Multilateral Development Banks: Overview
Overview and Issues for Congress
Rebecca M. Nelson
Analyst in International Trade and Finance
April 9, 2010March 7, 2011
Congressional Research Service
7-5700
www.crs.gov
R41170
CRS Report for Congress
Prepared for Members and Committees of Congress
Multilateral Development Banks: Overview and Issues for Congress
Summary
Overview: The multilateral development banks (MDBs) include the World Bank and four smaller
regional regional
development banks: the African Development Bank (AfDB), the Asian Development
Bank Bank
(AsDB), the European Bank for Reconstruction and Development (EBRD), and the InterAmerican Development Bank (IDB). The United States is a member of each of the MDBs. The
The MDBs provide financial assistance to developing countries in order to promote economic and social
social development. They primarily fund large infrastructure and other development projects and,
increasingly, provide loans tied to policy reforms by the government. Most of the MDBs have
two facilities from which they make loans (loan windows): a non-concessional lending window
that provides loans to middle-income countries at market-based interest rates, and a concessional
lending window that provides loans at below-market interest rates and grants to low-income
countries.
Debate over the effectiveness of MDB financial assistance is contentious. Critics argue that the
MDBs focus on “getting money out the door” (rather than delivering results in developing
countries), are not transparent, and lack a clear division of labor. They also argue that providing
aid multilaterally relinquishes U.S. control over where and how the money is spent. Proponents
argue that providing aid to poor countries is the “right” thing to do and has been successful in
helping developing countries make strides in health and education over the past four decades.
They also argue that providing foreign aid to the MDBs is important for leveraging funds from
other donors, tying policy reforms to financial assistance, and enhancing U.S. leadership. Most
U.S. aid for economic and social development is provided directly to projects and programs in
developing countries (bilateral aid) rather than to multilateral organizations, like the MDBs
(multilateral aid).
Issues for Congress: Congressional legislation is required for U.S. financial contributions to the
MDBs. Replenishments of the concessional windows occur regularly; capital increases for the
non-concessional windows happen more infrequently. Unusually, all the MDBs have currently
requested capital increases, generally because MDB lending has increased following the global
financial crisis. Any U.S. participation in capital increases are likely to be included in the FY2011
(for the AsDB) and FY2012 (for the other MDBs) budgets. See also CRS Report RS20792,
Multilateral Development Banks: U.S. Contributions FY1998-FY2009, by Jonathan E. Sanford.
In addition to congressional hearings on the MDBs, Congress exercises oversight over U.S.
participation in the MDBs through legislative mandates. These mandates direct the U.S.
Executive Directors to the MDBs to advocate certain policies and how they should vote at the
MDBs on various issues. Congress also issues reporting requirements for the Treasury
Department on The MDBs provide nonconcessional financial assistance to middle-income countries and some creditworthy low-income
countries on market-based terms. They also provide concessional assistance, including grants and
loans at below-market rate interest rates, to low-income countries.
Issues for Congress
•
Effectiveness: Critics argue that the MDBs focus on “getting money out the
door” (rather than delivering results), are not transparent, and lack a clear
division of labor. They also argue that providing aid multilaterally relinquishes
U.S. control over where and how the money is spent. Proponents argue that
providing assistance to developing countries is the “right” thing to do and has
been successful in helping developing countries make strides in health and
education over the past four decades. They also argue that MDB assistance is
important for leveraging funds from bilateral donors, tying policy reforms to
financial assistance, and enhancing U.S. leadership.
•
Funding: Congressional legislation is required for U.S. financial contributions to
the MDBs. Replenishments of the concessional windows occur regularly; capital
increases for the non-concessional windows happen more infrequently.
Unusually, all the MDBs have currently requested capital increases, generally
because MDB lending has increased following the global financial crisis. The
Administration requested U.S. participation in capital increases in the FY2011
budget (for the AsDB) and FY2012 budget (for several other MDBs).
•
Oversight: In addition to congressional hearings on the MDBs, Congress
exercises oversight over U.S. participation in the MDBs through legislative
mandates. These mandates direct the U.S. Executive Directors to the MDBs to
advocate certain policies and how to vote on various issues at the MDBs.
Congress also issues reporting requirements for the Treasury Department on
issues related to MDB activities. Finally, Congress can withhold funding for the
MDBs unless certain institutional reforms are met (“power of the purse”).
•
U.S. Commercial Interests: More than $30 billion in contracts are awarded each
year to complete projects financed by the
MDBs. Some of these contracts are awarded to U.S. companies. Major changes are underway at
the World Bank, the biggest MDB, that would alter how companies bid on World Bank projects.
The World Bank argues that these changes will strengthen national institutions, while opponents
argue that they will weaken existing procurement standards. Finally, the G-20 has proposed
voting reform at the World Bank to reflect the increased role of emerging-markets in the world
economy. While the voting power of the United States is unlikely to be affected, these proposals
are likely to be a focus of discussion about the World Bank moving forward
awarded to U.S. companies. The World Bank has been discussing major changes
in how companies bid on World Bank projects, and this could be an area for
Congress to monitor given U.S. commercial interests in the bank.
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Multilateral Development Banks: Overview and Issues for Congress
Contents
Introduction ................................................................................................................................1
Overview of the Multilateral Development Banks .......................................................................21
Historical Background ..........................................................................................................2
World Bank.....................................................................................................................2
Regional Development Banks .........................................................................................3
Operations: Financial Assistance to Developing Countries.....................................................65
Financial Assistance Over Time ......................................................................................65
Recipients of MDB Financial Assistance .........................................................................76
Funding: Donor Commitments and Contributions................................................................ 13..8
Non-Concessional Lending Windows ..............................................................................9 13
Concessional Lending Windows.................................................................................... 1611
Structure and Organization.................................................................................................. 1813
Relation to Other International Institutions .................................................................... 1813
Internal Organization .................................................................................................... 18
Debates about Effectiveness of the MDBs13
Issues for Congress ........................................................................... 20
Effectiveness of Foreign Aid ........................................ 14
Debates about Effectiveness of the MDBs ................................................. 20
Bilateral vs. Multilateral Aid .......................... 15
Effectiveness of Foreign Aid ................................................................ 21
Issues for Congress .......................... 15
Bilateral vs. Multilateral Aid ......................................................................................... 2316
Authorizing and Appropriating U.S. Contributions to the MDBs ......................................... 2318
Frequency and Process .................................................................................................. 23
Administration’s Request for FY2011 ......18
FY2012 Budget Request ..................................................................... 24
Congressional Oversight ..................................................... 18
Congressional Oversight of U.S. Participation in the MDBs ................................................ 2722
U.S. Commercial Interests and “Country Systems”............................Interest in the MDBs .................................. 28
Proposals for Voting Reform at the World Bank................................................................... 30 23
Figures
Figure 1. MDB Non-Concessional Financial Assistance, 2000-20092010............................................65
Figure 2. MDB Concessional Financial Assistance, 2000-20092010....................................................7
Figure 3. World Bank: Commitments of Financial Assistance, FY2009........................................8
Figure 4. African Development Bank: Commitments of Financial Assistance, 2008.....................9
Figure 5. Asian Development Bank: Commitments of Financial Assistance, 2008...................... 10
Figure 6. European Bank for Reconstruction and Development: Commitments of
Financial Assistance, 2008 ..................................................................................................... 11
Figure 7. Inter-American Development Bank: Commitments of Financial Assistance,
2008 ...................................................................................................................................... 12
Figure 8. U.S. Bilateral and Multilateral Official Development Assistance, 2001-2008 .............. 22
Figure 9. Comparison of IBRD Voting Share and Share of World GDP...................................... 32
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Multilateral Development Banks: Overview and Issues for Congress
Tables
Table 1. Overview of MDB Lending Windows ............................................................................5
Table 2. MDB Non-Concessional Lending Windows: U.S. Share of Capital Subscriptions......... 15
Table 3. MDB Non-Concessional Lending Windows: Top Donors ............................................. 16
Table 4. MDB Concessional Lending Windows: U.S. Share of Cumulative Contributions.......... 17
Table 5. MDB Concessional Lending Windows: Top Donors..................................................... 18
Table 66
Figure 3. U.S. Bilateral and Multilateral Official Development Assistance, 2000-2009 .............. 17
Tables
Table 1. Overview of MDB Lending Windows ............................................................................4
Table 2. MDB Non-Concessional Lending Windows: Top 10 Recipients, 2009 or FY2010 ..........7
Table 3. MDB Concessional Lending Windows: Top 10 Recipients, 2009 or FY2010 ..................8
Table 4. MDB Non-Concessional Lending Windows: U.S. Financial Commitments .................. 10
Table 5. MDB Non-Concessional Lending Windows: Top 10 Donors, 2009 or FY2010 ............. 11
Table 6. MDB Concessional Lending Windows: Cumulative U.S. Contributions ....................... 12
Table 7. MDB Concessional Lending Windows: Top 10 Donors, 2009 or FY2010..................... 13
Table 8. U.S. Executive Directors.............................................................................................. 19
Table 714
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Table 9. U.S. Voting Power in the MDBs................................................................................... 1914
Table 810. Administration Request for Appropriations to the MDBs, FY2011..FY2012 .............................. 25 20
Table 911. MDB Contracts Identifiably Awarded to U.S. Companies............, 2009 ................................. 2924
Contacts
Author Contact Information ...................................................................................................... 3325
Acknowledgments .................................................................................................................... 3325
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Multilateral Development Banks: Overview and Issues for Congress
Introduction
Multilateral Development Banks (MDBs) are international institutions that provide loans and
grantsfinancial
assistance, typically in the form of loans and grants, to developing countries in order to promote
economic and social development. The term
MDBs typically refers to the World Bank and four
smaller regional development banks:
•
the African Development Bank (AfDB);
•
the Asian Development Bank (AsDB);
•
the European Bank for Reconstruction and Development (EBRD); and
•
the Inter-American Development Bank (IDB). 1
The United States is a member of each of these institutions.2
Congressional interest in the MDBs has increased since the outbreak of the current global
financial crisis. Following the onset of the crisis in fallthe fall of 2008, the MDBs ramped up financial
financial assistance to developing countries, and. As a consequence, each of the MDBs has requested
increased funding from
their member states in order to increase lending to middle-income
countries. A capital increase for an
MDB is unusual and simultaneous requests for capital
increases by all the MDBs has not
happened since the 1970s. Any U.S. financial contribution to
the MDBs requires congressional
authorization and appropriation legislation. Negotiations for increasing MDB resources are
currently underway, and it is expected that any increases would be included in the FY2011 budget
(for the AsDB) or FY2012 budget (for the other MDBs). Hearings may be held in 2010The Administration
requested U.S. participation in these capital increases in the FY2011 and FY2012 budgets.
This report provides an overview of the MDBs and highlights major current issues for Congress.
The first section discusses the history of the MDBs, their operations, major donor contributions,
and their organization, and debates about the effectiveness of MDB financial assistance. The second
. The second section discusses issues of particular interest to Congress, including
including the effectiveness of the MDBs; congressional legislation
authorizing and appropriating
U.S. contributions to the MDBs,; congressional oversight of the
MDBs, and U.S. commercial interests in the MDBs. It also discusses recent proposals for
increasing the voting power of emerging-markets at the World Bank.
1
There are also several sub-regional development banks, such as, the Caribbean Development Bank and the Andean
Development Corporation. However, the United States is not a member of these sub-regional development institutions.
This report does not discuss the North American Development Bank (NADBank), a binational financial institution
capitalized and governed equally by the United States and Mexico.
2
The International Monetary Fund (IMF), whose mandate is to ensure international financial stability, is not an MDB.
The IMF does lend to developing countries on concessional terms (defined on p. 2), but this lending is primarily used to
address balance of payments problems. However, the IMF provides some financial assistance to low-income countries,
and the MDBs provide some balance of payments support through policy-based loans. This has led to some criticism in
recent years about duplication of IMF and MDB efforts. Broadly speaking, though, the IMF focuses on providing
financial support to countries facing balance of payments difficulties, and the MDBs provide financial support for
economic and social development.
