Third General Replenishment of IDA Resources
The rapid recent growth of IDA commitments and the still faster growth of developing countries’ needs for concessionary development finance of the kind that IDA provides make it essential that the Association obtain more funds. Negotiations for a third general replenishment of IDA’s resources, for the fiscal years 1972, 1973, and 1974, were successfully concluded. In July, the Association’s Executive Directors recommended and transmitted to member governments for approval a proposal under which 21 member countries plus Switzerland would make available to IDA approximately $813 million a year. This compares with the first replenishment of IDA’s resources, in 1966, which provided $250 million a year, and the second replenishment, in 1968, which provided $400 million a year.
Under the terms of this proposal, the 18 high-income member countries known as “Part I” countries would make annual contributions to IDA in the amounts shown below:
Three IDA members that are not Part I countries have also indicated their intention, subject to any necessary legislative action, of making a contribution in connection with the replenishment. These countries and the amounts they propose to contribute over the three-years are as follows:
Completing the package of additions to IDA’s resources, the Swiss Confederation, not a member of IDA, has agreed to make the Association a 50-year interest-free loan equivalent to approximately $10 million a year for a total of $30 million, payable in three equal installments in 1971, 1972, and 1973. Switzerland had extended a $12 million loan on similar terms to IDA at the time of the second replenishment in 1968.
The target date for the replenishment to become effective is June 30, 1971, by which time at least 12 countries, pledging not less than $1,900 million, must formally notify IDA that they will make their specified contributions.
It was also agreed that the voting power of Part I members should be adjusted so as to reflect more accurately the share of each of them in the total financial contributions of Part I countries to the Association. It was further agreed that Part II countries be given the opportunity to make additional subscriptions on easy terms to the Association in order to permit them to maintain the relative voting power of the Part II countries as a group.
Bank Transfers $100 million to IDA
Annual transfers from net income in the form of grants have been made by the Bank to IDA in each year since 1964; the six-year total amounts to $385 million. These transfers have been of sums that would otherwise have been made available for distribution as dividends to the Bank’s member countries and that are not needed for allocation to reserves or otherwise required to be retained in the Bank’s business. At the Annual Meeting in Copenhagen in September, the Board of Governors approved a recommendation of the Executive Directors for a further transfer to IDA of $100 million.
The Bank took over from the International Monetary Fund the chairmanship of the Consultative Group for the coordination of development assistance to Ghana, and reactivated the Group for Thailand during the quarter ended September 30. A meeting of the Pakistan Consortium was also held during the quarter.
At its meeting in London in July the Ghana Group reviewed the country’s economic situation and prospects and noted that Ghana was fully justified in seeking to accelerate the pace of its development. To sustain more rapid growth Ghana needs domestic and external resources well above those available at present.
In addition to the Bank, the Fund, and Ghana, the following countries were represented at the meeting: Canada, France, Germany, Italy, Japan, the Netherlands, Switzerland, the United Kingdom, and the United States. The United Nations Development Program (UNDP) was represented by an observer.
The meeting of the Group, the first to be held under Bank chairmanship, was a preliminary to a more comprehensive meeting planned before the end of 1970.
The Consultative Group for Thailand met in Paris in September under the chairmanship of the Bank and noted the remarkable economic growth of Thailand over the last decade, achieved under conditions of stability. The meeting agreed that the increased inflow of external capital and the ensuing rise of debt service liabilities had not in any way reduced Thailand’s creditworthiness. The necessity of larger capital inflows, the major part of which is expected from the private sector, during the Third Five-Year Plan (1971-76) was recognized. In this regard, the maintenance of a good investment climate was considered of importance. The amount of public capital inflows suggested by the Government of Thailand and endorsed in the Bank’s economic report was considered realistic.
The meeting agreed that in the next 12 months the efforts of the Government and the Group should be directed toward the study and preparation of programs and projects for inclusion in the Third Development Plan. During 1971 the Bank will review economic developments in Thailand and the Third Plan. A report will be distributed to the Group prior to the next meeting, which it was agreed should be held late in 1971.
