Norway to provide NOK 3.3 billion to new, record-high financing package for world’s poorest countries

‘The World Bank’s International Development Association is the international community’s largest single channel for multilateral aid. The IDA20 replenishment is crucial to prevent a sudden decline in the World Bank’s assistance to the poorest countries at a time when they need it most. During the pandemic, more than 100 million people have fallen into extreme poverty,’ said Minister of International Development Anne Beathe Tvinnereim.

On 15 December, 48 donor countries concluded the 20th replenishment process of the International Development Association (IDA), the World Bank’s fund for the world’s poorest countries. The result is a record-high USD 93 billion financing package for low-income countries (IDA20), which will cover the period from mid-2022 to mid-2025. This is USD 11 billion higher than the previous replenishment. Norway will provide over NOK 3.3 billion for the three-year period. This is an increase of 7 % compared with Norway’s contribution to the previous replenishment in 2019. Close to NOK 100 million of Norway’s contribution will be used to provide debt relief for poor countries.  

IDA provides heavily subsidised or interest-free long-term loans to the world’s 74 poorest countries, and grants to the most indebted of these countries. The World Bank, the recipient countries and the donors have agreed that the IDA20 policy package is to give priority to climate action, women’s rights and gender equality, private sector development and job creation, health, education, and support for countries and regions affected by conflict and fragility.    

This latest replenishment was brought forward due to the urgent financing needs that have arisen during the Covid-19 pandemic. Over the past two years, a substantial proportion of IDA’s resources has been allocated to health-related efforts and measures to counter economic decline in the world’s poorest countries. 

‘For the first time since 2000, global poverty is increasing. Women, children and vulnerable groups are severely affected. The world is falling behind in the efforts to achieve the SDGs. In the coming years, the international community will need to stand together and take concerted, effective action to regain lost ground and defeat poverty,’ Ms Tvinnereim said. 

There is agreement among the donors that the post-pandemic recovery is to be designed to stimulate growth and create many tens of millions of jobs, and must be based as far as possible on clean energy and climate-friendly technology. Over a third of the IDA20 financing package will be allocated to addressing climate change. Priority will be given to efforts to strengthen preparedness and build resilience to future crises, including climate-related disasters, famine and new pandemics. A substantial proportion of IDA20 funding will be used to finance the purchase and distribution of coronavirus vaccines in the world’s poorest countries.    

Of the total USD 93 billion that has now been mobilised for the next three-year period, contributions from the donor countries account for USD 23.5 billion. Most of the replenishment funding comes from the World Bank itself, with financing raised through the relending of loan repayments and loans in the capital markets.  

‘This is a very effective financing model that provides good value for money in terms of poverty reduction. For every krone we give to IDA20, almost four will be provided to the poorest countries in the form of soft loans or grants,’ Ms Tvinnereim said.  

The US is the largest donor to IDA20, followed by Japan and the UK. The Nordic and Baltic countries have together mobilised more than USD 2 billion, accounting for over 8 % of the funding from donors. 

‘The combined contributions of the Nordic countries make the Nordic region the third largest donor to IDA20, up from fourth place from IDA19. As Minister for Nordic Co-operation, I am very pleased about this. It is also very positive that the share of IDA funding provided to African countries is continuing to rise. IDA20 provides an important means of showing solidarity with Africa,’ Ms Tvinnereim said. 

Potential IDA20 achievements, provided that efforts are fully successful, include:

  • essential health services, better nutrition and family planning services for some 430 million people
  • vaccination of 200 million children
  • a social safety net for as many as 375 million people
  • better access to electricity for 50 million people
  • access to clean cooking stoves for 20 million people
  • better access to clean water for 20 million people

IDA, the part of the World Bank that helps the world’s 74 poorest countries, was established in 1960. IDA is the largest single channel for unearmarked multilateral aid to these countries. IDA provides heavily subsidised or interest-free long-term loans to low-income countries, and grants to the most indebted of these countries. Around two-thirds of IDA funding goes to African countries.

For every dollar the donors give to IDA, IDA now provides almost four dollars to the poorest countries. This is made possible by a financing model under which donor contributions are combined with internal resources from the World Bank itself, in particular relending of repayments. This is supplemented by financing raised by issuing bonds in the financial markets, where the Bank benefits from its AAA credit rating and can secure very favourable terms. 

In October 2021, IDA made its debut in the Norwegian financial market raising NOK 2 billion in capital through a five-year sustainable development bond. The World Bank and IDA are rated very highly in international evaluations of aid effectiveness and performance.