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WB: Lending Rises, Quality Remains High

Financial support provided by the World Bank to developing countries rose to US$22.3 billion in fiscal year 2005, which ended June 30, for 279 projects worldwide. This is an increase of US$2.2 billion over the previous year.

Of this amount, US$13.6 billion was in financing to mostly middle-income countries from the International Bank for Reconstruction and Development (IBRD) for 118 projects; and US$8.7 billion was mostly in the form of no-interest loans or grants to the poorest countries from the International Development Association (IDA), for 161 projects. By comparison, total IBRD and IDA lending commitments were US$20.1 billion in FY04, including US$11 billion from IBRD, and US$9 billion from IDA.

While the volume of new lending was on the increase, overall lending quality also rose. Steady improvements in the quality of ongoing projects through better preparation, greater selectivity and more effective supervision has resulted in the more effective utilization of IBRD/IDA assistance.  In particular, the share of total outstanding commitments at risk of not achieving their development objectives declined significantly to 13.5 percent at the end of fiscal year 2005, from 15.9 percent in FY 2004.

Disbursements increased to US$18.7 billion in FY2005 from US$17 billion in the previous year.

World Bank lending continued to reflect the varying demands and needs of borrowing countries in different regions. Latin American countries, with a total of US$5.2 billion, accounted for the largest share of loans, grants, and guarantees during FY 2005, followed closely by South Asia with US$5 billion.  Europe and Central Asia received US$4.1 billion; Africa US$3.9 billion; East Asia/Pacific US$2.9 billion; and Middle East and North Africa US$1.3 billion.  The limits on IDA-13 resources had an impact, in particular, on Africa figures.  It is noteworthy, however, that Africa disbursements increased from US$3.3 billion in FY04 to US$4 billion in FY05.

Of total loans, grants, and guarantees, US$15.7 billion was for investment operations while the remaining US$6.6 billion was for policy based/development policy operations. Investment lending is now more than 50 percent higher than it was in 2000.

"We are particularly encouraged by the turnaround of two declining trends: the Bank's financial assistance to middle-income countries, and the volume of investment lending.  These increases were attained without any apparent trade-off in quality, indicating that the Middle Income Country Action Plan and the simplification and modernization agenda are making a difference" said James Adams, Vice President of Operational Policy and Country Services.

India and Turkey received the largest share of commitments last year – with US$2.89 billion and US$1.8 billion respectively, followed by Brazil at US$1.77 billion, China at US$1 billion and Indonesia at US$917 million. India was the largest recipient of IDA assistance, with US$1.1 billion followed by Vietnam at US$700 million and Bangladesh at US$600 million. Turkey was the largest recipient of IBRD lending at US$1.8 billion, followed by Brazil at US$1.77 billion and India at US$1.75 billion.

The World Bank's primary mission – that of poverty reduction – is conducted by channeling financial resources, and technical expertise, to benefit poor people in its member countries. Financial support is provided through loans and guarantees by the IBRD and grants, credits, and guarantees from IDA. The IBRD raises its funds through the international capital markets, while IDA is funded by direct contributions by wealthier nations. IBRD's clients are generally middle-income countries, and some of the larger low-income countries that are deemed creditworthy for borrowing. IDA's clients are the poorest countries that usually can not afford to borrow on commercial terms. IDA offers these countries grants and concessional, no-interest loans – called "development credits" – that are repayable in 35–40 years. IDA is the single largest source of discounted financial assistance to the world's poorest countries.

Special Financing and Global Environmental Facility operations totaled US$301 million, with the East Asia/Pacific receiving US$110 million, followed by Middle East and North Africa with US$56 million, Europe and Central Asia with US$54 million, Africa with US$51 million, and Latin American Countries with US$31 million.

The Bank Group remains in the forefront of work to harmonize and align aid delivery across development agencies, reduce fragmentation, and eliminate duplication.  Notable examples of these are seen in reconstruction efforts in Afghanistan, Iraq and on Tsunami.

(China.org.cn July 15, 2005)

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