Concessional Assistance Research Articles

Chinese Aid to the Industrial Development of the South: Input into Post-Industrialization of China

The article discusses the true goals and benefits of China’s assistance to the South. A hypothesis reveals the relationship between China’s transition to an innovative development model and its interest in the industrialization of the least developed countries. The tasks of modernizing the economy and the national interests of China in the context of the modern international labor division are analyzed. To ensure the growth of incomes of the population to the level of developed countries, the creation of a post-industrial structure of the economy is required. This means that a number of industrial functions must be transferred to such backward countries that, without Chinese capital and technology, are not able to industrialize. In addition, for China, the problem of equilibrium of the balance of payments is urgent, the solution to which is to increase imports of simple goods and make direct investments within the Chinese Global Value Chains. Analysis of directions and first results of Chinese development assistance confirmed its important contribution to solving these problems, as well as its systemic nature within the framework of the Belt and Road Initiative. The Initiative coordinates the construction of power plants, all types of infrastructure, and on their basis the development of industry and consumption under the control of Chinese companies. Therefore, all types of grants or concessional assistance to the South can be considered as investments into the development of the Chinese economy, which has gone beyond national borders. At the same time, participation in the Initiative brings benefits and growth prospects up to the level of the modern PRC for the most backward countries, but does not create growth opportunities for countries with already developed industry and an average standard of living, on the contrary, it reduces their space for post-industrialization.

Transitioning from Foreign Aid: Is the Next Cohort of Graduating Countries Ready?

In the coming years, over a dozen middle-income countries (MICs) are likely to transition from multilateral concessional assistance, including assistance from the International Development Association (IDA) and Gavi, the Vaccine Alliance (Gavi). The cohort of upcoming graduates, which includes Nigeria and Pakistan, may find the transition more challenging when compared with the experiences of previous countries that have already graduated. Many upcoming graduates, for example, still have high rates of child and maternal mortality and large proportions of the population living in poverty. Is the upcoming cohort more vulnerable and less “ready” to transition than those countries that previously graduated? If it is, do multilateral agencies need to adjust their transition policies? To help answer these questions, in this working paper we compared two cohorts of countries: a “previous cohort” that graduated from IDA between 2010 and 2015, and an “upcoming cohort” that is anticipated to graduate from IDA, Gavi, or both in coming years. We compared the two cohorts across five categories of indicators: macroeconomic conditions, health financing, health performance, governance, and overall levels of poverty and inequality. Overall, our findings suggest that, on average, the countries that graduated from IDA in the previous 2010-15 period had stronger capacity to manage the donor transition than that of upcoming graduates. The upcoming cohort seems to have, on average, lower per capita income, greater indebtedness, weaker capacity to efficiently use public resources, more limited and less effective health systems, weaker governance and public institutions, and greater inequality.

2018-19 Review of Facilities for Low-Income Countries---Reform Proposals

2018-19 Review of Facilities for Low-Income Countries---Reform Proposals: Review Of The Financing Of The Fund’s Concessional Assistance And Debt Relief To Low-Income Member Countries

Update on the Financing of the Fund's Concessional Assistance and Debt Relief to Low-Income Countries

