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Bank activity: Assistance from IDA reaches $10 billion mark; Executive Board recommends capital increase; aid to Brazil, the Philippines, and Somalia; Bank interest rate goes up; recent loans

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
September 1976
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IDA crosses $10 billion mark in aid funds

The International Development Association (IDA), an affiliate of the World Bank, has crossed the $10 billion mark in total concessionary development assistance so far granted to the poorer developing countries, where more than a billion of the world’s people live. The majority of IDA credits (90 per cent of credits in fiscal 1975 and fiscal 1976) have been granted to countries with per capita incomes of less than $200.

IDA credits are for a term of 50 years, with a 10-year initial grace period and no interest charge, except a service charge of ¾ of 1 per cent per annum.

About 650 million people in the developing world currently live in absolute poverty, with annual per capita incomes of not more than $50, while another 100 million people earn little more than $50. IDA’s major goal has been to raise the standard of living of the poorest populations of the developing countries by helping to raise national incomes and productivity, increase employment opportunities, and alleviate the recurring food shortages.

The bulk of IDA’s 650 credits have been for specific development projects, all of which have to yield a high financial and economic return to the country where they are located.

Since the great majority of the populations of the developing countries—about 750 million people—live in rural areas, almost a third of IDA’s resources has so far been allocated to agriculture and rural development, and about a fifth has been provided for industrial development. IDA funds have also been lent for telecommunications, education, development finance companies, population, power, tourism, transportation, urbanization, water supply and sewerage, and technical assistance.

Since 1973, the Bank and IDA together have, in fact, become the world’s largest single source of agricultural and rural development finance. In fiscal 1975 and fiscal 1976, IDA lending has been designed to benefit approximately 18 million of the rural poor, by at least doubling their incomes and by increasing food production substantially. Food grain output generated by IDA lending over the past two years, given continuing favorable climatic conditions, is projected at 6 million tons; its value is estimated to be $1.5 billion annually.

IDA lending, as of June 1976(In millions of U.S. dollars)
Approximate

amounts
East Africa1.5
West Africa0.7
East Asia0.7
South Asia*5.9
Europe, Middle East, and North Africa0.9
Latin America and the Caribbean0.3

Three countries in the region—Bangladesh, India, and Pakistan—account for 57 per cent of the population of the developing countries eligible for IDA credits.

Three countries in the region—Bangladesh, India, and Pakistan—account for 57 per cent of the population of the developing countries eligible for IDA credits.

IDA’s funds have been obtained from initial subscriptions from all 116 member countries and subsequently from periodic replenishments provided by richer member countries. Other sources of funds are: special contributions made by some member nations, IDA’s own accumulated net income, and transfers of income from the World Bank (by May 1976, the Bank had made transfers totaling $1,088 million to IDA). Since 1965, there have been four replenishment periods, each lasting three years. For the Fourth Replenishment, which came into effect in January 1975, 23 countries have so far agreed to contribute about $4,254 million. These countriesare: Australia, Austria, Belgium, Canada, Denmark, Finland, France, the Federal Republic of Germany, Iceland, Ireland, Israel, Japan, Kuwait, Luxembourg, the Netherlands, New Zealand, Norway, South Africa, Spain, Sweden, the United Kingdom, the United States, and Yugoslavia. These resources will be fully committed by June 1977 and negotiations are now under way to provide IDA with fresh resources.

Main sources of IDA contributions, as of June 1976
Approximate

percentages
United States34.0
United Kingdom10.0
World Bank110.0
Germany, Fed. Rep.9.0
Japan6.5
France5.5
Canada5.5
Sweden3.5
Netherlands2.5
Italy2.0
Total IDA credit committed$10 billion

Transfers to IDA from the World Bank’s income. In addition, IDA’S own income and repayments on IDA credits amount to approximately 1 per cent.

Transfers to IDA from the World Bank’s income. In addition, IDA’S own income and repayments on IDA credits amount to approximately 1 per cent.

IDA credits during fourth quarter of fiscal 1976(Ended June 30, 1976)
CountryPurposeAmount

(Million U.S. dollars)
Afghanistan (2)Agriculture, power25.0
Bangladesh (3)Development finance company, rural development, technical assistance48.5
BurmaAgriculture30.0
BurundiAgriculture6.0
EgyptDrainage40.0 a
The GambiaRural development4.1
HaitiPower16.0
HondurasAgricultural credit14.0
Jordan (2)Development finance company, tourism10.0
MadagascarTransportation22.0
NigerTelecommunications5.2
Pakistan (3)Drainage, program, water supply90.6
Senegal (2)Agriculture, rural development10.5
Somalia (2)Agriculture, drought relief18.0
SudanTransportation9.0 b
TogoRural development9.5
Upper VoltaRural development9.4
Yemen Arab RepublicGrain storage5.2
Zaïre (2)Education, water supply42.5
Total credits during fourth quarter of fiscal 1976415.5
Total credits during fiscal 19761,655.3

With a $10 million Bank loan.

