* This article was first published in the International Development Journal of Japan in February 2022.
Next month will mark two years since COVID-19 was declared a global pandemic. In this time, we have seen the global health emergency become an economic crisis, with the poorest and most vulnerable countries hit the hardest.
As a result of COVID-19, global poverty has increased for the first time in a generation. A lot of the development gains achieved over the last 15 years in terms of education, health, and nutrition have been wiped out by this crisis. At the same time, the effects of climate change present additional challenges across countries.
In December 2021, the international community came together to support the largest ever replenishment of the International Development Association (IDA), the World Bank’s arm that provides zero- to low-interest loans and grants to the world’s poorest countries. While IDA financing is normally renewed every three years, the current replenishment was advanced by one year to respond to increased demand over the course of the pandemic from our client countries. Japan hosted the virtual pledging meeting that saw $23.5 billion of contributions from donors, which enabled a $93 billion replenishment, the largest financing package in the 61-year history of IDA.
Japan’s support to IDA has been tremendous as one of the largest donors in the twentieth replenishment (IDA20), as it was in the previous replenishment of IDA as well. With support from donors, including a generous contribution from Japan, the 74 countries that rely on IDA funding—most of them in Africa but including Asian and Pacific Island countries such as Bangladesh, Nepal, Cambodia, Laos, Micronesia, and Papua New Guinea—will have $93 billion in concessional financing available over the next three years, with $23.5 billion coming from donor contributions and the rest from a combination of financing raised in the capital markets, repayments, and the World Bank’s own contributions. This means that every $1 that donors contribute to IDA is leveraged into almost $4 of support for the poorest countries, achieving greater value for donor resources through a non-fragmented platform and increased efficiency for development impact.
In the first 20 months of the pandemic, IDA delivered nearly $57 billion in grants and low-interest loans , the largest crisis response in its history. This involved working with partners to assist countries to purchase and deploy vaccines. Nearly 70 countries benefited from IDA financing for vaccines, health professionals’ training, and hospital equipment.
Donor contributions will help IDA support efforts to rebuild human capital, including universal health coverage, vaccines, and nutrition; strengthen debt management and transparency; stimulate green growth with quality infrastructure while adapting to the impacts of climate change; and bolster crisis preparedness, including enhancing disaster risk management.
IDA builds on six decades of experience preparing for, responding to, and recovering from crises—be it Ebola, natural disasters, economic shocks, or global pandemics. Over the last decade, IDA countries have been hit by nearly eight times as many natural disasters relative to the 1980s. This is why IDA joins forces with partners such as Japan to help countries adapt to climate change and mitigate impacts of disasters. In fact, in the fiscal year 2021, 61% of total IDA climate finance was for adaptation and IDA helped 62 countries institutionalize disaster risk reduction as a national priority.
IDA is also one of the main sources of concessional development finance for addressing malnutrition, clean drinking water, and food insecurity. IDA will continue to work with partners to help countries fight malnutrition, improve hygiene, scale up climate-smart agriculture, and repurpose agricultural subsidies . These efforts go hand in hand with the global emphasis on nutrition, such as the Tokyo Nutrition for Growth Summit that Japan convened in December 2021.
There is still much work to be done to support developing countries through the COVID-19 crisis. IDA countries are still lagging in vaccinations and economic recovery. We have seen that the recovery has been dramatically uneven, with per capita income in advanced economies growing at 5% compared to only 0.5% in low-income countries. Many of these countries also increasingly grapple with the impacts of conflict, climate change, and mounting debt challenges, and they need the grants and built-in debt relief that IDA provides. IDA addresses rising debt levels in the poorest countries through the implementation of the Sustainable Development Finance Policy (SDFP), which aims to incentivize IDA-eligible countries to enhance debt transparency, fiscal sustainability, and debt management.
The trust and cooperation of the international community remains crucial. IDA20 is a prime example of such global commitment. The international community is grateful to the Government of Japan for hosting the IDA20 pledging meeting in December and for providing a strong platform to support the world’s poorest and most vulnerable toward a resilient recovery for all.
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