¶¹ÄÌÊÓƵAPP

Advisory services and analytics for development outcomes

The ¶¹ÄÌÊÓƵAPP Group¡¯s advisory services and analytics help countries implement better policies and strategies and strengthen their institutions so they can sustain development gains over the long term. These products include analytical reports, good practice and policy notes, toolkits, hands-on advice, capacity-building initiatives, knowledge-sharing workshops, and training programs. At the country level, our advisory services and analytics underpin our Systematic Country Diagnostics and Country Partnership Frameworks, as well as government programs and ¶¹ÄÌÊÓƵAPP-supported projects. At the regional and global levels, the products inform solutions for development and contribute to global public goods. In fiscal 2023, the ¶¹ÄÌÊÓƵAPP produced 1,089 advisory services and analytics products in over 120 countries and globally. These addressed topics such as climate change, economic growth and planning, public sector data development and capacity building, public administration, pandemic response, and jobs.

Reimbursable Advisory Services are advisory services and analytics requested and paid for by country clients; all member states, including non-borrowing countries, can request these services. In fiscal 2023, 53 such agreements were signed for a total amount of $63 million in 14 countries. These services provided countries with technical assistance, capacity building, and implementation support on topics such as climate change, digital transformation, social safety nets, energy transition, private sector¨Cled growth, public investment management, and agriculture and judicial sector reform.

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A greater focus on climate change

Climate change poses serious threats to sustainable development, and countries urgently need to integrate efforts to reduce greenhouse gas emissions as well as incorporate adaptation and resilience into their development strategies. Under the ¶¹ÄÌÊÓƵAPP Group¡¯s , we launched a core diagnostic product: the Country Climate and Development Reports, which are prepared jointly by the ¶¹ÄÌÊÓƵAPP, IFC, and MIGA. Building on rigorous data and research, these reports analyze how a country can achieve its development goals and work to mitigate or adapt to climate change. As a core diagnostic, they are expected to provide inputs into the Systematic Country Diagnostics, which in turn inform Country Partnership Frameworks. We published the first batch of 20 reports during the 2022 UN Climate Change Conference in November 2022.

Starting July 1, 2023, the World ¶¹ÄÌÊÓƵAPP will align all new financing operations with the goals of the Paris Agreement, per our commitment in the . Every activity in Investment Project Financing, Program-for-Results, and Development Policy Financing operations will need to show that it is designed with a thorough, meticulous, and transparent climate lens, using a three-step, risk-based methodology.

Support to small states

Small states¡ªcountries with a population of 1.5 million or less¡ªface some of the biggest risks from the multiple crises affecting the global economy. They are highly vulnerable to external shocks, such as economic volatility, natural disasters, and climate change, due to the small size of their economies, remoteness, and capacity constraints. They suffer from annual disaster-related losses that average roughly 5 percent of GDP. Several small states experienced double-digit inflation in 2022, resulting in financial tightening and higher international borrowing costs. Many face exacerbated debt vulnerabilities. As most small states are net food and fuel importers, persistently high prices contribute to deteriorating external accounts and adverse social impacts, especially in countries with relatively high poverty rates.

We have scaled up IDA and IBRD resources to help small states combat these crises. During fiscal 2021¨C22 (IDA19), the ¶¹ÄÌÊÓƵAPP provided an average of $1.5 billion per year to small states, which was 66 percent higher than the average annual support provided during fiscal 2018¨C20 (IDA18). In fiscal 2023, financing to small states totaled $0.6 billion ($0.5 billion under IDA and $0.1 billion under IBRD). This is aligned with the levels in the first year of IDA18, the last regular non-condensed IDA cycle. The January 2023 edition of the ¶¹ÄÌÊÓƵAPP¡¯s Global Economic Prospects report also includes a special focus on the challenges facing small states.