With a $20 million Third Window loan.

With a $10 million Bank loan.

With a $20 million Third Window loan.

Increase in Bank’s capital is recommended

In May 1976, the Executive Directors of the World Bank recommended approval by the Bank’s Governors of an $8.3 billion increase in subscribed capital. If fully subscribed, this increase will raise the Bank’s total capital subscriptions to $39.2 billion.

This increase is related to the Fund’s Sixth General Review of quotas and represents a continuation of the Bank’s policy of making parallel increases in Bank capital subscriptions corresponding to selective increases in Fund quotas. The purpose of this policy is to ensure that relative positions of member countries remain similar in the two institutions.

Under the Articles of Agreement, the Bank can lend only up to the point where loans outstanding equal the total of subscribed capital and reserves (the so-called statutory limit). The capital increase will enable the Bank to increase its lending program in fiscal 1977 by $800 million (16 per cent) to $5.8 billion and maintain that level indefinitely. Further increases in the Bank’s capital subscriptions are to be considered in the near future to enable its lending program to grow in line with the developing countries’ needs for financial assistance.

Bank makes first nutrition loan with $19 million aid to Brazil

The World Bank made its first loan for a nutrition project in June 1976. The loan, which amounted to $19 million, was approved for Brazil—Latin America’s largest and most populous country.

The funds will go toward a $72 million project designed to help Brazil upgrade the nutritional standards of its population. The project is part of a $1.3 billion comprehensive national nutrition program and helps to lay the foundation for the program. The Brazilian commitment is the largest ever undertaken by a country to combat malnutrition.

Brazil: some basic data on nutrition
1970Most recent estimate
GNP per capita (US$)530.0760.0
Population (millions)92.8101.1
Population per physician1,950.0*2,070.0*
Population per nursing person3,300.0*2,920.0*
Population per hospital bed260.0
Per capita supply of:
Calories (per cent of requirements)109.0110.0
Proteins (qrams per day)64.065.0
Of which: animal and pulse39.0
Source: World Bank.

Economically active population

Dots (…) indicate that data are not available.
Source: World Bank.

Economically active population

Dots (…) indicate that data are not available.

Malnutrition in Brazil, as in many other developing countries, is widespread. It is especially serious in parts of the Northeast where the infant mortality rate—largely nutrition-related—is the highest reported in Latin America.

It is expected that under the project the health of some 110,000 children will be improved over the next four years. The beneficiaries will include pregnant and lactating women from low-income familes, among them families of 3,000 small farmers in Northeast Brazil.

Main components of the project include financing of surveys and studies of national nutrition standards and the nutritional implications of agricultural policies; agricultural extension and credit; social extension involving health services and nutrition education; food supplementation; development of new nutritious foods and food fortifiers; credit for the production of low-cost nutritious foods; and technical assistance for the agencies involved.

The Instituto Nacional de Alimentacao e Nutricao (National Food and Nutrition Institute) will be responsible for the overall administration of the project and will coordinate the other participating agencies.

The loan was approved for a term of 18 years, including 5 years of grace, with annual interest at 8.85 per cent.

The Bank loan to Brazil is a response to the resolution of the World Food Conference calling on international agencies to assist countries in preparing food and nutrition policies and programs.

New Bank lending rate

The World Bank (International Bank for Reconstruction and Development) has announced the adoption of a new formula for determining the interest rate it will charge on new loans after July 1, 1976. A major objective of this change is to help ensure that the Bank’s commercial soundness is protected against the effects of inflation on its cost of borrowing.

Under the formula, the Bank’s lending rate will be reviewed quarterly and will be set 1/2 of 1 per cent above the weighted average cost of funds borrowed by the Bank in the preceding 12 months. The new rate after July 1 is 8.90 per cent.

World Bank to assist Manila slum upgrading

Approximately 180,000 slum area residents will directly benefit from an urban development project in Manila, the Philippines, which is being assisted by the World Bank with two loans totaling $32 million. One loan of $22 million is on conventional World Bank terms. The other loan of $10 million is on the Bank’s “Third Window” terms.

The project seeks to demonstrate that upgrading and improvement of slum areas is an appropriate alternative to resettlement. The area covered by the project embraces the Tondo Foreshore, one of Manila’s worst slums, and the neighboring Dagat-Dagatan area, where the first phase of a sites and services settlement will be developed.

In the two areas, health, nutrition, and other social service improvements will be integrated with physical improvements in water supply, sewerage, and drainage; as far as possible, individual water and sewer connections will be provided. Also included in the project are traffic engineering and management improvements and technical assistance for the Metropolitan Manila Government, as well as technical assistance for national transportation planning.

The project is expected to generate a wide range of benefits, including improvements in health and living conditions and creation by the private sector of about 800 industrial and commercial jobs. Another 200 jobs will be created through a cottage industry loan program.

