International Monetary Fund and World Bank Adopt Plan to Improve Aid to Developing Nations

Strategic Insights -

A key committee of the International Monetary Fund and the World Bank has adopted a plan to improve the efficiency of aid to developing nations as donor countries' budgets for aid tighten. The Development Committee, which advises the Boards of Governors for the Bank and the IMF, agreed with the Bank's prescription for success through increased 'ownership' of projects in the recipient countries, good management of loans, and broader participation of the recipients' societies, particularly among women and the poor.

The committee, led by Morocco's Minister for Finance and Investments, Mourad Cherif, welcomed the surge in private lending but expressed concern about its stability and called for an end to a recent plateau in public international lending. The committee also noted the slow rate of growth in official development assistance and called on donor countries to enhance their aid as soon as possible and to increase its focus on the poorest countries.

Key Takeaways:

  • The Development Committee adopted a plan to improve the efficiency of aid to developing nations through increased 'ownership' of projects, good management of loans, and broader participation of the recipients' societies.
  • The committee welcomed the surge in private lending but expressed concern about its stability and called for an end to a recent plateau in public international lending.
  • The committee noted the slow rate of growth in official development assistance and called on donor countries to enhance their aid as soon as possible.
  • The poorest countries and the transitional economies of the former Soviet Union will have to wait for increased funding following a breakdown in IMF negotiations.
  • The World Bank has projected a minority of developing countries, including Egypt, Sudan, Bangladesh, Mauritania, and Togo, would suffer from the liberalization of agriculture trade and pricing under the World Trade Organization.
  • The magnitude of any rise in food prices resulting from the Uruguay Round would be gradual and occur in a context where real food prices are trending downwards.
  • The First Discussion of IDA-11, the next replenishment of the International Development Association, marked the beginning of a process to determine the relative proportion of contributions, the size of the total fund, and set priorities for recipients.

Statistics:

  • Foreign lending increased by $60 million in 1993 to $260 billion worldwide, with the addition coming entirely from private sources.
  • The current program, IDA-10, has a membership of 157 countries and went into effect July 1, 1993.
  • The total fund under IDA-10 extends through June 30, 1996.
  • Over the next 12 to 18 months, donors must set the relative proportion of their contributions, the size of the total fund, and set priorities for the recipients.
  • Major changes in the donor proportion sector of the last round included a drop in the allocation by the United States from a previous average of 26 percent to 22 percent of the total fund, while Japan's share rose from 17 to 21 percent.

Sources:

  • A key committee of the International Monetary Fund and the World Bank, as quoted in the article.
  • Morocco's Minister for Finance and Investments, Mourad Cherif, as quoted in the article.
  • World Bank report, as quoted in the article.