The International Development Association (IDA) is the concessional lending arm of the World Bank Group. IDA has the potential to be a key financing instrument for many African countries, as it provides concessional finance and can leverage this finance by ratio of a 4:1.
Our infographic observes three key elements in the continent’s engagement with IDA i) total amounts of IDA funding, ii) frequency of IDA access and iii) trends of IDA funding.
i) Amounts: African countries have accounted for the bulk of IDA’s resource disbursement. Over the IDA’s lifetime, African countries have accounted for approximately 73% of total IDA disbursements, totalling just over US$210 bn. Africa’s share of IDA’s resources is five times more than that of the second-highest IDA recipient region (East Asia) which accounts for 14.5%.
On a country level, eight of the top 10 recipients of IDA funding are African countries – with Vietnam (US$18.5 bn) and China (US$10.2 bn) being the only two non-African countries. Ethiopia (US$23.4 bn), Nigeria (US$18.8 bn) and Tanzania (US$16.7 bn) are the top three African recipients of IDA resources.
African countries have managed to access relatively large amounts from IDA, with 30 African countries having received a total of more than US$1 bn from the IDA. Indeed, the average African country has received a volume of IDA resources that is four times the average of the next region: US$ 4.4 bn vs. US$ 1.8 bn in East Asia.
Furthermore, most of the continent has accessed IDA – with 48 African countries (89%) having accessed the IDA at least once, whilst only six African countries (11%) have never accessed IDA.
ii) Frequency: The amount that each African country has accessed from the IDA has varied drastically. For instance, the top 3 countries in terms of frequency differ slightly from the top three recipients in terms of volume – with Tanzania (288 times, US$16.7 bn), Ghana (252 times, US$11.2 bn) and Ethiopia (252 times, US$23.4bn) having accessed IDA the greatest number of times in terms of frequency.
Overall, eight African countries have accessed IDA resources more than over 200 times. Importantly, the average African country has accessed IDA resources at a frequency three times greater than the next region (120 times vs. 40 times)
iii) Trends Driving Frequency: In general, IDA lending tends to be countercyclical, increasing during periods of fiscal strain. For example, up until 1998, Africa as a region accessed IDA just under 100 times per year. However, from the early 2000s, IDA lending to the continent increased, with 153 access counts in 2001 – this was largely driven by the need for cheap, concessional finance during the Heavily Indebted Poor Country Initiative.
After 2001, the frequency and volume of lending then generally decreased up until 2009, when the Global Financial Crisis resulted in countries needing additional finance to cover the external shocks. The most recent peak of IDA lending was during the COVID-19 crisis, with 2021 recording 273 times, resulting in a new peak.
At Development Reimagined, we have three core recommendations to reimagine the continent’s engagement with IDA.
First, the World Bank should significantly scale up the IDA’s resource envelope to meet the huge needs of its borrower countries, the majority of whom are African countries. IDA resources can be increased through:
- Increasing the level of IBRD transfers to the IDA. Between 2015 and 2023, its transfers to the IDA declined by about 55% from $0.65 billion to less than $0.3 billion. This was partly due to a decision in 2017 by the Bank’s (highly unrepresentative) Board of Governors to adopt a formula-based approach to determining IBRD’s annual transfers to the IDA. This formula must be overturned to enable bigger contributions relative to the fiscal space the World Bank has, rather than its financial performance as determined by Credit Rating Agencies.
- Tripling the level of donor contributions over the two upcoming replenishment cycles.
Second, given the continent’s significant financing needs, increasing IDA’s resource envelope should be accompanied by an increase in Africa’s share of IDA resources to 85% from the current 75%. With Africa having the highest poverty levels of any region in the world, there is a strong argument for channelling concessional resources to African countries to support their poverty eradication efforts.
Third, the World Bank should overhaul its lending guidance and policies so its loans can be better used by borrowing governments. From ever-shortening maturities to problematic debt sustainability assessment frameworks and the use of market-based conditions, the evidence is clear that the World Bank’s instruments have often hindered rather than enabled poverty reduction.
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Acknowledgements: Special thanks go to Trevor Lwere, Kenean Wase and Jade Scarfe, for their work on the graphics, collecting/analysing the underlying data and sharing this accompanying article. The data was collated from the World Bank Group Finances Database. Our methodology is entirely in-house, based on analysis of economic growth, inflation and other trends.
