The draft IDA18 Deputies’ Report—released to the public at the end of October and closed for public comment on Nov. 11—indicates the 18th replenishment of IDA will result in several major changes to the way the World Bank operates in its poorest member countries. These changes are described in the report as “groundbreaking” and “transformational,” creating a “new and improved IDA.” However, many of the proposed structural changes to IDA and new commitments for measuring its progress over the next three years should be further strengthened and closely monitored to ensure this “new” IDA is in fact an improved one.
Not so New: IDA Negotiation Process
As in past replenishments, the draft Deputies Report summarizes the priorities identified during the IDA18 negotiations, and will serve as the basis for the final replenishment agreement, set to be adopted in early 2017, which identifies priorities and lays out a financing package for the concessional lending window. IDA “deputies” are typically representatives from the finance ministries of IDA member countries that meet every three years to negotiate the replenishment of IDA funds. Civil society is not included in these negotiations.
For decades, the IDA replenishment process has provided a platform for donor governments to advance development policy reforms—both at the World Bank as well as across the development finance landscape. Accordingly, the draft IDA18 Deputies Report reflects the broader development agenda agreed to by its member states in 2015, including the Paris Agreement and the SDGs. For example, climate change was chosen as a “special theme” for the replenishment period, and the draft Report makes several references to how IDA can support the Intended Nationally Determined Contributions ((I)NDCs) submitted by its member states in Paris last year.
What is new?
- Accountability to IDA Donors
The Draft Report includes key structural changes to IDA that could impact how member states shape its agenda in future replenishment cycles. In September, IDA obtained a AAA credit rating, allowing it to raise money on capital markets, thereby reducing its reliance on donors as a primary source of funds going forward. While the ability to “optimize” its balance sheet will dramatically increase the amount of funds available to the world’s poorest countries, it could also weaken the ability of donors to advance priorities and reform efforts through IDA replenishment negotiations by using their contributions as leverage.
- Private Sector Financing
The report also indicates that $2.5 billion of the total IDA package will be made available to the private sector. While the increase in the overall financing package means that current levels of IDA funding will not necessarily be diverted to private corporations, the introduction of an IFC-MIGA private sector window is significant given the tension that can exist between the World Bank’s mission and that of the private sector. In addition, the recent trend at IFC toward funneling public funds into commercial banks, private equity and hedge funds, where it has little control over how the money is spent and the standards that are applied to it, is concerning. Making public funds available for this type of lending rather than the sectors in which IDA has demonstrated value such as health and education is, at the very least, problematic and should be carefully considered by IDA deputies during this final negotiation stage.
In addition to new investments in the private sector, the Report indicates IDA may also be entering into new territory by providing assistance for borrowers hosting significant populations of refugees. The World Bank is diving into this type of financing for its middle income borrowers as well through the Global Concessional Financing Facility, which enjoys significant support from IDA donors including the United States. The GCFF is part of a larger effort by the Bank to wade into humanitarian work through its Global Crisis Response Platform, which aims to address various global crises including pandemics and natural disasters. While such crises undoubtedly impact and exacerbate global poverty levels, these sectors have long been considered outside the mission and scope of the World Bank’s work. In addition to building up its own expertise in these areas, it will also need to ensure it is consulting early and often with civil society as well as engaging refugee and host communities appropriately to ensure these funds are spent wisely.
What can still be improved?
- Citizen Engagement
IDA Replenishment is an important opportunity for the World Bank to review not only its own progress toward reaching its goals over the last three years, but also to honestly reflect on its impact to people and planet. To that end, we welcome the promising commitments in the draft Deputies Report to enhance the Bank’s efforts around “citizen engagement.” However, the way in which those commitments are currently framed in the Report puts them at risk of remaining box-checking exercises rather than meaningful measurements for how the World Bank engages project beneficiaries as well as affected communities. The indicator intended to track “beneficiary feedback” in projects not only appears to exclude feedback from people and communities that are negatively impacted—as opposed to a project’s intended beneficiaries—but also only measures the number of projects with an indicator on beneficiary feedback at the design phase. There is no measurement for how many projects actually implement or monitor such feedback nor any way to track whether such feedback was addressed by the World Bank or its borrowers’ implementing agencies.
- Forests and Land Use
We also welcome the renewed focus on climate change in this year’s replenishment negotiations—a carryover “special theme” from IDA17. The World Bank has made some progress in mainstreaming efforts to combat climate change throughout the institution, and IDA18 presents a crucial opportunity for the Bank to be even more ambitious on this issue. However, the goals and targets in the Draft Report must be clarified to explicitly address the link between land use and climate change, and include more robust commitments to protect forests—a cost-effective and critical way to mitigate the impacts of climate change that many IDA borrowers demonstrated clear demand for in their (I)NDCs. Vague language around continuing to work on “innovative solutions for forest-based low carbon development” with the IFC and various trust funds should also be complemented by stronger and more specific commitments to reduce the World Bank Group’s own impact on forests caused by its investments in other sectors such as agriculture, infrastructure, and mining.
The new governance special theme should also prioritize secure tenure rights for forest-dependent communities. Securing tenure rights is not only as a proven way to protect forests and combat climate change, but also a key tenet of good governance that should be prioritized in IDA18.
- Public Participation in the Negotiation Process
More generally, the final agreement must respond to the calls of civil society and communities around the world that stand to lose most if IDA funds are not used to their full potential. To that end, we have been disappointed at the minimal efforts to include public participation in the negotiation process. Although the second negotiation meeting occurred in Myanmar—a country the World Bank only just recently reengaged in after years of international isolation and repressive military rule—the Bank did not use the opportunity to consult with local civil society or communities that would be most directly affected by the significant changes proposed in the Deputies Report. The Bank did make public the draft Deputies Report for comment, but only for a two-week period that closed last week—leaving little time for civil society to digest the 157-page report and provide meaningful feedback on it.
Although it is late in the game to make changes to the process for IDA18, there is still time to improve its record on public participation. The fourth and final negotiation is set to take place in December in Indonesia, which is an important emerging middle income country with an engaged civil society community that the Bank should include in its discussions around these key issues—particularly climate change, forests and land use.
Verdict? Jury is Still Out….
IDA has the capacity to effect real change for the poorest and most marginalized, but changes to its financing commitments are still necessary for the new IDA to be considered truly improved. We look forward to reviewing the final agreement and monitoring the new commitments and areas for IDA financing over the next three years to ensure IDA funds are used for truly sustainable development that benefits both people and the planet.