Multilateral Development Banks: Issues for the 108th Congress

Abstract

The U.S. is a member of five multilateral development banks (MDBs): the World Bank, Inter-American Development Bank (IDB), Asian Development Bank (ADB), African Development Bank (AFDB), and European Bank for Reconstruction and Development (EBRD). It also belongs to two related organizations, the North American Development Bank (NADB) and the International Fund for Agricultural Development (IFAD). As a group, the MDBs are the largest source of development aid for middle- and low-income countries. They lent or invested nearly $39 billion in 2002, some 73% of it at market-based terms and the rest on concessional terms. The World Bank accounted for 58% of all MDB aid and 71% of all MDB concessional aid. In the World Bank and most regional MDBs, the U.S., European Union, and Japan control over half of the vote. U.S. participation in the MDBs is managed by the Treasury Department. Congress has substantial influence over the direction and focus of U.S. policy. The MDB market-based loan windows are revolving funds. New legislation would be needed if they wished to expand their capital base and increase their lending operations. By contrast, the MDBs' concessional loan windows need annual contributions from donor countries in order to replenish their funds so they can continue their loan operations. In 2002, the Administration asked Congress to approve legislation authorizing U.S. participation in new funding plans for the International Development Association (IDA), the World Bank's concessional loan facility, as well as new replenishments for IFAD, the Asian Development Fund (ADF) and African Development Fund. Congress enacted these authorizations in the fiscal 2004 omnibus appropriations bill (H.R. 2673.) In 2003, the Administration asked Congress to appropriate $1,555 million for MDB programs in FY2004. The conference report ultimately approved $1,396 million. Late in 2003, Congress rolled the Foreign Operations Appropriations bill together with other similar legislation into the FY2004 omnibus appropriations bill (H.R. 2673.) Because of other matters, final passage was delayed until January 20, 2004. For FY2005, the Administration has requested appropriations totaling $1,492.5 million to fund U.S. contributions to MDBs. The MDBs have taken several initiatives to help middle- and low-income countries deal with their foreign debt problems. The MDBs have also put more emphasis on poverty alleviation programs, governance, institutional capacity building, and economic policy reform. The IFIs also expanded their transparency and the amount of information they make public on their operations. It is generally believed that such openness will make the IFIs more credible and accountable and improve the effectiveness of their operations. Many countries believe, though, that they are being forced to reveal too much. Countries may bar the IFIs from releasing information about themselves without permission. Critics say, however, that they should be more open. In 2004, Congress passed legislation (H.R. 2673) requiring the Administration to seek further transparency in the MDBs. It asked the MDBs to publish transcripts of Board meetings, release loan and policy documents 15 days before Board consideration, and to make more information available on their anti-corruption activities.