International Development Association FOR OFFICIAL USE ONLY 68834 IDA/SecM98-86 FROM: The Secretary March 3, 1998 EXECUTNE DIRECTORS' MEETING - MARCH 3, 1998 IDA-12 Deputies Meeting - February 26 - 27, 1998 Statement bv Mr. Sandstrom Attached is a copy of the statement made by Mr. Sandstrom on the above subject, at the meeting of the Executive Directors held on March 3, 1998. \ Distribution: Executive Directors and Alternates President Bank Group Senior Management Vice Presidents, Bank, IFC and MIGA This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. t' ..... - ..-.. _____.............._ _ _ _ _''"'"_'._w._'_ _""""""_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ "~"-_.,,,,,;~., t"_a""""ge Report to the Board on the IDA-12 Deputies Meeting February 26 and 27, 1998 Paris The first meeting of the Deputies for the Twelfth Replenishment of IDA was held last Thursday and Friday, February 26 and 27, in Paris. The discussions were constructive and productive, covering an ambitious agenda, and we agreed on how to proceed towards an effective agreement in the Fall. Deputies noted the current positive environment for IDA, including the strong actions taken by donors which allowed IDA-ll to be declared effective in February, 1998, when more than 30 donors had provided their Instruments of Commitment or Notes. We also welcomed three new donors to IDA: Venezuela and the Slovak Republic (which are new donors starting with IDA-ll) and Israel (which intends to participate starting with IDA-12). All of this provided a very positive environment for the IDA-12 discussions to be launched. The meeting started with a discussion with Paul Collier (professor of Economics at Oxford University, whose appointment as Director of Development Research for the Bank was announced last week). Paul explored the critical role that well-targeted aid plays in the development of low income countries. His presentation paid particular attention to sub-Saharan Africa where he indicated that many countries face a window of opportunity (which could be as short as five years) during which substantial resources are required to help ensure that the benefits of policy reforms are fully realized and that investment provides a strong foundation for sustainable growth. Paul's presentation generated a lively discussion. A summary of this discussion is being prepared and I think you will find it stimulating. Against this background, we then discussed three closely related issues: (1) Country Performance and IDA Lending. We described to the Deputies IDA's country performance assessment system and the strong relationship between IDA lending allocations and country performance. Deputies endorsed the approach, including its flexibility, but asked for further clarification of the criteria used to assess performance -- for instance, with regard to governance - which we will provide. They also asked us to clarify how we assist poor performers and to provide them with a note on the instruments at our disposal. (2) IDA-II Implementation to Date. Deputies welcomed the fact that IDA lending recovered strongly in the first half of FY98, from the low level of FY97, and that lending in both FY98 and FY99 is now expected to be close to SDRS billion. (3) Preliminary IDA-12 Lending and Funding Prospects. At the request of many Deputies we provided them already in this first meeting with our current best estimate of IDA lending requirements during IDA-12. These had been arrived at through a "bottom up" approach, anchored in current CAS lending programs. The purpose was essentially to provide a framework for looking at future lending volumes and to explore what further analyses the Deputies would like us to undertake, rather than to discuss the estimates per se. We will provide the .Deputies with more detailed information on the underpinnings of the aggregate numbers, for discussion at our next meeting. We then discussed the performance of the IDA portfolio and the improvements in its quality. And we agreed on how to determine the exchange rates to be used for the IDA -12 contributions. Deputies finally discussed at some length the subjects which they felt would need to be addressed as part of the IDA-12 replenishment process. This was a very open, free-flowing and stimulating session. We agreed to proceed as follows: (1) We will keep Deputies fully informed about progress in a number of areas which are important for IDA-12 and are already being closely monitored by the Board -- for instance, implementation of the Strategic Compact, the CAS retrospective, cross-cutting themes such as the environment and gender, and lessons from East Asia. We will, of course, share relevant Board documents with the Deputies; (2) We will ensure continuity with the IDA-lO and -11 agreements and build on the policies which have already been set out. We will prepare for the Deputies a brief note on progress being made in implementing these policies; (3) We will start preparing the IDA-l2 Report early to ensure that our discussions are focused and that the Report is given the time and attention it deserves; and (4) We will prepare technical notes that will help Deputies conclude the replenishment discussions in a constructive and timely manner, including the notes mentioned earlier as well as notes on IDA's financial management, on burden sharing, and on allocation to blend countries. Deputies indicated that, in preparing the IDA-l2 Report, they will emphasize subjects which can be grouped under three broad categories: (l) Policies. Deputies felt that more explicit targets for poverty reduction should drive IDA programs. They emphasized the need to address governance issues more clearly. They asked us to explore how capacity building could be strengthened and partnerships be made more effective. And they asked us to take a closer look at our programs in certain areas such as post-conflict assistance, and energy and the environment. f·-....".,.,,"''''''·_·n __....."" ,I~~_._, ----===. .. _ _________ ... ... ="""""""'''"., ..._ _._.~_ ... ,., .... ..._.____________________________ ___________________________ r_.~~~~.~ (2) Instruments. Deputies agreed on the central role of the CAS and asked us to explore improvements in several areas: including the use of explicit poverty reduction targets, franker assessment of performance (both borrower and IDA) and risk; more participatory approaches to CAS preparation; and the use of the CAS in donor coordination. They also asked us to review the instruments at our disposal to assist poor performers -- particularly for capacity building; to look into the possibility of selective use of IDA grants; and to continue exploring ways in which IDA can support private sector development. (3) Effectiveness. Deputies urged us to intensify our efforts to measure and monitor the effectiveness of both CASs and individual operations, focusing on poverty reduction outcomes. So, as you can see, the meeting was fruitful. It generated a substantive agenda for further discussion and was an excellent first step towards a strong replenishment. At the invitation of the UK, the next IDA Deputies' meeting will be held in Londonon May 14 and 15. Sven Sandstrom - March 3,1998 ! 1; I . ~.. , I