In what is considered a historic commitment, donor countries agreed to replenish the International Development Association fund of the World Bank to $100 billion over the next three years. This money will be channeled towards offering grants and low-interest loans to 78 low-income countries.
It is the largest pledge since December 2021, when countries committed $93 billion. Although contributions from countries will amount to a direct contribution of about $24 billion, the fund will raise the $100 billion target by mid-2028 through bond issuance and other financial instruments.
Challenges and shortcomings in funding
Although it promised a good amount, the conference did not live up to the expected $120 billion for which the African heads of state had campaigned. This was partly influenced by how the strength of the US dollar made the value of other currencies’ pledges less valuable. Norway, for instance, increased 50% from 2021 to 5.024 billion krone ($455 million) in value, worth less in dollars than its organizers had anticipated.
Top Pledges and Commitments
- Norway: Increased its pledge by 50% to 5.024 billion krone ($455 million), though less valuable than it had initially anticipated because of currency exchange rates.
- South Korea: Increased its pledge by 45% to 846 billion won ($597 million).
- Britain: Increased its commitment by 40% to 1.8 billion pounds.
- Spain: Increased its pledge by 37% to 400 million euros, equivalent to $423 million at the time of the announcement.
US President Joe Biden committed $4 billion, which is more than the $3.5 billion raised during the 2021 round. The World Bank stated that 17 countries have increased their contributions by over 25%, and 10 countries increased pledges over 40%.
New Role for IDA in Global Development
World Bank President Ajay Banga said that this new set of pledges will allow IDA to go to the maximum extent of utilizing contributions and optimizing its balance sheet. Over the period of 10 years, the World Bank has increased its lending capacity by $150 billion. According to Banga, work of IDA goes far beyond just providing financial assistance-it catalyzes job creation and sustainable development.
“IDA is not just an instrument of finance; it is a provider of jobs,” Banga said. “It makes it possible for countries to build infrastructure, improve education and health systems, and spur private sector growth.”
Graduating donor nations
The success of IDA has been marked by the ever-growing number of countries graduating from aid to becoming donors, among them China, South Korea, Chile, Jordan, and Turkey. These developments represent a growing influence by the fund on global development.
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