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Multilateral Development Banks: Overview and Issues for Congress MDBs; and U.S. commercial
interests in the MDBs.
Overview of the Multilateral Development Banks
The MDBs provide financial assistance to developing countries, typically in the form of loans and
grants, for investment projects and policy-based loans. Project loans include large infrastructure
projects, such as highways, power plants, port facilities, and dams, as well as social projects,
including health and education initiatives. Policy-based loans provide governments with
financing simultaneous within exchange for agreement by the borrower country government that it will undertake
particular policy reforms, such as the privatization of state-owned industries or reform in
agriculture or electricity sector policies. Policy-based loans can also provide budgetary support to
developing country governments. In order for the disbursement of a policy-based loan to
1
There are also several sub-regional development banks, such as the Caribbean Development Bank and the Andean
Development Corporation. However, the United States is not a member of these sub-regional development institutions,
and they are not discussed in this report. This report also does not discuss the North American Development Bank
(NADBank), a binational financial institution capitalized and governed by the United States and Mexico. The
International Monetary Fund (IMF), whose mandate is to ensure international financial stability, is not an MDB.
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continue, the borrower must implement the specified economic or financial policies. Some have
expressed concern over the increasing budgetary support provided to developing countries by the
MDBs. Traditionally, this has been the province of the International Monetary Fund (IMF).
Most of the MDBs have two funds, often called lending windows or lending facilities. One type
of lending window is used to make loans at market-based interest rates.3 Such non-concessional
loans are, depending on the MDB, extended to governments and private sector firms in middleincome and some creditworthy low-income countries. The other type of lending window is used
to make loans at below-market interest rates (concessional loans) and grants to the governments
provide financial assistance on market-based terms, typically in the
form of loans, but also through equity investments and loan guarantees. 2 Non-concessional
assistance is, depending on the MDB, extended to middle-income governments, some
creditworthy low-income governments, and private sector firms in developing countries.3 The
other type of lending window is used to provide financial assistance at below market-based terms
(concessional assistance), typically in the form of loans at below-market interest rates and grants,
to governments of low-income countries.
Historical Background
World Bank
The World Bank is the oldest and largest of the MDBs. The World Bank Group comprises three
sub-institutions that make loans and grants to developing countries: the International Bank for
Reconstruction and Development (IBRD), the International Development Association (IDA), and
the International Finance Corporation (IFC).4
The famous 1944 Bretton Woods Conference led to the establishment of the World Bank, the
IMF, and
the institution that would eventually become the World Trade Organization (WTO). The
IBRD IBRD
was the first World Bank affiliate created, when its Articles of Agreement became effective
in in
1945 with the signatures of 28 member governments. Today, the IBRD has near universal
membership with 186 member nations. Only Cuba and North Korea, and a few micro-states such
3
as the Vatican, Monaco, and Andorra, are non-members. The IBRD lends mainly to the
governments of middle-income countries at market-based interest rates.
In 1960, at the suggestion of the United States, IDA was created to make concessional loans (with
low interest rates and long repayment periods) to the poorest countries. IDA also now provides
grants to these countries. The IFC was created in 1955 to extend loans and equity investments to
private firms in developing countries. The World Bank initially focused on providing financing
for large infrastructure projects. Over time, this has broadened to also include social projects and
policy-based loans.
2
These carry repayment terms that are lower than those normally required for commercial loans, but they are not
subsidized. See the discussion of financing below.
4
3
Countries that are eligible for concessional and non-concessional assistance are often referred to as “blend” countries.
4
In addition to the IBRD, IDA, and the IFC, the World Bank Group also includes the Multilateral Investment
Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). The term
“World Bank” typically refers to IBRD and IDA specifically. MIGA and ICSID are not covered in this report, even
though they arguably play an important role in fostering economic development, because they do not make loans and
grants to developing countries. MIGA provides political risk insurance to foreign investors, in order to promote foreign
direct investment (FDI) into developing countries. The ICSID provides facilities for conciliation and arbitration of
disputes disputes
between governments and private foreign investors.
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as the Vatican, Monaco, and Andorra, are non-members. The IBRD lends mainly to the
governments of middle-income countries at market-based interest rates.
In 1960, at the suggestion of the United States, IDA was created to make concessional loans (with
low interest rates and long repayment periods) to the poorest countries. IDA also now provides
grants to these countries. The IFC was created in 1955 to extend loans and equity investments to
private firms in developing countries. The World Bank initially focused on providing financing
for large infrastructure projects. Over time, this has broadened to also include social projects and
policy-based loans.
Regional Development Banks
Inter-American Development Bank
The IDB was created in 1959 in response to a strong desire by Latin American countries for a
bank that would be attentive to their needs, as well as U.S. concerns about the spread of
communism in Latin America.5 Consequently, the IDB has tended to focus more on social
projects than large infrastructure projects, although the IDB began lending for infrastructure
projects as well in the 1970s. From its founding, the IDB has had both non-concessional and
concessional lending windows. The IDB’s concessional lending window is called the Fund for
Special Operations (FSO). The IDB Group also includes the Inter-American Investment
Corporation (IIC) and the Multilateral Investment Fund (MIF), which extend loans to private
sector firms in developing countries, much like the World Bank’s IFC.
African Development Bank
The AfDB was created in 1964 and was for nearly two decades an African-only institution,
reflecting the desire of African governments to promote stronger unity and cooperation among the
countries of their region. In 1973, the AfDB created a concessional lending window, the African
Development Fund (AfDF), to which non-regional countries could become members and
contribute. The U.S. joined the AfDF in 1976. In 1982, membership in the AfDB nonconcessional lending window was officially opened to non-regional members. The AfDB makes
loans to private sector firms through its non-concessional window and does not have a separate
fund specifically for financing private sector projects with a development focus in the region.
Asian Development Bank
The AsDB was created in 19651966 to promote regional cooperation. Similar to the World Bank, and
unlike the IDB, the AsDB’s original mandate focused on large infrastructure projects, rather than
social projects or direct poverty alleviation. The AsDB’s concessional lending facility, the Asian
Development Fund (AsDF), was created in 1973. Like the AfDF, the AsDB does not have a
5
Sarah Babb, Behind the Development Banks: Washington Politics, World Poverty, and the Wealth of Nations
(Chicago: University of Chicago Press, 2009).
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separate fund specifically for financing private sector projects, and makes loans to private sector
firms in the region through its non-concessional window.
European Bank for Reconstruction and Development
The EBRD is the youngest MDB, founded in 19901991. The motivation for creating the EBRD was to
ease the transition of the former communist countries of Central and Eastern Europe (CEE) and
the former Soviet Union from planned economies to free-market economies. The EBRD differs
from the other regional banks in two fundamental ways. First, the EBRD has an explicitly
political mandate: to support democracy-building activities. Second, the EBRD does not have a
concessional loan window. The EBRD’s financial assistance is heavily targeted on the private
sector, although the EBRD does also extend some loans to governments in CEE and the former
Soviet Union.
5
Sarah Babb, Behind the Development Banks: Washington Politics, World Poverty, and the Wealth of Nations
(Chicago: University of Chicago Press, 2009).
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Table 1 summarizes the different lending windows for the MDBs, noting what types of financial
assistance they provide, who they lend to, when they were founded, and how much financial
assistance they committed to developing countries in 2008 or FY20092009 or FY2010.6 The World Bank
accounted for more than 60%half of total MDB financial assistance commitments to developing
countries in 2008 or FY20092009 or FY2010.7 Also, more than 6085% of the financial assistance provided by the
MDBs to developing countries in 2008 or FY2009 was on non-concessional terms.
6
World Bank commitments are for FY 2009 (July 2008 – June 2009). Regional bank commitments are for 2008
(calendar year).
7
Including IBRD, IFC, and IDA.
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2009 or FY2010 was on non-concessional terms.
Table 1. Overview of MDB Lending Windows
MDB
Type of Financing
Type of Borrower
Year
Founded
Commitments,
2008 or
FY20092009 or
FY2010
(Billion US$)
World Bank Group
International Bank for
Reconstruction and
Development (IBRD)
Non-concessional loans
and loan guarantees
Primarily middle-income
governments, also some
creditworthy low-income
countries
1944
32.944.2
International
Development
Association (IDA)
Concessional loans and
grants
Low-income governments
1960
14.05
International Finance
Corporation (IFC)
Non-concessional loans
and equity investments
loans, equity
investments, and loan
guarantees
Private sector firms in
developing countries
19551956
10.56
African
Development Bank
(AfDB)
Non-concessional loans
loans, equity
investments, and loan
guarantees
Middle-income governments,
some creditworthy lowincome governments, and
private sector firms in the
region
1964
28.8
African Development
Fund (AfDF)
Concessional loans and
grants
Low-income governments in
the region
1973
2.61972
3.8
Asian Development
Bank (AsDB)
Non-concessional loans
loans, equity
investments, and loan
guarantees
Middle-income governments,
some creditworthy lowincome governments, and
private sector firms in the
region
1965
8.71966
11.0
Asian Development
Fund (AsDF)
Concessional loans and
grants
Low-income governments in
the region
1973
1.83.1
European Bank for
Reconstruction and
Development
(EBRD)
Non-concessional loans
and equity investments, and
loan guarantees
Primarily private sector firms
in developing countries in the
region, also developingcountry governments in the
region
1990
7.41991
11.3
6
World Bank commitments are for FY2010 (July 2009–June 2010). Regional bank commitments are for 2009
(calendar year).
7
Including IBRD, IFC, and IDA.
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MDB
Type of Financing
Type of Borrower
Year
Founded
Commitments,
2009 or
FY2010
(Billion $)
Inter-American
Development Bank
(IDB)
Non-concessional loans
and loan guarantees
Middle-income governments,
some creditworthy lowincome governments, and
private sector firms in the
region
1959
11.115.3
Fund for Special
Operations (FSO)
Concessional loans and
grants
Low-income governments in
the region
1959
0.12
Source: MDB Annual Reports. World Bank data is for FY2009FY2010 (July 2008 – June 20092009–June 2010). Regional development
bank data is for 2008 (calendar year). 2009 (calendar year). AsDB data is for loans only (data on loan guarantees and equity
investments funded out of ordinary capital resources not available). Most of the MDBs also have additional funds
that they administer, typically
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funded by a specific donor and/or targeted towards narrowly defined projects.
These special funds tend to be
very small in value and are not included in this report.
Operations: Financial Assistance to Developing Countries
Financial Assistance Over Time
Figure 1 shows MDB financial commitments to developing countries since 2000. As a whole,
non-concessional MDB financial assistance was relatively flat until the current global financial
stable in nominal terms until the global
financial crisis prompted major member countries to press for increased financial assistance. In
response to
the financial crisis and at the urging of its major member countries, the IBRD dramatically
dramatically increased lending between FY2008 and FY2009. When the 2009 lending data for the regional
development banks is released later this year (2010), they are also expected to show substantial
upticks in lendingsince FY2008. Regional development banks also had substantial
upticks in lending between 2008 and 2009.
Figure 1. MDB Non-Concessional Financial Assistance, 2000-20092010
Source: MDB Annual Reports.
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Notes: World Bank data is for FY2009 (July 2008 – June 2009). Regionalfiscal years (July – June), while regional development bank data is for 2008
(calendar year).
Figure 2 showscalendar
years. AsDB data is loans only.
Figure 2 depicts concessional financial assistance provided by the MDBs to developing countries
from 2000 to 2008-2009since 2000. The World Bank’s concessional lending arm, IDA, has grown steadily
over the
decade in nominal terms, while the regional development bank concessional lending
facilities, by
contrast, have remained relatively stable in nominal terms over the past several
years. When the 2009 data for the regional development banks becomes available, however, it is
expected that these figures will show an increase in concessional assistance as the regional banks
responded to the financial crisis.
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before increasing in 2009 in response
to the financial crisis.
Figure 2. MDB Concessional Financial Assistance, 2000-20092010
Source: MDB Annual Reports.
