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Finance & Development, March 1980
Article

Bank activity: Sixth Replenishment of IDA; general capital increase of Bank announced; Ecuador gets first urban project loan; Bank loans and IDA credits

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
March 1980
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Agreement reached on a Sixth Replenishment of IDA

The International Development Association (IDA) recently announced that representatives of 33 countries have agreed to arrangements to increase the Association’s resources in real terms through a Sixth Replenishment of its funds.

The Sixth Replenishment, which gives the Association commitment authority for the three-year period July 1, 1980 to June 30, 1983, provides for an estimated $12 billion of additional funds to IDA for priority development projects in the poorest developing countries.

The proposed $12 billion replenishment allows for a real increase in IDA’S resources, taking into account price increases and inflation since the Fifth Replenishment.

The Executive Directors of the Association approved these arrangements and submitted them for adoption to the Association’s Governors, who represent all member governments. No commitment to contribute by any member will be made until approval, where necessary, has been obtained from its legislature.

IDA is the largest source of multilateral lending on concessional terms to developing countries. IDA credits are for 50 years, with repayments after 10 years. These credits are interest free, except for a service charge of ¾ of 1 per cent to meet IDA’S administrative costs. The development projects financed by IDA must meet the same economic and financial standards as those financed by the World Bank.

Representatives reviewed the burden-sharing arrangements under the Fifth Replenishment and negotiated a rearrangement of shares in the Sixth Replenishment. The main changes occurring under this rearrangement involved increases in the shares of the Federal Republic of Germany (from 10.9 per cent to 12.5 per cent of the total) and Japan (from 10.3 per cent to 14.65 per cent); and reductions in those of the United States (from 31.2 per cent to 27 per cent), Sweden (from 3.8 per cent to 3 per cent), and Canada (from 5.8 to 4.3 per cent). Nine other countries—Austria, Belgium, Denmark, Finland, the Netherlands, Norway, Korea, Spain, and Yugoslavia—have increased their shares.

Since it began operations in 1960, IDA has attracted growing support from the international community. Membership in IDA has increased from the original 68 in 1960 to the present 122 countries, while the number of contributors has grown from 17 to 33 contributing to the Sixth Replenishment. Member governments contributing to the Sixth Replenishment for the first time are Argentina, Brazil, Greece, Mexico, Portugal, and Venezuela (Romania may join this group), providing a total of at least $128 million.

By June 30, 1979, IDA had extended credits totaling $16.7 billion for development projects in 74 of the poorest countries in Asia, Africa, the Middle East, and Latin America. Some 90 per cent of IDA credits have gone to 40 countries with a median annual per capita income level of $200 or less. IDA assistance is also directed toward projects designed to increase the productivity, incomes, employment opportunities, and standards of living in the lowest income groups within the recipient countries—nearly half of its lending being devoted to agricultural and rural development.

General capital increase approved by Bank’s Governors

An increase of the equivalent of $40 billion to the authorized capital stock of the World Bank was recently approved by the Bank’s Board of Governors by a three-fourths majority, the margin required for approval by the Bank’s Articles of Agreement.

The increase—which roughly doubles the World Bank’s current authorized capital stock—will enable Bank lending to continue to grow, in real terms, through the middle of the 1980s. (The Bank’s Articles of Agreement limit the amount of disbursed and outstanding loans to the total of its subscribed capital and reserves.)

Of subscriptions received, 7.5 per cent— amounting to approximately $3 billion—will be paid in to the Bank. The remaining 92.5 per cent, or $37 billion, will be added to the subscribed capital, which is callable only to meet the obligations of the Bank to holders of its securities and thus serves to back the Bank’s obligations. Subscriptions to the increased capital will be accepted between September 30, 1981 and July 1, 1986.

The World Bank finances its lending primarily from three sources: its own borrowings on the world capital markets; paid-in capital; and retained earnings. As of September 30, 1979, it had made loan commitments in excess of $52.4 billion. A further $17.3 billion had been committed by the Bank’s affiliate, the International Development Association.

Bank loan for Ecuador’s first urban development project

Ecuador’s first urban development project will be implemented with the help of a $31 million World Bank loan.

The project will provide improved shelter to 12,700 households and employment to about 5,000 persons in Guayaquil, the largest city in the country. It will directly benefit about 100,000 people, or 10 per cent of the city’s population. Nearly 90 per cent of the project investments are meant to help the poorest families in Guayaquil. The project will also help to promote institutional development to address urban needs on a larger scale, both in Guayaquil and nationwide.

The total cost of the project is estimated at $51.6 million. It includes loans and technical assistance for small-scale enterprises, upgrading of slums, development of sites and services, and loans for household construction and improvement. A feasibility study for an artisans’ market in Guayaquil will also be undertaken.

The $31 million Bank loan is for 17 years, including 4 years of grace, with 7.95 per cent interest per annum.

World Bank loans approved during second quarter of fiscal year 1980(Ended December 31, 1979)
Amount
CountryaPurpose(In millions of U.S. dollars)
AlgeriaTechnical assistance20.0
ArgentinaHydroelectric power210.0
BotswanaWater supply4.4
Caribbean regionDevelopment bankingb23.0
ColombiaNickel80.0
Dominican Republic (3)Financing of import
requirements for post-
hurricane reconstruction,
road reconstruction, road maintenance and reconstruction85.0
EcuadorUrban development31.0
Ivory CoastEducation24.0
JordanEducation19.0
Korea (2)Population, power145.0
LiberiaOil palm12.0
MauritiusDevelopment banking6.0
NicaraguaAgricultural and industrial rehabilitationc20.0
Nigeria (2)Power, urban development117.8
PanamaPower23.0
ParaguayPreinvestment studies5.0
PeruIrrigation56.0
Philippines (2)Fishery (training), rural development65.0
RomaniaLivestock85.0
Thailand (3)Hydroelectric power, natural gas pipeline, irrigation262.0
TurkeyAir pollution control6.0
UruguayPower24.0
Yugoslavia (2)Port, railways64.0
ZambiaRailwayd25.0
Total1,412.2
IDA credits approved during second quarter of fiscal year 1980(Ended December 31, 1979)
Amount
CountryaPurpose(In millions of U.S. dollars)
Bangladesh (2)Small-scale drainage and flood control, highways35.0
BurmaTelecommunications35.0
Caribbean regionDevelopment bankingb7.0
CongoPetroleum5.0
India (3)Forestry, fisheries, irrigation267.0
Kenya (2)Integrated agricultural development, development of semi-arid areas52.5
Nicaragua (2)Urban reconstruction, agricultural and industrial rehabilitationc32.0
NigerAgricultural development20.0
Pakistan (2)Agricultural development banking, power75.0
Sierra LeoneTechnical assistance2.5
SomaliaAgricultural development12.0
TanzaniaPort engineering2.5
Upper VoltaEducation14.0
West AfricaDevelopment banking (Banque Ouest Africaine de Développement)3.0
ZambiaRailwayd15.0
Total577.5

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