The World Bank Group comprises the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). These institutions work together and complement one another’s activities to achieve their shared goals of reducing poverty and improving lives. Collaboration by the affiliates is increasing as the World Bank Group works more closely with the private sector. Each institution discloses its fiscal year highlights in a separate annual report.
The Role of IBRD
This global development cooperative is owned by 188 member countries. IBRD works with its members to achieve equitable and sustainable economic growth in their national economies and to find solutions to pressing regional and global problems in economic development and other important areas, such as environmental sustainability. It pursues its overriding goals—to overcome poverty and improve standards of living—primarily by providing loans, risk management products, and expertise on development-related disciplines and by coordinating responses to regional and global challenges. (See worldbank.org/ibrd.)
IBRD Financial Commitments and Services
New lending commitments by IBRD were $15.2 billion in fiscal 2013 for 92 operations. This volume was higher than the precrisis historical average ($13.5 billion in fiscal 2005–08) but lower than the $20.6 billion in fiscal 2012. Latin America and the Caribbean ($4.8 billion) and Europe and Central Asia ($4.6 billion) received the largest shares of new lending, followed by East Asia and Pacific ($3.7 billion). Commitments to the Middle East and North Africa ($1.8 billion), South Asia ($378 million), and Africa ($42 million) followed. Public Administration, Law, and Justice received the largest commitment ($4.4 billion), followed by Transportation ($2.6 billion), Health and Other Social Services ($1.8 billion), and Finance ($1.6 billion). The theme receiving the highest share of commitments was Financial and Private Sector Development (18 percent), followed by Public Sector Governance (14 percent) and Social Protection and Risk Management (13 percent).
In addition to its lending activities, IBRD offers financial products that allow clients to efficiently fund their development programs and manage risks related to currency and interest rates, commodity prices, and natural disasters. In fiscal 2013, the Bank’s Treasury executed U.S. dollar equivalent (USDeq) 4.8 billion in hedging transactions on behalf of member countries, including USDeq 3.7 billion in interest rate hedges, USDeq 82 million in currency hedges (all local currency conversions), and USDeq 1 billion of currency hedges against non–IBRD obligations. It also executed swaps to provide catastrophe risk insurance to five Pacific Island countries and 16 Caribbean nations, and USDeq 878 million in funding and swaps for the International Finance Facility for Immunisation. The Bank’s Treasury also served as arranger for the government of Mexico’s second MultiCat bond, a three-year, $315 million, multitranche catastrophe bond providing parametric risk insurance coverage against earthquakes and hurricanes.
IBRD issues bonds in international capital markets and provides long-term loans to
middle-income countries. In fiscal 2013, IBRD raised USDeq 22.1 billion by issuing bonds
in 21 currencies. Its standing in the capital markets and its financial strength allowed IBRD
to borrow these large volumes on very favorable terms despite volatile market conditions.
The Bank’s strength is based on IBRD’s robust capital position and shareholder support, as well as on prudent financial policies and practices, which help maintain its AAA credit rating. IBRD’s equity comprises primarily paid-in capital and reserves. Under the terms of the general and selective capital increase resolutions approved by the Board of Governors on March 16, 2011, subscribed capital is expected to increase by $86.2 billion, of which $5.1 billion will be paid in over a five-year period. As of June 30, 2013, the cumulative increase in subscribed capital totaled $32.2 billion. Related paid-in amounts in connection with these capital increase resolutions were $1.9 billion.
As a cooperative institution, IBRD seeks not to maximize profit but to earn enough income to ensure its financial strength and sustain its development activities. Of fiscal 2012 allocable net income, the Executive Directors approved the addition of $147 million to the general reserve and recommended to the Board of Governors the transfer of $621 million to IDA and the allocation of $200 million to surplus.
Consistent with IBRD’s development mandate, the principal risk it takes is the country credit risk inherent in its portfolio of loans and guarantees. One summary measure of the Bank’s risk profile is the ratio of equity to loans, which is closely managed in line with the Bank’s financial and risk outlook. This ratio stood at 26.8 percent as of June 30, 2013.
The Role of IDA
The International Development Association (IDA) is the largest multilateral source of concessional financing for the world’s poorest countries. Its funding supports countries’ efforts to boost economic growth, reduce poverty, and improve the living conditions of the poor. In fiscal 2013, a total of 82 countries were eligible to receive IDA assistance. (See http://www.worldbank.org/ida.)
IDA Financial Commitments
IDA commitments amounted to $16.3 billion in fiscal 2013, including $13.8 billion in credits, $2.5 billion in grants, and $60 million in guarantees. The largest share of resources ($8.2 billion) was committed to Africa. South Asia ($4.1 billion) and East Asia and Pacific ($2.6 billion) also received large shares of committed funding, followed by Europe and Central Asia ($729 million), Latin America and the Caribbean ($435 million), and Middle East and North Africa ($249 million). Vietnam ($2.0 billion) and Bangladesh ($1.6 billion) received the largest shares of committed financing.
Commitments for infrastructure—including the Energy and Mining sector; Transportation; Water, Sanitation, and Flood Protection; and Information and Communications—reached $6.1 billion. Significant support was also committed to the Education sector and Health and Other Social Services (combined $4.2 billion); Public Administration, Law, and Justice ($3.6 billion); and Agriculture ($1.3 billion). The themes receiving the highest share of commitments were Rural Development ($2.9 billion), Human Development ($2.8 billion), and Social Protection and Risk Management ($1.9 billion).
IDA is financed largely by contributions from partner governments. Additional financing comes from transfers from IBRD’s net income, grants from IFC, and borrowers’ repayments of earlier IDA credits. Every three years, partner governments and representatives of borrower countries meet to agree on IDA’s strategic direction, priorities, and financing for the subsequent three-year implementation period.
Under the 16th replenishment (IDA16), which covers fiscal years 2012–14, total resources (revised to reflect IDA’s currency hedging and updated subsequent to the replenishment discussions) amounted to Special Drawing Rights (SDR) 33.9 billion (equivalent to $50.9 billion). This figure includes partner resources of SDR 17.6 billion (equivalent to $26.4 billion) from 51 countries, 7 of which are new contributing partners; partner compensation for debt forgiveness of SDR 3.5 billion (equivalent to $5.3 billion); credit reflows of SDR 8.9 billion (equivalent to $13.4 billion), including reflows from contractual and voluntary acceleration of credit repayments and hardening of the lending terms for IDA’s blend and gap borrowers; transfers from within the World Bank Group, including associated investment income of SDR 1.9 billion (equivalent to $2.8 billion); and balances carried forward from prior replenishments of SDR 2.0 billion (equivalent to $2.9 billion). As of June 30, 2013, SDR 19.9 billion (equivalent to $29.9 billion) of the IDA16 envelope had been committed to credits, grants, and guarantees. The U.S. dollar equivalents are based on the reference exchange rate for IDA16, and the amounts are provided for illustrative purposes only because IDA cash flows are hedged to SDRs, the currency in which IDA’s commitment authority is recorded.
The overarching theme and main focus of IDA16 is the delivery of development results. Special themes include crisis response, gender, climate change, and fragile and conflictaffected situations. IDA16 includes funding for a dedicated Crisis Response Window to help low-income countries deal with the impact of natural disasters and severe economic shocks.
The replenishment process for IDA17, which covers fiscal years 2015–17, is under way. It culminates in December 2013.
|The World Bank: The Roles of IBRD and IDA||PDF (79KB)|