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Developing IFAD’s Middle Income Country Strategy

Developing IFAD’s Middle Income Country Strategy. Informal Seminar of the Executive Board Brian Baldwin Senior Operations Management Adviser. The 8 th Replenishment.

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Developing IFAD’s Middle Income Country Strategy

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  1. Developing IFAD’s Middle Income Country Strategy Informal Seminar of the Executive Board Brian Baldwin Senior Operations Management Adviser

  2. The 8th Replenishment “The Consultation recognized that the needs of MICs are varied, and are changing, and that to remain effective IFAD needs to better fulfil its mandate by improving the service that it offers them, ensuring that its engagement with them is relevant, and enhancing the partnerships that these are built on”. “IFAD will develop a graduation policy consistent with the voluntary practice of other IFIs. It will furnish a framework with objective and transparent criteria that provides for consideration of the interests and wishes of borrowing countries that reach a graduation point”. (Report of the Consultation on the Eighth Replenishment of IFAD’s Resources, Governing Council February 2009)

  3. The MICs are highly heterogeneous: 89 IFAD Member Countries (defined by World Bank) with GDP/Capita $996-$12,195

  4. The MICs are highly heterogeneous: 89 IFAD Member Countries (defined by World Bank) with GDP/Capita $996-$12,195

  5. IFAD Financing to MICs (2004-2009): Intermediate and Ordinary Terms (US$ ‘000)

  6. IFAD current financing portfolio MICs≈IFAD

  7. IFAD portfolio: without current MIC financing MICs≈IFAD

  8. Rural Poverty in MICs • MICs still account for a third of the world’s poor, and a substantial majority of these poor people reside in rural areas; • MDG1 in MICs still to be accomplished. Needs more domestic and international investment in agriculture and rural development, both public and private, focussed on: • Smallholder production and productivity improvement, particularly amongst the poorest rural population and women • Rural employment generation through investment in smallholder farming, agro-industry, marketing, input supply • Example: Turkey-16 of the 20 least-developed provinces, located in either the eastern or south-eastern regions, have GDP less than 30% of the national average; • Example: Venezuela- about 12 per cent of Venezuelans live in rural areas, where more than 70 per cent of the population is poor,The Orinoco Delta Warao Support Programme targets the Warao indigenous group; • Example: Indonesia-50% of the total households of Indonesia remain clustered around the national poverty line and 70% of the poor live in rural areas. Poverty gap index indicates that although the proportion of people living in poverty has fallen to almost the pre-1997 crisis level, those who are poor now are worse off than before, especially in the Eastern Indonesia.

  9. IFAD and MICs • IFAD projects have performed well in MICs • Office of Evaluation finds 80% project success rate in MICs (ARRI 2009) • All Country Program Evaluations undertaken by OE in MICs have all found IFAD performance satisfactory • Recent examples: India, Argentina, Brazil, Philippines • IFAD projects in MICs heavily cofinanced:2007-09 • 52% IFAD financing • 37% government and beneficiaries • 11% other donor financing • IFAD-financed projects in MICS transfer the following to other MICs and to low income countries : • Knowledge about rural poverty reduction • Project management and supervision techniques • Policy advice based on successful MIC experience • Targeting the rural poor

  10. Loan reflows from MICs finance IFAD’s PoW MICs provide transferable knowledge MICs provide financial resources to IFAD Mobilisation of MIC national public resources for rural poor The future MICs and IFAD: A partnership for rural development IFAD’s program of loans & grants in MICs MICs≈IFAD

  11. Partnership examples Support to developing national agricultural/rural development strategies: • In 2008, Egypt asked IFAD and the World Bank to help in the preparation of a new agricultural development strategy; IFAD responded • Lebanon requested technical assistance for the pro-poor update of its agricultural development strategy • China, Indonesia, Vietnam and Sri Lanka: grant on "Pro Poor formulation , dialogue and implementation at the country level”. • China, Indonesia, Philippines: Effects of bio-fuel on agricultural development, food security , poverty and impact   Policy, ‘convening’ and advocacy platforms • DR CAFTA in Central America and the Caribbean; REAF and COPROFAM in MERCOSUR acting as policy dialogue platforms for regional MICs/low income countries contributing to governments’ policy reform and to expanded investment in rural development and poverty reduction. South-South Cooperation and Learning • New Delhi Conference on Rural Transformation of Emerging Economies (April 2010) organised by India, China, Brazil and South Africa: rural development technologies; multi-sectoral planning and coordinated investments.