The Fund is adapting its framework for providing support to low-income countries (LICs) amid rising vulnerabilities. Despite a global economic upswing, many LICs continue to face difficult fiscal and external positions, aggravated by increasing debt levels and natural disasters in many countries. In this context, the Executive Board approved in May 2017 higher annual access limits under the Rapid Credit Facility (RCF) for balance of payment needs arising from large natural disasters and in May 2017 decided to keep the list of Poverty Reduction and Growth Trust (PRGT)-eligible countries unchanged notwithstanding rising per capita income levels. A comprehensive review of PRGT facilities is underway to consider potential adaptations of program modalities and access policies. PRGT demand in 2017 was above the historical average for the third year in a row. New commitments totaled SDR 1.7 billion, the highest level since the global financial crisis. Demand is expected to moderate somewhat in 2018. Longer-term demand estimates are broadly unchanged from last year’s update, and remain generally consistent with the self-sustaining PRGT financing framework adopted in 2012. Loan resources have been successfully replenished, while subsidy contributions remain somewhat below pledged amounts. The 2015 fundraising round mobilized slightly more than the initial target of SDR 11 billion in new loan resources from 15 PRGT lenders, which should provide adequate loan resources into the next decade. By contrast, progress has been limited in collecting the remaining pledged resources for subsidizing the interest on PRGT credit. The PRGT self-sustained capacity remains intact. The PRGT’s self-sustained long term average annual lending capacity is estimated at SDR 1.31 billion, broadly unchanged from last year’ estimate. While capacity estimates are sensitive to a variety of factors, they remain relatively close to the target of SDR 1¼ billion under a number of shocks. The Catastrophe Containment and Relief Trust (CCR Trust) remains underfunded. Funding is below the original targeted amount of new bilateral contributions totaling US$150 million, and the gap is more sizeable when considering the increase of members’ quotas under the 14th General Review of Quotas. To meet funding needs for future qualifying catastrophe relief, it is important that countries with outstanding pledges fulfill their commitments and for additional countries to come forward. Additional financing would be required to provide debt relief to members with protracted arrears. Debt relief under the Heavily Indebted Poor Counties (HIPC) Initiative is winding up, with only two potentially eligible countries left with outstanding Fund credit. These are the protracted arrears cases of Somalia and Sudan. Additional resources would be required to finance the Fund’s participation in debt relief when these countries are ready to undertake the HIPC Initiative process

Update on the Financing of the Fund’s Concessional Assistance and Debt Relief to Low-Income Countries

PRGT-related policies following the 2015 enhancement of the financial safety net for LICs, while options to better assist countries confronting sudden balance of payments needs due to large natural disasters are under consideration. Demand for PRGT resources has increased. Demand for concessional resources has exceeded historical averages in recent years, mainly in response to sustained low commodity prices and deteriorated global financial market conditions. Demand is expected to reach new highs in 2017 and longer-term estimates have been raised somewhat.

Update on the Financing of the Fund's Concessional Assistance and Debt Relief to Low-Income Member Countries

Better targeted support to LICs. In July 2015, the Executive Board approved measures to strengthen the financial safety net for low-income countries. Specifically, access norms and limits to the Poverty Reduction and Growth Trust (PRGT) resources were increased by 50 percent and the Rapid Credit Facility (RCF) interest rate was set permanently at zero. In addition, four countries graduated from PRGT eligibility. Together with a rebalancing of the mix of blended financing towards more use of general Fund resources for better-off PRGT-eligible countries, these reforms were broadly resource neutral and left the PRGT self-sustaining framework intact. Demand for PRGT resources up strongly. In 2015, demand reached SDR 1.5 billion, largely in response to shocks to commodity prices and adverse global financial market conditions. Demand is expected to remain elevated in 2016, as the global environment continues to be challenging.

Aid, Growth and Employment in Africa

Aid, Growth and Employment in Africa

Update on the Financing of the Fund's Concessional Assistance and Debt Relief to Low-Income Member Countries

This paper reviews recent developments in the financing of the Fund’s concessional lending and debt relief since the October 2014 Update. It presents the latest available data including the new commitments of loan resources to the PRGT and the sources of initial financing for the newly created CCR Trust, replacing the PCDR Trust. It also discusses the PRGT’s potential self sustaining capacity in the context of longer term projections of the demand for concessional lending and robustness to alternative scenarios.

Update on the Financing of the Fund’s Concessional Assistance and Proposed Amendments to the PRGT Instrument

New commitments under PRGT-supported programs amounted to SDR 0.15 billion in 2013, while disbursements on existing arrangements amounted to about SDR 0.8 billion. However, this lower demand is expected to be temporary. New commitments are projected to rebound to about SDR 1.5 billion in 2014, similar to the level observed in 2012. These projections are subject to considerable uncertainty regarding progress on ongoing program negotiations.

Update on the Financing of the Fund's Concessional Assistance and Debt Relief to Low-Income Member Countries

New commitments under programs supported by the Poverty Reduction and Growth Trust (PRGT) amounted to SDR 0.6 billion during the first nine months of 2014, and disbursements on existing arrangements amounted to about SDR 0.3 billion through end-August. While this level of demand is low by historical standards, new commitments for 2014 as a whole could still exceed SDR 1 billion. These projections are, however, subject to considerable uncertainty regarding progress with ongoing program negotiations.

