Order Code RS22162
June 9, 2005
CRS Report for Congress
Received through the CRS Web
The World Bank: The International
Development Association’s 14th
Replenishment (2006-2008)
Martin A. Weiss
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade
Summary
On April 18, 2005, the Board of Governors of the International Development
Association (IDA) approved the fourteenth replenishment of IDA’s resources. The
World Bank’s concessional lending and grant making facility, IDA is funded by
transfers from World Bank resources and periodic replenishments from World Bank
donor countries.
The Bush Administration pursued and achieved a number of objectives at the IDA-
14 negotiations. These include implementing a results measurement framework,
increasing the allocation of grants, implementing performance-based allocation,
increasing transparency of IDA decision-making, and promoting opportunities for
private sector development in the poorest countries. Congress is currently considering
both authorization of U.S. participation in the three-year IDA-14 agreement, and a
FY2006 $950 million appropriation request for the first year contribution. This report
discusses key aspects of the agreement and will be updated as authorizing and
appropriating legislation move forward.
On April 18, 2005, the Board of Governors of the International Development
Association (IDA) approved the fourteenth replenishment of IDA’s resources.1 IDA, the
World Bank’s concessional lending and grant-making facility, provides development
assistance to the world’s 81 poorest countries. Eligibility for IDA resources is determined
by a country’s level of poverty as measured by per capita income. In 2004, countries with
annual per capita gross national income of up to $865 were eligible for IDA assistance.
IDA is funded annually by the United States and other donor governments, with major
agreements and funding strategies determined approximately every three years.
1 The World Bank, “Additions to IDA Resources: Fourteenth Replenishment,” available at
[http://siteresources.worldbank.org/IDA/Resources/14th_Replenishment_Final.pdf]
Congressional Research Service ˜ The Library of Congress

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IDA commitments in FY2004 reached $9 billion for 158 operations, consisting of
$7.3 billion in loans and $1.7 billion in grants. The largest share of IDA resources was
committed to Africa, with $4.1 billion, constituting 45% of total IDA commitments.
South Asia and East Asia and Pacific followed with $3 billion and $0.9 billion,
respectively. Among countries, Bangladesh, the Democratic Republic of Congo, India,
Pakistan, and Vietnam represented the largest single recipients in nominal terms.
The IDA Agreement
At the conclusion of the IDA-14 negotiations, IDA donors announced that at least
$34 billion in resources will be made available to the 81 IDA-eligible countries during the
three years of IDA-14 (2005-2008). Of the $34 billion, $18 billion will be in new
donations from the 40 contributor countries. The remaining $16 billion will come from
reflows (repayments on former IDA loans) and transfers from the International Bank for
Reconstruction and Development (IBRD), the World Bank’s market-rate lending facility.
The $34 billion in resources made available by IDA-14 is an $11.6 billion increase
from the total IDA-13 level of $22.8 billion. It includes an $8 billion increase in donor
contributions from $12.7 billion in IDA-13 to $20.7 billion in IDA-14, an almost 40%
increase.
The Bush Administration has pledged $2.85 billion to IDA between FY2006 and
FY2008, and seeks $950 million of this total in FY2006. This represents no real increase
from the amount budgeted and requested by the United States for IDA-13. For that
replenishment, the Administration requested $2.55 billion over three years ($850 million
per year, FY2003-FY2005) as well as $300 million in incentive agreements if the World
Bank met certain Treasury-specified performance targets ($100 million in FY2004 and
$200 million in FY2004).
Since the total size of donor contributions to IDA has increased by 40% while the
U.S. contribution has remained constant, the U.S. share of IDA decreases to 13% in IDA-
14 from 21% in IDA-13. Whether this decrease in the U.S. IDA share will have any
effect on the ability of the United States to pursue future objectives at IDA has not yet
been determined. The decline in U.S. percentage contributions does not affect voting
share. The United States is still the largest shareholder in IDA with 13.98% percentage
of votes as of June 1, 2005. However, since the European member countries combined
hold a much larger percentage of World Bank shares than the United States, as well as
an increased share of IDA contributions, some analysts argue that they could exert more
force in IDA lending decisions and/or future replenishment negotiations if they negotiate
together.2
2 Current IDA voting status of all contributor countries is available at
[http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/ORGANIZATION/BODE
XT/0,,contentMDK:20124817~menuPK:64020035~pagePK:64020054~piPK:64020408~theS
itePK:278036,00.html].

