India to be part of core World Bank team

index.jpgSource: Business Standard, Nov 15, 2016

New Delhi: For decades a borrower, India will soon sit in the core management team of the International Development Association (IDA) of the World Bank.

Axel Van Trotsenburg, vice-president, development finance at the Bank, told Business Standard: “India will be one of the IDA deputies, the 14-member group of donor nations which run the key negotiations with member countries.” Van also said the institution would weigh costs to consider Indian markets for raising bonds — as the institution will for the first time tap international markets to raise money — to finance low-cost aid programmes.

Set up in September 1960, IDA was at one time the biggest source of aid for India. For IDA, too, India happened to be the largest aid recipient among its 173 member-countries.

Even now, the pipeline of un-disbursed aid from the institution to India is $6.5 billion. But, since 2014, India had stopped taking fresh aid from IDA, which provides a hugely attractive line of credit, with an annual interest rate of less than one per cent and a repayment window of at least 25 years. Instead, in 2015, it provided $200 million as a donor to the IDA17 corpus, a three-year purse the institution rustles up among member-nations to finance support to poor countries.

Trotsenburg said: “India is now expected to become an active participant in the policy dialogue IDA holds with member countries.” India’s presence will raise the “credibility of IDA” with the borrower nations. “India is a case of an incredible journey of poverty reduction. It has produced a very successful partnership with us, and now we expect her presence on the table will sharpen our focus on the support we can provide to, especially, the fragile nations,” he said.

The Bank’s initiative to position India in a stronger role in its various institutions is also aimed to counter the increasing interest New Delhi and Beijing have shown to support the BRICS bank — the New Development Bank (NDB) based in Shanghai. It has long been a gripe with India and China that the World Bank and the International Monetary Fund are dominated by Western European nations and the USA.

World Bank President Jim Yong Kim had recently been quoted as saying: “There is plenty of room for New Development Bank and the AIIB (the Asian Infrastructure Investment Bank). It is good that new institutions are providing a challenge for groups like us. We have to now redefine our specific advantages and get better at what we are doing.”

Within IDA, the executive directors representing the interests of member-countries decide, along with the President, on key policy issues.

The management of each programme is handled by a smaller group. This group is referred to as the IDA group of deputies, comprising the donor nations.

While the donors were separate from the borrowers, India joins China as one of the few nations that have transitioned from the latter to the former group.

Former executive director to the World Bank C M Vasudev said the role of IDA had decreased over the years. “The size of bilateral aid chalked up by the traditional donors now outweighs it but it is an important change for India.”

Trotsenburg said IDA hoped to leverage India’s reputation to extend its outreach with the fragile nations — the group of countries whose economy has been shattered by war and internal strife. He said their numbers were rapidly climbing and qualified for grants from the institution.

IDA has recently earned a triple AAA+ by the rating agencies. It aims to use the rating to borrow at low cost from the international capital markets to finance up to a third of its purse of $75 billion for IDA18 replenishment. On whether some of that borrowing could be from India, he said: “We shall go wherever we find the spread is the best.”

Both IFC and Asian Development Bank raise some of their money from the Indian debt markets. The first round of fund raising for IDA is slated to begin from the more developed bond markets abroad.

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