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IFAD’s engagement with Middle-Income Countries

This informal seminar discussed IFAD's approach to Middle-Income Countries (MICs) in terms of financing modalities and graduation strategies. The need for differentiated services to MICs was emphasized, along with a demand-driven country-based approach. Potential new financial products and services were explored, while addressing concerns about graduation and its impact on IFAD's development capacity.

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IFAD’s engagement with Middle-Income Countries

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  1. Executive Board Informal Seminar IFAD’s engagement with Middle-Income Countries 2nd March 2011

  2. Issues raised at the December Executive Board The December Executive Board discussed management’s paper “IFAD’s engagement with Middle-Income Countries” Issues raised : • IFAD’s approach to MICs; • Financing Modalities for MICs; and, • Approaches to graduation. 2

  3. The need for differentiated services to MICs • MIC members represent a very heterogeneous group; • IFAD initiatives are country differentiated not differentiated by per capita income of country; • IFAD projects are tailored to the rural poverty and hunger situation; • MIC member countries confirm need for continued IFAD involvement to focus on rural poor; • Upper income MICs want help to in transition from receivers of aid to donor status; and, • Need for menu of options that suits the conditions of each MIC.

  4. Demand-driven country-based approach IFAD has a menu of lending and knowledge products, some of which are being developed: • Financial products and projects; • Knowledge products and services; • Policy and advocacy services and products; • Support to national agricultural and rural development strategies; and, • South-South cooperation. All products are of interest to MICs, and to LICs.

  5. Potential new Financial Products and Services • Currency options; • Different grace periods, maturities and interest rates; • Mobilisation of additional external resources. BUT: • Need to avoid duplication and seek complementarity with financing offered by other multilaterals; • IFAD not become a bank nor issue bonds in the market.

  6. Graduation Concerns that ‘classic’ graduation system could lead to a significant decline or decrease in IFAD’s development capacity and the achievement of its objectives. • Current IFAD Graduation policy: a voluntary choice of the governments to cease borrowing E.G. Algeria & Macedonia have ‘self-graduated’; • IFAD needs own threshold definition to launch a process and a discussion for graduation and on the nature of the relationship and engagement that IFAD has with the country; • IFAD could mobilise non-replenishment funds for graduation countries.

  7. Development of IFAD threshold Option 1: Use World Bank threshold (per capita income above $6995); Option 2: Create a unique definition for IFAD: Per capita income supplemented by other factors- • value added per worker; • crop yields per hectare; • percentage of the population who are undernourished; • the rate of agricultural growth; • changes to agricultural productivity; • the contribution of agriculture to GDP; • employment in agriculture as a percentage of all employment, and, • the percentage of the population who are rural.

  8. Thank you

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