Notes: World Bank data is for FY2009 (July 2008 – June 2009). Regionalfiscal years (July – June), while regional development bank data is for 2008
(calendar year)calendar
years.
Recipients of MDB Financial Assistance
Figures 3-7 show which countries received commitments for financial assistance from the MDBs
in the most recent year available (FY2009 for the World Bank and 2008 for the regional
development banks). Additionally, Figure 3 shows how much, on a per capita basis, each country
received. Darker regions in the graphs indicate higher levels of MDB financial assistance per
capita. The data used is a sum of total financial assistance – concessional and non-concessional –
for each MDB.
Generally, Latin America and Eastern and Central Europe (CEE) received the highest levels of
financial assistance per capita from the World Bank in FY2009, although there are notable
instances in Asia and Africa, such as Kazakhstan and Botswana. For the AfDB, financial
assistance per capita in 2008 was concentrated in Western and Eastern Africa, with some lending
in Northern African (particularly Morocco and Egypt) and Southern Africa (particularly
Botswana and South Africa). For the AsDB, Mongolia, Kazakhstan, Georgia, Papua New Guinea,
and the Cook Islands were among the top recipients of financial assistance per capita in 2008.
Regional economic powers China and India were also among the recipients of lower levels of
financial assistance per capita from the AsDB in 2008. For the EBRD and the IDB, financial
assistance per capita was spread fairly evenly throughout the region in 2008. For the EBRD,
Bosnia and Herzegovina, Georgia, Moldova, and Albania received the highest levels of financial
assistance per capita in 2008. Russia also received substantial assistance from the EBRD in 2008.
For the IDB, the Bahamas, Costa Rica, Panama, and Barbados received high levels of financial
assistance per capita. Mexico and Brazil also received lower levels of financial assistance from
the IDB in 2008, among others.
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Figure 3. World Bank: Commitments of Financial Assistance, FY2009
Source: World Bank Projects & Operations Database, http://go.worldbank.org/0FRO32VEI0. IFC FY09 Project & Portfolio Information,
http://www.ifc.org/ifcext/annualreport.nsf/Content/AR2009_Projects_Portfolio.
Notes: Includes concessional and non-concessional financial assistance from lending windows listed in Table 1 (IBRD, IDA, and IFC). Excludes regional assistance, which is
typically a small portion of the banks’ lending portfolios.
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Figure 4. African Development Bank: Commitments of Financial Assistance, 2008
Source: African Development Bank Annual Report, 2008.
Notes: Includes concessional and non-concessional financial assistance from lending windows listed in Table 1.
Excludes regional assistance, which is typically a small portion of the banks’ lending portfolios.
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Figure 5. Asian Development Bank: Commitments of Financial Assistance, 2008
Source: Asian Development Bank Annual Report, 2008.
Notes: Includes concessional and non-concessional financial assistance from lending windows listed in Table 1. Excludes regional assistance, which is typically a small
portion of the banks’ lending portfolios.
CRS-10
Figure 6. European Bank for Reconstruction and Development: Commitments of Financial Assistance, 2008
Source: European Bank for Reconstruction and Development Annual Report, 2008.
Notes: EBRD only provides non-concessional loans. Excludes regional assistance. Excludes regional assistance, which is typically a small portion of the banks’ lending
portfolios.
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Figure 7. Inter-American Development Bank: Commitments of Financial Assistance,
2008
Source: Inter-American Development Bank Annual Report, 2008.
Notes: Includes concessional and non-concessional financial assistance from lending windows listed in Table 1.
Excludes regional assistance, which is typically a small portion of the banks’ lending portfolio.
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The above Figures show that several large, emerging-market countries, such as the “BRICs”
(Brazil, Russia, India, and China), receive a steady flow of financial assistance from the MDBs.
This trend is somewhat controversial. Some argue that, instead of using MDB resources, these
countries should rely on their own resources, particularly countries like China which has
substantial foreign reserves holdings and can easily get loans from private capital markets to fund
development projects. MDB assistance, it is argued, would be better suited to focusing on the
needs of the world’s poorest countries, which do not have the resources to fund development
projects and cannot borrow these resources from international capital markets.
Others argue that MDB financial assistance provided to large, emerging-market countries is
important, because these countries have substantial numbers of people living in poverty and
MDBs provide financial assistance for projects for which the government might be reluctant to
borrow. Additionally, MDB assistance helps address environmental issues, promotes better
governance, and provides important technical assistance to which emerging-market countries
might not otherwise have access. Finally, supporters point out that because MDB assistance to
emerging-market countries takes the form of loans with market-based interest rates, rather than
concessional loans or grants, this assistance is relatively inexpensive to provide.
Funding: Donor Commitments and Contributions
MDBs are able to make loans and grants to developing countries due to the financial
commitments of their more prosperous member countries. This support takes several forms,
depending on the type of assistance (non-concessional or concessional) provided to developing
countries. The MDBs use money contributed or subscribed by their member countries to support
their assistance programs. They fund their operating costs from money earned on nonconcessional loans to borrower countries. Some of the MDBs transfer a portion of their surplus
net income annually to help fund their concessional aid programs.
Table 2 lists the top recipients of MDB non-concessional financial assistance in FY2010 (for the
World Bank) and 2009 (for the regional development banks). The table shows that several large,
emerging economies, including the “BRICs” (Brazil, Russia, India, and China), receive a steady
flow of financial assistance from the MDBs. For example, at least one of the BRIC countries is
among the top three recipients of financial assistance from the IBRD, the IFC, the AsDB, the
EBRD, and the IDB in 2009 or FY2010.
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Table 2. MDB Non-Concessional Lending Windows:Top 10 Recipients, 2009 or
FY2010
(New commitments)
World Bank, FY2010
IBRD
Bill. $
IFC
Bill. $
India
6.69
Brazil
8.16
Mexico
6.37
India
7.35
South Africa
3.75
Russia
5.57
Brazil
3.74
Turkey
5.12
Turkey
2.99
Mexico
4.41
Indonesia
2.99
Argentina
4.35
Egypt
2.16
China
3.95
China
1.41
Nigeria
3.22
Hungary
1.41
Regional
3.00
Poland
1.33
Pakistan
2.80
Regional Development Banks, 2009
AfDB
Bill. $
Somalia
2.72
Botswana
AsDB
Bill. $
EBRD
Bill. $
Indonesia
2.18
Russia
3.41
Mexico
3.13
1.74
China
1.96
Ukraine
1.46
Brazil
2.96
Mauritius
0.91
India
1.81
Romania
1.04
Argentina
1.60
Zimbabwe
0.72
Vietnam
1.40
Hungary
0.84
Colombia
1.35
Mauritania
0.69
Philippines
1.18
Serbia
0.64
Venezuela
1.00
Togo
0.43
Pakistan
0.70
Kazakhstan
0.63
Dominican Rep.
0.99
Niger
0.34
Kazakhstan
0.69
Poland
0.57
Panama
0.71
Mali
0.18
Bangladesh
0.60
Croatia
0.36
Guatemala
0.65
Ethiopia
0.16
Sri Lanka
0.22
Bulgaria
0.34
Ecuador
0.51
São Tomé &
Principe
0.15
0.08
Slovak
Republic
0.33
Thailand
IDB
Peru
Bill. $
0.45
Source: MDB Annual Reports.
Notes: AsDB data is for loans only.
Financial assistance from the MDBs to emerging economies is somewhat controversial. Some
argue that, instead of using MDB resources, these countries should rely on their own resources,
particularly countries like China which has substantial foreign reserves holdings and can easily
get loans from private capital markets to fund development projects. MDB assistance, it is
argued, would be better suited to focusing on the needs of the world’s poorest countries, which do
not have the resources to fund development projects and cannot borrow these resources from
international capital markets.
Others argue that MDB financial assistance provided to large, emerging economies is important,
because these countries have substantial numbers of people living in poverty and MDBs provide
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financial assistance for projects for which the government might be reluctant to borrow.
Additionally, MDB assistance helps address environmental issues, promotes better governance,
and provides important technical assistance to which emerging economies might not otherwise
have access. Finally, supporters argue that because MDB assistance to emerging economies takes
the form of loans with market-based interest rates, rather than concessional loans or grants, this
assistance is relatively inexpensive to provide.
Table 3 shows the shows the top recipients of concessional financial assistance from the MDBs in
FY2010 (for the World Bank) and 2009 (for the regional development banks). India and Vietnam
were top recipients of financial assistance from IDA, the World Bank’s concessional lending
window, in FY2011. Among the regional development banks, the AfDF concentrated assistance
on regional projects in 2009, as well as in a variety of sub-Saharan countries including Côte
d’Ivoire, Tanzania, and Nigeria. For the AsDF, the top recipients of financial assistance in 2009
from the AsDF were Vietnam, Bangladesh, and Nepal, while the top recipients of aid from the
IDB’s concessional lending window, the Fund for Special Operations (FSO) were Peru and
Colombia, as well as assistance targeted towards regional projects.
Table 3. MDB Concessional Lending Windows:Top 10 Recipients, 2009 or FY2010
(New commitments)
World Bank, FY2010
Regional Development Banks, 2009
IDA
Mill. $
AfDF
India
2,578
Multinational
890
Vietnam
523
Peru
65.0
Vietnam
1,429
Côte d’Ivoire
509
Bangladesh
428
Colombia
40.0
Tanzania
928
Tanzania
238
Nepal
336
Regional
9.8
Ethiopia
890
Nigeria
235
Afghanistan
333
Haiti
3.3
Nigeria
890
Kenya
212
Pakistan
245
Ecuador
2.9
Bangladesh
828
Uganda
202
Georgia
229
Bolivia
2.6
Africa (regional)
695
Senegal
118
Cambodia
145
El Salvador
2.4
Kenya
590
Congo, Dem.Rep.
102
Armenia
140
Guatemala
2.4
Congo, Dem.Rep.
460
Burkina Faso
97
Sri Lanka
115
Paraguay
1.8
Uganda
440
Rwanda
90
Laos
103
Guyana
1.6
Mill. $
AsDF
Mill. $
IDB: FSO
Mill. $
Source: MDB Annual Reports.
Note: FSO is the Fund for Special Operations, the IDB’s concessional lending window.
Funding: Donor Commitments and Contributions
MDBs are able to extend financial assistance to developing countries due to the financial
commitments of their more prosperous member countries. This support takes several forms,
depending on the type of assistance provided. The MDBs use money contributed or “subscribed”
by their member countries to support their assistance programs. They fund their operating costs
from money earned on non-concessional loans to borrower countries. Some of the MDBs transfer
a portion of their surplus net income annually to help fund their concessional aid programs.
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Non-Concessional Lending Windows
To offer non-concessional loans, the MDBs borrow money from international capital markets and
then re-lend the money to developing countries. MDBs are able to borrow from international
capital markets because they are backed by the guarantees of their member governments. This
backing is provided through the ownership shares that countries subscribe as a consequence of
their membership in each bank.8 Only a small portion (typically less than 5-10%) of the value of
these capital shares is actually paid to the MDB (“paid-in capital”). The bulk of these shares is a
guarantee that the donor stands ready to provide to the bank if needed. This is called “callable
capital,” because the money is not actually transferred from the donor to the MDB unless the
bank needs to call on its members’ callable subscriptions. Banks may call upon their members’
callable subscriptions only if their resources are exhausted and they still need funds to repay
bondholders. To date, no MDB has ever had to draw on its callable capital. In recent decades, the
8
In most cases, the banks do not use the capital subscribed by their developing country members as backing for the
bonds and notes they sell to fund their market-rate loans to developing countries, but instead just use the capital
subscribed by their developed country members.
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MDBs have not used their paid-in capital to fund loans. Rather it has been put in financial
reserves to strengthen the institutions’ financial base.
Due to the financial backing of their member country governments, the MDBs are able to borrow
money in world capital markets at the lowest available market rates, generally the same rates at
which developed country governments borrow funds inside their own borders. The banks are able
to relend this money to their borrowers at much lower interest rates than the borrowers would
generally have to pay for commercial loans, if, indeed, such loans were available to them. As
such, the MDBs’ non-concessional lending windows are self-financing and even generate net
income.
