Message from the Chairman

© World Bank

This Annual Report covers a year that saw a revitalized global commitment to fighting poverty.

The 2005 “Year of Development” was an opportunity for stocktaking five years after 189 UN Member States agreed to a set of specific targets for reducing poverty, hunger, disease, gender inequality, illiteracy, and environmental degradation— the Millennium Development Goals.

The G-8 Summit in Gleneagles, UK, in July 2005 saw significant commitments by donors to double aid and cancel the debts of the poorest countries to multilateral organizations in order to accelerate progress toward these goals. G-8 leaders called on the World Bank, specifically, to help ensure results in Africa on poverty reduction and to create a new framework for mobilizing investment in clean energy and development.

At the Annual Meetings last September, this G-8 initiative became what Development Committee Chairman Trevor Manuel called “a G-184 initiative.” In March of 2006, the Bank’s Governors agreed to a financing package for the Multilateral Debt Relief Initiative (MDRI), cancelling $37 billion in IDA debt of some of the world’s poorest countries over 40 years. This is in addition to some $17 billion of debt relief already committed by IDA under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.

In September, an Africa Action Plan was presented to the Board of Directors of the World Bank, setting specific targets on everything from closing the infrastructure gap and rolling back malaria to cutting through regulations that stifle business. Africa continues to present a serious development challenge. Despite global growth and declining poverty rates, between 1981 and 2002, the number of people living in extreme poverty in Sub-Saharan Africa nearly doubled from 164 million to 303 million—almost half the total population. By 2015, the number of poor is projected to rise still further to 336 million.

But there is reason for optimism. Since 1995, 15 non–oil producing African countries—representing 35 percent of Africa’s population—had growth rates of 4 percent or better, with the median growth rate of 15 countries reaching 5.3 percent. Enrollment rates in primary education shot up from 73 percent in 1990 to 93 percent in 2004. Improvements in governance—public financial management, administrative, and transparency reforms in a number of countries—also promise to bring hope and opportunity to the people of Africa.

We now know that aid will not deliver sustainable results in the absence of strong governance. Good governance is essentially the combination of transparent and accountable institutions, strong skills and competence, and a fundamental willingness to do the right thing—the things that enable a government to deliver services to its people efficiently. Over the last year, the Bank stepped up governance and anticorruption efforts along three different fronts: at the country level; minimizing the risk of corruption in World Bank–funded projects; and expanding global partnerships with groups that have a stake in improving governance—including the private sector.

Good governance is also critical for the investment that creates jobs and thus opportunities for poor people to escape poverty. Here too, important progress is being made. According to the World Bank Group’s 2006 Doing Business report, 10 African countries introduced reforms to make it easier to do business in 2004. More importantly, the Doing Business index itself has become a catalyst for reform in more than 20 countries, contributing to policy debates and legislative reform.

During fiscal 2006, total IBRD lending reached $14.1 billion. We provided $9.5 billion in IDA credit and grants, of which half—or $4.8 billion—went to Africa. IDA currently represents 13 percent of all external aid to Africa. IFC marked its 50th anniversary with a record year of commitments totaling $6.7 billion. And guarantees provided by MIGA increased to $1.3 billion, of which $180 million went to projects in Africa.

While Sub-Saharan Africa is the most important priority for the World Bank—it is not the only priority. Middle-income countries are home to 25 percent of the world’s poor people: more people live in extreme poverty in Brazil, China, and India combined than in all of Sub-Saharan Africa. And, looking ahead, the Bank will continue to play a large role in the provision of global public goods, whether addressing the challenge of avian flu and other diseases or helping developing countries expand access to clean energy.

As the fiscal year came to a close, I announced structural changes designed to make the organization more effective: the former Environmentally and Socially Sustainable Development and Infrastructure networks have become a single network called “Sustainable Development”; and the Financial Sector and Private Sector Development networks have been consolidated.

The integration of environmental and infrastructure projects represents an important outcome of lessons learned over the last decade. During the 1990s the World Bank significantly reduced infrastructure investments. But with 1.6 billion people in the world without access to even basic energy services, we needed to reverse that trend, and we are. In doing so, the World Bank will take the lead in developing responsible and sustainable infrastructure—infrastructure that promotes human development.

Over the last year, I have had the privilege of visiting five continents and talking with policy makers, entrepreneurs, civil society leaders, farmers, and schoolchildren in almost 30 countries. These exchanges have convinced me that while we face a daunting challenge to eradicate poverty, we also face an unprecedented opportunity to make a difference. Over the last 25 years, the number of people worldwide living on less than a dollar a day fell by half a billion. If current trends continue, by the year 2015, another 400 million people, it is estimated, will escape poverty. Those numbers demonstrate that reducing poverty is not just a hope. It can become a reality with partnership, vision, good leadership, and investment from inside and outside developing countries.

Paul Wolfowitz