The UK’s support to the World Bank’s International Development Association

 The International Development Association provides good value for money, as it aligns strongly with UK development priorities, leverages non-aid resources and influences development at scale across all low-income countries. However, it could do more to focus on climate change outcomes, to target the poorest, to engage citizens and to meet its own demanding social and environmental safeguard standards.

This review assesses how the Foreign, Commonwealth and Development Office (FCDO) manages its contribution to the World Bank’s International Development Association (IDA), the world’s largest source of grants and low-interest loans for low-income countries, and the value for money this contribution provides for the UK taxpayer. We focus in particular on three ‘priority themes’: climate resilience, fragile states, and the COVID-19 response, as well as IDA’s track record on environmental and social safeguards and social inclusion. This review mainly covers the period from 2015 to 2021 and the four multi-year IDA funding arrangements, called replenishments, falling within it. The last of these (announced in December 2021, and which we could not review in any depth due to timing) marks the end of a long period when the UK was IDA’s largest contributor.

Background

About a third of all development aid from industrialised countries is provided as institutional (or un-earmarked) funding to multilateral or inter-governmental organisations. These include multilateral development banks, of which the World Bank Group (WBG), with its annual commitments (including from non-aid sources) of over $100 billion, is the largest. These banks can offer donors like the UK the benefit of their larger scale, depth and (often) breadth of operations and related technical expertise, including a presence on the ground where the donor has none itself. Increasingly they are also valued for the delivery of international public investments in global public goods, like climate change mitigation.

IDA, founded in 1960, is one of the major components of the WBG, and provides grants and long-term loans to 74 low-income countries for a wide range of social and economic development purposes. IDA’s funding ceiling is agreed with its shareholders every three years, during lengthy ‘replenishment’ negotiations. Its funds come from four main sources, including donor contributions, reflows from loan repayments, internal World Bank resources, and, more recently, borrowing from financial markets. This third source has facilitated a continuous rise in IDA’s three-year replenishment budget, from $52 billion for 2014-17 to $93 billion for 2022- 25. IDA complements the operations of the WBG’s other institutions, which include the International Bank for Reconstruction and Development’s lending to middle-income countries on more market-related terms than IDA, and the International Finance Corporation’s financing to the private sector.

The UK spends about 35% of all its aid through core multilateral contributions and about a quarter of that on IDA, meaning that roughly £1 of every £12 of UK aid was received by IDA during 2015-20. During our review period, the UK was also the largest single donor to IDA, contributing a steady 12-13% of all donor funds, until the decision to reduce this share to just over 8% announced in December 2021. IDA replenishment negotiations also set allocations across funding streams and countries, and sector priorities and policies to be applied to its operations. The UK, as we examine below, is particularly active in this process.

Relevance: How well aligned is IDA with the UK’s international development priorities?

IDA is relevant to, and strongly aligned with, the UK’s development priorities during the review period. IDA’s portfolio has a strong poverty focus. This alignment is partly by design: only low-income countries (currently below $1,205 per capita income, with specific exceptions) can receive support from IDA, and within this eligible group, more funding and softer terms are available for lower-income countries. The UK has consistently advocated for this progressive income-based ‘graduation’ approach for countries within and ultimately out of the IDA pool altogether. However, the empirical link between countries with low per capita income and the concentration of global poverty and other major challenges has weakened over the past decade, as average incomes grew but underlying structural problems persisted in many large developing countries.

Thematically IDA is also well aligned to key UK priorities such as gender, disability, fragility, early crisis responses, human capital, and jobs and economic transformation. Indeed, the UK was a front-runner among IDA donors in advocating for all of these priorities, especially in the case of disability inclusion. Climate change, particularly resilience, has been a special theme since IDA16. IDA support for climate resilience developed further during IDA18 and IDA19, although IDA19 climate-related commitments fell short of UK ambitions. World Bank priority for climate change more widely, especially support for mitigation, was less evident during the Trump US administration (2017-21), which opposed multilateral action in this area.

A third of global aid from Organisation for Economic Cooperation and Development donors goes towards core funding to multilateral development organisations, such as the World Bank’s International Development Association (IDA). Multilateral organisations are diverse in their mandates, but collectively offer certain advantages as a channel for aid, including their ability to concentrate resources and expertise, promote global public goods, and address development challenges at a global scale. It has also been suggested that they provide a greater degree of political neutrality and insulation from donor economic interests than bilateral development organisations do.

Among multilateral organisations, the multilateral development banks (MDBs) play a unique role in utilising a variety of financing instruments – including grants, loans and guarantees – to support investments at scale across a wide range of countries and sectors. By far the largest MDB in terms of commitments to developing countries is the World Bank Group, which currently provides more than $100 billion in finance annually to developing countries through its five institutions, including IDA.