Periodically, when donors agree that future demand for loans from an MDB is likely to expand,
they increase their capital subscriptions to an MDB’s non-concessional lending window in order
to allow the MDB to increase its level of lending. This usually occurs because the economy of the
world or the region has grown in size and the needs of their borrowing countries have grown
accordingly, or to respond to a financial crisis. An across the board increase in all members’
shares is called a “general capital increase” (GCI). This is in contrast to a “selective capital
increase” (SCI), which is typically small and used to alter the voting shares of member countries.
The voting power of member countries in the MDB is determined largely by the amount of
capital contributed and through selective capital increases; some countries subscribe a larger
share of the new capital stock than others to increase their voting power in the institutions. GCIs
happen infrequently. For example, the World Bank’s main non-concessional lending window, the
IBRD, has had only three GCIs since it was created in 1945. Since the onset the current
international financial crisis in fall 2008, all the MDBs have been planning to seek new GCIs.
Simultaneous requests for capital increases from all the MDBs is quite unusual and has not
occurred since the mid-1970s.
Table 24 summarizes current U.S. capital subscriptions to the MDB non-concessional lending
windows. The largest U.S. share of subscribed MDB capital is with the IDB at 30% while its
smallest share among the MDBs is with the AfDB at 6%.
8
In most cases, the banks do not use the capital subscribed by their developing country members as backing for the
bonds and notes they sell to fund their market-rate loans to developing countries, but instead just use the capital
subscribed by their developed country members.
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Table 24. MDB Non-Concessional Lending Windows: U.S. Share of Capital
Subscriptions
Current subscriptions, including paid-in capital and callable capital, as of 2008 or FY2009.
MDB
IBRD
U.S.
Subscription
Total
SubscriptionFinancial Commitments
MDB
U.S.
Paid-in
Capital
U.S.
Callable
Capital
Total U.S.
Commitment
U.S.
Share
Billion US$
Billion US$
%
32.0
189.9
17
IFC
0.6
2.4
24
AfDB
2.2
33.5
6
AsDB
8.5
54.9
16
EBRD
2.9
28.7
10
IDB
30.3
100.9
30
Total
76.5
410.3
19
Source: MDB Annual Reports.
Notes: World Bank data is for FY2009 (July 2008 – June 2009). Regional development bank data is for 2008
(calendar year).
Table 3 shows the top donor countries to the MDB non-concessional facilities. Cumulatively, the
United $
Billion $
Billion $
%
World Bank, as of FY2010
IBRD
2.00
29.97
31.96
16.83
IFC
0.57
—
0.57
24.03
Regional Development Banks, as of 2009
AfDB
0.23
2.03
2.26
6.61
AsDB
0.60
8.02
8.63
14.20
EBRD
0.76
2.12
2.88
5.05
IDB
1.30
29.01
30.31
28.87
Total
5.46
71.15
76.61
Source: MDB Annual Reports.
Table 5 lists the top donors to the MDBs’s non-concessional facilities. Cumulatively, the United
States has the largest financial commitments to the non-concessional lending windows at
the the
IBRD, the IFC, the IDB, and the EBRD. At the AfDB, the United States has the second largest
financial commitment after Nigeria. At the AsDB, the United States is tied with Japan for the
largest financial commitment.
Other top donor states include Western European countries, Japan, and Canada. Additionally,
several regional members have large financial stakes in the regional banks. For example, among
the regional members, China and India are large contributors to the AsDB; Egypt and South
Africa are large contributors to the AfDB; Argentina, Brazil, and Venezuela are large contributors
to the IDB; and Russia is a large contributor to the EBRD.
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Table 35. MDB Non-Concessional Lending Windows:Top Donors
Current subscriptions to capital, including paid-in capital and callable capital, as of 2008 or FY2009.
World Bank
IBRD
%
United States
10 Donors, 2009 or FY2010
(Financial commitment, including callable and paid-in capital, as a % of total financial commitments)
World Bank, FY2010
IBRD
United States
%
16.83
IFC
United States
%
24.03
Japan
8.07
Japan
5.96
Germany
4.60
Germany
5.44
United Kingdom
4.41
United Kingdom
5.11
France
4.41
France
5.11
CanadaFrance
4.41
France
5.11
United
Kingdom
4.41
United
Kingdom
5.11
China
2.85
Canada
3.43
ChinaRussia
2.85
India
3.43
India
2.85Canada
2.84
Italy
3.43
Russia
2.85India
2.84
Russia
3.43
Saudi Arabia
2.85Italy
2.84
Netherlands
2.37
Regional Development Banks, 2009
AfDB
%
AsDB
%
EBRD
%
IDB
%
Nigeria
8.8886
Japan
15.57
United States14.20
United States
5.05
United States
28.87
United States
6.44
United States
15.57
France
Japan
5.49
China
6.43
Egypt
5.14
India
South Africa
4.56
Germany
%
%
United States
30.03
8.61
Argentina
10.76
Germany
8.61
Brazil
10.76
6.32
Italy
8.61
Mexico
6.92
Australia
5.77
Japan
8.61
Venezuela
5.76
4.12
Indonesia
5.43
United
Kingdom
8.61
Japan
5.00
Algeria
3.97
Canada
5.22
Russia
4.04
Canada
4.00
Libya
3.84
S. Korea
5.03
Canada
3.44
Chile
2.95
Canada
3.75
France
4.32
Spain
3.44
Colombia
2.95
2.72
ECa
3.03
France
1.90
EIBb
3.03
Germany
1.90
Spain
1.90
France
3.75
Malaysia
10.10
IDB
Source: MDB Annual Reports.
Notes: World Bank data is for FY2009 (July 2008 – June 2009). Regional development bank data is for 2008
(calendar year). a. European Community. b. European Investment Bank61
United States
14.20
France
4.30
Argentina
10.34
Japan
5.47
Pakistan
5.95
Germany
4.30
Brazil
10.34
Egypt
5.13
China
5.86
Japan
4.30
Canada
7.70
South Africa
4.58
India
5.76
United Kingdom
4.30
Mexico
6.65
Germany
4.11
Australia
5.26
Italy
4.30
Venezuela
5.54
Algeria
3.99
Indonesia
4.95
Russia
2.02
Japan
4.81
Libya
3.83
Canada
4.76
Canada
1.72
Chile
2.84
Canada
3.74
S. Korea
4.58
Spain
1.72
Colombia
2.84
3.94
EIBa
1.52
France
1.82
EUb
1.52
Germany
1.82
Italy
1.82
Spain
1.82
France
3.74
Germany
Source: MDB Annual Reports.
Notes: a. European Investment Bank. b. European Union.
Concessional Lending Windows
Concessional lending windows do not issue bonds; their funds are contributed directly from the
financial contributions of their member countries. Most of the money comes from the more
prosperous countries, while the contributions from borrowing countries are generally more
symbolic than substantive. The MDBs have also transferred some of the net income from their
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non-concessional windows to their concessional lending window in order to help fund
concessional loans and grants.
As the MDB extends concessional loans and grants to low-income countries, the window’s
resources become depleted. The donor countries meet together periodically to replenish those
resources. Thus, these increases in resources are called replenishments, and most occur on a
planned schedule ranging from three to five years. If these facilities are not replenished on time,
they will run out of lendable resources and have to substantially reduce their levels of aid to poor
countries.
Table 46 summarizes cumulative U.S. contributions to the MDB concessional lending windows.
The U.S. share of total contributions is highest to the IDB’s concessional lending window (50%)
(49.6%) and lowest to the AfDB’s concessional lending window (1110.6%).
Table 46. MDB Concessional Lending Windows: Cumulative U.S. ContributionsU.S. Share of Cumulative
Contributions
Cumulative contributions as of 2008 or FY2009.
MDB
U.S.
Contribution
Total
Contribution
U.S.
Share
Billion US$
Billion US$
%
IDA
42.7
199.4
21
AfDF
3.0
28.3
11
AsDF
3.8
23.3
16
EBRD
---
---
---
IDB: FSO
4.8
9.6
50
54.3
260.6
21
Total
Source: MDB Annual Reports.
U.S.
Share
Billion $
%
World Bank, as of FY2010
IDA
42.87
21.53
Regional Development Banks, as of
2009
AfDF
3.52
11.95
AsDF
3.78
10.59
EBRD
—
IDB: FSO
4.84
Total
55.01
—
49.57
Source: MDB Annual Reports.
Notes: EBRD does not have a concessional lending window. FSO is the Fund for Special Operations, the IDB’s
concessional lending window. World Bank data is for FY2009 (July 2008 – June
2009FY2010 (July 2009–June 2010). Regional development bank
data is for 20082009 (calendar year).
Table 57 shows the top donor countries to the MDB concessional facilities. The United States has
made the highest cumulative contributions to IDA and the IDB’s FSO, and the second highest
cumulative contributions to the AfDF and the AsDF, after Japan. Other top donor states include
the more prosperous member countries: Japan, Canada, and those in Western Europe. Within the
FSO, Brazil, Argentina, and Mexico have also made substantial contributions. In recent years, the
U.S. contributions to IDA have been well below its historical share on some occasions and other
countries (notably the United Kingdom) have played a predominant role.
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Table 57. MDB Concessional Lending Windows:Top Donors
Cumulative contributions as of 2008 or FY2009.
IDA
%
10 Donors, 2009 or FY2010
(Cumulative contributions)
World Bank, FY2010
IDA
%
Regional Development Banks, 2009
AfDF
%
AsDF
%
IDB: FSO
%
United States
21.40
Japan
11.96
Japan
36.9453
United States
11.95
Japan
48.21
United States
50.2249.57
Japan
19.44
United States
10.5485
Japan
11.71
United States
16.1810.59
Japan
6.1406
Germany
11.0410.93
France
10.47
Canada
6.7925
Germany
6.39
Brazil
5.6558
United Kingdom
10.169.95
Germany
10.29
Australia
6.5708
Canada
5.78
Argentina
5.2418
France
7.2914
United Kingdom
7.81
Germany
6.3565
Australia
5.56
Mexico
3.41
Italy
4.4137
Canada
4.49
Canada
7.6347
France
4.71
Canada
3.21
Canada
4.37
Italy
5.9131
Venezuela
3.23
Italy
4.23
Italy
5.78
United Kingdom
4.51
Germany
2.393.18
Canada
3.18
Netherlands
3.7054
Sweden
5.2109
Italy
3.93
France
2.292.63
Germany
2.36
Sweden
2.993.04
Norway
4.5041
Netherlands
2.52
Spain
2.24
Switzerland
1.6156
France
2.26
Belgium
1.74
Netherlands
4.043.95
Spain
1.2743
Spain
2.21
Italy
2.2421
Source: MDB Annual Reports.
Note: FSO is the Fund for Special Operations, the IDB’s concessional lending window. World Bank data is for
FY2009FY2010 (July 2009–June 2010). Regional development bank data is for 20082009 (calendar year).
Structure and Organization
Relation to Other International Institutions
The World Bank is a specialized agency of the United Nations. However, it is autonomous in its
decision-making procedures and its sources of funds. It also has autonomous control over its
administration and budget. The regional development banks are independent international
agencies and are not affiliated with the United Nations system. All the MDBs must comply with
directives (for example, economic sanctions) agreed to (by vote) by the U.N. Security Council.
However, they are not subject to decisions by the U.N. General Assembly or other U.N. agencies.
Internal Organization
The MDBs have similar internal organizational structures. Run by their own management and
staffed by international civil servants, each MDB is supervised by a Board of Governors and a
Board of Executive Directors. The Board of Governors is the highest decision-making authority,
and each member country has its own governor. Countries are usually represented by their
Secretary of the Treasury, Minister of Finance, or Central Bank Governor. The United States is
currently represented by Treasury Secretary Timothy Geithner. The Board of Governors meets
annually, though may act more frequently through mail-in votes on key decisions.
