Multilateral Development Banks

Published under: Bondevik's 2nd Government

Publisher Ministry of Foreign Affairs

September 2004

Multilateral Development Banks

The "World Bank" is the name that has come to be used for the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).

The World Bank (IBRD) and the regional development banks (the African Development Bank, the Asian Development Bank and the Inter-American Development Bank) mobilise financial resources and expertise to assist developing countries and middle-income countries. The member countries contribute to the banks’ capital bases according to their relative size in the world economy.

The major part of the capital base consists of guarantees from the member countries, and this gives the institutions high creditworthiness and consequently enables them to borrow from the international capital markets on extremely favourable terms. The money is then lent to borrower countries on approximately the same terms. Their terms are usually far superior to those that the countries themselves could get on the capital markets.

For the poorest countries, which do not have access to loans from the capital markets, the banks mobilise their development funds through periodical negotiations between donor countries. The World Bank, the International Monetary Fund (IMF) and the regional development banks are the only credit institutions that are willing to issue loans to many poor countries.

The replenishment negotiations constitute important arenas for policy development and determine the guidelines for the activities of these the institutions. At present (2004) replenishments are under way in the World Bank (IDA) and the African Development Bank.

During recent years the development banks have to an increasing extent set the agenda of the development debate, and they have gained importance for instance when it comes to post-conflict stabilisation. The World Bank has to a large degree shaped the international debate on national poverty reduction strategy papers (PRSPs), but is not always equally good at following up the harmonisation agenda at country level.

Norway has, together with its Nordic co-operation partners, consistently stressed that the development banks should follow up their efforts towards harmonisation and division of roles, including a greater degree of recipient orientation and national ownership. Norway gives high priority to the work of these institutions and is a major contributor.