International Development Association - Know Donor & Borrowing Countries, Financial Instruments & More!

The International Development Association (IDA) of the World Bank is a significant and highly effective initiative dedicated to combatting extreme poverty in some of the world's poorest nations. Operating in 74 countries across Africa, East Asia & Pacific, South Asia, Europe & Central Asia, Latin America & Caribbean, and the Middle East & North Africa, IDA's primary mission is to alleviate poverty through the provision of funding and policy guidance for initiatives that promote economic growth, enhance resilience, and enhance the well-being of impoverished individuals worldwide. Notably, more than half of the active IDA recipient countries presently receive the entirety or half of their IDA resources in grants, which do not require repayment. These grants are specifically directed towards low-income countries at greater risk of debt distress.

 Over the course of the last 62 years, IDA has allocated approximately $458 billion to support investments in 114 countries. Furthermore, IDA has a commendable history of assisting nations facing various crises.

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International Development Association

The International Development Association is part of the World Bank Group which aims to reduce poverty by providing zero to low interest loans and grants for programs that boost economic growth, reduce inequalities, and improve the living conditions.

It was established in 1960 by signing an agreement between 15 countries. Currently, 173 countries are its members. Among them, 52 Nation states are Donor countries. It lends to around 75 countries, out of which 39 countries are located in the African subcontinent. It is the single largest source of Donor funds for basic social services in these countries. It replenishes its resources every 3 years. It compliments the World Bank’s original landing arm -the International Bank for Reconstruction and Development (IBRD). It lends money to the borrowing countries on concessional terms. More than half of the member states received the resources on grant terms, which carry no repayment. In addition to concessional loans and grants, it also provides significant levels of debt relief through the Heavily Indebted Poor Countries Initiative(HIPC) and the Multilateral Debt Relief Initiative (MDRI).

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Donor countries of International Development Association

A global coalition of development partners announced in 2019 their commitment to maintain momentum in their fight against extreme poverty with $82 billion for the International Development Association. The funds of IDA get eroded and hence need to be replenished periodically. These resources are replenished every 3 years. Different countries provide the replenishment. Statistics have pointed out that G7 countries remain the top donor contributors. Their contribution forms 69% of the total funds donated. 26% of the funds are donated by mid-sized traditional donor countries and the 34 small donor Nations contribute 5%.

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International Development Association- Borrowing Countries

The eligibility for support depends on the country’s relative poverty, defined as gross national income per capita below a specified threshold updated annually. Ida supports countries, including several Small Island States that are above the operational cut off but lack the creditworthiness to borrow from the IBRD.

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International Development Association- Fund Allocation

The fund allocation decisions are based on several criteria, including each country’s income level and performance record in managing their economy and ongoing projects. To be eligible for funds the country must meet the following criteria:

• Relative property must be below the established threshold. In fiscal year 2022 it was $1205.
• Lack creditworthiness to borrow on market terms and hence are in need of concessional resources to finance the country’s development program.
• The countries are also assessed to determine how well they implement policies that promote economic growth and poverty reduction.

International Development Association- Financial Instruments

The financial instruments under the IDA are as follows:

• Development policy operations- it focuses on financial policies that are consistent with the country’s economic policies.
• Investment operations- It is used to finance physical and social infrastructure which are necessary to reduce poverty and enable sustainable development.
• IDA guarantees- It helps in the mobilisation of private sector finance.

International Development Association and India

India was among the founding members of the International Development Association. It got its first investment from the IDA to construct a Highway way back in 1961. In the next decade, it accounted for nearly 3/4th of all the World Bank’s lending to India. By 1970, India was the largest recipient of funds. It is also a Donor to the IDA, classified as part 2 donor country. Currently, India is classified as a Blend country and is creditworthy for receiving funding from both IBRD and IDA.

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We hope all your doubts regarding the International Development Association are addressed after going through this article. Testbook provides comprehensive notes for different competitive examinations. It has always assured the quality of its product like content pages, live tests, Gk and current affairs, mocks and so on. Ace your UPSC preparation with the Testbook App!