Message-ID: <mailto:sfd5e00d.068@crs.loc.gov> Date: Wed, 7 Jun 1995 17:17:04 -0500 From: Jonathan Sanford <mailto:JSANFORD@CRS.LOC.GOV> Subject: After IDA, what? To: Multiple recipients of list DEVEL-L
Apparently fifty years has been enough. Actually, IDA was only about 35 years old when the people carrying it stumbled and fell. We do not know if IDA will survive, but she certainly has sustained some serious injuries. The doctors (spin, policy and others) are working full time to save her. Nevertheless, it is probably prudent for interested persons to contemplate what needs to be done in case of her demise.
In case your attention has been focused elsewhere, let me recapitulate recent events. Two years ago, the US Congress enacted legislation authorizing US participation in the tenth replenishment of the International Development Association (IDA) but it only authorized two-thirds of the funds needed to finance full US participation in that replenishment. The last $1.25 billion payment to IDA 10 was withheld by the authorizing committee pending action by the World Bank to implement procedures giving the public greater access to Bank operating information. There is debate whether the WB has taken sufficient steps in this regard, but that is not the source of recent events.
The new majorities in the House and Senate approved budget resolutions this May which substantially reduce the amount that can be spent for function 150 (international affairs). The final resolution has not been approved, but the differences between the H and S versions are not great in this regard. The House and Senate Budget Committees said, in the reports accompanying their resolutions, that the lower figure assumed (among other things) the immediate termination of all US contributions to IDA and eventual termination of US contribiutions or subscriptions to all other multilateral agencies once existing authorizations were completed. The relevant subcommitttee of the Housxe Banking Committee proposed last week, that--in lieu of authorizing the last $1.25 billion payment for IDA 10-- the authorization should be reduced to $800 million and spread over two years. Effectively, this was a two thirds cut. Most analysts believe the full Banking Committee and House will not be asked to vote on this bill (HR 1667). Rather, since the subcommittee has historically been the forum where the most support was shown form the MDB program, its action will be taken by the appropriators as indicating the maximum amount for which there might be congressional support for IDA this year. The appropriations committees are free to fund IDA at whatever level they like (up to the full $1.25 billion if the Banking Committee's bill is not enacted) but they have only the spending authority approved in the budget resolution out of which to finance it. Most everything was cut substantially, so there are simply no funds to pay for everything they'd like to support (even if they want to support it). Funds cannot be taken from domestic programs to fund international programs (or vice versa). The new majority on the appropriations subcommittees will probably be less sympathetic to arguments concerning IDA than were previous majorities.
I gather from other postings that the other OECD countries have been soundly criticizing the United States for its proposed cuts in foreign aid. The IDA 11 replenishment negotiations are currently underway. It is my view that the other IDA donor countries will follow the US lead, cutting their own contribuitons to IDA proportionally and blaming it all on the United States. I also suspect that, at best, IDA 11 will be set back a year and reduced in size beyond the reduced size the donors had previously contemplated. I have no inside knowledge, however, on either point.
My first question for the list is this. Are my assumptions in the prior paragraph correct? Will other countries fully fund their contributions to IDA this year despite the probable US cutback? Will they go ahead with a full scale IDA 11 anyway even if the United States cuts or substantially eliminates its participation? Those of you with contacts in other countries could help a great deal if you'd pass along any relevant information you might have. What I hear will be reported to Congress.
My second question is this. Assuming that funding for IDA goes down very substantially in the future, what impact will there be on development? IDA is the principal source of foreign aid for sub-Saharan Africa, for example. Can they make it up through reduced capital flight and reduced corruption, more private investment, or increased bilateral development aid? Many people think IDA's troubles are indicative of widespread "aid fatigue" on the part of the donor countries. Does this mean that fifty years of development assistance has been enough? Given that money may be very short, should a new multilateral agency be created or IDA reinvented? If so, what should be the focus of its work? Your comments and suggestions would be most appreciated. I'm trying to look into the crystal ball and see the future in order to better advise Congress in this regard.
Thanks.
Jon Sanford (mailto:JSanford@CRS.LOC.GOV)