Nigeria makes World Bank’s top-three IDA debtors’ list - BUSINESSDAY
...credit support of $2.586bn confirms poverty level …trails Ethiopia, Bangladesh
The World Bank says it is helping Nigeria to fight extreme poverty and improve the living standards of her citizens with International Development Association (IDA) credits of about $2.586 billion (N790bn) as at end of 2018.
Nigeria is third in the list of IDA top country borrowers, the World Bank said in its annual report for 2018 available to BusinessDay. Nigeria trails behind Ethiopia, which is the first with IDA credit of $3.122 billion, and Bangladesh (second) with IDA credit of $2.991 billion. IDA is one of the largest sources of assistance for the world’s 75 poorest countries, 39 of which are in Africa, and is the single-largest source of donor funds for basic social services in these countries.
Nigeria overtook India last year as the country with the largest number of people living in extreme poverty, according to report by the World Poverty Clock, which noted that extreme poverty in Nigeria was growing by six people every minute, the highest number in the world. At the end of May 2018, the survey showed that Nigeria had an estimated 87 million people in extreme poverty, compared to India’s 73 million.
The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries. Overseen by 173 shareholder nations, IDA aims to reduce poverty by providing loans (called “credits”) and grants for programmes that boost economic growth, reduce inequalities, and improve people’s living conditions.
Traditionally, IDA has been funded largely by contributions from high- and middle-income partner countries. Additional financing comes from transfers from International Bank for Reconstruction and Development (IBRD) net income, grants from International Finance Corporation (IFC), and borrowers’ repayments of earlier IDA credits.
Other top country borrowers and their IDA credits as at fiscal year 2018 are Pakistan ($1.948bn); Kenya ($1.280bn); Côte d’Ivoire ($987m); Tanzania ($955m); Uzbekistan ($740m); Nepal ($706m), and Uganda ($640m).
“In fiscal 2018, our combined commitments for the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) totalled more than $47 billion,” said Kristalina Georgieva, chief executive officer of IBRD and IDA. “But these impressive numbers stand for something much bigger. They represent our ability to confront the world’s toughest challenges and to step in when our clients need us the most.”
The World Bank Group’s risk officers monitor the global political and economic impacts that could affect the institution’s finances. In fiscal 2018, economic growth in advanced economies reaccelerated, while activity in developing countries also rebounded. Policy uncertainty in some advanced and larger developing economies continues to present an overarching risk, and there is a significant chance that economic activity could diverge from the forecast of continued strengthening of global activity, the World Bank said in the annual report, adding that “geopolitical tensions remain elevated, with potential impacts on financial market confidence and volatility”.
Every three years, the World Bank Group development partners meet to review IDA’s policies, assess its financial capacity, agree on the amount of financing for the next replenishment period, and commit to additional contributions of equity that are required to meet IDA’s objectives and development goals.
Going forward, IDA said it will continue to grow its borrowing programme to raise funds that complement donor contributions, enabling it to expand its life changing investments in the poorest countries.
“We exceeded our targets for climate change, with one-third of total World Bank lending, or nearly $16 billion, going to development activities that address climate change. This was also a successful and innovative year for IDA, including the highest-ever first year of commitments – $24 billion – to support the world’s poorest countries,” Georgieva said.
In April 2018, IDA made its debut in the global capital markets for the first time in its nearly 60-year history, leveraging its strong financial position and triple-A rating. IDA’s inaugural bond – a $1.5 billion, five-year US-dollar benchmark issue – received strong reception in the market, with total orders reaching $4.6 billion from around the world.
The World Bank is a leader in mobilising private investment for development through the capital markets. Since issuing the first IBRD bond in 1947, the Bank has been a key promoter of unique capital market instruments that give the private sector the opportunity to engage in global development priorities.
The World Bank is one of the largest issuers of green bonds, for example, which tap capital markets to support climate-related projects. Since issuing the first labelled green bond in 2008, the Bank has issued $11 billion equivalent through more than 140 transactions in 19 currencies. In April 2018, the Bank issued its first green bond denominated in Hong Kong dollars (HK$ 1 billion). The World Bank also supports country efforts to build green bond markets. Through this work, the Bank helps clients demonstrate leadership on sustainability and climate action, while offering investors an opportunity to support development solutions that address climate change.
“This year (2018), the World Bank Group committed nearly $67 billion in financing, investments, and guarantees. The International Bank for Reconstruction and Development (IBRD) continues to see strong demand from clients for its services, with commitments rising to $23 billion in fiscal 2018. Meanwhile, the International Development Association (IDA) provided $24 billion to help the poorest countries – the largest year of IDA commitments on record,” Jim Yong Kim, President of the World Bank Group and Chairman of the Board of Executive Directors, said.
“This year, we leveraged IDA’s strong capital base and launched the inaugural IDA bond. Investor demand for the $1.5 billion bond reached more than $4 billion. By combining IDA’s traditional donor funding with funds raised in the capital markets, this financial innovation will expand IDA’s ability to support the world’s poorest countries, including efforts to prevent conflict. “The International Finance Corporation (IFC) provided more than $23 billion in financing for private sector development this past year, including $11.7 billion mobilized from investment partners. Of this, nearly $6.8 billion went to IDA countries, and more than $3.7 billion was invested in areas affected by fragility, conflict, and violence.
“Marking its 30th year of operation, the Multilateral Investment Guarantee Agency (MIGA) has become the third leading institution among the MDBs in terms of mobilizing direct private capital to low- and middle-income countries. This year, MIGA issued a record $5.3 billion in political risk insurance and credit enhancement guarantees, helping finance $17.9 billion worth of projects in developing countries. New issuances and gross outstanding exposure – at $21.2 billion this year – almost doubled as compared to fiscal 2013,” Kim stated in the annual report.