AT A GLANCE: - The World Bank is the world's leading development institution for raising private and public sector money for the global fight against poverty.
- The two institutions at the core of what is known as the World Bank - the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) - have mobilized more than half a trillion dollars over 60 years.
- At more than US$400 billion, the bulk of this lending was financed by private investors, who have bought bonds sold by IBRD, which has then loaned the money for development projects in middle-income developing countries.
- This huge volume of lending has been at a relatively small cost to taxpayers. IBRD's 185 government shareholders have paid in US$11 billion in capital since 1946, and there has been no increase in shareholder subscriptions in more than a decade.
- IBRD gets its money from the capital markets, providing investors with a safe, triple-A asset they can invest in. Annual funding volumes vary from year to year, and are currently around US$10-15 billion.
- IBRD's income pays for World Bank operating expenses and goes into reserves to strengthen the balance sheet. About 40 percent is contributed to IDA's assistance for the poorest countries and for debt relief.
- IDA gets most of its money from almost 40 countries, including several developing ones. In 2008, US$46.1 billion was made available to the world's 80 poorest countries over three years. IDA has committed more than US$170 billion in assistance since 1960.
- The World Bank also administers other money to support development activities, which is provided by governments, foundations, and the private sector. As at June 30, 2007 these trust funds held US$13.8 billion in cash. Another US$7.6 billion was held in Promissory Notes, which are unconditional promises by donors to provide funds.
Overview At the core of the institution's funding are IBRD and IDA, known as the World Bank. The World Bank Group consists of these two institutions and three others: the International Finance Corporation (IFC), which promotes private sector investment; the Multilateral Investment Guarantee Agency (MIGA), which provides political risk insurance to investors and lenders; and the International Centre for Settlement of Investment Disputes (ICSID), which settles investment disputes between foreign investors and their host countries. Of the latter three, only the IFC raises funds from the capital markets, with US$2.8 billion borrowed in fiscal 2007. The World Bank has become one of the most established borrowers on the world's capital markets since issuing its first bond in 1947 to finance the reconstruction of Europe after World War Two. With enormous foresight, the founders of the Bank created IBRD to raise large amounts of money from the capital markets. Investors see IBRD bonds as a safe and profitable place to put their money, and their cash finances projects in middle-income countries. As the original institution in what became known as the World Bank, IBRD has raised the bulk of the money loaned by the global development institution to alleviate poverty around the world. This has been done at a relatively low cost to taxpayers, with governments paying in US$11 billion in capital since 1946 to generate more than US$400 billion in loans. The second major source of World Bank money was tapped in 1960 with the creation of IDA, which provides long term, interest-free credits and, increasingly, grants to the poorest countries. IDA gets most of its money from rich countries, which make an allocation of funds every three years. The other main source of funding for IDA is repayments on its loans. Annual transfers to IDA from IBRD income and, in 2006, from IFC income represent an additional source of financing. Trust funds, which are provided on a grant basis, are a growing source of finance for development, accounted for separately from the Bank's own resources. Hundreds of these funds are administered by IBRD, with contributions from one or more donors. The first of these funds was established in 1960 when several donors together established a trust fund to finance the Indus Basin Project in Pakistan. IBRD Borrowing IBRD became a major player on the international capital markets by developing modern debt products, opening new markets for debt issuance, and by building up a broad investor base around the world of pension funds, insurance companies, central banks, and individuals. The World Bank's borrowing requirements are primarily determined by its lending activities for development projects. As World Bank lending has changed over time, so has its annual borrowing program. In 1998 for example, IBRD borrowing peaked at US$28 billion with the Asian financial crisis. It is now projected to borrow between US$10-15 billion a year. IBRD borrows at attractive rates on the capital markets thanks to its triple-A status that it has had with credit rating agencies since 1959. This has enabled it to borrow in U.S. dollars, for example, at an overall funding cost that comes close to that of the U.S. Treasury. IBRD enjoys its high credit rating because it is backed by the capital commitments of its 185 shareholder governments. It is also the result of IBRD's strong balance sheet, prudent financial policies, and its expected treatment as a preferred creditor when a country has difficulty in repaying its loans. IBRD has also profited from anticipating shifts in investor preferences and investing in the risk management and systems to take advantage of those trends. IBRD has to its credit a string of firsts in its borrowing program. These include the first currency swap in international markets in 1981, through to the introduction of the first global bond in 1989, to the first fully integrated electronic bond offering via the Internet in 2000. In 2003, the World Bank executed the first fully electronic swap auction. Innovations by IBRD have also supported its goal of promoting development. Although much of its borrowing is in U.S. dollars, IBRD has over the years offered bonds in more than 40 different currencies. Its issues in nascent capital markets have often been a catalyst for improving market infrastructure and efficiency. More Money for IDA In the 2007 replenishment round-the Fifteenth Replenishment-IDA's resources increased by 42 percent to US$41.6 billion for the next three years, which represents the largest expansion in donor funding in IDA's history . A total of 45 countries made pledges to IDA's 15th replenishment, the highest number of donors in IDA's history. Six countries - China, Cyprus, Egypt, Estonia, Latvia, and Lithuania, joined the list of donors. Some of the countries, such as Egypt and China, were once IDA borrowers. Donors strongly endorsed IDA's development effectiveness and recognized its critical importance in helping developing nations reach the Millennium Development Goals, including the internationally agreed target to halve poverty by the year 2015. The replenishment round was especially challenging as repayments during IDA15, including compensation for debt forgiveness, remain broadly the same as in IDA14. This meant that the bulk of any increase in the overall IDA envelope would be borne by donors, requiring a proportionally larger effort on their part. Donors had previously pledged to offset the loss of financing for IDA that will occur through the cancellation of debt repayments over the next 40 years. IDA will make such compensatory resources available to low-income countries. Trust Funds Grow In the fiscal year ending June 2007, cash held in trust grew to US$13.8 billion from US$10.3 billion, with Promissory Notes growing to US$7.6 billion from US$2.6 billion. Most of this increase followed the launch of the International Financing Facility for Immunization (IFFIm), for which the World Bank provides Treasury services. Disbursements for the year were US$5.8 billion, compared to US$4.4 billion for the fiscal year ending June 2006. More than half of this money was disbursed for Limited Fiduciary Arrangements such as: IFFIm, the Global Fund to Fight AIDS, Tuberculosis and Malaria, and the Global Environment Facility. Over one third was disbursed for Recipient Executed projects, while less than 10% was used for activities undertaken directly by the Bank. Trust funds help finance global initiatives on topics such as avian 'flu and agricultural research as well as major reconstruction programs in Afghanistan, Iraq, Sudan, and Aceh and Nias. Trust funds are also used to increase Bank support to key priorities in countries such as Vietnam, Bangladesh, and Tanzania. ### For more information on IBRD’s borrowing program please see the web site World Bank Treasury
For more information on IDA please see the web site International Development Association
For more information on trust funds please see the Trust Funds web site. Updated March 2008 Media Contact:
Alexander Ferguson: (202) 458-4953
aferguson@worldbank.org |
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