While the Boards of Governors in each of the Banks retain power over major policy decisions,
such as amending the founding documents of the organization, they have delegated day-to-day
authority over operational policy, lending, and other matters to their institutions’ Board of
Executive Directors. The Board of Executive Directors in each institution is smaller than the
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Board of Governors. There are 24 members on the World Bank’s Board of Executive Directors,
and fewer for some of the regional development banks. Each MDB Executive Board has its own
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schedule, but they generally meet at least weekly to consider MDB loan and policy proposals and
oversee bank activities. The current U.S. Executive Directors to the MDBs are listed in Table 68.
Table 68. U.S. Executive Directors
MDB
U.S. Executive Director
World Bank
Ian Solomon
AfDB
Walter Crawford Jones
AsDB
Curtis S. ChinaRobert M. Orr
EBRD
James Hudson
IDB
Gustavo Arnavat
Source: MDB websites.
Notes: a. Robert M. Orr has been nominated by the Obama Administration to be the U.S. Executive Director
to AsDB, pending approval by the Senate (see p. 28).
Decisions are reached in the MDBs through voting. Each member country’s voting share is
weighted on the basis of its cumulative financial contributions and commitments to the
organization. 9 Table 79 shows the current U.S. voting power in each institution. The voting power
of the
United States is large enough to veto major policy decisions at the World Bank and the
IDB, such
as amending the World Bank’s Articles of Agreement. However, the United States cannot
cannot unilaterally veto more day-to-day decisions, such as individual loans.
Table 79. U.S.Voting Power in the MDBs
MDB
U.S. Voting Share
(%)
IBRD
16.36
IDA
12.1611.24
IFC
23.59
AfDB
6.3450
AsDB
12.7611.66
IDB
30.0001
EBRD
10.15
Source: MDB Annual Reports.
9
Issues for Congress
This section provides an overview of MDB issues of particular interest to Congress, including the
effectiveness of the MDBs; authorizing and appropriating legislation for U.S. contributions to the
9
This is not necessarily the case with the MDBs’ concessional windows, though. In order to insure that borrower
countries have at least some say in these organizations, the contributions of donor countries in some recent
replenishments have not given the donor countries additional votes. In all cases, though, the donor countries together
have a comfortable majority of the total vote.
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MDBs, congressional oversight of the MDBs; and U.S. commercial interests in the MDBs. For
more details on U.S. policy-making at the MDBs, see CRS Report R41537, Multilateral
Development Banks: How the United States Makes and Implements Policy, by Jonathan E.
Sanford.
Debates about Effectiveness of the MDBs
Effectiveness of Foreign Aid
The effectiveness of foreign aid, including the aid provided by MDBs, in spurring economic
development and reform in developing countries, is hotly debated. The most prominentMost academic,
peer-reviewed
studies of foreign aid effectiveness typically attempt to examine the effecteffects of total
foreign aid provided to
developing countries, including both bilateral aid and multilateral aid.
With bilateral aid, most
U.S. resources go directly to programs and projects in developing
countries. With multilateral aid,
multilateral organizations, like the MDBs, pool money from
different donors and then provide
money to fund programs and projects in developing countries.
The results of these studies that
examine the effectiveness of bilateral and multilateral aid are
mixed, with conclusions ranging
from (a) aid is ineffective at promoting economic growth10 to (b)
aid is effective at promoting
economic growth11 to (c) aid is effective at promoting growth in
some countries under specific
circumstances (such as when developing-country policies are
strong).12 The divergent results of
these academic studies make it difficult to reach firm
conclusions about the overall effectiveness
of aid.
Beyond the debates about the overall effectiveness of foreign aid, there are also criticisms of the
providers of foreign aid. Many of these criticisms are made broadly about multilateral aid
organizations and government aid agencies, and are not targeted at the MDBs specifically. For
example, it is argued that the national and international bureaucracies that dispense foreign aid
focus on “getting money out the door” to developing countries, rather than on delivering services
to developing countries; emphasize short-term outputs like reports and frameworks but do not
engage in long-term activities like the evaluation of projects after they are completed; and put
enormous administrative demands on developing-country governments.13 Bilateral and
multilateral foreign aid agencies have also been criticized for their lack of transparency about
their operating costs and how they spend their aid money; the fragmentation of foreign aid across
many small aid bureaucracies that are not well coordinated; and the proportion of foreign aid that
goes to corrupt leaders or is spent ineffectively. 14 (However, some analysts contend that among
government and international foreign agencies, MDBs ranked among the best for adhering to
foreign aid “best practices.”15) Many of these criticisms and proposals for change are discussed in
10
10
E.g., see William Easterly, “Can Foreign Aid Buy Growth?,” Journal of Economic Perspectives, vol. 17, no. 3
(Summer 2003), ppp. 23–-48.
11
E.g., see Carl-Johan Dalgaard and Henrik Hansen, “On Aid, Growth, and Good Policies,” Journal of Development
Studies, vol. 37, no. 6 (August 2001), pp. 17-41.
12
E.g., see Craig Burnside and David Dollar, “Aid, Policies, and Growth,” American Economic Review, vol. 90, no. 4
(September 2000), ppp. 847–-868.
13
William Easterly, “The Cartel of Good Intentions,” Foreign Policy, vol. 131 (July-August 2002), pp. 40-49.
14
William Easterly and Tobias Pfutze, “Where Does the Money Go? Best and Worst Practices in Foreign Aid,”
Journal of Economic Perspectives, vol. 22, no. 2 (Spring 2008). For more on foreign aid reform, also see: CRS Report
R40102, Foreign Aid Reform: Studies and Recommendations, by Susan B. Epstein and Matthew C. Weed and CRS
Report R40756, Foreign Aid Reform: Agency Coordination, by Marian Leonardo Lawson and Susan B. Epstein.
15
Ibid.
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foreign aid “best practices.”15) Many of these criticisms and proposals for change are discussed in
a March 2010 report by the Senate Foreign Relations Committee on the international financial
institutions (IFIs).16
Proponents of foreign aid argue that, despite some flaws, such aid at its core serves vital
economic and political functions. With 1.4 billion people in the developing world (one in four
people in the developing world) living on less than $1.25 a day in 2005,17 some argue that not
providing assistance is simply not an option; providing aid to the world’s poorest countriesthey argue it is the
“right” thing to do and part of
“the world’s shared commitments to human dignity and survival.”18
These proponents typically
point to the use of foreign aid to provide basic necessities, such as
food supplements, vaccines,
nurses, and access to education, to the world’s poorest countries.
Additionally, proponents of
foreign aid argue that, even if foreign aid has not been effective at
raising overall levels of
economic growth, foreign aid has been successful in dramatically
improving health and education
in developing countries over the past four decades. For example,
it is argued that foreign aid
contributed to rising life expectancy in developing countries from 48
years to 68 years over the
past four decades, and lowering infant mortality from 131 out of every
1,000 babies born in
developing countries to 36 out of every 1,000 babies.19 It is also argued that
providing foreign aid
is an important component of U.S. national security policy and U.S.
leadership in the world.
Bilateral vs. Multilateral Aid
There are also policy debates about the merits of bilateral versus multilateral aid.20 There are
different advantages to each approach. Bilateral giving aid bilaterally or multilaterally.20 Bilateral
aid gives donors more control over where the
money goes and how the money is spent. For
example, donor countries may have more flexibility
to allocate funds to countries that are of
geopolitical strategic importance, but not facing the
greatest development needs, than might be
possible by providing aid through a multilateral
organization. By building a clear link between
the donor country and the recipient country,
bilateral aid may also garner the donor country more goodwill from the
recipient country towards the donor than if than if
the funds had been provided through a multilateral
organization.
Providing aid through multilateral organizations offers different benefits for donor countries.
Multilateral organizations pool the resources of several donors, allowing donors to share the cost
of development projects (often called burden-sharing). Additionally, donor countries may find it
politically sensitive to attach policy reforms to loans or to enforce these policy reforms.
Multilateral organizations can usefully serve as a scapegoat for imposing and enforcing
16
conditionality that may be politically sensitive to attach to bilateral loans. Finally, many believe
15
Ibid.
U.S. Congress, Senate Committee on Foreign Relations, The International Financial Institutions: A Call for Change,
111th Cong., 2nd sess., March 10, 2010, http://foreign.senate.gov/imo/media/doc/55285.pdf.
17
World Bank, New Data Show 1.4 Billion Live On Less Than US$1.25 A Day, But Progress Against Poverty Remains
Strong, August 26, 2008, http://go.worldbank.org/F9ZJUH97T0.
18
Jeffrey Sachs, The End of Poverty: Economic Possibilities for Our Time (Penguin Books, 2006), p. xvi.
19
William Easterly, The White Man’s Burden (New York: Penguin Press, 2006), pp. 176-177.
20
For more on the choice between bilateral and multilateral aid, see, for example: Helen Milner and Dustin Tingley,
“The Choice for Multilateralism: Foreign Aid and American Foreign Policy,” Working Paper, February 10, 2010 and
Helen Milner, “Why Multilateralism? Foreign Aid and Domestic Principal-Agent Problems,” in Delegation and
Agency in International Organizations, eds. Darren Hawkins et al. (New York City: Cambridge University Press,
2006), pp. 107-139.
16
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conditionality. Finally, many believe that providing funds to multilateral organizations is
important for enhancing and symbolizing
U.S. leadership in the world economy.
The United States provides most of its foreign aid for promoting economic and social
development bilaterally rather than multilaterally. Data from the Organization for Economic
Cooperation and Development (OECD) Development Assistance Committee (DAC) reports that
in 2008, 112009, 12% of U.S. foreign aid disbursed to developing countries with the purpose of promoting
economic and social development was provided through multilateral institutions, while 8988% was
provided bilaterally. 21 Figure 83 shows that the level of multilateral aid disbursed by the United
States has remained fairly constant between 20012000 and 20082009, although U.S. bilateral aid for
development has increased.
OECD-DAC data allows comparison of the United States with other developed countries.
Generally, other developed countries disbursedtypically disburse a higher proportion of their foreign aid through
development
assistance through multilateral institutions than the United States did in 2008does. For example, 2921% of
Japan’s, 3337% of
Germany’s, and 3633% of the United Kingdom’s foreign aid for economic and
social development
in 2008 in 2009 was disbursed to multilateral organizations. One exception is Australia, who disbursed
only 10% of foreign aid through multilateral organizations in 2008.22
Figure 83. U.S. Bilateral and Multilateral Official Development Assistance, 2001-2008
Billion US$ (Current2000-2009
(Billion $)
Source: OECD Development Assistance Committee (DAC) (www.oecd.org/dac/stats).
Notes: DAC reports data on gross disbursements at current prices of official development assistance (ODA), which.
ODA is defined as flows
to developing countries and multilateral institutions which are administered with the
promotion of economic
development and is concessional in character and conveys a grant element of at least
25%. DAC data does not
include, for instance, other official flows including military assistance. DAC data also focuses on the
focuses on the disbursements of ODA, and would not include, for example, the callable capital committed by the
21
See the note in Figure 83 for explanation of OECD DAC data. DAC data does not, for example, include military
assistance provided by the United States or the callable capital committed by the United States to the MDBs.
22
Gross disbursements at current prices.
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disbursements of ODA, and would not include, for example, the callable capital committed by the United States
United States to the MDBs, because this money has never actually been disbursed from the United States to the
MDBs. Also,
multilateral organizations not only include the MDBs but also U.N. agencies.
An alternative data source for U.S. multilateral and bilateral economic assistance to developing
countries is U.S. Overseas Loans and Grants: Obligations and Loan Authorization, published by
U.S. Agency for International Development (USAID).2223 This publication is commonly referred to
as “the Greenbook.” According to this publication, 6.79% of U.S. economic assistance in 20082009 was
provided to multilateral organizations. The data is drawn from the same source as the data
provided by the United States to the OECD-DAC, but the totals are different due to differences
between the definitions of economic assistance used by the OECD-DAC and by the Greenbook.
Issues for Congress
This section discusses current issues of particular interest to Congress, including authorizing and
appropriating legislation for U.S. contributions to the MDBs, congressional oversight of the
MDBs, U.S. commercial interests in the MDBs, and proposed voting reforms at the World Bankthe Greenbook.
