World Bank Group Directs $34.3 Billion in 2007 to Boost Growth and Overcome Poverty

During fiscal year 2007, ending June 30, the World Bank Group committed US $34.3 billion in loans, grants, equity investments, and guarantees to its members and to private business in its member countries – up $2.7 billion (7.8 percent) from fiscal year 2006. The recipients are using these funds in more than 620 projects designed to overcome poverty and enhance growth – for example, by improving education and health services, promoting private sector development, building infrastructure, and strengthening governance and institutions.

“During Fiscal Year 2007, the World Bank Group provided over $34 billion of financial support for developing countries to invest in practical plans to move from poverty to prosperity,” said World Bank Group President Robert B. Zoellick. “But we can and should do more. Given the great needs among diverse developing countries, the World Bank Group can make its capital work for people by creating development solutions for all. That would help advance an inclusive and sustainable globalization.”

The World Bank Group institutions contributing to this financial outcome are: the International Bank for Reconstruction and Development (IBRD), which provides financing, risk management products, and other financial services to members; the International Development Association (IDA), which provides interest-free loans and grants to the poorest countries; the International Finance Corporation (IFC), which makes equity investments, and provides loans, guarantees and advisory services to private-sector business in developing countries; and the Bank Group’s political risk insurance agency, the Multilateral Investment Guarantee Agency (MIGA).

IDA commitments were $11.9 billion, 25 percent higher than the previous year, and the highest in IDA’s history. IBRD commitments in FY07 totaled $12.8 billion. IFC committed $8.2 billion for private sector development in developing countries, an all-time high, which topped last year’s total by $1.5 billion – $3 billion of the total, went to IDA countries. Of MIGA’s $1.4 billion in guarantees, $387 million went to projects in IDA countries. MIGA’s exposure in IDA countries now stands at 41% of its portfolio.

In addition, IBRD carried out $5.4 billion in interest rate and currency risk management transactions on behalf of its members.This is an increase of more than three-fold over totals for the past several years and highlights the expanding portfolio of financial services we offer.

Financial commitments provided by the World Bank Group to the countries of sub-Saharan Africa increased by $1.8 billion in FY07 to $7.5 billion and included a record $5.8 billion in IDA credits, grants, and guarantees to sub-Saharan Africa, (up by $1billion from the previous year); $1.4 billion from IFC for private sector development projects, (double last year’s effort); and $311 million in MIGA guarantees for projects in the region, up $131 million from 2006.

While many challenges remain in Africa, there have been clear signs of progress, according to Obiageli Ezekwesili, Vice President for Africa. “We are now seeing increases in African countries’ per capita income consistent with those of other developing countries and African countries have made great strides in expanding access to health and education,” she said. “African leaders are well aware of the support that IDA provides and this is why they are strong supporters of a robust replenishment of IDA this year.”

IFC involvement in projects often serves to increase confidence in sectors or projects, which generates additional investment from the private sector. In FY07, IFC mobilized an additional $3.9 billion through loan participations, structured finance, and parallel loans. For example, IFC has helped increase cellular access in the Democratic Republic of Congo (DRC), Madagascar, Malawi, Sierra Leone, and Uganda by mobilizing loans from international commercial banks to rebuild the communications infrastructure and providing a basis for future economic growth, while at the same time encouraging investor confidence in other sectors in these countries.

Speaking of IFC’s activity in Africa, Lars Thunell, IFC Executive Vice President and CEO, said. “Last year we doubled our financial commitments to the private sector in Sub-Saharan Africa, which continues to be a priority frontier region for IFC. We helped 166,000 small African businesses get access to finance last year. Our projects gave 6 million new customers access to power and created 11 million new telephone connections across the region. We also substantially increased our advisory services and local currency financing capabilities in the region.”

MIGA Executive Vice President Yukiko Omura said, “Supporting investments into sub-Saharan Africa continues to be a priority for MIGA. Since the agency’s inception in 1988, we have issued $2.3 billion in guarantees in support of projects in 27 countries in the region. In fiscal year 2007, MIGA provided guarantees ranging from support to a micro-credit institution in Cameroon to backing a large telecommunications project in Guinea.”

Development aid from OECD countries fell 5.1% in 2006

The 22 member countries of the OECD Development Assistance Committee, the world’s major donors, provided USD 103.9 billion in aid in 2006, down by 5.1% from 2005, in constant 2005 dollars. This figure includes USD 19.2 billion of debt relief, notably exceptional relief to Iraq and Nigeria. Excluding debt relief, other forms of aid fell by 1.8%.
Sixteen of the DAC’s 22 member countries met the 2006 targets for ODA that they set at the 2002 Monterrey Conference on Financing for Development. However, aid to sub-Saharan Africa, excluding debt relief, was static in 2006, leaving a challenge to meet the Gleneagles G8 summit commitment to double aid to Africa by 2010.

