Africa Group 1 Constituency FY 14 ANNUAL REPORT Denny H. Kalyalya Executive Director 1
FY14 ANNUAL REPORT Welcome to the 2014 Annual Meetings I would like to express my gratitude to you, Honorable Governors, for your unwavering support to the Office, which has enabled me to represent you over the past two years 2
TOPICS COVERED IN THE FY14 ANNUAL REPORT Global Economic Developments and Prospects World Bank Group Operations in FY14 Update on Selected Bank Policies and Programs Constituency Matters 3
OUTLINE OF TODAY’S PRESENTATION 1. ECONOMIC DEVELOPMENTS AND PROSPECTS 2. UPDATE ON THE WORLD BANK GROUP OPERATIONS IN SSA 3. UPDATE ON THE WBG OPERATIONAL POLICIES AND PROGRAMS 4. REFLECTIONS AND OUTLOOK ON THE CONSTITUENCY ENGAGEMENT WITH THE WBG 5. CONCLUSION 4
ECONOMIC DEVELOPMENTS AND PROSPECTS The latest WBG forecast points to yet another disappointing year, with global growth rates slated to remain slow and weak. The downside risks remain due mainly to continued low growth in the Euro area, rising geopolitical tensions in eastern Europe and the Middle East, the slow down in China. The decline in commodity prices will have an adverse impact on trade balances and growth prospects in some countries. 5
ECONOMIC DEVELOPMENTS AND PROSPECTS Most developing countries have seen their fiscal buffer decline compared to the pre-crisis levels and will therefore have less room to maneuver. Debt levels remain low but are growing. SSA has been a bright spot for growth in developing countries, but Ebola crisis is a serious downside risk to growth prospects. These developments and uncertainties do not augur well for our countries. There is need for more infrastructure investment to meet the deficits in energy and transport; improve the business environment and enhance competition; ensure that growth creates jobs; and improve macroeconomic management. 6
UPDATE ON THE WBG OPERATIONS IN SSA 7
AFG1 GDP Growth Rates 8
OPERATIONS IBRD total commitments were US$18.6 billion, of which only US$0.42 billion went to SSA. IDA total commitments were US$22.2 billion, with US$10.19 billion to SSA. IFC commitments stood at US$15.4 billion in FY14, down from US$18.4 billion for FY13. Share for SSA remained level at US$3.4 billion. However, IFC approvals for AfG1 in FY amounted to US$405 million in support of 18 projects, down from US$500 million in support of 23 projects in FY13. MIGA issued guarantees for AfG1 amounting to US$36 million in support of two projects in Kenya and Burundi, compared to US$178.4 million in support of six projects in four countries in FY13. 9
OPERATIONS IBRD COMMITMENTS BY REGION IDA COMMITMENTS BY REGION (US$ BILLION) (US$ BILLION) 20 25 20 15 15 10 FY13 FY13 10 5 FY14 FY14 5 0 0 EAP ECA LAC MENA SA SSA Total 10
OPERATIONS APPROVALS BY REGION IFC APPROVALS FOR AfG1 (US$ BILLIONS) 600 20 500 15 400 10 FY13 FY13 300 5 FY14 200 FY14 0 100 ECA LAC MENA SA SSA World Total 0 Amount ( US$ million) 11
OPERATIONS IN SSA (US$ BILLION) IN AfG1 200 1.5 150 1 FY13 FY13 100 0.5 FY14 FY14 FY14 50 FY13 0 0 Guarantees (US$ bilion) Amount (US$ million) 12
UPDATE ON THE WBG OPERATIONAL POLICIES AND PROGRAMS A. IDA 17 B. IBRD C. OTHER 13
1. Change in IDA Financing Terms 2. Changes to the Allocation System 3. Flexibility in the use of Country Allocations IDA17 a. Front-loading IMPLEMENTATION b. Back-loading POLICIES c. Intra and Inter-regional reallocation 4. Changes to the IDA Regional Program Funding for IDA17 IDA17 AMOUNT : US$52 BILLION 5. Disclosure of Country Allocations Effectiveness: July 1, 2014 – June 30, 2017 6. IDA17 Crisis Response Window and the Ebola Emergency Operations 14
IDA 17 IMPLEMENTATION POLICIES 1. CHANGE IN IDA FINANCING TERMS IDA’s financing terms have been hardened . Starting in IDA 17, regular terms for credits for IDA-only countries will change from the current 40-year maturity and 10-year grace period to a maturity of 38 years with a 6- year grace period, with equal principal payments. 2. CHANGES TO THE ALLOCATION SYSTEM Increase in the minimum base allocation to SDR4 million per year from the IDA16 level of SDR3 million per year. Changes in the poverty orientation of the regular PBA system to allow for a sizeable increase in the allocation to fragile states without undermining allocation to other well performing IDA countries. Exceptional regime for countries facing “turn - around” situations – A new exceptional regime for countries facing “turn around” situations will start in FY 15. This applies to countries warranting the delivery of exceptional IDA support, including post-conflict and re-engaging countries. 15