The ¶¹ÄÌÊÓƵAPP houses the Small States Secretariat, which hosts the high-level Small States Forum annually on the sidelines of the World ¶¹ÄÌÊÓƵAPP Group¨CIMF Annual Meetings, as well as a Small States Information Session on the margins of the World ¶¹ÄÌÊÓƵAPP Group¨CIMF Spring Meetings. At the last information session in April 2023, the discussions focused on how small states could better respond to crises and build resilience to shocks. The forum remains an important platform for small states to foster partnerships, advocate for their needs, and facilitate knowledge exchange in tackling their unique challenges.

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Budgeting amid an unprecedented confluence of crises

In fiscal 2023, the ¶¹ÄÌÊÓƵAPP responded at record pace and scale to help countries address multiple, overlapping, and compounding crises and increasingly complex development challenges. Our efforts focused on responding to food insecurity; protecting people and preserving jobs; strengthening resilience; and strengthening policies, institutions, and investments. The ¶¹ÄÌÊÓƵAPP provided unprecedented levels of crisis financing and developed a range of rapid, flexible financing instruments and facilities for countries.

The ¶¹ÄÌÊÓƵAPP¡¯s growing program was facilitated by strong budget discipline and implementing a savings program that has been rolled out over the past few years. Through efficiencies and cost avoidance, redeployments, and cost recoveries, the ¶¹ÄÌÊÓƵAPP has directed an increasing share of its administrative budget toward frontline services; advancing country, regional, and global knowledge and analytics; and increasing our staff presence in client countries.

IBRD financial commitments and services

IBRD is a global development cooperative owned by its 189 member countries. As the largest multilateral development bank in the world, it provides loans, guarantees, risk-management products, and advisory services to middle-income and creditworthy low-income countries, and coordinates responses to regional and global challenges.

In fiscal 2023, new IBRD lending commitments amounted to $38.6 billion for 136 operations, of which six were IBRD and IDA blended operations.

For monitoring, reporting, and better decision-making about its commitments, the ¶¹ÄÌÊÓƵAPP applies a taxonomy of codes to all lending operations to reflect the sectors and themes to which it directs resources. Sector codes reflect high-level groupings of economic activities based on the types of goods and services produced and are used to indicate which part of the economy is supported by the ¶¹ÄÌÊÓƵAPP¡¯s intervention. Theme codes reflect the goals and objectives of ¶¹ÄÌÊÓƵAPP-supported activities and are used to capture the ¶¹ÄÌÊÓƵAPP¡¯s support to the Sustainable Development Goals.

IBRD Top Country Borrowers, Fiscal 2023 (millions of dollars)

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IBRD financial resources and financial model

IBRD finances its loans from its own equity and from money borrowed in the capital markets through the issuance of IBRD bonds to fund development projects in member countries. IBRD is rated Aaa by Moody¡¯s and AAA by Standard & Poor¡¯s, and investors view its bonds as high-quality securities. IBRD¡¯s funding approach continues to be aimed at achieving the best long-term value on a sustainable basis for borrowing members. IBRD¡¯s ability to intermediate the funds it raises in international capital markets to developing member countries is important in helping achieve its goals.

IBRD issues its securities through both global offerings and bond issues tailored to the needs of specific markets or investor types. Its bonds connect the private and public sectors to the ¶¹ÄÌÊÓƵAPP¡¯s development goals through investors such as asset managers, insurance companies, pension funds, central banks, corporations, and bank treasuries from around the world. IBRD issues bonds for investors in various currencies, maturities, and markets, and at fixed and variable terms. It often opens new markets for international investors by issuing new products or bonds in emerging market currencies. IBRD¡¯s annual funding volumes vary from year to year.

IBRD¡¯s approach has enabled it to borrow at favorable market terms and pass the savings on to its borrowing members. Funds not immediately deployed for lending are held in IBRD¡¯s investment portfolio to provide liquidity for its operations. In fiscal 2023, IBRD raised about $43 billion by issuing bonds in a variety of currencies.

As a cooperative institution, IBRD does not seek to maximize profit but to earn enough income to ensure the long-term financial capacity necessary to sustain its development activities. Of fiscal 2023 allocable net income, the Executive Directors approved the allocation of $921 million to the General Reserve and recommended to the Board of Governors the transfer of $291 million to IDA and $100 million to Surplus. As part of its lending, borrowing, and investment activities, IBRD is exposed to market, counterparty, country credit, and operational risks.

