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The International Development Association (IDA) plays a key role in supporting the World Bank's poverty reduction mission. IDA helps the earth's poorest countries by providing interest-free loans and grants for programs aimed at boosting economic growth and improving living conditions. IDA complements the World Bank's other lending arm - the International Bank for Reconstruction and Development - which serves middle-income countries with capital investment and advisory services.

IDA's goal is to reduce inequalities both across and within countries by allowing more people to participate in the mainstream economy, reducing poverty, and promoting more equal access to the opportunities created by economic growth. In pursuing this goal, IDA's funds pay for programs that build the policies, institutions, infrastructure and human capital needed for equitable and environmentally sustainable development.

IDA also emphasizes increased access to basic human services, such as primary education, housing, and health care, that are necessary to ensure people a decent quality of life and empower poor people in developing countries to become productive participants in the global economy.

IDA's support is vital, because most of the 81 countries eligible for IDA loans or grants have average annual incomes of less than $500 per capita and in many, substantially less. IDA funds help these countries deal with the complex challenges they face in striving to meet the Millennium Development Goals world leaders have agreed on as benchmarks for progress – including halving poverty – by 2015. Countries must, for example, respond to the competitive pressures as well as the opportunities of globalization; arrest the spread of HIV/AIDS; and prevent conflict or deal with its aftermath.

IDA lends money (known as credits) on 'concessional' terms, meaning there is no interest charge and repayments are stretched over 35 to 40 years, including a 10-year grace period. In 2002 IDA began providing a significant portion of its resources in the form of grants. Since its inception in 1960, IDA loans and grants have totaled $152 billion, averaging $7–$9 billion a year in recent years and directing the largest share, about 50 percent, to Africa.

Although the World Bank raises most of its funds on the world's financial markets, IDA depends on contributions from its wealthier member countries for most of its financial resources. Donors meet every three years to replenish IDA funds; this replenishment schedule ensures ample oversight and accountability in the program and guarantees the active participation of member countries in their shared financial responsibilities. The United States, Japan, Germany, United Kingdom, France, Italy, and Canada have traditionally made the largest donations.

The fourteenth IDA replenishment, referred to as IDA14, was launched in Paris, France in February 2004, with a subsequent meeting in July in Hanoi, Vietnam. Future discussions will take place throughout the year, with the aim of finalizing the replenishment consultations by the end of 2004 or early 2005. This particular replenishment is crucial in both timing and volume to ensure adequate financing is available to help the poorest countries achieve the Millennium Development Goals – goals for our common future.

IDA in Action

Promoting Governance and Transparency

IDA supports countries' efforts for broad-based growth by helping improve public sector governance, and enhancing institution and capacity building. IDA's strategy for improving governance and combating corruption combines economic policy reform, public sector administration reform, legal and judicial reform, and the strengthening of oversight, transparency and accountability in the use of public resources. The area of public sector reform has seen the single largest increase in IDA disbursements in recent years, and traditional “technical assistance” has become more focused to foster capacity building in specific sectors.

• The Indonesia-Kecamatan Development Project has supported community efforts to establish self-governance mechanisms that are responsive to local needs and are relatively free of corruption.
• Poverty Reduction Strategy Credits (PRSCs) for Burkina Faso and Uganda focus on accountability and transparency in budget management and emphasize decentralization in order to improve access to and quality of public services, while in Vietnam the emphasis is on private sector development and reforming state enterprises to improve efficiency.
• In India, IDA's collaboration with reforming states has provided a platform to support cross-sectoral governance and institutional reforms, aimed at making governments smaller, more effective, and responsive to citizens' needs.
• Stand-alone legal and judicial reform projects have been designed for Albania, Armenia, Bangladesh, and Sri Lanka.

Particularly noteworthy is the strengthening of IDA's performance-based allocation system, which is the principal mechanism for ensuring that IDA resources are delivered to countries where they can be used effectively and are most likely to make a significant impact. This system puts in place a tight link between IDA resource allocation and country policy performance, particularly governance. This allocation system has resulted in per capita IDA allocations to countries in the highest performance quintile which are almost three times larger than those in the lowest performance quintile.

IDA Helps Countries Recover from Conflicts, Crises and Disasters

IDA plays a critical role in helping countries and regions weather shocks and crises not always of their own making, and has expanded its programs for post-conflict assistance.

• In the Democratic Republic of Congo, an IDA Emergency Demobilization and Reintegration Project is supporting the efforts of the Government to demobilize an estimated 150,000 ex-combatants and help them return to civilian life.
• IDA is helping ensure that the savings from forgiven debt are being invested in programs designed to increase growth and fight poverty, as part of an international effort to help relieve countries of unsustainable debt levels (known as the HIPC initiative).
• IDA funding in disaster management included $11.6 million to support emergency recovery in several Caribbean countries after the September 11th terrorist attacks, which adversely affected the tourism sector; $7.9 million to support emergency recovery and management of natural disasters in St. Vincent and the Grenadines and Grenada; $10.8 million to support natural disaster mitigation in Honduras (following the passage of Hurricane Mitch in November 1998); and $13.5 million to support natural disaster vulnerability reduction in Nicaragua.