Total official development assistance (ODA) from members of the Development Assistance Committee (DAC) fell by 5.1% in 2006 to USD 103.9 billion. This represents 0.30% of members’ combined Gross National Income. In real terms this is the first fall in ODA since 1997, though the level is still the highest recorded with the exception of 2005.

The fall was predicted. ODA was exceptionally high in 2005 due to large Paris Club debt relief operations (notably for Iraq and Nigeria) which boosted ODA to its highest level ever at USD 106.8 billion. In 2006, net debt relief grants still represented a substantial share of net ODA, as members implemented further phases of the Paris Club agreements, providing a little over USD 3 billion for Iraq and nearly USD 11 billion for Nigeria. Excluding debt relief, ODA fell by 1.8%.
Preliminary data show that bilateral net ODA to sub-Saharan Africa rose by 23% in real terms, to about USD 28 billion. However most of the increase was due to debt relief grants. Excluding debt relief for Nigeria, aid to sub-Saharan Africa increased by only 2%.

The only countries to reach or exceed the United Nations target of 0.7% of GNI were Sweden, Luxembourg, Norway, the Netherlands and Denmark. The largest donor in 2006 was the United States, followed by the United Kingdom, Japan, France and Germany. The combined ODA of the fifteen members of the DAC that are EU members accounted for 57% of total net ODA.

In 2006, net ODA by the United States was USD 22.7 billion, a fall of 20% in real terms. Its ODA/GNI ratio also fell to 0.17%. The fall was mostly due to debt relief which was exceptionally high in 2005 as the United States forgave all its outstanding debt with Iraq in 2005 rather than spreading it over several years. US disbursements to Sub-Saharan Africa (USD 5.6 billion) reached a record high mainly due to debt relief (USD 1.4 billion, of which Nigeria was USD 0.6 billion) and increased disbursements for education, HIV/AIDS and malaria programmes. Net ODA flows to Iraq remained substantial (USD 4.8 billion), to Afghanistan increased (USD 1.6 billion) and to the least developed countries were at their highest level ever (USD 5.5 billion).

Japan’s net ODA was USD 11.6 billion, representing 0.25% of its GNI. The 9.6% fall in real terms since 2005 was partly due to exceptionally large expenditures in 2005, including humanitarian relief for the Indian Ocean tsunami and debt relief grants to Iraq. Japan’s net ODA has been on a downward trend since 2000, except for an increase in 2005 due to debt relief. The 2006 ODA total includes an increase in Japan’s contributions to the International Financial Institutions.
The combined ODA of the fifteen DAC-EU members rose slightly by 2.7% in real terms, from USD 55.7 billion in 2005 to USD 58.9 billion in 2006. This represented 0.43% of their combined GNI, surpassing the EU collective ODA/GNI target of 0.39%. The increase in 2006 was mainly due to debt relief grants.

Aid rose in ten DAC EU member countries as follows:

• Ireland (33.7%), reflecting increasing bilateral aid as well as large multilateral contributions,
• Spain (20.3%), due to a large increase in contributions to the UN and other multilateral, organisations, as well as an increase in disbursements by AECI, the Spanish Co-operation Agency
• Sweden (15%), due to general scaling up of its aid and debt relief,
• United Kingdom (13.1%), due to a substantial increase in contributions to international organisations,
• Aid also rose in Denmark (2.9%), France (1.4%), Germany (0.9%), Luxembourg (4.9%),
• Netherlands (4.2%) and Portugal (0.6%).

Falls were noted in Austria (-6.0%), Belgium (-2.7%), Finland (-9.9%), Greece (-4.1%) and Italy (-30%, mainly due to the timing of its contributions to international organisations).
Aid provided by the European Commission rose by 5.7% to USD 10.2 billion reflecting increased budget support and improved disbursement capacity from the higher level of commitments made in recent years.

ODA from other DAC countries rose, or fell, from 2005 to 2006 as follows:

• Australia (22.8%), primarily due to debt relief, notably to Iraq and the Multilateral Debt Relief Initiative,
• Canada (-9.2%), due to the decline in debt relief and lower levels of humanitarian aid compared to the extraordinary response to the Indian Ocean tsunami in 2005,
• New Zealand saw no change (0.0%),
• Norway (-2.2%),
• Switzerland (-7%), due to the lower volume of debt relief grants provided.

Net ODA data reported by seven non-DAC economies rose, or fell, from 2005 to 2006, as follows:

• Chinese Taipei (3.6%),
• Czech Republic (6.4%), due to increased contributions to the EC,
• Iceland (55.3%), due to a general scaling up of Iceland’s contribution to development cooperation,
• Korea (-44.6%), due to lower contributions to the World Bank and regional development banks,
• Latvia (-1.0%),
• Lithuania (15.2%), as it increased its contributions to the EC,
• Slovak Republic (-9.1%), as bilateral aid fell.