Asia
16 Armenia 18 Georgia 20 Kyrgyz Rep 22Tajikistan
17 Bosnia-
Herzegovina
19 Kosovo 21 Moldova 23Uzbekistan
Latin America and Caribbean
24 Bolivia 27 Grenada 29 Haiti 31Nicaragua
25 Dominica 28 Guyana 30 Honduras 32St Lucia
26 St Vincent
Middle East and North Africa
33 Djibouti 34 Yemen
List of Eligible Countries for IDA Assistance?List of Eligible Countries for IDA Assistance?
Prof. Ajit Kumar Ray

10. South Asia
1 Afghanistan 3 Bhutan 4 Maldives 7 Pakistan
2 Bangladesh 4 India 6 Nepal 8 Sri Lanka
List of Eligible Countries for IDA Assistance?List of Eligible Countries for IDA Assistance?
Prof. Ajit Kumar Ray

11. Sl. No. Countries
1 Mongolia 8 Georgia
2 Papua New Guinea 9 Uzbekistan
3 Timor-Leste 10 India
4 Vietnam 11 Pakistan
5 Armenia 12 Sri Lanka
6 Bolivia 13 Zimbabwe
7 Bosnia-Herzegovina
Small Islands
14 Dominica
15 St Vincent
16 Grenada
17 Cape Verde
18 St Lucia
Blend countries: IDA-eligible but also creditworthy for some IBRD borrowing
Prof. Ajit Kumar Ray

12. Prof. Ajit Kumar Ray

13. Lending Rates
Prof. Ajit Kumar Ray

14. Prof. Ajit Kumar Ray

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16. Prof. Ajit Kumar Ray

17. Prof. Ajit Kumar Ray

18. IDA-16 will end on 30th
June, 2014 and IDA-17 will run from July 1, 2014
to June 30, 2017.
IDA-16 will end on 30th
June, 2014 and IDA-17 will run from July 1, 2014
to June 30, 2017.
$52 Billion for World Bank’s fund for the poorest (IDA fund) is declared
for IDA-17
Prof. Ajit Kumar Ray

19. IDA’s
Performance-Based Allocation
System:
IDA’s
Performance-Based Allocation
System:
Prof. Ajit Kumar Ray

20. According to the policy declaration of World
Bank, IDA resources are allocated to
countries through a formula that considers
country performance and characteristics,
such as population size and Bank
classification.
According to the policy declaration of World
Bank, IDA resources are allocated to
countries through a formula that considers
country performance and characteristics,
such as population size and Bank
classification.
IDA’s Performance-Based Allocation System:IDA’s Performance-Based Allocation System:
Prof. Ajit Kumar Ray

21. The performance of IDA countries is assessed annually using
(a)the CPIA (Country Policy and Institutional Assessment)
(b)the ARPP (Annual Review of Portfolio Performance)
(c)The Governance factor.
Overview of
IDA’s Performance-Based
Allocation System
Prof. Ajit Kumar Ray

22. (a) The CPIA assesses each IDA country’s
 present policy and
 institutional framework for
 fostering poverty reduction,
 sustainable growth and
 ability to effectively use of development assistance.
The system now comprises 16 criteria grouped in four equally
weighted clusters:
Overview of
IDA’s Performance-Based
Allocation System
Prof. Ajit Kumar Ray

23. A. Economic Management
1. Macroeconomic Management
2. Fiscal Policy
3. Debt Policy
B. Structural Policies
4. Trade
5. Financial Sector
6. Business Regulatory Environment
C. Policies for Social Inclusion
7. Gender Equality
8. Equity of Public Resource Use
9. Building Human Resources
10. Social Protection and Labor
11. Policies and Institutions for Environmental Sustainability
D. Public Sector Management and Institutions
12. Property Rights and Rule-based Governance
13. Quality of Budgetary and Financial Management
14. Efficiency of Revenue Mobilization
15. Quality of Public Administration
16. Transparency, Accountability, and Corruption in the Public Sector
CPIA Criteria (agreed upon during the IDA14 deliberations) under 4 clusters – A,B,C,D
Overview of
IDA’s Performance-Based Allocation
System
Prof. Ajit Kumar Ray