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U.S. Objectives
The United States Government pursued many priorities at the IDA-14 negotiations.
Major U.S. objectives at IDA-14 were: implementing a results measurement framework,
increasing the allocation of grants, implementing performance-based allocation, and
increasing World Bank transparency.3
Measuring Results. In recent years, many observers — both critics and
supporters of the multilateral development banks — have cited a need to better measure
the performance of World Bank projects. A criticism, often voiced by the U.S.
Administration, is that it is unclear what MDB assistance has accomplished due to vague
objectives and too much emphasis on outputs (volume of aid) rather than country
outcomes. Introducing stronger performance requirements thus became one of the
Administration’s most sought after goals at IDA.
The IDA-14 performance measurement system is two-fold, assessing both (1)
progress on aggregate country outcomes, and (2) IDA’s contribution to country outcomes.
To assess country performance, the World Bank will monitor a set of 14 country
indicators for all IDA countries.4 To analyze IDA performance, the World Bank will
create output indicators measuring IDA’s contribution in the health, education, water
supply and transportation sectors. In addition to country performance and IDA
performance indicators, the World Bank will design country-level institutional indicators
and project-level indicators. The IDA-14 Agreement also stipulates that World Bank
management work to ensure that 100% of IDA investment projects and development
policy loans include indicators connected to a timeline with baseline data and periodic
assessments of project and program performance.
Performance-Based Allocation. Building on the new results measurement
system, the U.S. Administration would like to channel more IDA resources to the
strongest performing countries. Total IDA-14 allocations will be determined using a
formula that includes the IDA Country Performance Rating5, Gross National Income
3 See Secretary of the Treasury John Snow, Remarks: IDA-14 Replenishment Meeting, February
22, 2005, available at [http://www.treas.gov/press/releases/js2270.htm].
4 Country indicators are: proportion of population below $1/day poverty line, under-5 child
mortality, HIV prevalency rate of women aged 15-24, proportion of births attended by skilled
health personnel, ratio of girls to boys in primary and secondary education, primary school
completion rate, proportion of population with sustainable access to an improved water source,
fixed lines and mobile telephone per 1,000 inhabitants, formal cost required for business start-up,
time required for business start-up, public expenditure management, GDP per capita, access of
rural population to an all-season road, household electrification rate.
5 The IDA country performance rating is determined by two World Bank ratings: the Country
Policy and Institutional Assessment (CPIA) and the Portfolio Performance Rating (ARPP). The
CPIA constitutes 80% of IDA’s country performance rating, and is a combined index of 16 pieces
of information evaluating economic management, structural policies, policies for social
inclusion/equity, and governance. The CPIA system was a U.S. initiative and was put in place
during the IDA negotiations in 1998. The ARPP assesses each country’s performance on
implementing prior programs, and accounts for 20% of the performance rating. The CPIA/ARPP
(continued...)

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(GNI) per capita, and population. The IDA Performance Rating is the dominant factor,
and higher performance can increase IDA allocations exponentially.
Grants. The United States has advocated for several years the use of grants rather
than loans at the MDBs concessional lending facilities. This view is a response to the
debt situation of many of the poorest countries, principally in sub-Saharan Africa.
Bilateral and multilateral debt of the poorest countries increased heavily between the
1970s and the present. It has become increasingly clear that the poorest countries are
unable to service their old loans let alone new loans. In 1996, the multilateral banks, the
International Monetary Fund, and the major creditor nations introduced the Heavily
Indebted Poor Countries (HIPC) initiative to reduce debt levels for the poorest countries.
Building on this initiative, President Bush, in 2001, introduced his proposal that the
World Bank shift its assistance to the poorest countries away from loans to grants.6
According to Bobby Pittman, Treasury Deputy Assistant Secretary for Multilateral
Development Banks, “grants can be useful for ending the lend-and-forgive cycle.”7 Other
donor countries agree with the concept of grants, yet note that without commensurate
increases in IDA funding, the bank’s financial strength may suffer. Some analysts note
that an unstated component of the long-term U.S. Administration policy-shift towards
increased MDB grants may be a shrinking of the institution. Barring additional donor
funds, the capacity to provide future assistance will decline because of fewer loan
repayments. Critics of grants also note that the World Bank’s IDA loans are already
provided on highly concessional terms, with little or no interest.
At IDA-14, deputies agreed on 30% of total IDA assistance in the form of grants, an
8% increase from IDA-13. Which IDA countries are eligible for grants depends on their
level of “debt distress.” Under the new “debt distress” framework, 47 countries are
projected to receive grant financing, 42 of which will receive 100% of their IDA
assistance in grants. Special dispensation will be given for HIV/AIDS grants to IDA-only
countries that would be ineligible for grant assistance under the new debt distress
criterion.
Transparency. Increasing transparency and public disclosure of World Bank
documents and policies has also been a longstanding U.S. priority at the World Bank.
Section 581 of the FY2004 Consolidated Appropriations Act (PL 108-199) directed the
Treasury Department to pursue policy goals related to transparency and accountability
across the MDBs.
5 (...continued)
number is multiplied by a country measure of good governance to determine the IDA Country
Performance Rating.
6 “I propose that up to 50 percent of the funds provided by the development banks to the poorest
countries be provided as grants for education, health, nutrition, water supply, sanitation and other
human needs” President George Bush, speech to the World Bank, July 17, 2001. See also CRS
Report RL31136: World Bank: IDA Loans or IDA Grants?
7 Paul Blustein, “World Bank Plans to Shift to Grant Aid,” The Washington Post, January 14,
2005.