Ten countries—Australia, Belgium, Canada, France, Germany, Italy, Japan, New Zealand, the United Kingdom, and the United States—were represented at the meeting. In addition, representatives of the Fund, UNDP, and observers from the Asian Development Bank, the Netherlands, Switzerland, and the Organization for Economic Cooperation and Development (OECD) attended the meeting.
The Thailand Group last met in 1966. In the ensuing years Thailand’s circumstances were such that it had no need for assistance other than that provided by the member countries following that meeting.
The Pakistan Consortium met in Paris in July and reviewed (a) the recent economic developments and the issues confronting the country during the Fourth Five-Year Plan, which began on July 1, (b) Pakistan’s demographic situation and family planning program, and (c) the country’s aid requirements for the current fiscal year. The meeting also considered a program for the accelerated development of East Pakistan’s agricultural and water resources.
Members of the Consortium noted with satisfaction that over the past five years Pakistan had been able, despite severe difficulties, to achieve considerable progress in several important areas of economic development, notably in over-all economic growth, in accelerating agricultural growth in West Pakistan, and in expanding foreign exchange earnings.
Members of the Consortium also noted that progress toward meeting the needs of economic and social development, as outlined in the Fourth Plan, would make considerable demands on the Government of Pakistan to raise additional resources domestically, to achieve continuing rapid expansion of exchange earnings, and to provide an effective framework for the allocation of resources to areas of high priority. They noted further that successful implementation of the Fourth Plan would also depend on the ability of those assisting Pakistan to provide adequate technical and financial support.
|Iran||Development Finance Company||50.00|
|Morocco||Development Finance Company||10.00|
|Nigeria||Development Finance Company||10.00|
|Total loans made during the first|
|quarter of Fiscal 1971||172.50|
Many members of the Consortium shared the concern expressed by the head of the Pakistan delegation on the implications rapid population growth had on the possible improvement in living standards in Pakistan. They noted with satisfaction that over the past five years Pakistan had made a promising start in dealing with this problem and in building up a countrywide organization for family planning. They also welcomed the Government’s intention to pursue these efforts with determination in the years ahead.
A report prepared by the Bank proposing a series of short-run and long-run measures to increase the pace of agricultural and water development and flood protection in East Pakistan was presented at the meeting. Members agreed that the objectives of this program were of the first priority in accelerating economic and social development in East Pakistan, and that the proposals for an action program prepared by the World Bank represented a reasonable basis for a coordinated effort to this end.
The members noted the Pakistan Government’s request for external assistance in the current fiscal year of $570 million and accepted that Pakistan could effectively use aid in this amount.
Norway became a member of the Consortium at this meeting. The other members are Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom, the United States, and the Bank and IDA. Representatives of the Fund, the OECD, the UNDP, and Switzerland attended as observers.
Equatorial Guinea and Cambodia became members of the Bank in July, raising the membership of the Bank to 115 countries. IDA membership increased to 106 with the addition of Cambodia.
New IFC Investments
IFC joined a broad group of Turkish private investors and a United States company to sponsor NASAS (Aluminyum Sanayii ve Ticareti A.S.), a new $24.7 million, 20,550 tons-a-year aluminum sheet and foil producing enterprise in Turkey. Turkish sources, including a group of more than 100 business firms and individuals, are providing the bulk of the financing. Amax Aluminum Company, Inc., a subsidiary of American Metal Climax Inc., is technical partner. IFC’s commitment was approximately $7.3 million in loan and equity.
The Corporation made its third commitment to C.A. Venezolana de Desarrollo (Sociedad Financiera), known as Cavendes, Venezuela’s only private development finance company and its most important private source of investment finance. The $10 million loan and stand-by loan commitment bring IFC’s investments in Cavendes to almost $19 million and will help the company meet rapidly rising demands for industrial finance in Venezuela.
|Total credits extended during the first|
|quarter of fiscal 1971||55.80|