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What is IDA?

Last Updated: November 2008
INTERNATIONAL DEVELOPMENT ASSOCIATION: What is IDA?

The International Development Asso- ciation (IDA) is the part of the World Bank that helps the world’s poorest countries. Established in 1960, IDA aims to reduce poverty by providing interest-free credits and grants for programs that boost economic growth, reduce inequalities and improve people’s living conditions.

The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries.

IDA complements the World Bank’s other lending arm–the International Bank for Reconstruction and Development (IBRD)–which serves middle-income countries with capital investment and advisory services. IBRD and IDA share the same staff and headquarters and evaluate projects with the same rigorous standards.

IDA is one of the largest sources of assistance for the world’s 81 poorest countries, 39 of which are in Africa. It is the single largest source of donor funds for basic social services in the poorest countries.

IDA lends money (known as credits) on concessional terms. This means that IDA credits have zero or very low interest charge and repayments are stretched over 25 to 40 years, including a 5 to 10-year grace period. IDA also provides grants to countries at risk of debt distress.

Since its inception, IDA credits and grants have totaled US$238 billion, averaging US$15 billion a year in recent years and directing the largest share, about 50 percent, to Africa.

IDA Borrowers

Eligibility for IDA support depends first and foremost on a country’s relative poverty, defined as GNI per capita below an established threshold and updated annually (in fiscal year 2012: US$1,175).

IDA also supports some countries, including several small island economies, which are above the operational cutoff but lack the creditworthiness needed to borrow from IBRD.

Some countries, such as India and Pakistan, are IDA-eligible based on per capita income levels, but are also creditworthy for some IBRD borrowing. They are referred to as “blend” countries.

Eighty one countries are currently eligible to receive IDA resources. Together, these countries are home to 2.5 billion people, half of the total population of the developing world. An estimated 1.5 billion people there survive on incomes of US$2 or less a day.

FY11 Top Ten IDA Borrowers

($million, excludes regional projects)

Bangladesh

2,139

India

2,072

Pakistan1,292

Vietnam

1,280

Ethiopia 

630
Ghana605

Nigeria

535

Kenya 

490
Tanzania420
Mozambique413

New IDA Lending by Region:

Sub-Saharan Africa...........43%
South Asia...........................39%
East Asia/Pacific..................10%
Europe/Central Asia...............4%
Latin America/Caribbean........3%
Middle East/North Africa.........1%

IDA Lending by Sector:

Infrastructure ......................42% Public Admin and Law..........23%
Social sector.......................20% Agriculture ............................8%
Industry ................................6% Finance...................................1%

New IDA Lending by Region.

IDA Lending

IDA funds are allocated to the recipient countries in relation to their income levels and record of success in managing their economies and their ongoing IDA projects.  IDA's lending terms are highly concessional, meaning that IDA credits carry no or low interest charges.  The lending terms are determined with reference to recipient countries' risk of debt distress, the level of GNI per capita, and creditworthiness for IBRD borrowing.  Recipients with a high risk of debt distress receive 100 percent of their financial assistance in the form of grants and those with a medium risk of debt distress receive 50 percent in the form of grants.  Other recipients receive IDA credits on regular or blend and hard-terms with 40 year and 25 year maturities respectively.

Lending Terms for credits approved from July 1, 2011

In fiscal year 2011 (which ended June 30, 2011), IDA commitments totaled US$16.3 billion, of which 17 percent was provided on grant terms. New commitments in FY11 comprised 228 new operations. Since 1960, IDA has provided US$228 billion to 108 countries. Annual commitments have increased steadily and averaged about US$15 billion over the last three years.

IDA-financed operations address primary education, basic health services, clean water and sanitation, environmental safeguards, business climate improvements, infrastructure and institutional reforms. These projects pave the way toward economic growth, job creation, higher incomes and better living conditions. Explore IDA Projects

IDA emphasizes broad-based growth, including:
- Sound economic policies, rural development, private business and sustainable environmental practices
- Investment in people, in education and health, especially in the struggle against HIV/AIDS, malaria and TB
- Expansion of borrower capacity to provide basic services and ensure accountability for public resources
- Recovery from civil strife, armed conflict and natural disaster
- Promotion of trade and regional integration

IDA carries out analytical studies to build the knowledge base that allows intelligent design of policies to reduce poverty. IDA advises governments on ways to broaden the base of economic growth and protect the poor from economic shocks.

IDA also coordinates donor assistance to provide relief for poor countries that cannot manage their debt-service burden. IDA has developed a system for allocating grants based on countries’ risk of debt distress, designed to help countries ensure debt sustainability.

IDA Funding

While the IBRD raises most of its funds on the world's financial markets, IDA is funded largely by contributions from the governments of its richer member countries. Additional funds come from IBRD's income and from borrowers' repayments of earlier IDA credits.

IDA Replenishments
Donors get together every three years to replenish IDA funds. 51 countries contributed to the 16th replenishment of IDA, which totaled US$ 49.3 billion.

The IDA16 replenishment raised funds for poor countries for the three-year period between July 2011 and June 2014. These are critical years for countries trying to achieve the UN Millennium Development Goals since it takes time for projects to be completed and yield measurable results.

IDA History
The International Bank for Reconstruction and Development (IBRD), better known as the World Bank, was established in 1944 to help Europe recover from the devastation of World War II. The success of that enterprise led the Bank, within a few years, to turn its attention to developing countries. By the 1950s, it became clear that the poorest developing countries needed softer terms than those that could be offered by the Bank, so they could afford to borrow the capital they needed to grow.

With the United States taking the initiative, a group of the Bank’s member countries decided to set up an agency that could lend to the poorest countries on the most favorable terms possible. They called the agency the "International Development Association." Its founders saw IDA as a way for the "haves" of the world to help the "have-nots." But they also wanted IDA to be run with the discipline of a bank. For this reason, US President Dwight D. Eisenhower proposed, and other countries agreed, that IDA should be part of the World Bank.

IDA's Articles of Agreement became effective in 1960. The first IDA loans, known as credits, were approved in 1961 to Chile, Honduras, India and Sudan.

IDA currently has 172 member countries. Members subscribe to IDA’s initial subscriptions and subsequent replenishments by submitting the necessary documentation and making the required payments under the replenishment arrangements.

Thirty-six countries have graduated from IDA throughout its history, ceasing to borrow from the Association. Some of these countries have since "reverse graduated," or reentered IDA. List of IDA Graduates

 




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