Authorizing and Appropriating U.S. Contributions to the MDBs
Frequency and Process
Replenishments of the MDB concessional windows happen regularly, while capital increases for
the MDB non-concessional windows occur much more infrequently. Quite unusually, all the
MDBs are currently requesting capital increases, primarily to address the increase in demand for
loans that resulted from the financial crisis, prepare for future crises, and, in the case of the IDB,
recover from financial losses resulting from the financial crisis. Simultaneous capital increases
for all the MDBs has not happened since the 1970s. Negotiations over the capital increases are
ongoing, and hearings may be held as early as Spring 2010. Any U.S. participation in the capital
increases increases
would require legislation. The Administration has requested that U.S. contributions to
the Asian
Development Bank (AsDB) capital increase be included in the FY2011 budget. Capital
increases for the other MDBs, if agreed to, would likely be included, and for several
other MDBs in the FY2012 budget.
Authorizing and appropriations legislation is required for U.S. contributions to the MDBs. The
Senate Committee on Foreign Relations and the House Committee on Financial Services are
responsible for managing MDB authorization legislation. During the past several decades,
authorization legislation for the MDBs has not passed as freestanding legislation. Instead, it has
been included through other legislative vehicles, such as the annual foreign operations
appropriations act, a larger omnibus appropriations act, or a budget reconciliation bill.
The The
Foreign Operations Subcommittees of the House and Senate Committees on Appropriations
manage the relevant appropriations legislation. MDB appropriations isare included in the annual
foreign operations appropriations act or a larger omnibus appropriations act. For FY2010
22
Available at http://gbk.eads.usaidallnet.gov/.
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appropriations legislation for the MDBs, see CRS Report R40693, State, Foreign Operations, and
Related Programs: FY2010 Budget and Appropriations, by Susan B. Epstein, Kennon H.
Nakamura, and Marian Leonardo Lawson.
Administration’s Request for FY2011
The Administration has requested authorizations and appropriations for U.S. contributions to the
MDBs for FY2011.23
Authorizations
The Administration’s request for authorization of appropriations for FY2011 has three major
components: authorization for U.S. contributions to the AsDB general capital increase,
authorization for U.S. contributions to the replenishments of the AsDF, and authorization for U.S.
contributions to a variety of smaller funds associated with the World Bank.
First, the Administration has requested authorization for U.S. contributions to AsDB’s capital
increase. This includes a request to authorize $532 million paid-in capital and $12.79 billion
callable capital. The Administration has requested that these funds be appropriated over a fiveyear period. Second, the Administration is seeking authorization of $461 million for the most
recent replenishment of the ADF, to be appropriated over a four year period. Third, the
Administration has requested authorization for U.S. contributions to a new Multilateral Food
Security Fund (to be established at the World Bank); authorization of $1,625 million for the
Climate Investment Funds (of which the World Bank serves as the trustee); and an extension of
authorization for U.S. contributions to the Heavily Indebted Poor Country (HIPC) Initiative and
HIPC Trust Fund (administered by the World Bank).
Appropriations
The Administration’s request for appropriations to the MDBs for FY2011is listed in Table 8.24
There are three major components to the Administration’s appropriations request: appropriations
for U.S. contributions to a capital increase at the AsDB, appropriations for U.S. contributions to
the replenishments of IDA, the AfDF, and the AsDB, and appropriations for U.S. contributions to
a variety of smaller funds associated with the MDBs.
First, for FY2011, the Administration has requested appropriations for the capital increase of the
AsDB’s non-concessional lending window. General capital increases entail paid-in and callable
capital. Since 1981, only paid-in capital has been appropriated. For callable capital, Congress has
annual program ceilings in the annual Foreign Operations Appropriations legislation specifying
23
For the Administration’s request for FY2011, see U.S. Department of Treasury, International Programs:
Justification for Appropriations, FY2011 Budget Request, http://www.treas.gov/offices/internationalaffairs/intl/fy2011/FY%202011%20CPD%20for%20web.pdf.
24
For the Administration’s requests for appropriations to the MDBs and the final appropriations to the MDBs since
1999, see CRS Report RS20792, Multilateral Development Banks: U.S. Contributions FY1998-FY2009, by Jonathan E.
Sanford.
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the amount of callable capital the United States may be subscribed to in each MDB during the
current fiscal year. The Administration has requested $106.6 million paid-in capital and roughly
$5 billion callable capital for FY2011 as the first of five annual U.S. contributions to the AsDB
general capital increase.25
Table 8. Administration Request for Appropriations to the MDBs, FY2011
Million US$
Amount
Capital increases for non-concessional lending windows
Asian Development Bank (AsDB), paid-in capital
106.6
Asian Development Bank (AsDB), callable capital
5,000.0 a
Replenishments for concessional lending windows
International Development Association (IDA)
1,285.0
African Development Fund (AfDF)
155.9
Asian Development Fund (AsDF)
115.3
Contributions to funds administered by or affiliated with an
MDB, or where an MDB serves as the trustee
Multilateral Investment Fund (MIF)b
25.0
Inter-American Investment Corporation (IIC)b
21.0
Multilateral Food Security Fund c
408.4
Clean Technology Fund (CTF)d
400.0
Strategic Climate Fund (SCF)d
235.0
Global Environment Facility
175.0
(GEF)d
Heavily Indebted Poor Countries (HIPC)
Initiativee
75.0
Source: U.S. Department of Treasury, International Programs: Justification for Appropriations, FY2011 Budget
Request, http://www.treas.gov/offices/international-affairs/intl/fy2011/FY%202011%20CPD%20for%20web.pdf.
Notes: Does not include the $30 million request for the International Fund for Agricultural Development
(IFAD). IFAD is a multilateral organization focused on reducing rural poverty and hunger. The IFAD is not
covered in this report.
a. Since 1981, the United States no longer appropriates money to back its callable capital subscriptions to the MDBs.
Rather Congress sets annual program ceilings in the annual Foreign Operations Appropriations Act specifying the
amount of callable capital the United States may subscribe in each MDB during the current fiscal year.
b. Affiliate of the Inter-American Development Bank (IDB).
25
The World Bank (IBRD), the IFC, the AfDB, and the EBRD have also requested capital increases for their nonconcessional lending windows. Any U.S. participation in these capital increases are expected to be included in the
FY2012 budget, although hearings on the capital increases could be held as early as 2010.
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c. Administered by the World Bank.
d. The World Bank serves as the trustee for this fund.
e. The Administration has proposed using the requested funds for the Heavily Indebted Poor Countries (HIPC) Trust
Fund, which is administered by the World Bank.
Second, the United States has previously committed to replenishments of IDA, the AfDF, and the
AsDF, and these payments were scheduled in the replenishment agreements to occur over a
period of three to four years. To meet these previous commitments, the Administration has
requested appropriations for $1,285 million for the second of three payments for the 15th
replenishment of IDA (IDA-15), $155 million for the third and final payment for the 11th
replenishment of the AfDF (AfDF-11), and $115.3 million for the second of four payments to the
10th replenishment of the AsDF (AsDF-10).
Third, the Administration has also requested appropriations for U.S. contributions to several
smaller funds. These include funds that are administered by or affiliated with an MDB, or funds
where an MDB servers as the trustee. These appropriations requests include:
•
$25 million for the Multilateral Investment Fund (MIF), an affiliate of the IDB
that promotes small-and medium-size enterprise growth in the Western
Hemisphere. This funding would be for the fifth of six installments of the first
replenishment of the MIF.
•
$21 million for the Inter-American Investment Corporation (ICC), an affiliate of
the IDB that supports small- and medium-sized enterprises in Latin America and
the Caribbean. This funding would be used to clear arrears for the U.S. payment
of subscribed shares from the 1999 capital increase.
•
$408.4 million for a new Multilateral Food Security Fund to be administered by
the World Bank. The Fund will finance developing country efforts to create and
sustain improvements in their food security by strengthening agricultural
productivity, nutrition, and access to food.
•
$400 million for the Clean Technology Fund (CTF), for which the World Bank
serves as the trustee. The CTF seeks to reduce the growth of greenhouse gas
emissions in developing countries by financing the additional costs of cleaner
technologies.
•
$235 million for the Strategic Climate Fund (SCF), for which the World Bank
servers as the trustee. It seeks to pilot new approaches to address climate change
challenges in developing countries, such as scaling-up renewable energy in lowincome countries. The Administration proposes using the funds for three
programs within the SCF: the Pilot Program for Climate Resilience ($90 million),
the Forest Investment Program ($95 million), and the Program for Scaling-Up
Renewable Energy in Low Income Countries ($50 million).
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•
$175 million for the Global Environment Facility (GEF), for which the World
Bank serves as the trustee. 26 The GEF finances projects that aim to improve the
environment. The Administration proposes $170 million for the first payment of
the GEF replenishment and $5 million to pay off a portion of U.S. arrears to the
GEF.
•
$50 million for the Enhanced HIPC Initiative. The Administration proposes using
the funds to meet the $75.4 million in U.S. pledges to the HIPC Trust Fund,
administered by the World Bank. For qualifying countries, the HIPC Trust Fund
will either prepay or purchase a portion of the debt owed to a multilateral creditor
and cancel such debt or pay debt service as it comes due. 27
Congressional Oversight
As international organizations, the MDBs are generally exempt from U.S. law. The President has
delegated the authority to manage and instruct U.S. participation in the MDBs to the Secretary of
Treasury. Within the Treasury Department, the Office of International Affairs has the lead role in
managing day-to-day U.S. participation in the MDBs. The President appoints the U.S. Executive
Directors, and their alternates, with the advice and consent of the Senate. Thus, the Senate can
Data on U.S. contributions (including requests and appropriated funds) to the MDBs can be found
in CRS Report RS20792, Multilateral Development Banks: U.S. Contributions FY2000-FY2011,
by Jonathan E. Sanford.
FY2012 Budget Request
The status of the FY2011 budget request for the MDBs and appropriations legislation is tracked
in CRS Report R41228, State, Foreign Operations, and Related Programs: FY2011 Budget and
Appropriations, by Marian Leonardo Lawson, Susan B. Epstein, and Tamara J. Resler. This
23
Available at http://gbk.eads.usaidallnet.gov/.
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section focuses on the Administration’s FY2012 request for authorizations and appropriations for
the MDBs.24
Authorizations
The Administration's request for authorization of appropriations for FY2012 has four major
components: (1) authorization for U.S. contributions to the general capital increases of the nonconcessional lending windows at some MDBs; (2) authorization for replenishments of the
concessional lending windows at some MDBs; (3) authorization for contributions to debt relief
provided by the MDBs; and (4) authorization for participation in voting reform initiatives at the
IBRD and IFC.
First, the Administration has requested authorization for U.S. contributions to the general capital
increases at several MDBs. Specifically, the Administration is seeking authorization for $9.8
billion ($0.6 billion paid-in capital, $9.2 billion callable capital) for the IBRD general capital
increase; $4.3 billion ($0.3 billion paid-in capital, $4.1 billion callable capital) for the AfDB
general capital increase; and $21.0 billion ($0.5 billion paid-in capital, $20.5 billion callable
capital) for the IDB general capital increase; and $1.3 billion (all callable capital) for the EBRD
general capital increase.25 Since 1981, only paid-in capital, not callable capital, has been
appropriated. The Administration is requesting that the paid-in capital be appropriated over a fiveto eight-year period, depending on the institution.
Second, the Administration is seeking authorization for replenishments of two concessional
lending facilities: IDA and AfDF. Specifically, the Administration is requesting $4.1 billion for
the sixteenth replenishment of IDA (IDA-16) to be appropriated over a three-year period, and
$585 million for the twelfth replenishment of the AfDF (AfDF-12), also to be appropriated over a
three-year period.
Third, the Administration is seeking authorization for U.S. commitments to debt relief associated
with IDA and AfDF. Specifically, the Administration is seeking $474 million for the U.S.
commitment to multilateral debt relief provided through IDA, and $62 million for the U.S.
commitment to debt relief provided through the AfDF.