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These priorities influenced U.S. objectives at IDA-14. A major component of the
IDA-14 agreement is the World Bank’s commitment to full disclosure of the numerical
ratings for the Country Policy and Institutional Assessments (CPIA) ratings beginning in
2005. The CPIAs are the main component for determining IDA lending allocations.
Although the World Bank began disclosing the CPIA ratings in 2000, non-governmental
organizations argued that they were released in an aggregated format that did not reveal
anything about how country rating differed between countries and how the ratings were
calculated.8
In addition to releasing the CPIA indicators and their supporting data, the IDA-14
Agreement calls on the World Bank Executive Board to implement other important
transparency reforms. Specifically, the Agreement directs the Board to: (1) disclose
Board minutes; (2) strengthen procedures for documenting public consultation processes;
(3) make interim results of projects during their execution publicly available; and (4)
require an independent audit or assessment of internal management controls and
procedures for meeting operational objectives.
World Bank reports already available to the public include Country Assistance
Strategies, Project Appraisal Reports, Tranche Release Documents, Heavily Indebted Poor
Country (HIPC) initiative documents, Poverty Reduction Strategy Papers, Joint Staff
Assessments, and Implementation Completion Reports. In addition, as required by the
1989 Pelosi Amendment, all environmental assessment reports, resettlement instruments
and indigenous people’s development plans associated with projects that required the
preparation of these documents are to be disclosed to the public.9
FY2005 Appropriations and the FY2006 Request
In FY2005, the President requested $1.061 billion to cover the third of three
scheduled annual contributions under IDA-13 ($850 million base payment plus $200
million of a U.S.-committed $300 million incentive contribution for increasing IDA
performance standards) and $11.3 million to cover a portion of U.S. arrears. As enacted,
the FY2005 Foreign Operations spending measure (Division D of P.L. 108-447) provides
$843.2 million to IDA in FY2005. The enacted appropriation provided slightly less than
the $850 million annual IDA 13 commitment, and did not fund the Administration’s $200
million incentive payment or make any payments towards U.S. arrears.
Of the Bush Administration $2.85 billion commitment to IDA-14, the
Administration is seeking $950 million of this total in FY2006. The request for IDA
makes up 70% of the $1.335 billion FY2006 request for the international financial
institutions. The Administration has not made any request to cover the $328 million U.S.
arrears to IDA. Since the Administration considers its total authorized IDA subscription
amount binding, Congressional appropriations less than the requested amount are counted
as arrears. Current U.S. IDA arrears stem principally from the $300 million incentive
8 Jeff Powell, “The World Bank policy scorecard: The new conditionality?” The Bretton Woods
Project, November 22, 2004. Document is available at
[http://www.brettonwoodsproject.org/doc/knowledge/cpia.PDF]
9 See CRS Report 98-180, Mulilateral Development Banks’ Environmental Assessment and
Information Policies: Impact of the Pelosi Amendment.


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contribution that was included in the U.S. IDA-13 commitment of which only $40 million
was appropriated in FY2004. Remaining arrears are due to IDA appropriations less than
the requested amount.
Congressional Action
Authorization. Congressional authorization is required for U.S. participation in
each IDA replenishment agreement and appropriation of funds to meet the commitment
over a multi-year period.10 On May 26, 2005, the Development Bank Reform and
Authorization Act of 2005
(S. 1129), was introduced in the Senate. The bill would
authorize the full $2.85 billion U.S. request for IDA-14 as well as direct the U.S.
Executive Director at the World Bank to advocate several reform measures related to
increased transparency and accountability.
The reform measures included in the proposed legislation include (1) setting aside
funds in a trust at the World Bank for borrowers to use for investigation and prosecution
of fraud and corruption related to development bank loans or projects; (2) requiring a
public explanation of each U.S. Executive Director vote on the Treasury website and
disclosure of statements on controversial projects; requiring funding documents be
distributed to the public; (3) supporting mandatory financial disclosure of all employees
(as is done by U.S. senior government employees); and (4) encouraging the
implementation of Foreign Corrupt Practices Act guidelines for all entities contracting
with the development banks. Other reforms included in the legislation are reforms (5) to
strengthen whistleblower policies; (6) to support the independence and efficacy of the
audit functions; and (7) to ensure that revenues from extractive industries projects are not
stolen. The legislation would also require several GAO reports to monitor the
implementation of these recommendations.
Appropriations. IDA appropriations are included in the annual Foreign
Operations appropriations bill in the House, and the State, Foreign Operations measure
in the Senate. As of the end of May 2005, neither piece of legislation has been
introduced.11
10 See also CRS Report RS22133, Multilateral Development Banks: Current Authorization
Requests.

11 CRS Report RL32919, Foreign Operations (House)/State, Foreign Operations, and Related
Programs (Senate): FY2006 Appropriations.