Update on the Financing of the Fund’s Concessional Assistance and Debt Relief to Low-Income Member Countries

This paper reviews recent developments in financing of the Fund’s concessional lending and debt relief. It reports the latest available data including the pledges made thus far in response to the Managing Director’s fund-raising requests of August 2009 and February and November 2012 aimed at establishing a self-sustained PRGT. The PRGT’s potential self-sustained capacity is discussed in the context of longer-term projections of the demand for concessional lending.

Update on the Financing of the Fund’s Concessional Assistance and Debt Relief to Low-Income Member Countries

This paper reviews recent developments in the status of financing for the Fund’s concessional lending and debt relief. It presents the latest data available and projections whilst taking into account the pledges made thus far in response to the Managing Director’s fund-raising requests of August 2009 and February and November 2012. Additionally, following the Executive Board’s decision in September 2012, the PRGT’s self-sustained capacity is discussed in the context of longer-term projections of the demand for concessional lending. Section II provides an overview of the Fund’s concessional lending instruments and the associated financing framework as well as the developments since the October 2012 Update. Section III reviews the sources of financing for PRGT operations and discusses developments in the PRGT framework. Section IV reviews the use of PRGT resources and assesses the Trust’s self-sustained capacity in light of the demand projections. Section V provides updates on the subsidization of emergency assistance, while Section VI presents the developments on the financing of debt relief under the HIPC, MDRI, and PCDR Trust. The paper concludes with a proposed decision completing the financing reviews of the PRG-HIPC and MDRI Trusts.

AID TO THE POOR IN MIDDLE INCOME COUNTRIES AND THE FUTURE OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION

We are sleep walking into a situation where over the next decade and a half concessional development assistance will disengage from the bulk of the world's poor. This is happening because countries that are graduating into Middle Income status still have large numbers of poor people. This new situation, where three quarters of the world's poor live in Middle Income Countries, raises fundamental questions about the salience of national level achievements in determining global responsibilities towards the poor in each nation. They also raise basic questions for the operational rules of access to concessional development assistance such as that provided by the International Development Association (IDA). This paper set out the issues, and presents a proposal for a new window of IDA which recognizes that poverty persists and development problems remain despite the welcome graduation of many countries to Middle Income status.

Update on the Financing of the Fund's Concessional Assistance and Debt Relief to Low-Income Member Countries

Commitments under new PRGT-supported programs are expected to increase in 2012 in part reflecting the weaker global economic outlook. PRGT commitments in 2011 amounted to SDR 1.2 billion, unchanged from their 2010 level. Staff projections suggest demand could rise to about SDR 2 billion in 2012. If all elements of the 2009 financing package are secured, the PRGT will have an annual average lending capacity of SDR 2.2 billion over 2012–14, or SDR 1.6 billion through 2015. Additional pledges of SDR 1 billion in loan resources are still required to secure the targeted loan resources approved under the 2009 financing package. Fourteen members have so far pledged SDR 9.8 billion in new loan resources for the PRGT compared with the target of SDR 10.8 billion. New borrowing agreements totaling SDR 9.5 billion have been signed with thirteen lenders.

Update on the Financing of the Fund's Concessional Assistance and Debt Relief to Low-Income Member Countries

New commitments under PRGT-supported programs are expected to increase to about SDR 2 billion in 2012, in part reflecting the large ECF commitment (SDR 0.6 billion) for Bangladesh approved in April. Commitments in the first eight months of 2012 amounted to SDR 1.4 billion and a further SDR 0.6 billion is expected to be committed by year end. This compares to total commitments of SDR 1.2 billion in each of 2010 and 2011. If all elements of the 2009 financing package are secured, the PRGT will have an annual average lending capacity of SDR 2.2 billion remaining under this package for the period 2013–14. Additional

Update on the Financing of the Fund's Concessional Assistance and Debt Relief to Low-Income Member Countries

Lower-than-expected demand over the recent past has raised the lending capacity of the PRGT for the years 2012–14. Staff’s latest projections suggest PRGT demand in 2011 could be about SDR 1.4 billion, up from SDR 1.2 billion in 2010. Assuming the 2009 LIC financing package is completed, these projections would be consistent with lending capacity of about SDR 2.1 billion per year from 2012–14, or SDR 1.5 billion per year through 2015. Most of the targeted loan resources under the 2009 package have now been secured, but additional pledges of about SDR 1 billion in loans are still needed. Fourteen members have pledged SDR 9.8 billion in new loan resources for the PRGT, compared to the target of SDR 10.8 billion. New borrowing agreements totaling SDR 9.5 billion have been signed with thirteen lenders. Eight of these agreements provide loan resources in SDRs, and seven creditors also participate in the voluntary encashment regime.

