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Begin New Search Publishing Institution Center for Global Development Author Benjamin Leo

11. Leveraging World Bank Resources for the Poorest: IDA Blended Financing Facility Proposal

Author:
Benjamin Leo
Publication Date:
06-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
With the Millennium Development Goals deadline only five years away, the international donor community faces significant challenges due to the global economic crisis, record government deficits, and simultaneous funding requests from nearly every multilateral development institution. This paper proposes a new World Bank financing model for creditworthy emerging economies, such as India and Vietnam, which currently receive billions of dollars in IDA assistance. In contrast to the current IDA-centric financing model, the IBRD would provide the same loan volumes to qualifying emerging economies while IDA would provide grant subsidies to buy down the concessionality level of these IBRD loans. As such, these countries would be held harmless both in terms of aid volumes and lending terms. By better leveraging the IBRD's balance sheet for loan capital, IDA then could re-allocate what it otherwise would have provided to emerging economies. For the current IDA-15 replenishment period, this would mean up to $7.5 billion in additional assistance for the world's poorest, most vulnerable countries. In relative terms, this would entail a 30 percent increase over existing levels. Of this, African countries would have received an additional $5.5 billion in IDA assistance. If donor governments find a way to scrape together increased contributions to IDA, then the allocation pie would grow by an even larger margin. The Inter-American Development Bank already successfully utilizes a similar approach for its lower middle-income and low-income country clients. It is time for World Bank shareholders to seriously consider the same resource-maximizing model. With the IDA-16 replenishment and IBRD general capital increase negotiations currently underway, they have an excellent window of opportunity to implement this win-win-win approach.
Political Geography:
Africa, America, and Vietnam

12. Inside the World Bank's Black Box Allocation System: How Well Does IDA Allocate Resources to the Neediest and Most Vulnerable Countries?

Author:
Benjamin Leo
Publication Date:
06-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
During the last few International Development Association (IDA) replenishment negotiations, several large donors have pressed for reforms to further increase the share of IDA resources provided to the neediest and most vulnerable countries. While the proposed reforms take different forms, the philosophical Thrust is the same—push IDA's focus further down the development chain. Against this backdrop, this paper explores just how well IDA's existing performance-based allocation (PBA) system actually addresses these issues. To achieve this, I examine how IDA allocations are distributed at each successive stage of the PBA methodology based upon a number of need and vulnerability measures. Next, I apply two simple measures to gauge IDA's performance: (1) whether per-capita allocations to the neediest and most vulnerable countries are equal to or greater than those for the best off countries and (2) whether allocations to the neediest and most vulnerable countries increase between the baseline and final allocation scenarios. Based on these criteria, IDA has a mixed track record. IDA's performance is very modest with respect to the relative share allocated to the neediest or most vulnerable countries. Of the eight measures examined, only two illustrate parity between final allocations to the bottom and top quartile of countries. However, the litany of PBA exceptions clearly helps to redistribute resources in absolute terms. Per-capita allocations to the neediest and most vulnerable countries more than doubles between the baseline and final PBA scenarios for every need and vulnerability indicator examined. Clearly, the existing system has several built-in biases to redistribute resources to these countries. However, these exceptions fall short from ensuring full parity that some IDA donors may wish to achieve. As such, the philosophical debate among key IDA donors likely will continue for the foreseeable future.
Topic:
Development, Economics, Foreign Aid, and Financial Crisis

