October 11, 2012
This is a joint post with Stephanie MajerowiczWorld 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.
Related PodcastAfter 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:
- Graduation success! Countries that currently account for over 30% of IDA flows are on the precipice of graduating. Everyone’s talking about India and Vietnam, but about half of IDA’s clients should become in the next decade or so too rich to qualify. By 2025, IDA will be almost exclusively African and predominately fragile.
- The new geography of poverty. Three-quarters of the world’s poor are now in middle-income countries.
- 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.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.