IDA 17 IMPLEMENTATION POLICIES CHANGES TO THE ALLOCATION SYSTEM TURN AROUND SITUATION – CRITERIA OF ELIGIBILITY The cessation of an ongoing conflict (e.g., interstate warfare, civil war or other cycles of violence and/or partial state collapse that significantly disrupt a country’s development prospects); or The commitment to a major change in the policy environment following: (i) a prolonged period of disengagement from IDA lending; or (ii) a major shift in a country’s policy priorities addressing critical elements of fragility ( This should be used to some of our countries like Somalia, South Sudan, Sudan and Zimbabwe). SYSTEMS also allow smooth transition from the old exceptional post-conflict and re- engaging regime to the new turn-around situation regime. There will be a case-by-case extension of the phase-out period for the duration of IDA17. This may be applicable to Burundi and Liberia. 16
IDA 17 IMPLEMENTATION POLICIES 3. FLEXIBILITY IN THE USE OF COUNTRY ALLOCATIONS ALLOCATIONS WILL BE MANAGED WITHIN THE 3-YEAR IDA17 REPLENISHMENT PERIOD. EACH COUNTRY, OPERATING WITHIN ITS CUMULATIVE RESOURCE ENVELOPE, CAN FRONTLOAD OR BACKLOAD PART OF ITS IDA ALOCATIONS. a. FRONT-LOADING In FY15 and FY16, 1 st and 2 nd year of the IDA17 implementation, countries can front-load (i.e. using allocation early in the replenishment period) up to a maximum of 30 percent of relevant year’s allocation. Small countries (with population of less than 1.5 million) can front-load up to 80 percent of their cumulative three-year allocation to allow for scale economies. Front-loading may mean that limited funds would remain for the final year (FY17), but promotes operational flexibility in the use of IDA resources. 17
IDA 17 IMPLEMENTATION POLICIES b. BACK-LOADING Back-loading (i.e. using allocations later in the replenishment period) of up to the entire allocation in FY15 and FY16 is possible for all countries. All unused resources in FY15 and FY16 can be fully utilized in FY17. The financing terms will be aligned with the country’s debt rating for the year in which funds are used. It is not possible to back-load to the next replenishment period (i.e. from IDA17 to IDA18). In such circumstances, intra or inter-regional reallocation will take place. c. INTRA AND INTER-REGIONAL REALOCATION In the final year of IDA17, unused IDA funds may be allocated between countries or across regions. The rationale of this reallocation is to promote optimization of the use of IDA funds in respective regions while respecting the PBA principle. Regions and countries submitting a list of potential projects can access these resources before the close of the replenishment period. 18
IDA 17 IMPLEMENTATION POLICIES 4. CHANGES TO THE IDA REGIONAL PROGRAM FUNDING FOR IDA 17 In IDA17, the regional program funding has a total allocation of US$3.2 billion 75 percent of this amount (i.e. US$2.4 billion) is for regional projects in the Africa Region 19
IDA 17 IMPLEMENTATION POLICIES POSITIVE CHANGES IN THE REGIONAL PROGRAM FUNDING : The required minimum number of countries to be eligible for regional funding has been reduced from three to two with at least one fragile country participating in the regional project. On a case-by-case basis, where it can be clearly demonstrated that the project would have a transformational impact on the region and that three or more countries (one being a fragile and conflict affected state-FCS), the IDA regional program would fund projects that require the participation of only one IDA country. Example has been the case of the INGA III project in DRC. Contributions from national annual allocation is now capped at 20 percent. Allocations within a region are based on a first come first served basis. Finally, as a pilot, up to 10 percent of the regional IDA envelope for each region can be used to provide IDA grants to regional institutions for the purpose of preparing or implementing regional operations and building entities’ capacity. 20
IDA 17 IMPLEMENTATION POLICIES 5. Disclosure of Country Allocations IDA countries allocations are disclosed annually to promote transparency and to maintain the reputation and credibility of IDA vis-a- vis its partners. Governors are encouraged to follow up with the Vice Presidency of the Africa region on their respective country allocations. This is critical for effective management and planning of the use of the resources and aligning the intervention choices informed by the Systematic Country Diagnostics and Country Partnership Framework. 21
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