The ¶¹ÄÌÊÓƵAPP Group¡¯s Chief Risk Officer leads the risk oversight function and supports the institutional decision-making process via dedicated risk committees covering financial and operational risks. In addition, IBRD has put in place a strong risk management framework, which supports management in its oversight functions. The framework is designed to enable and support IBRD in achieving its goals in a financially sustainable manner. One summary measure of IBRD¡¯s risk profile is the ratio of equity to loans, which is closely managed in line with its financial and risk outlook. As of June 30, 2023, this ratio was 22.0 percent, and the cumulative subscribed capital of IBRD totaled $317.8 billion, including $21.8 billion in paid-in capital.

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IDA financial commitments and services

IDA is the world¡¯s largest multilateral source of concessional financing for the poorest countries. It provides financing in the form of development loans, grants, and guarantees to help these countries increase economic growth, reduce poverty, and improve living conditions for poor people.

Fiscal 2023 marked the first year of the IDA20 cycle. In light of extraordinary circumstances and IDA countries¡¯ elevated financing needs caused by multiple unfolding crises, IDA made available, in line with existing policies, resources from fiscal 2024 and fiscal 2025 for fiscal 2023 as part of the World ¶¹ÄÌÊÓƵAPP Group¡¯s crisis response package.

In fiscal 2023, 75 countries were eligible for IDA assistance.¹ New IDA lending commitments for fiscal 2023 amounted to $34.2 billion for 192 operations, of which six were IBRD and IDA blended operations. These commitments included $27.0 billion in credits and $7.3 billion in grants. In addition, 22 projects for $900 million and six subprojects for $105 million were approved for support from the IDA20 IDA-IFC-MIGA Private Sector Window (PSW) during the fiscal year.

For monitoring, reporting, and better decision-making about its commitments, the ¶¹ÄÌÊÓƵAPP applies a taxonomy of codes to all lending operations to reflect the sectors and themes to which it directs resources. Sector codes reflect high-level groupings of economic activities based on the types of goods and services produced; these are used to indicate which part of the economy is supported by the ¶¹ÄÌÊÓƵAPP¡¯s intervention. Theme codes reflect the goals and objectives of ¶¹ÄÌÊÓƵAPP-supported activities and are used to capture our support to the Sustainable Development Goals.

IDA Top Country Borrowers, Fiscal 2023 (millions of dollars)

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IDA financial resources and financial model

IDA is primarily funded by contributions from high- and middle-income partner countries, transfers from other ¶¹ÄÌÊÓƵAPP Group institutions, borrowers¡¯ repayments of earlier IDA credits, and funding raised in the capital markets. In 2016, IDA received its first-ever public credit rating¡ªtriple-A¡ªwhich has been reaffirmed by rating agencies annually since then. IDA¡¯s financial strength is based on its robust capital position and shareholder support, as well as prudent financial policies and practices, including a capital adequacy framework. IDA shares the same risk-management governance as IBRD.

IDA uses this funding to support an ambitious policy package with five special themes and several cross-cutting issues that are adjusted for each replenishment cycle.

IDA Business Model

For IDA20, a global coalition of development partners agreed to a financing envelope of $93 billion (equivalent to SDR 65.1 billion)² to provide credits, grants, and guarantees to IDA¡¯s client countries. Of this, $84.2 billion is expected to be used on concessional terms, $6.3 billion on IBRD terms for the Scale-Up Window, and $2.5 billion for the Private Sector Window. To help countries address the impacts of the COVID-19 crisis, the ¶¹ÄÌÊÓƵAPP front loaded IDA19 resources to enable IDA to sustain the scale of financing at $35 billion for both fiscal 2021 and fiscal 2022, excluding the Private Sector Window; the remaining amount of about $11 billion was carried over into IDA20. IDA has continued to lean forward with deploying resources in fiscal 2023 to help countries deal with multiple crises. As of June 30, 2023, $32.0 billion was committed on concessional terms, $2.2 billion on non-concessional terms (through the Scale-Up Window), and $0.9 billion through the Private Sector Window. Administrative expenses for IDA are recovered primarily through net charges and interest paid by recipient countries.