IDA specialises in providing finance on grant terms and better loan terms than available from financial markets (collectively referred to as ‘concessional’ finance) to low-income countries. It will provide $93 billion of finance in the three-year cycle beginning in July 2022, making it the single-largest source of international aid for the world’s poorest countries. In addition to its funding impact, IDA offers platforms for policy dialogue at country and thematic levels, including through its specialised windows on regional public goods, refugees, private sector investment and other topics.

The UK government is a major supporter of multilateral development organisations, especially the World Bank. Between 2015 and 2020, the UK provided 35% of its mostly increasing aid budget – equivalent to an average of £4.9 billion annually – as core multilateral funding. Over this same period, a quarter of UK multilateral aid went to IDA which, as a result, received around £1 in every £12 of total UK aid. This level of support led to the UK becoming the largest donor to IDA over most of the past decade, a position it has decided to relinquish in the 20th round (IDA20, covering 2022-25). The quality of support provided through IDA is therefore central to the overall impact of UK aid.

While a number of Independent Commission for Aid Impact (ICAI) reviews have examined programmes financed by IDA, only a small number have examined IDA as a whole, most recently in 2015. A review of UK support for IDA therefore provides an opportunity for a stand-alone assessment of this important element of UK multilateral aid. It also provides an opportunity to examine changes to IDA’s financing and investment model introduced since 2016.

The purpose of this review is to assess both the effectiveness of UK aid through IDA and how well the UK has used its position as IDA’s largest bilateral donor to shape its policies and operations.

The review is built around the evaluation criteria of relevance, effectiveness and efficiency. It will address the following questions and sub-questions about IDA’s impact and the UK’s efforts to influence its operations.

The review methodology included six main components (see Figure 1) to allow for a good level of methodological and data triangulation for robust answers to the review questions.

IDA’s history and role in the World Bank

Building on its experience in supporting post-war reconstruction in Europe, in 1960 the World Bank formed a new financing arm to provide concessional finance to developing countries – the International Development Association (IDA). IDA’s founding Articles of Agreement state that its purpose is to:

…promote economic development, increase productivity and thus raise standards of living in the less-developed areas of the world included within the Association’s membership, in particular by providing finance to meet their important developmental requirements on terms which are more flexible and bear less heavily on the balance of payments than those of conventional loans…

Beginning with an initial capitalisation of $912 million and a founding membership of 15 countries, over the following decades IDA grew rapidly in size and attracted a wider range of member countries. IDA currently has 174 members and supports 74 developing countries, committing $36.7 billion in funding in financial year 2020-21.

IDA is one of five development institutions which form the World Bank Group, and its focus is on providing highly concessional finance to governments in the poorest and most vulnerable countries. The other World Bank Group institutions are:

• the International Bank for Reconstruction and Development (IBRD), which provides less concessional financing to middle-income countries
• the International Finance Corporation (IFC), which provides equity and more commercial loans to private companies and financial institutions across developing countries
• the Multilateral Investment Guarantee Agency (MIGA), which provides political risk insurance (guarantees) to investors and lenders across developing countries
• the International Centre for Settlement of Investment Disputes (ICSID), which supports the conciliation and arbitration of international investment disputes.

How IDA functions

IDA replenishments

The funding available to countries from IDA is mobilised through a process of replenishing its funds, usually every three years (by custom, these replenishment periods are referred to sequentially by number; IDA20 is starting in 2022). Traditionally, funds were pledged by its shareholders (mainly Organisation for Economic Cooperation and Development countries) and supplemented by reflows from loan repayments and other sources.11 However, since IDA18 (2017-20), the World Bank has supplemented IDA’s finances with borrowing from international bond markets (against the value of IDA’s outstanding loans). This has allowed IDA to expand its resources, from $52 billion for IDA17 to $93 billion for IDA20. Not only did this expansion confirm its status as the world’s largest source of concessional multilateral funding for developing countries, it also helped IDA to overtake its older and less concessional (or more market-related) sister, IBRD, in 2020, at least in terms of commitments. As a consequence of this additional funding, the share of donor contributions – which had remained broadly constant until IDA17 – in IDA’s total resources has fallen considerably (see Figure 2).

Relevance: How well aligned is IDA with the UK’s international development priorities?

This section first reviews the overall strategic alignment of IDA’s portfolio with the UK’s long-standing focus on poor countries, as well as fragile states, and other key UK thematic priorities such as gender, disability, crisis response and climate change. It then examines how well the voices of partner countries, in terms of both governments and citizens, are reflected in IDA policies and operations, which is also a major UK objective.

