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low income countries

Time to Boost IBRD as well as IDA

Homi Kharas's picture

2013 World Bank / IMF Annual Meetings When the negotiations for IDA17 were wrapped up in December, there was great relief that IDA deputies were supportive of an IDA expansion despite their own significant budget difficulties. As part of that package, the World Bank Group itself pledged to give IDA $3 billion from profits.

This was a generous gesture by the World Bank (albeit a drop in the bucket of total aid), but how good was it for the global development effort? Consider the following—net disbursements of official grants and concessional loans (the category where IDA flows appear) have expanded from $39 billion per year in the 1980s (in constant 2005 dollars) to $85 billion in 2010 and 2011. In contrast, official non-concessional lending (the category where IBRD and IFC flows appear) has stayed steady. The latter was $15 billion in the 1980s and $22 billion in 2010/11. This picture is even more striking when considering the amounts in terms of recipient GDP. Grants and concessional flows to low income countries have gone from 3% of their GDP in the 1980s to 13% today, while non-concessional flows to lower middle-income countries (excluding India and China) have gone from 0.7% to 0.3% of their GDP. In fact, from 2000 to 2009, non-concessional flows to lower middle- income countries (and to developing countries as a whole) were negative, implying that developing countries repaid more to official development agencies than they received in gross disbursements.

BRIC Spillovers helped Low Income Countries Withstand Crisis

Justin Yifu Lin's picture

A clear pattern of 'two speed recovery' emerged from the global economic crisis: although the East Asian economies saw a drop of nearly 4 percentage points in their GDP growth to 8.5 percent in 2008 and a further decline to 7.5 percent in 2009, they rebounded quickly to 9.7 percent in 2010. At the same time, however, growth in high income countries fell by 6.6 percentage points during 2008-09, from 2.7 percent in 2007 to -3.9 in 2009. Moreover, these economies are not yet out of the woods given the sovereign debt crises in the Euro Area.  This is one of the many fascinating patterns revealed in the newly updated online version of the World Development Indicators.

What is more striking is that low income countries (LICs) have been resilient during the crises, more so than in the past.  The annual GDP growth rate for low income countries declined less than 1 percentage point in 2008, standing at 4.7 percent in 2009 and quickly recovered to 5.9 percent in 2010.  In particular, Ethiopia, Mozambique, Tanzania, and Zambia have shown robust growth of 6 to 11 percent throughout this period. Similar conclusions were presented in Didier, Hevia and Schmukler April 2011.