Developing countries are facing multiple crises — including climate change, crushing debt burdens, and growing food insecurity. The world’s 17 U.N. Sustainable Development Goals (SDGs) — once the bright north star for the international community — sometimes seem dim and unattainably distant, just five urgent years from the deadline. The financing gap for achieving the SDGs is estimated at $4 trillion per year.
One tool to help developing countries navigate these crises and build a promising future is the International Development Association (IDA), the concessional lending arm of the World Bank. It is a crucial lifeline to those who need it most. As we near the IDA’s donor conference in December, its three-year replenishment hangs in the balance.
IDA’s centrality in funding development and climate resilience is undisputed. IDA is the largest source of financing for low-income countries and the world’s largest fund for climate adaptation. It provides concessional loans (with low interest rates and long repayment periods) and grants to the poorest countries. It is essential to the fight against climate change and poverty.
And, as the U.N. Conference on Trade and Development (UNCTAD) recently observed, the cost of development finance is a “critical determinant in the sustainability of external and public sector debt.” As a result, IDA’s mix of concessional loans and grants can change to meet the moment — in fact, grants have recently made up as much as one-third of IDA’s overall annual support to developing countries.
Since it was created over 60 years ago, IDA has had a strong record of success in enabling developing countries to determine their own needs for funding climate solutions as well as investments in education, health, agriculture, and infrastructure, and empowering women. It has been so effective that 36 countries graduated from IDA and many — including India, China, and South Korea — have become IDA donors themselves.
IDA's Unique Capacity
IDA’s funding is largely driven by contributions from donor countries who meet every three years to negotiate replenishments of IDA resources and review its policy framework. More than half of contributions to IDA come from 5 donors — the United States, Japan, the United Kingdom, Germany, and France. In December, donors will assemble in Seoul, South Korea, to announce their expected contributions for IDA21 — which is focused on “Ending Poverty on a Livable Planet: Acting with Ambition.”
The last IDA replenishment (IDA20) was $93 billion in 2021, of which $23 billion was donor contributions. World Bank President Ajay Banga makes IDA replenishment one of his top goals, arguing that its “unique capacity to multiply every donor dollar four times [makes it] the best deal in development.” To stay even with IDA20 in real terms, it would require approximately a $105-billion replenishment — with donor governments increasing their contributions by 20-30% — no small feat given the fluctuations in currencies and highly constrained budgets.
Leadership from all sectors will be necessary to succeed. Following a Ministerial co-hosted by The Rockefeller Foundation and convened during the IMF/World Bank Spring Meetings, Brazil, Barbados, five other countries, the UN, and four philanthropies — including our Foundation — issued a communiqué calling for a robust $115-billion IDA21 replenishment. At nearly the same time, many African leaders called in unison for a $120-billion replenishment.
Global cooperation is key to addressing the world’s greatest challenges. The world must come together around an ambitious IDA replenishment. IDA’s donors must increase their contributions to the world’s poorest so that we can address climate change and end extreme poverty.