24. (b) Annual Review of Portfolio Performance (ARPP)
The CPIA underpins IDA’s country performance ratings but is not its only
determinant. To capture the important dimension of quality of development
project and program management, the Bank’s Annual Report on Portfolio
Performance (ARPP) is used to determine a rating for each country’s
implementation performance. The portfolio ratings are based on the
percentage of IDA funded projects in the country that are considered at risk.
These percentages are translated into 1-6 scores with the help of a
conversion table.
Overview of
IDA’s Performance-Based Allocation
System
Prof. Ajit Kumar Ray

25. To calculate portfolio performance ratings the number of actual and
potential projects at risk in Country’s portfolio is taken:
Actual projects at risk are those for which Implementation Progress (IP) is
unsatisfactory or Development Objectives (DO) are not likely to be achieved.
Potential problem projects are those that, although rated as satisfactory for
both IP and DO, are affected by factors likely to bring about an eventual
unsatisfactory outcome. These projects are identified by criteria or “flags”.
This number is then divided by the total number of projects in the
portfolio of country to obtain percent of projects at risk.
This number is then divided by the total number of projects in the
portfolio of country to obtain percent of projects at risk.
Overview of
IDA’s Performance-Based Allocation
System
Prof. Ajit Kumar Ray

26. Percent of Projects at Risk Rating
0% 6.0
1% 5.5
2% 5.0
3-4% 4.5
5-6% 4.0
7-10% 3.5
11-15% 3.0
16-32% 2.5
33-60% 2.0
61-99% 1.5
100% 1
Conversion Table
Overview of
IDA’s Performance-Based Allocation
System
Prof. Ajit Kumar Ray

27. (c) Governance factor
The governance factor is derived from the five criteria in the CPIA’s
governance or public sector management and institutions (cluster D),
PLUS
the three-year moving average of portfolio rating from ARPP.
The average score of these six governance criteria is divided by
3.5 and an exponential of 1.5 is applied to this ratio.
Thus
Governance Factor = (average governance rating / 3.5)^1.5
The country’s overall rating is then multiplied by this factor, resulting in an
increase or decrease of the overall IDA country performance ratings.
The country’s overall rating is then multiplied by this factor, resulting in an
increase or decrease of the overall IDA country performance ratings.
Overview of
IDA’s Performance-Based Allocation
System
Prof. Ajit Kumar Ray

28. Example
Gov. Criteria Country-1 Country-2
a 2 1
b 4 2
c 6 3
d 3 4
e 6 2
f 6 3
Total 27 15
Average 4.5 2.5
Average/3.5 1.28571429 0.71428571
(Average/3.5)^1.
5 1.45786297 0.60368161
It is what is known as Governance FactorIt is what is known as Governance Factor
Overview of
IDA’s Performance-Based Allocation
System
Prof. Ajit Kumar Ray

29. Country performance ratings:
FIRST STEP:
A weighted average rating is calculated of the CPIA (80 percent) and the
portfolio rating ARPP (20 percent).
SECOND STEP:
This composite rating is multiplied by the “governance factor” to
produce the country’s IDA country performance ratings.
Calculation of the country performance rating
Country performance rating = (0.8*CPIA + 0. 2*Portfolio rating)*(governance factor)
Suppose for a country X, CPIA score=3.42, ARPP score = 3.5 and Governance factor =
2.9. Then
Country performance rating = [(0.8*3.42) + (0.2*3.5)]* (2.9 / 3.5)^1.5 = 2.65
Overview of
IDA’s Performance-Based Allocation
System
Prof. Ajit Kumar Ray

30. -2
Weighted
Average
Chart 1: IDA Country Performance Rating
Country Policy and
Institutional
Assessment (CPIA)
80% 20%
Portfolio Performance
Rating (from ARPP)
5 governance
related
indicators from
the CPIA
Governance
Factor
1 governance
related indicator
from ARPP
Country Performance Rating
Schematic Representation of IDA Country Performance Rating
Overview of
IDA’s Performance-Based Allocation
System
Prof. Ajit Kumar Ray

31. IDA’s resources are allocated on the basis of the IDA country performance
ratings, population, and GNI per capita:
IDA Country Allocation = function of ( Country Performance Ratings^ 2.0,
Pop^1.0, (GNI/Capita)^.-0.125 )
Overview of
IDA’s Performance-Based Allocation
System
Prof. Ajit Kumar Ray

32. Thanks for patienceThanks for patience
Prof. Ajit Kumar Ray