IDA’s strategy and portfolio are well aligned with the UK’s international development priorities in the Association’s emphasis on tackling poverty, fragility and crises, its country allocations and its focus on inclusion

Overall, and consistent with previous analysis,32 we find IDA well aligned in strategy and portfolio terms with UK development priorities, especially regarding IDA’s poverty focus, cross-country footprint, emphasis on fragile states, focus on gender and disability, and responses to the COVID-19 pandemic. As explained below, this alignment seems to have been driven in part by the UK government’s significant influence over IDA in recent years.

IDA’s legal remit (see Section 3.1) is to “promote economic development, increase productivity and thus raise standards of living” in its beneficiary countries, which is squarely in line with promoting global prosperity, another of the UK government objectives in its 2015 aid strategy. From a strategic perspective, both IDA and the UK also place a significant emphasis on addressing global poverty. The first of the World Bank Group’s two overarching strategic goals is to support the eradication of extreme poverty. This mirrors the statutory objective of UK aid, which must be provided in ways that are “likely to contribute to poverty reduction”. In addition, one of the four core strategic objectives for UK aid over the period of this review has been “tackling extreme poverty and helping the world’s most vulnerable”.

UK development priorities continue to evolve, however, and with them the relative emphasis on poverty reduction. For example, following the merger of the Foreign and Commonwealth Office and the Department for International Development (DFID) into the Foreign, Commonwealth and Development Office (FCDO) on 2 September 2020, the then foreign secretary laid out a significant shift in priorities in a letter to the chair of the International Development Committee linked to seven “global challenges”:

• climate change and biodiversity
• COVID-19 and global health security
• girls’ education
• science, research and technology
• open societies and conflict resolution
• humanitarian preparedness and response
• trade and economic development.

There may be questions about how the UK government sees the poverty reduction agenda reflected in the priorities of this letter and its new strategy for international development, which was published just as this review was being finalised. Answers will only become apparent over time. The integrated review for security, defence, development and foreign policy, which sets out the UK’s ambitions to tilt its global engagement towards the Indo-Pacific region, could be seen as implying a priority for more aid to be spent in this region, which tends to be less poor in terms of gross national income per capita.

The mid-term review of the World Bank’s gender strategy 2016-23 notes that, during the period from 2017 to 2019, the proportion of Bank projects receiving the gender tag – which identifies operations that meaningfully narrow gaps between males and females – increased from 49% to 65%. It also identified that commitment to the gender strategy across the WBG has translated into improvements in project designs. However, it also noted that implementation actions do not consistently match this commitment and are not yet commensurate with the ambition in the strategy.

The challenges facing the Bank in addressing gender issues in a culturally sensitive way were illustrated by our review of the Niger Refugees and Host Communities Support Project. This project originally had a goal of employing 11,500 women through labour-intensive work, but this had to be scaled back to 2,300 because it was judged impossible to achieve within the cultural context of Niger, where very few women are employed in labour-intensive work in the public arena.

Disability has emerged as a new priority for IDA, and securing substantive progress will require sustained attention on this agenda

IDA19 was the first replenishment to address disability-inclusive development in a substantive way, with the UK playing a leading role in securing this outcome. The Bank agreed to address disability across six thematic areas during the course of IDA19, with an overarching commitment to ensuring that “all investment operations will be screened for risks and opportunities for people with disabilities and will be in line with the WB’s ten commitments on disability inclusion”. These commitments were introduced in response to the 2018 Global Disability Summit organised and hosted by the UK.

It is too early to know whether these commitments on disability are supporting IDA to respond more effectively to the development challenges facing people with disabilities. However, the IDA19 mid-term review reported that these commitments are on track, and the Bank informed us in an interview that to date 55 projects launched through IDA19 have addressed the needs of people with disabilities.

In addition, the Environmental and Social Framework requires IDA clients to consider disability in their social impact assessments and outlines an objective of universal access to Bank-supported operations, along with a tracking indicator. Reports show that a quarter of IDA investment projects now apply the concept of universal access at design.

“Yes, we were involved in the design as they promised to build a special design for us the disabled, so we can find it easy to access transportation.”

– Remark made by a community representative in reference to authorities implementing the IDA-funded IRUMP project, Lumley, Freetown, Sierra Leone

“They hadn’t involved us in the design, we had only seen them come to our house to identify us and do the evaluations.”

– Remarks made by project-affected people talking about the IDA-funded Great Lakes Trade Facilitation Project, Goma, DRC    

The mainstreaming of ESF requirements through national systems is, in principle, good development practice. It suggests that any improvements will accrue not just to Bank-funded operations, but to all public investments. It also supports faster initial progress on project design and approval, as much of the staff monitoring burden is deferred until implementation is well under way.