13. Sudan Debt Dynamics: Status Quo, Southern Secession, Debt Division, and Oil–A Financial Framework for the Future

Author:
Benjamin Leo
Publication Date:
12-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The people of Southern Sudan are scheduled to vote in a referendum on whether to remain unified with the central government in Khartoum or break away to form a new, fully independent country. While the Khartoum government remains committed to a unified Sudan, all indications suggest that the Southern Sudanese will vote for secession by an overwhelming majority. Khartoum's willingness to accept the potential losses remains unclear. Many suspect that its ultimate actions will depend, at least in part, upon the resolution of key outstanding issues, such as oil and debt. This paper contributes to ongoing discussions about the role of Sudan's $35 billion in external debt obligations – both for a unified Sudan and a possible Southern secession. First, it examines Sudan's existing debt dynamics and the potential eligibility for traditional debt relief and multilateral debt relief initiatives. Second, it outlines potential options for dividing Sudan's external debt obligations in the event of a Southern secession. Third, it estimates external indebtedness ratios under each debt division scenario and the potential relevance of traditional debt relief treatments. Lastly, the paper provides an indicative roadmap for clearing Sudan's loan arrears of $30 billion and potentially securing comprehensive debt relief in the future.
Topic:
Civil War, Debt, Ethnic Conflict, and Territorial Disputes
Political Geography:
Africa and Sudan

14. Will World Bank and IMF Lending Lead to HIPC IV? Debt Deja-Vu All Over Again

Author:
Benjamin Leo
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Four years ago, the G-7 pushed through an unprecedented initiative forcing the international financial institutions to cancel 100 percent of their outstanding debt claims on the world's poorest countries. Through the Multilateral Debt Relief Initiative (MDRI), these heavily indebted poor countries (HIPCs) stand to receive up to $60 billion in debt relief over time. Moreover, the World Bank, African Development Bank, and IMF shareholders approved a new debt sustainability framework to govern future lending decisions and prevent the need for yet another round of systemic debt relief. All parties emerged from these landmark agreements confident that the dragon of unsustainable debt finally had been slain. However, several unsettling trends raise serious questions about the finality of these actions. First, World Bank and AfDB lending disbursement volumes to these very same HIPC countries remain very high, and nearly the same as compared to pre-MDRI. Emergency IMF lending in response to the global economic crisis has compounded the situation. Second, IMF and World Bank growth projections for HIPCs remain overly rosy compared to actual and historical performance. Our new dataset of IMF growth projections suggests a structural optimism of at least one percentage point per year. Third, HIPCs continue to experience significant volatility in country performance measures that has a direct impact on their ability to carry debt sustainably. Taken together, these findings suggest that donor countries should re-examine the issue of debt sustainability in low-income countries and the system for determining the appropriate grant/loan mix. The upcoming IDA and AfDF replenishment negotiations present a timely opportunity to do so. Absent assertive and corrective action, the international community may be faced with the prospect of a HIPC IV agreement in the not too distant future.
Topic:
Development, Economics, and Foreign Aid
Political Geography:
Latin America

15. Moving Mugabe's Mountain: Zimbabwe's Path to Arrears Clearance and Debt Relief

Author:
Todd Moss and Benjamin Leo
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Zimbabwe is embarking on a long, complex, and difficult journey to rebuild its economy, which has been shattered by years of neglect and destructive government policies. If the final political hurdles are overcome hopefully sooner rather than later—the new coalition government will be faced with making politically difficult decisions and addressing conclusively the economic ghosts of the past. One of those ghosts is more than $5 billion owed to external creditors, of which nearly 80 percent is arrears. Clearing Zimbabwe's external debt arrears and securing comprehensive debt relief will be a critical step in eventual recovery. By doing so, the government will remove a crippling burden on its budget, investment climate, and overall macroeconomic environment. More important to the success of the coalition government, it will unlock hundreds of millions of dollars in new external assistance for critical reconstruction programs that will improve the Zimbabwean people's quality of life. This paper provides a detailed overview of the arrears clearance and debt relief processes. The purpose is to spark a debate in creditor capitals and hopefully to buttress the government's analytical foundation. With a strong dedicated team of experts—and support from relevant donor agencies— the Zimbabwean government will one day conclusively address its crushing debt burden and proceed with the rebuilding of a once vibrant and proud nation.
Topic:
Corruption and Governance
Political Geography:
Africa and Zimbabwe