  12. MIC financing parameters MICs increasingly provide most of the finance for IFAD-supported projects in own country, and increasingly contribute resources to IFAD to finance low income countries • Loan reflows from MICs for 2010-12: $275M (projected) • Replenishment contributions 2010-2012: $68M • Domestic mobilisation and cofinancing of MICs projects for 2010-2012: up to $1B • Projected lending to MICs for 2010-12: $500M

  13. IFAD services to MICs • IFAD Loans and grants to MICs will decline as MICs finance more of own rural development; • IFAD supported projects in MICs to be increasingly customized to MIC needs; • Knowledge products to MICs (project design, analysis, policy) • IFAD technical assistance to higher per capita MICs could be reimbursable; • IFAD will help mobilize additional external and internal resources for MIC country projects • IFAD will facilitate South-South cooperation

  14. Current IFAD graduation policy • IFAD members, through the Lending Policies and Criteria, ‘progress’ from borrowing at highly concessional terms to ordinary terms members and can “voluntarily” graduate from borrowing loans and from grants; • Other non-financial services are available from IFAD (policy advice, supervision of ongoing projects-Algeria) when member stops borrowing; • IFAD can provide reimbursable technical services to non-borrowing MICs; • MIC members no longer borrowing are encouraged to contribute to IFAD replenishment (Malaysia, Thailand, Argentina, Chile, Colombia, Uruguay, Algeria, Jordan and Tunisia did not borrow in 2007-09 but contributed to 8th Replenishment); • MICs provided $ 68M for 8th Replenishment; • Other MICs which did not borrow from IFAD (2007-2009) include: Namibia, several Pacific and Caribbean islands, Kazakhstan, Macedonia and Croatia; • For MICs that borrow, the PBAS system reduces their potential loan/grant ceilings as a function of per capita income increase (high per capita income results in a lower PBAS allocation, all other things equal): • PBAS is therefore a mechanism for gradual graduation.

  15. Graduation policies of other IFIs World Bank: • progression of lending terms from IDA, through blends, to IBRD; • flexible approach to determining the pace of graduation with re-engagement allowed; • graduation process from IBRD initiated at $6,885 per capita GNI (1 July 2010); • Mexico, with per capita income of $7,890 still borrows from IBRD. Asian Development Bank: • progression of lending terms from ADF, through blends, to ADB; • availability of commercial capital flows on reasonable terms; • key economic and social institutions, attainment of a certain level of development; • graduation process from ADB initiated at $6,885 per capita GNI(1 July 2010); • borrowing has ceased only at member’s initiative. Inter-American Development Bank: • progression of lending terms from FSO (Fund for Special Operations) to OC (Ordinary Capital); • No policy for graduation and recent General Capital Increase took account of anticipated borrowing of all members. African Development Bank: • Credit Policy determines progression of lending terms from ADF through blends to ADB; • No graduation policy, countries have ceased borrowing at own initiative, re-engagement possible.

  16. Options for future IFAD graduation policy • Option 1: Maintain existing graduation/progression mechanism (in line with Agreement Establishing IFAD) • Voluntary cessation of borrowing at discretion of the MIC • Continued eligibility for other IFAD services and encouraged to provide replenishment resources • Borrowing MICs gradually receive lower PBAS allocation as per capita income increases • Option 2: As above, but with IBRD system of per capita income level above which graduation process is launched - currently at $6,885 for IBRD (1 July 2010); • Process would include assessment of readiness to graduate, pace and nature of continued partnership.

  17. Thank you

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