However, from our interviews with independent experts on social and environmental safeguards, we heard that, in practice, ESF implementation leads Bank staff to focus more on reviewing national rules against relevant checklists and guidelines, and less on monitoring performance on the ground, which in any case has been made much harder by COVID-19 travel restrictions.

In our country reviews in Sierra Leone and DRC, we were assisted by local facilitators who canvassed communities and individuals affected by the projects we selected, not at random but for their potential risks, primarily linked to resettlement and compensation processes. These brought to light multiple potential failings of current efforts to implement the ESF (see Box 1 for more detail).

The establishment and operation of GRMs is a key element of the safeguards system as these provide avenues for complaint and redress. The Integrated Resilient Urban Mobility Project (IRUMP) in Sierra Leone provided an illustration of a largely operational GRM: over 300 hundred complaints had been logged, and a process was in place for working through them.

“[The social safeguarding lead] from the project implementation unit has been trying in terms of communication. The other day in a meeting she told us about the 9090 toll-free line and that we could call and raise any issue we have pertaining to the project.”

 – Project-affected person, Lumley, Freetown, Sierra Leone

Unfortunately, we also found examples of poor GRM performance. Due to technical failings, a year into the Sierra Leone COVID-19 response project, complaints were not being monitored or followed up. In the DRC Great Lakes Trade Facilitation Project, only a small number of complaints had been registered. This did not seem consistent with a complex project that had been heavily delayed and restructured, and in relation to which our citizen engagement reported extensive challenges (see Box 2). These weaknesses with GRMs do not seem to be isolated cases, as we heard in an interview with senior Bank staff that GRMs were so far believed to be mostly not fit for purpose, across regions and sectors.

“I was registered for compensation but they’ve broken my house to construct the road to the site but I have not been compensated. Instead, they said be patient and they will get back to us but up till now there has been nothing.”

 – Project Affected Person, Lumley, Freetown, Sierra Leone

Other major donors interviewed concurred that the UK’s influence was greatly enhanced by its analytical and policy contributions, not just its financial strength. They also noted its ability to network and coordinate information rapidly from, and to, its overseas network and other government departments.

We heard several examples of how such UK-IDA collaboration networks, spanning the in-country teams and headquarters, work closely together to monitor and ensure consistent messages, including on difficult topics benefiting from real-time local knowledge. In one country, FCDO country-based staff flagged unusually high risks in implementing a statistical support activity locally, which was subsequently postponed by IDA. IDA staff also told us that, alone among major donors, the UK delegation to the World Bank was regularly in touch with them to monitor progress on key cross-country topics – such as for preventing sexual abuse and exploitation – as part of the follow-up to the UK-hosted Global Safeguarding Summit in 2018. These exchanges were in addition to specific country issues requiring immediate attention.

We heard from multiple stakeholders that as the UK’s influence on IDA does not rest exclusively on the size of its financial contribution, it may not be seriously affected by the loss of lead donor status, especially if that proves to be temporary or at least not to lead to a further slide in rankings. However, UK influence might be more seriously affected if there were also a reduction in the level of staffing and intellectual capacity that the UK invests in the relationship.

Country-based engagement between FCDO and IDA is more variable and opportunistic, and dependent on local leadership

In contrast to the UK’s influencing of IDA centrally in Washington, the UK’s relationship and level of influence with World Bank country offices is more variable. Efforts to influence the Bank’s operations are opportunistic and mainly concentrated in sectors or areas where both have programmatic interests, particularly when the responsible staff on both sides are based in the same country, which is a logical enough way of prioritising collaboration. These areas of common interest have narrowed as a result of recent reductions to the UK bilateral aid budget, as well as the progressive withdrawal of the UK from budget support, which has the side-effect of cutting out many otherwise necessary interactions with local IDA staff on matters of general development policy. A recent ICAI review also found that in some instances, the nature of the decision-making processes meant that reductions in UK support had to be communicated at short notice to Bank staff, giving them little time to manage the implications for Bank’s own operations. This was confirmed by interviewees in Sierra Leone for this review of IDA.

We nonetheless saw some strong examples of collaboration in particular sectors. An example was education in Sierra Leone, where even a relatively modest UK financial stake was leveraged into a very effective partnership with IDA, whose investment stake was far larger (see Box 3). In Bangladesh, we were also informed the UK’s influence over the design and implementation of IDA programmes was greatest where the UK was also a financial contributor to the sector.