IDA Helps Build Infrastructure

The numbers of "infrastructure poor" people are vast in every region of the developing world. Some 1.2 billion currently lack access to safe, potable water, making them vulnerable to water-borne illness. Inadequate sanitation for 2.4 billion people means they are having to live in degraded environments where disease can easily spread. An estimated 2.5 billion remain without access to modern energy supplies, often meaning no light for studying or learning and only dirty fuel to burn for heating and cooking (leading to respiratory illness). And, for the 900 million rural dwellers in developing countries who live without reliable all-season roads, access to markets, jobs and clinics is limited.

• In Zambia, IDA is working to restore and expand the country's road network. A Road Rehabilitation and Maintenance credit is currently helping develop and maintain institutional capacity for the efficient, equitable and financially sustainable management of public road infrastructure and safety. The project helps preserve the public core road network and extends urban and rural transport infrastructure and services for increased accessibility. The project also focuses on routine and periodic maintenance, and rehabilitation of roads and bridges.
• To help Albania cope with an electricity crisis, which initially was the result of excessive demand resulting from illegal use of electricity and non-payment of bills, IDA is supporting a Power Sector Generation and Restructuring Project. The project is helping finance the construction of a new thermal power plant and is providing technical assistance to improve the performance and support the reform of the country's power sector.

IDA Supports Education

IDA lending for education has grown steadily since fiscal year 2000, to a near record $1 billion mark in fiscal year 2003. As of March 2004, about 90 IDA-supported projects were under implementation, amounting to nearly $4 billion. Support for primary education accounted for the largest share, or nearly a third, of total lending for the five-year period of $3.3 billion.

• In Yemen, IDA is supporting a child development project that uses a community education approach to increase girls' enrollment and retention in primary schools. The project compliments Yemen's new strategy on girls' education, which includes reduction of cost barriers by waiving school fees for girls. The project is setting up community schools; increasing the number of female teachers and providing them with adequate training; providing school kits to reduce costs and strengthening textbook distribution system; and incorporating water systems in the project thus, freeing girls up from fetching water and giving them more time to attend school.
• A recently approved Education Modernization project in Macedonia is assisting the government in its efforts to improve the quality of learning and efficiency of a decentralized education system. The project aims to improve school-based learning and attendance at the local level, and to empower schools and school communities to strengthen school level planning and management. It will build systems and capacity to operate in a decentralized education system, including improving strategic planning, management, and monitoring.

IDA Helps Fight The Spread Of HIV/AIDS

To date, IDA has committed more than $1.7 billion globally for HIV/AIDS prevention, care, support and treatment. Of this amount $472 million has been committed in the form of grants.

• IDA has invested more than $1 billion in a multisectoral HIV/AIDS strategy for Africa, which involves a highly participatory strategic planning process including the following main elements:
  • Mounting an aggressive advocacy campaign with leaders in Africa and elsewhere to situate HIV/AIDS at the center of the global development agenda
  • Building knowledge by conducting cross-country analyses of the macroeconomic impact of AIDS, integrating AIDS into economic models for IDA recipients, and working with UNAIDS on estimating the costs of comprehensive national programs
  • Developing capacity, for example, by retrofitting projects with HIV/AIDS activities, drafting an HIV/AIDS impact assessment module as part of the standard environmental and health assessment of projects, incorporating HIV/AIDS into “heavily indebted poor country” (HIPC) and Poverty Reduction Strategy Paper (PRSP) packages, and developing sector-specific guidelines for addressing HIV/AIDS in transport, agriculture, education, and mining.
• In Chad, IDA is supporting an AIDS project intended to reduce the transmission and socioeconomic impact of the HIV/AIDS epidemic and the socioeconomic impacts of high fertility. IDA accomplishes this goal by supporting women's education and income-generating activities for women and women's associations. The project seeks to empower women to make their own decisions on their fertility and includes gender-specific indicators to help gauge project performance.

IDA Supports Developing Private Sectors

IDA helps improve the investment climate by encouraging countries to establish the legal and regulatory framework for private sector development, including deregulation, strengthened property rights, and improved corporate governance.

• Between 2000 and 2002, 118 IDA projects were approved with components including these objectives. IDA's ongoing work to improve macroeconomic stability, open up trade, strengthen financial systems, and develop infrastructure also contributes to improving the investment climates in countries.
• In Pakistan, the Banking Sector Restructuring and Privatization Project focused on partially divesting the state's shares in national commercial banks (NCBs). The state shares of the Muslim Commercial Bank will be fully divested, and the government's 49 percent stake in the Allied Bank will be sold. As part of the bank restructuring process, the project supports rationalization of NCB branches and staff.
• IDA helps provide direct financing of rural poor and rural microenterprises. The Vietnam Second Rural Finance Project, in addition to directly supporting the rural poor through microenterprise finance, provides term lending for viable private investments in the rural areas. An estimated 90,000 economic entities will benefit from the project.

For more information on IDA, its history, and how IDA works in individual countries, please visit:www.worldbank.org/ida

Updated September 2004

Media Contact:
David Theis (202) 458-8626
Email: dtheis@worldbank.org