This is a joint post with Stephanie Majerowicz
World Bank presidents have often defined their success in part via ever-larger replenishments for IDA, the Bank’s soft loan window. But at his first ever Bank-Fund annual meetings this weekend in Tokyo, Jim Yong Kim should explain to the gathered illuminati why this is no longer an appropriate metric.
After 52 years, IDA is facing a watershed moment. Drastic changes in both the supply and demand for the World Bank’s cheap long-term loans to governments of poor countries requires rethinking IDA’s purpose, tools, and broad role. In Tokyo, Kim should be sure that shareholders understand that the future of IDA depends, not on its size, but on adapting its mandate and business model to certain new realities:
- Shifting financial power. Budget austerity in traditional shareholder capitals makes future replenishments more difficult politically, while new donors and private capital flows are pouring money into IDA countries.
- Plain vanilla country loans are becoming passé. The World Bank is increasingly asked to address complex global challenges, but its instruments are dated while many of the big development challenges require regional or global responses.
No doubt, in his first months as World Bank President, Kim has been told by Bank staff that a bigger IDA is necessary and that operations need no major changes. But the opposite is more likely true: keeping IDA relevant means a smaller envelope and a modernized business model.
To push the shareholders to think beyond next year—and to put a few new ideas on the table—Jean-Michel Severino and I co-chaired the Future of IDA Working Group. The group explored various options, and concluded with five main recommendations to get the discussion rolling. Read the full report here or listen to the podcast here.