Update on the Financing of the Fund’s Concessional Assistance and Debt Relief to Low-Income Member Countries

Significant progress has been made towards meeting the fund-raising targets for the PRGT, but additional resources will be needed to complete the 2009 LIC financing package. So far, fourteen members have pledged about SDR 9.8 billion in new loan resources, compared to the target of SDR 10.8 billion (including provision for a liquidity buffer to facilitate encashment). New borrowing agreements totaling SDR 7.7 billion have been signed with ten lenders. Six of these agreements provide loan resources in SDRs, and five creditors also participated in the voluntary encashment regime.

Who Takes a Seat at the Pro-Poor Table?: Civil Society Participation in the Honduran Poverty Reduction Strategy

Although much has been written on civil society participation in the formula- tion and monitoring of Poverty Reduction Strategy Papers (PRSPs), very little system- atic and scientifi c evidence exists on the kind of organizations that participate and the elements that explain their involvement in these processes. This article considers one country case, Honduras, for which survey data were gathered from 101 civil society organizations (CSOs) in 2006. This study examines the characteristics these organiza- tions display which explain (non)participation in the next participatory round of the PRSPs. The fi ndings challenge some of the by now widely accepted ideas relating to the kinds of organizations involved in PRSP processes. The idea that predominantly urban- based, highly professional, well-funded, donor-bred-and-fed nongovernmental organiza- tions participate is too blunt. The Honduran case shows that the players in participative processes are more diversifi ed than much of the current literature on PRSPs suggests. CIVIL SOCIETY PARTICIPATION UNDER THE NEW AID APPROACH: RATIONALE AND STATE OF THE ART The World Bank launched the Poverty Reduction Strategy Paper (PRSP) in 1999, and it soon became the linchpin of a new aid approach. The principles of this new aid approach emphasize the importance of recipient ownership over national development strategies, pro-poor results, and civil society involvement in draft- ing and monitoring poverty reduction strategies. The production of such a PRSP gave access to debt relief, concessional assistance from the international fi nancial institutions (IFIs), and more aid from the larger donor community. Moreover, the PRSP was promoted as a medium- and long-term national economic and social policy planning instrument (Lazarus 2008). The new aid approach indicates a de- sire to move away from donor-driven development to give more room to home- grown, government-led, and nationally owned poverty reduction strategies. One of the most remarkable issues in the PRSP was the participation condi- tionality. Governments had to consult civil society during the formulation of the fi rst PRSP draft, and participation had to become institutionalized through

Update on the Financing of the Fund's Concessional Assistance and Debt Relief to Low-Income Member Countries

A new framework to facilitate mobilization of loan resources for the PRGT became effective in June 2010. It includes a voluntary encashment regime allowing claims of participating creditors to qualify as reserve assets; the issuance of PRGT notes; and a revised framework for borrowing in SDRs. Members have responded positively to the Managing Director’s fund-raising request. Thirteen members have pledged about SDR 9.3 billion in additional loan resources, compared to the target of SDR 10.8 billion (including provision for a liquidity buffer to facilitate encashment). New loan and note purchase agreements totaling SDR 7.2 billion have been signed so far with nine lenders. Five of these borrowing agreements provide loan resources in SDRs. It remains important to mobilize additional loan resources to complete the financing package.

Update on the Financing of the Fund’s Concessional Assistance and Debt Relief to Low-Income Member Countries

This paper updates the quota data base through 2008 and discusses implications for members’ calculated quota shares. A subsequent staff paper will review key issues related to the realignment of quota shares and present additional illustrative simulations, for discussion by the Committee of the Whole in early July.