The Philippines: some basic data
1970Most recent

estimate
GNP per capita (US$)220.0280.0
Population (mid-year, in millions)36.940.2
Population density (per sq. km)123.0134.0
Urban population growth rate (per cent)3.03.0
Urban population (per cent of total)27.629.0
Source: World Bank.
Source: World Bank.

Somalia’s drought rehabilitation

Somalia’s efforts to recover from the drought of 1973 and 1974 will be supported by an $8 million credit by the World Bank affiliate, the International Development Association (IDA). The IDA credit announced in April 1976 is for 50 years, including 10 years’ grace, and is interest-free, with a 3/4 of 1 per cent charge for administrative expenses.

Additional finance of nearly $50 million for the Government’s drought rehabilitation program will be provided by other sources.

The Sahelian drought affected the entire central and northeastern parts of Somalia, involving a large part of the nomadic pastoralist population of about 2 million. Large-scale loss of human life was averted by the Somali Government’s emergency relief camps, which received up to 270,000 nomads, but the livestock loss was extensive.

Somalia: some basic data
1970Most recent

estimate
GNP per capita (US$)70.080.0
Population (mid-year, in millions)2.83.0
Population density:
Per sq. km.4.05.0
Per sq. km. arable land36.0
Total population growth rate (per cent)2.42.4
Source: World Bank.Dots (…) indicate that data are not available.
Source: World Bank.Dots (…) indicate that data are not available.
World Bank loans approved during fourth quarter of fiscal 1976(Ended June 30, 1976)
CountryPurposeAmount

(Million U.S. dollars)
AlgeriaPower57.5
Bolivia (2)Power, development finance company35.0
Botswana (2)Education10.5a
Brazil (5)Agricultural research, industry, nutrition, power211.0
Cameroon (2)Education, transportation19.3b
CyprusDevelopment finance company6.0
EcuadorTransportation33.5
Egypt (4)Agriculture, drainage, industry, transportation157.0c
El Salvador (2)Power39.0d
GhanaRural development21.0e
GreeceTransportation30.0
India (3)Agriculture, command area development, development finance company210.0f
Indonesia (7)Agricultural extension, education, industry, power, transportation436.0
JamaicaPopulation6.8
LiberiaEducation4.0g
MalawiRural development9.2h
MalaysiaRural development21.0
Morocco (2)Multipurpose development, tourism74.0
NicaraguaEducation11.0
PanamaWater supply and sewerage12.0
ParaguayEducation4.0i
Peru (2)Industry, urbanization61.6
Philippines (4)Agriculture, grain processing, urbanization55.5j
PortugalPower36.0
Romania (2)Irrigation, power110.0
SudanTransportation20.0k
Syria (2)Telecommunications, water supply63.0
Thailand (3)Agriculture, education, telecommunications107.0
TogoIndustry60.0l
Turkey (3)Agriculture, development finance company, industry154.5
Yugoslavia (4)Development finance company, environment, multipurpose development, water supply and sewerage153.0
Total-loans during fourth quarter of fiscal 19762,228.4
Total loans during fiscal 19764,978.1

Including a $3.5 million Third Window loan.

Including a $17 million Third Window loan.

Including a $50 million Third Window loan; with a $40 million IDA credit.

Including a $9 million Third Window loan.

Third Window loan.

Including a $145 million loan.

Third Window loan.

Third Window loan.

Third Window Loan.

Including a $10 million Third Window loan.

Third Window loan; with a $9 million IDA credit.

Loan made to Togo, Ivory Coast, and Ghana; project site in Togo.

Including a $3.5 million Third Window loan.

Including a $17 million Third Window loan.

Including a $50 million Third Window loan; with a $40 million IDA credit.

Including a $9 million Third Window loan.

Third Window loan.

Including a $145 million loan.

Third Window loan.

Third Window loan.

Third Window Loan.

Including a $10 million Third Window loan.

Third Window loan; with a $9 million IDA credit.

Loan made to Togo, Ivory Coast, and Ghana; project site in Togo.

Rains during 1975 relieved the drought and the relief camps were disbanded. More than 100,000 people from these camps were relocated in three agricultural settlements between the Juba and Shebelli rivers in southern Somalia, and 14,000 settled in coastal fisheries; the remainder returning to their nomadic life.

In the settlement areas, bush will be cleared from 30,000 hectares of previously uncultivated land for interim food production, halt under rainfed conditions (the IDA project) and half by irrigation. In the fourth year, the settlement areas are expected to produce about 12,500 tons of corn and sorghum, 5,000 tons of rice, 11,000 tons of vegetables, and 4,000 tons of seed cotton.

The Somali Government also plans to rehabilitate the northern rangelands from which the destitute nomads were relocated. The first project for their development has been prepared by IDA, building on previous work by UNDP and FAO, and will be financed by the Kuwait Fund. It will be the first comprehensive program for their rehabilitation. About 140,000 sq. km., representing about a third of the country’s total rangeland, will be developed, and sales of livestock are expected to increase in value by about $30 million a year.

Kyaw Htun

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