World Bank country directors and other colleagues in DRC and Sierra Leone told us that they consulted regularly with their UK peers (ambassadors or high commissioners and development directors), not just through formal donor coordination mechanisms but also via informal channels. We also heard of a country where an informal caucus of the UK and one other bilateral was recently used as sounding board by the IDA country director around the draft country strategy, ahead of wider consultations.

Interviews with the FCDO overseas network also highlighted a range of factors, other than financing, which helped promote, or conversely hindered, closer engagement with IDA. These included the need to receive better advance information on time-sensitive IDA processes and longer turnaround times for requests for related UK inputs. It was also found valuable to ensure continuity in critical professional skills in some cases. For example, the absence of a UK climate and environment adviser in DRC since April 2021, and the absence of any World Bank climate advisers over a substantial period, has constrained UK-World Bank engagement on this agenda.

The level of influence also inevitably turns on the time and energy that senior FCDO staff are able to put into the relationship. This necessarily varies across countries, according to their individual interests and the other demands on their time. Despite the substantial volume of UK aid spent through IDA, FCDO in-country staff are not necessarily either required or strongly incentivised to devote time to the relationship.

Conclusions on efficiency

UK taxpayers obtain good value for money from the UK contribution to IDA, due to the scale and reach of its operations, its ability to mobilise other funds, its close alignment to UK development priorities, its strong advisory and research capabilities, and its global insurer role. A future UK financial contribution of the order of 2% to this huge development resource pool, if it can retain substantial influence on its direction, represents real leverage.

Conclusions

Our review confirms IDA’s high relevance to and strong alignment with the UK’s development priorities through most of our review period. IDA’s portfolio has a strong poverty focus, complementing the UK’s up to now. IDA is also well aligned to key UK priorities such as gender, disability, fragility, early crisis responses, and education and health. IDA began to focus on climate change, particularly adaptation and resilience, in IDA16 and this focus has progressively expanded, though not as fast as the UK would have wished. IDA works closely with partner country governments, which affirm their ownership of programme choices and implementation and have an increasing, though largely informal, voice in replenishments. The World Bank is becoming more open to direct citizen engagement, but this is still work in progress.

IDA’s operational performance is generally strong, at least according to the standards and objectives used for its internal results system and their subsequent validation and reviews by the World Bank’s Independent Evaluation Group. The focus of most targets is still on processes and intermediate outcomes rather than final impacts, which are objectively harder to track and attribute. Climate change action is mainly rated through ‘co-benefit’ shares of the portfolio, a common standard among multilateral development banks with some weaknesses, notably its built-in focus on inputs rather than impact. IDA performance in fragile states has largely converged on that in non-fragile contexts, although underlying objectives differ. IDA’s COVID-19 response broke records for speed and flexibility at scale, thanks to process innovation, technology and sheer hard work, but it is too soon to judge its full impact.

IDA has also improved in including specific groups which suffer discrimination. It could do more for broader social inclusion, including implementing the Bank’s strategic ‘co-prosperity’ goal. The World Bank’s environmental and social safeguards have greatly expanded, with implementation outsourced to national bodies, but we found instances of weak monitoring and grievance redress systems. The Bank’s fiduciary and anti-corruption and fraud controls are considered an institutional strength. However, we remain concerned that pressure to hit ever-higher IDA volumes in countries with weak systems, under strict conditions and safeguards, may strain capacity to tackle fraud to the limit.

UK taxpayers obtain good value for money from the UK contribution to IDA, due to the scale and reach of its operations, its ability to mobilise other funds, its close alignment to UK development priorities, its strong advisory and research capabilities, and its global insurer role. The UK has a systematic approach to influence IDA’s policies and operational performance, and its effectiveness is acknowledged by IDA management and other donors. Importantly, this influence rests not just on the scale of UK funding, but on its intellectual contributions and agile networking. We heard that a substantial part of its influence is likely to survive the loss of lead donor status, provided this does not presage a further retreat and there is no parallel reduction in the intellectual and political effort that the UK invests in the relationship. Influence on IDA at country level is necessarily more variable and opportunistic and depends notably on the degree to which the UK bilateral programme overlaps with the World Bank’s work, personal relationships between senior managers, and the time and effort devoted to the partnership.

Recommendations

We offer a number of recommendations to FCDO:

Recommendation 1:

FCDO should advocate for more action-focused targets for IDA climate change action, particularly on adaptation.

Problem statements:

• Simply increasing the headline co-benefit target (now 35%) must eventually crowd out other legitimate priorities as the threshold rises.

Figures for IDA19 are presented based on the adjusted allocations/estimates to be implemented over the scaled-back two-year period for IDA19 implementation, with the original allocation/estimate also indicated in brackets.