To support IDA20, partners are providing $23.5 billion (equivalent to SDR 16.4 billion) in grants, of which $0.1 billion is the grant element from concessional partner loan contributions. Partners are also providing $0.2 billion in concessional partner loans, excluding the grant element, and $1.8 billion in compensation for debt relief under the Multilateral Debt Relief Initiative during IDA20. As of June 30, 2023, 51 partners had submitted IDA20 Instruments of Commitment. Total Instruments of Commitment deposited to date amount to $23.4 billion, representing 99 percent of the total pledge amount. IDA¡¯s borrowing program enables it to significantly scale up support for the Sustainable Development Goals while offering investors an efficient way to contribute to global development. Under IDA20, this hybrid financial model¡ªwhich blends donor contributions with market debt¡ªenables IDA to mobilize nearly $4 in IDA commitment authority for every $1 contributed by development partners.

Since its inaugural bond in international capital markets on April 17, 2018, IDA has issued bonds in five currencies: euro, British pounds, Swedish krona, Norwegian krone, and U.S. dollars. In fiscal 2023, IDA issued approximately $2 billion in bonds. IDA continues to broaden its investor base and raise liquidity in various currencies from a diverse set of investors. We will continue to seek opportunities to further diversify IDA¡¯s currency composition and develop its capital markets presence.

To address the impacts of the many crises faced by IDA countries, including the fallout from Russia¡¯s invasion of Ukraine, as well as to enhance ¶¹ÄÌÊÓƵAPP support to Ukraine and Moldova, IDA partners agreed to the establishment of the IDA Crisis Facility with strong support from IDA deputies and the Executive Directors; this facility was approved by the Board of Governors. The facility will have two pillars: the Special Program to Enhance the Crisis Response Window and the Special Program for Ukraine and Moldova Recovery. Voluntary donor contributions to these programs, leveraged through IDA¡¯s balance sheet, will provide resources at scale to IDA countries and to Ukraine and Moldova, respectively.

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^1. Sri Lanka was reclassified from IBRD-only to IDA-eligible (Gap) country, effective December 5, 2022.

^2. The Financing Framework for the IDA20 Replenishment is managed predominantly in Special Drawing Rights (SDRs). U.S. dollar equivalent figures given here are calculated using IDA20 reference exchange rates.

IDA20 replenishment

In December 2021, IDA members agreed on the IDA20 operational and financing framework with a financing envelope of $93 billion, covering fiscal years 2023¨C25. It is supported by $23.5 billion in contributions from 52 member countries, as well as contributions to the Multilateral Debt Relief Initiative, financing raised in capital markets, carryover from IDA19, internal resources (such as loan repayments), and transfers from IBRD. IDA20 introduced new lending terms for eligible countries: shorter-maturity loans and 50-year credits.

IDA20¡¯s policy framework maintains the four IDA19 special themes of climate change; fragility, conflict, and violence; gender and development; and jobs and economic transformation. It introduces human capital as the fifth special theme. IDA20 will also help deepen recovery efforts by focusing on four cross-cutting issues: crisis preparedness, which was newly introduced for IDA20; debt; governance and institutions; and technology. The IDA20 period began on July 1, 2022.

Following the conclusion of the IDA20 replenishment process, new and ongoing challenges continue to influence the global outlook. These include high inflation, rising food insecurity, growing inequality, global fragility, pandemic risks, Russia¡¯s invasion of Ukraine and other geopolitical events, elevated levels of debt, climate change, and macroeconomic imbalances. As part of broader ¶¹ÄÌÊÓƵAPP Group efforts, IDA works with partners at the global and country levels to help borrowing countries address the impacts of these multiple crises, enhance resilience, and lay the groundwork for rebuilding better.