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Developing IFAD’s Middle Income Country Strategy

Informal Seminar of the Executive BoardBrian Baldwin

Senior Operations Management Adviser

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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)

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

Country 2008 GDP/Capita

(US$)

Country 2008 GDP/Capita

(US$)

Country 2008 GDP/Capita

(US$)

Vietnam890

Sri Lanka1 780

Angola3 340

Pakistan950

Congo, Rep.1 790

Armenia3 350

Yemen, Rep.960

Egypt, Arab Rep.1 800

El Salvador3 460

Côte d’Ivoire980

Indonesia1 880

Jordan3 470

Senegal980

Philippines1 890

Tunisia3 480

Sao Tome and Principe1 030

Bhutan1 900

Iran, Islamic Rep.3 629

India1 040

Kiribati2 040

Maldives3 640

Papua New Guinea1 040

Paraguay2 110

Thailand3 670

Lesotho1 060

Syrian Arab Republic2 160

Ecuador3 690

Nicaragua1 080

Timor-Leste2 460

Belize3 740

Sudan1 100

Iraq2 467

Azerbaijan3 830

Djibouti1 130

Georgia2 500

Albania3 840

Cameroon1 150

Morocco2 520

Peru3 990

Nigeria1 170

Swaziland2 600

Fiji4 010

Guyana1 450

Guatemala2 680

Macedonia, FYR4 130

Bolivia1 460

Tonga2 690

Algeria4 190

Moldova1 500

Cape Verde2 800

American Samoa4 190

West Bank and Gaza1 557

Samoa2 820

Namibia4 210

Mongolia1 670

China2 940

Dominican Republic4 330

Honduras1 740

Marshall Islands3 270

Bosnia and Herzegovina4 520

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

Country 2008 GDP/Capita

(US$)

Country 2008 GDP/Capita

(US$)

Country 2008 GDP/Capita

(US$)

Colombia4 620

Turkey9 020

Dominica4 750

Venezuela, RB9 230

Suriname4 760

Chile9 370

Jamaica4 800

Mexico9 990

St. Vincent and the Grenadines5 050

Seychelles10 220

St. Lucia5 410

St. Kitts and Nevis10 870

South Africa5 820

Libya12 380

Grenada5 880

Antigua and Barbuda13 200

Costa Rica6 060

Cuba13 580

Kazakhstan6 160

Botswana6 640

Panama6 690

Mauritius6 700

Lebanon6 780

Argentina7 190

Malaysia7 250

Brazil7 300

Gabon7 320

Uruguay8 260

Romania8 280

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

Country Intermediate Terms Ordinary Terms Total

Gabon 6 000 6 000

Mauritius 6 001 6 001

Swaziland 5 998 5 998

China 62 345 62 345

Philippines 15 900 15 900

Argentina 39 341 39 341

Belize 3 000 3 000

Brazil 98 655 98 655

Colombia 20 000 20 000

Costa Rica 9 189 9 189

Dominican Republic 13 800 13 800

Ecuador 12 787 12 787

El Salvador 30 559 30 559

Guatemala 17 000 18 423 35 423

Mexico 29 973 29 973

Panama 4 200 4 200

Paraguay 3 100 3 100

Peru 23 037 23 037

Venezuela 13 000 13 000

Albania 9 600 9 600

Bosnia and Herzegovina 11 113 11 113

Egypt 64 134 64 134

Georgia 8 700 8 700

Jordan 11 777 11 777

Lebanon 4 605 4 605

Morocco 34 963 34 963

Tunisia 15 490 15 490

Turkey 43 300 43 300

Total (28) 264 630 371 360 635 990

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MICs≈IFAD

IFAD current financing portfolio

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MICs≈IFAD

IFAD portfolio: without current MIC financing

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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.

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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

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MICs≈IFAD Loan reflows from MICs

finance IFAD’s PoW

Mobilisation of MIC national

public resources for rural poor

The future MICs and IFAD: A partnership for rural development

MICs provide financial

resources to IFAD

IFAD’sprogramof loans& grants in MICs MICs provide

transferable knowledge

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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.

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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

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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

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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.

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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.

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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.

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Thank you