Fourth, voting reforms were agreed to by IBRD member countries in 2008. To meet this
commitment, the Administration is seeking authorization to vote in favor of a “selective capital
increase,” which is a small increase in the capital base typically used to alter the voting shares of
member countries. The Administration is also seeking authorization for funding for the selective
capital increase at the IBRD. The request is for $4.6 billion ($0.3 billion paid-in capital, $4.4
billion callable capital). The Administration is also requesting authorization to vote in favor of a
selective capital increase at the IFC, even though the Administration is not seeking to commit
funds to this initiative.
24
For the Administration's request for FY2011, see U.S. Department of Treasury, International Programs: Justification
for Appropriations, FY2012 Budget Request, http://www.treasury.gov/about/organizationalstructure/offices/Documents/FY2012CPD508.pdf.
25
Figures may not add due to rounding.
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Appropriations
The Administration's request for appropriations to the MDBs for FY2012 is listed in Table 10.24
There are four major components to the Administration's appropriations request: (1)
appropriations for paid-in capital in conjunction with the general capital increases at some of the
non-concessional lending; (2) appropriations for the replenishment of some concessional lending
windows; (3) appropriations for contributions to a variety of smaller funds associated with the
MDBs; and (4) appropriations for U.S. commitments for multilateral debt relief initiatives.
The FY2012 request is higher than the funds appropriated in FY2010, primarily due to the
general capital increases at several of the MDBs, as well as greater funding for multilateral funds
focused on the environment and food security.26
Table 10. Administration Request for Appropriations to the MDBs, FY2012
(Million US$)
FY2010
appropriated
FY2012
request
Paid-in capital for non-concessional
lending windows
International Bank for Reconstruction and
Development (IBRD, part of the World
Bank)
0
117.4
African Development Bank (AfDB)
0
32.4
Asian Development Bank (AsDB)
0
106.6
Inter-American Development Bank (IDB)
0
102.0
1,262.5
1,358.5
African Development Fund (AfDF)
155.0
195.0
Asian Development Fund (AsDF)
105.0
115.3
25.0
25.0
4.7
20.4
0a
308.0
Clean Technology Fund (CTF)
300.0
400.0
Strategic Climate Fund (SCF)
75.0
190.0
Global Environment Facility (GEF)
86.5
143.8
Replenishments for concessional
lending windows
International Development Association
(IDA, part of the World Bank)
Contributions to funds administered
by or affiliated with an MDB, or
where an MDB serves as the trustee
Multilateral Investment Fund (MIF)c
Inter-American Investment Corporation
(IIC)c
Global Agriculture and Food Security
Program (GAFSP)
26
FY2010 is used as the baseline comparison, because a full FY2011 foreign operations appropriations legislation has
not been passed to date.
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Debt Relief
Bilateral debt reduction/Heavily Indebted
Poor Country (HIPC) trust fund
Multilateral debt relief initiative (MDRI)
40.0
0
0
174.5
Source: U.S. Department of Treasury, International Programs: Justification for Appropriations, FY2011 Budget
Request, http://www.treas.gov/offices/international-affairs/intl/fy2011/FY%202011%20CPD%20for%20web.pdf.
Notes: Does not include the $15 million for debt relief through the Tropical Forest Conservation Act (TFCA),
or the $30.1 million for the Treasury Office of Technical Assistance. These programs are not strictly related to
the MDBs, and are not covered in this report. This table also does not include the $30 million request for the
International Fund for Agricultural Development (IFAD). IFAD is a multilateral organization focused on reducing
rural poverty and hunger. IFAD is not typically grouped with the MDBs, and not covered in this report.
a.
In FY2010, the U.S. Agency for International Development (USAID) transferred $67 million in development
assistance funds to Treasury for payment to the Global Agriculture and Food Security Fund.
First, for FY2012, the Administration has requested appropriations to support the general capital
increases at several of the MDBs. The appropriated funds are for paid-in capital only; as
mentioned above, callable capital has not been appropriated since the early 1980s. The
Administration has requested for the first of five to eight (depending on the institution) annual
payments, $117 million for the IBRD, $32 million for the AfDB, $107 million for the AsDB, and
$102 million for the IDB.
Second, the United States has made commitments to replenishments of IDA, the AfDF, and the
AsDF, and the replenishment agreements scheduled payments to occur over a period of three to
four years. To meet these previous commitments, the Administration has requested appropriations
for $1,359 million for the first of three payments for the sixteenth replenishment of IDA (IDA16), $195 million for the first of three payments of the twelfth replenishment of the AfDF (AfDF12), and $115 million for the third of four payments to the ninth replenishment of the AsDF
(AsDF-10).
Third, the Administration has also requested appropriations for U.S. contributions to several other
related funds. These include funds that are administered by or affiliated with an MDB, or funds
where an MDB servers as the trustee. These appropriations requests include:
•
$25 million for the Multilateral Investment Fund (MIF), an affiliate of the IDB
that promotes small-and medium-size enterprise growth in the Western
Hemisphere. This funding would be for the sixth and final installment of the first
replenishment of the MIF.
•
$20.4 million for the Inter-American Investment Corporation (ICC), an affiliate
of the IDB that supports small- and medium-sized enterprises in Latin America
and the Caribbean. This funding would be used to clear arrears for the U.S.
payment of subscribed shares from the 1999 capital increase.
•
$308 million for the Global Agriculture and Food Security Program (GAFSP), a
multilateral trust fund for which the World Bank serves as the trustee. The
GAFSP invests in the agricultural sectors of the world’s poorest countries.
•
$400 million for the Clean Technology Fund (CTF), for which the World Bank
serves as the trustee. The CTF aims to reduce global emissions growth and
combat climate change by helping to close the price gap in developing countries
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between commercially available clean technologies and conventional
alternatives.
•
$190 million for the Strategic Climate Fund (SCF), for which the World Bank
servers as the trustee. The Administration proposes using the funds for three
programs within the SCF: the Pilot Program for Climate Resilience ($40 million),
the Forest Investment Program ($130 million), and the Program for Scaling-Up
Renewable Energy in Low Income Countries ($20 million).
•
$143.75 million for the Global Environment Facility (GEF), for which the World
Bank serves as the trustee. The GEF finances, mostly through grants, projects
that provide global environmental benefits. The request is for the second of four
payments of the fifth replenishment of the GEF (GEF-5).
Fourth, the Administration is seeking $174.5 million for U.S. participation in the Multilateral
Debt Relief Initiative (MDRI). The Administration has requested $91 million for the U.S.
commitment to MDRI under the fifteenth replenishment of IDA (IDA-15), $76 million for the
U.S. commitment to MDRI under the sixteenth replenishment of IDA (IDA-16), and $7.5 million
to MDRI under the twelfth replenishment of the AfDF (AfDF-12).
Congressional Oversight of U.S. Participation in the MDBs
As international organizations, the MDBs are generally exempt from U.S. law. The President has
delegated the authority to manage and instruct U.S. participation in the MDBs to the Secretary of
the Treasury. Within the Treasury Department, the Office of International Affairs has the lead role
in managing day-to-day U.S. participation in the MDBs. The President appoints the U.S.
Executive Directors, and their alternates, with the advice and consent of the Senate. Thus, the
Senate can exercise oversight through the confirmation process.
Over the years, Congress has played a major role in U.S. policy towards the MDBs. In addition to
congressional hearings on the MDBs, Congress has enacted a substantial number of legislative
mandates that oversee and regulate U.S. participation in the MDBs. These mandates generally fall
into one of four major types. More than one type of mandate may be used on a given issue area.
First, numerous legislative mandates direct how the U.S. representatives at the MDBs can vote on
various policies. Examples include mandates that require the U.S. Executive Directors to oppose:
(a) financial assistance to specific countries, such as Burma, until sufficient progress is made on
human rights and implementing a democratic government;2827 (b) financial assistance to broad
categories of countries, such as major producers of illicit drugs;2928 and (c) financial assistance for
specific projects, such as the production of palm oil, sugar, or citrus crops for export if the
financial assistance would cause injury to United States producers.3029 Some legislative mandates
require the U.S. Executive Directors to support, rather than oppose, financial assistance. For
example, a current mandate allows the Treasury Secretary to instruct the U.S. Executive Directors
to vote in favor of financial assistance to countries that have contributed to U.S. efforts to deter
and prevent international terrorism.31
26
For more on the GEF, see CRS Report R41165, Global Environment Facility (GEF): An Overview, by Richard K.
Lattanzio.
27
For more on HIPC, see CRS Report RL34644, Debt Relief for Poor Countries, by Jonathan E. Sanford and Martin A.
Weiss.
28
27
Sec. 570(a)(2) of the Omnibus Consolidated Appropriations Act, 1997 (P.L. 104-208). Also on human rights more
broadly, see 22 USCS § 262d.
2928
22 USC § 2291j(a)(2).
3029
22 USC § 262g.
31
22 USC § 262p-4r(a).
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to vote in favor of financial assistance to countries that have contributed to U.S. efforts to deter
and prevent international terrorism.30
Second, legislative mandates direct the U.S. representatives at the MDBs to advocate for policies
within the MDBs. One example is a mandate that instructs the U.S. Executive Director of the
IBRD to urge the
IBRD to support an increase in loans that support population, health, and
nutrition programs.32 31
Another example is a mandate that requires the U.S. Executive Directors to
take all possible steps
to communicate potential procurement opportunities for U.S. firms to the
Secretary of the
Treasury, the Secretary of State, the Secretary of Commerce, and the business
community.33 32
Mandates that call for the U.S. Executive Director to both vote and advocate for a
particular particular
policy are often called “voice and vote” mandates.
Third, Congress has also passed legislation requiring the Treasury Secretary to submit reports on
various MDB issues (reporting requirements). Some legislative mandates call for one-off reports;
other mandates call for reports on a regular basis, typically annually. For example, current
legislation requires the Treasury Secretary to submit an annual report to the appropriate
congressional committees on the actions taken by countries that have borrowed from the MDBs
to strengthen governance and reduce the opportunity for bribery and corruption.3433
Fourth, Congress has also attempted to influence policies at the MDBs through “power of the
purse,”” – that is, withholding funding from the MDBs or attaching stipulations on the MDBs’s use
of funds. For example, the FY2010 Consolidated Appropriations Act stipulates that 10% of the
funds appropriated to the AsDF will be withheld until the Treasury Secretary can verify that the
AsDB has taken steps to implement specific reforms aimed at combating corruption.3534
U.S. Commercial Interests and “Country Systems”Interest in the MDBs
Billions of dollars of contracts are awarded to private firms each year in order to acquire the
goods and services necessary to implement projects financed by the MDBs. Table 911 shows that
this figure was abovemore than $30 billion in 2008contracts were awarded in 2009. MDB contracts are awarded through international
international competitive bidding processes, although most MDBs allow the borrowing country to
give some
preference to domestic firms in awarding contracts for MDB-financed projects in order
to help
spur development.
Among the regional development banks, only a very small fraction (less than 1.5%) of these
contracts are known to have been awarded to U.S. companies. Data on contracts awarded by the
World Bank by firm nationality is not available, 3635 nor is data on the nationality of subcontractors
that participate in carrying out projects financed by the MDBs.
3230
22 USC § 262p-4m.4r(a).
22 USC § 262p-4m.
32
22 USC § 262s-1.
3433
22 USC § 262r-6(b)(2).
3534
Sec. 7086 of the Consolidated Appropriations Act, 2010 (P.L. 111-117).
3635
World Bank Contracts Award website (http://go.worldbank.org/GM7GBOVGS0) reports firm nationality for only a
fraction of total contracts awarded.
3331
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Table 911. MDB Contracts Identifiably Awarded to U.S. Companies
Calendar Year 2008, Million US$, 2009
(Million $)
MDB
Contracts
Awarded to U.S.
Companies
Total
Contracts
Awarded
Percent of Contracts
Awarded to U.S.
Firms
World Bank
n.a.a
20,000.0b000b
n.a.
AsDBc
40.5
4,487.0
0.9%
AfDBc
36.0
2,866.3
1.3%
EBRDd
0.7
1,730.0
0.0%
IDBd
12.6
2,529.8
0.5%
Source: World Bank Contracts Award29.8
5,815
0.51%
AfDBc
20.9
6,402
0.33%
EBRDc
0.0
588
0.00%
IDBd
22.1
3,761
0.59%
Source: World Bank Procurement website (http://go.worldbank.org/GM7GBOVGS0); ADB Annual Report;
AfDB Annual Report; IDB Procurement Portal website http://www5.iadb.org/idbppi/aspx/ppProcurement.aspx;
EBRD Procurement Department, Annual Procurement Review, 2008.
Notes: In some cases, contracts have been awarded to firms in one country that intend to subcontract major
elements of the work to firms in other countries. It is not clear to what extent the data capture subcontracting.
a.
n.a. denotes not available. World Bank Contracts AwardProcurement website (http://go.worldbank.org/GM7GBOVGS0)
reports firm nationality for only a fraction of total contracts awarded.
b.
b.
Estimate of annual contracts awarded by the World Bank from World Bank Contracts AwardProcurement website
(http://go.worldbank.org/GM7GBOVGS0).
c. Contracts awarded by country of origin (
c.
Nationality of where the goods are mined, produced, grown, assembled and/or
manufactured).
d. Contracts awarded by nationality of firm (where the primary contractor is located).
As the largest MDB, the World Bank awards the biggest number and the highest volume of
contracts each year. Major policy changes are currently underway at the World Bank that would
alter how companies bid on World Bank projects. Currently, the World Bank has one centralized
procurement system for awarding World Bank contracts, regardless of which country the project
is being implemented in. The new system being proposed would award contracts using systems
devised by the borrowing governments, provided that the system meet certain standards and
criteria. The emphasis on the borrowing country’s design and implementation of procurement,
unique to each country, has led this system of procurement to be termed “country systems.”
The World Bank has not implemented country systems yet, but it has been in the process of
moving towards country systems over the past several years. In 2005, Congress stipulated that
20% ($31 million) of the funds appropriated to IDA would be withheld unless the Treasury
Secretary could verify that the Bank had, among other things, withdrawn its proposal on
increasing the use of country systems in procurement. 37 The World Bank did not withdraw the
country systems proposal, and Congress withheld the funds. Currently, the World Bank has plans
to launch pilot programs of country systems in eight developing countries, possibly as soon
2010.38 The Bank has completed assessments of the country procurement systems in 18 countries,
37
Sec. 299d of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006 (P.L. 109102).
38
Christopher L. Pallas and Jonathan Wood, “The World Bank’s Use of Country Systems for Procurement: A Good
(continued...)
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although getting beyond the benchmarking exercise has been slower than initially hoped by the
Bank.39
Scholars have argued that “although little discussed... the World Bank’s planned use of country
systems for public procurement has the potential to be one of its most significant policy changes
in the next ten years.”40 The World Bank argues that country systems will strengthen national
institutions in developing countries for public expenditures, whether they come from World Bank
funds, taxes, or other donors.41 It is also argued that country systems would help harmonize aid
flows, streamline the disbursement of funds, reduce donor overhead costs, and return control over
aid flows to borrowing countries. 42
Others, particularly among the business community that bids on World Bank contracts, have been
skeptical of the World Bank’s use of country systems. Critics note that harmonization of
procedures within countries would likely come at the expense of harmonization of uniformity in
the overall activities funded by the MDBs. Additionally, there is concern that standards used by
the World Bank to evaluate a country’s procurement policies and overall eligibility for country
systems have been watered down over time, especially since the country systems idea was first
seriously floated by the Bank in 2005. Lowering standards, it is argued, increases the scope for
corruption in the procurement process. Also, since the use of country systems allows each country
to have a unique procurement process as long as that process meets certain standards and criteria,
there is concern that country systems would disadvantage small- and medium-sized businesses in
bidding on World Bank contracts, since smaller businesses are less likely to have the resources to
invest in learning dozens of different procurement processes. Finally, there is concern that weak
bureaucracies in developing countries simply lack the capacity to administer the procurement
process and would be better suited to remain in the purview of the World Bank, even if
transitioning to country systems would reduce the overhead costs of the Bank.43
Proposals for Voting Reform at the World Bank
At the September 2009 G-20 meeting in Pittsburgh, leaders of the G-20 nations pledged to reform
the voting shares of member states at the World Bank. 44 In particular, the G-20 leaders called for
(...continued)
Idea Gone Bad?,” Development Policy Review, vol. 27, no. 2 (2009), pp. 215-230.
39
World Bank, Strengthening World Bank Group Engagement on Governance and Anticorruption: Second-Year
Progress Report, October 20, 2009, p. viii, http://go.worldbank.org/CJL9TZH330.
40
Christopher L. Pallas and Jonathan Wood, “The World Bank’s Use of Country Systems for Procurement: A Good
Idea Gone Bad?,” Development Policy Review, vol. 27, no. 2 (2009), pp. 215-230.
41
World Bank, Operations Policy and Country Services, Use of Country Procurement Systems in Bank-Supported
Operations: Proposed Piloting Program, R2008-0036/5, May 20, 2008,
http://siteresources.worldbank.org/INTPROCUREMENT/Resources/UseOfCountrySystemsFinalApprovedVersionFor
Disclosure-June20-2008.pdf.
42
Christopher L. Pallas and Jonathan Wood, “The World Bank’s Use of Country Systems for Procurement: A Good
Idea Gone Bad?,” Development Policy Review, vol. 27, no. 2 (2009), pp. 215-230.
43
Ibid.
44
The G-20 nations include 19 large developed and emerging-market countries (Argentina, Australia, Brazil, Canada,
China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea,
(continued...)
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Multilateral Development Banks: Overview and Issues for Congress
“adopting a dynamic formula at the World Bank which primarily reflects countries’ evolving
economic weight and the World Bank’s development mission, and that generates an increase of at
least 3% of voting power for developing and transition countries, to the benefit of underrepresented countries.”45 The G-20 leaders pledged to reach an agreement by the IMF and World
Bank’s 2010 Spring Meetings, which are to be held April 24-25, 2010. No agreement has yet been
announced.
Negotiations are expected to be contentious, particularly among European countries which are
largely expected to lose voting power if any voting reform is enacted. Figure 9 shows that
Belgium, the Netherlands, and Switzerland, for example, have voting power at the IBRD that is
larger than their economic weight in the world economy, suggesting that these countries are overrepresented at the World Bank. By contrast, voting at the World Bank has not been reformed to
reflect the increased weight in the world economy of large-emerging market countries. Voting
power at the World Bank is tied closely to the financial commitments of countries, so presumably
any increase of voting power for large emerging-market countries would also come with
increased financial commitments.
(...continued)
Turkey, the United Kingdom, and the United States), as well as the European Union. For more on the G-20, see CRS
Report R40977, The G-20 and International Economic Cooperation: Background and Implications for Congress, by
Rebecca M. Nelson. The report also discusses the G-20 proposal to reform voting at the IMF.
45
G-20, Leaders’ Statement: The Pittsburgh Summit, September 24-25, 2009,
http://www.pittsburghsummit.gov/mediacenter/129639.htm.
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Multilateral Development Banks: Overview and Issues for Congress
Figure 9. Comparison of IBRD Voting Share and Share of World GDP
Source: IMF World Economic Outlook; World Bank Annual Report.
Notes: The 20 IBRD members with the smallest and largest differences between share of world GDP (2009
data at current prices) and voting share in the IBRD. These calculations are for illustrative purposes only.
Alternative calculations could be made, for example, using voting power at IDA or GDP adjusted for differences
in price levels among countries. These alternative calculations would likely produce different results.
The United States is considered to be an under-represented country at the World Bank, as its
current voting share at the IBRD, for example, is smaller than its weight in the international
economy (Figure 9). The United States has lowered its share over time to allow new countries to
join and reduce its financial commitment to the institution. It is unlikely the United States would
lose or gain voting power if the G-20 proposals to shift voting power to under-represented
countries are implemented. However, the G-20’s calls for voting reform at the World Bank are
likely to be a central focus of debates about the World Bank moving forward.
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Author Contact Information
Rebecca M. Nelson
Analyst in International Trade and Finance
rnelson@crs.loc.gov, 7-6819
Acknowledgments
Paul Schirle created the maps, and Amber Wilhelm prepared the graphs.
Congressional Research Service
33 manufactured.
d.
Nationality of firm (where the primary contractor is located).
U.S. commercial interest in the MDBs has been and may continue to be a subject of
Congressional attention, particularly if the banks expand their lending capacity for infrastructure
projects through the GCIs. One area of focus may be the Foreign Commercial Services (FCS)
representatives to the MDBs, who are responsible for protecting and promoting American
commercial interests at the MDBs. 36 Some in the business community are concerned about the
impacts of possible budget cuts to the U.S. FCS, particularly if other countries are taking a
stronger role in helping their businesses bid on projects financed by the MDBs.
There may also be interest in discussions about policy changes for procurement standards at the
World Bank, who awards the largest number and highest volume of contracts each year.
Currently, the World Bank has one centralized procurement system, including use of international
best practice guidelines, for awarding World Bank contracts, regardless of which country the
project is being implemented in. The World Bank has discussed moving towards a system that
awards contracts using systems devised by the borrowing governments, provided that the system
meet certain standards and criteria. The emphasis on the borrowing country’s design and
implementation of procurement, unique to each country, has led this system of procurement to be
termed “country systems.”
The World Bank argues that country systems will strengthen national institutions in developing
countries for public expenditures, whether they come from World Bank funds, taxes, or other
36
For more information, see: http://www.export.gov/advocacy/eg_main_022753.asp.
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Multilateral Development Banks: Overview and Issues for Congress
donors.37 It is also argued that country systems would help harmonize aid flows, streamline the
disbursement of funds, reduce donor overhead costs, and return control over aid flows to
borrowing countries. 38 Opponents of country systems, particularly among the business
community, argues that country systems would: (1) lower procurement standards from
international best practices; (2) disadvantage small- and medium-sized businesses who do not
have the resources to learn dozens of different procurement processes; and (3) increase the scope
for corruption in World Bank projects. In contrast, they argue a better model is an initiative by the
IDB. In this initiative, the IDB is helping to build the capacity of national authorities to
implement international best practices in procurement.
The World Bank has been in the process of moving towards country systems over the past several
years. In 2005, Congress stipulated that 20% ($31 million) of the funds appropriated to IDA
would be withheld unless the Treasury Secretary could verify that the Bank had, among other
things, withdrawn its proposal on increasing the use of country systems in procurement.39
Currently, the World Bank has plans to launch two-year pilot program of country systems,40
although the business community has shown skepticism based on a lack of sufficient capacity
building in developing countries for the program. Because World Bank policy often sets the
benchmark for the other MDBs, Congress may have an interest in monitoring the next steps to be
taken by the World Bank on procurement issues.
Author Contact Information
Rebecca M. Nelson
Analyst in International Trade and Finance
rnelson@crs.loc.gov, 7-6819
Acknowledgments
Amber Wilhelm, Graphics Specialist, prepared the graphs.
37
World Bank, Operations Policy and Country Services, Use of Country Procurement Systems in Bank-Supported
Operations: Proposed Piloting Program, R2008-0036/5, May 20, 2008, http://siteresources.worldbank.org/
INTPROCUREMENT/Resources/UseOfCountrySystemsFinalApprovedVersionForDisclosure-June20-2008.pdf.
38
Christopher L. Pallas and Jonathan Wood, “The World Bank’s Use of Country Systems for Procurement: A Good
Idea Gone Bad?,” Development Policy Review, vol. 27, no. 2 (2009), pp. 215-230.
39
Sec. 299d of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006 (P.L. 109102).
40
World Bank, Expanding the Use of Country Systems in Bank-Supported Operations,
http://go.worldbank.org/RHRJVXDW60.
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