This piece originally appeared in the Financial Times.
The world’s poorest countries are in a development crisis and need greater access to affordable financing (Opinion, October 1; and Letters, October 11).
IDA, the World Bank’s concessional financing facility for these countries, has a proven track record for providing this support and its upcoming replenishment is a moment for the international community to match their stated concern with a stepped-up financial contribution. We urge finance ministers of the G20 countries to lead this effort and increase contributions to the 21st replenishment of the International Development Association (IDA21).
IDA has served the world’s poorest countries for over 60 years, but it has never been more vital. IDA borrowing countries continue to struggle in the aftermath of the Covid-19 pandemic and other crises that have halted decades of progress in poverty reduction and human development. The World Bank forecasts that nearly one-third of low-income countries will have lower per capita incomes in 2026 than in 2019. Of the UN’s sustainable development goals, goal 1 was to “end poverty in all its manifestations by 2030”. Current projections show that nearly 600mn people will remain in extreme poverty by that date.
As a group of economists who have devoted significant parts of our careers to the eradication of extreme poverty, we believe that IDA is particularly well suited to help low-income countries accelerate progress. IDA’s financing is tailored to the specific needs and capacities of each country. It is delivered through recipient governments, ensuring ownership and alignment with national priorities.
Most importantly, as other sources of external financing for the poorest countries have been pulled back in recent years, IDA has stepped up, nearly doubling its commitments to low-income countries in response to the Covid crisis, and maintaining average annual financing commitments of nearly $35bn per year over the last three years.
Over the past decade, IDA has been able to increase its volume of assistance mainly by leveraging flat donor contributions with progressively larger volumes of borrowed funds and recycled repayments of past loans. That model is no longer sustainable and without an increase in donor contributions IDA will have to reduce its annual financing commitments or offer less favourable terms to its borrowers, neither of which is appropriate in the current context.
That is why we call on G20 members to increase their contributions in IDA21 by at least 20 per cent, which would enable IDA to maintain its annual financing commitments. It would also send a strong signal of solidarity and support to the world’s poorest countries and people and respond to the priority that African leaders attach to IDA for their recovery and development.
We thank the G20 for their attention and leadership, and we hope they will seize this historic opportunity to make a difference for the world’s poorest countries and people.
Professor Daron Acemoglu
Massachusetts Institute of Technology, US
Professor Michael Kremer
University of Chicago, IL, US
Mavis Owusu-Gyamfi
President and CEO, African Center for Economic Transformation, Accra, Ghana
Professor Joseph Stiglitz
Columbia University, New York, NY, US
Masood Ahmed
President Emeritus, Center for Global Development
KY Amoako
Founder and President Emeritus, ACET, Accra, Ghana
François Bourguignon
Chaire émérite, Paris School of Economics
Barbara K. Buchner
Global Managing Director, Climate Policy Initiative
Ha-Joon Chang
Research Professor at the Department of Economics of SOAS, University of London and Co-Director of the Centre for Sustainable Structural Transformation (CSST)
Stefan Dercon
Economist & Professor of Economic Policy at the Blavatnik School of Government and the Department of Economics, University of Oxford
Shantayanan Devarajan
Professor of the practice of International Development at Edmund A Walsh School of Foreign Service, Georgetown University
Charles Kenny
Senior Fellow, Center for Global Development
Justin Lin
Dean, Institute of New Structural Economics, Peking University
Isaac M Mbiti
Associate Professor, of Public Policy and Economics, Frank Batten School of Leadership & Public Policy, University of Virginia
José Antonio Ocampo
Professor at the School of International and Public Affairs, Co-President of the Initiative for Policy Dialogue (IPD) and Member of the Committee on Global Thought at Columbia University
Dani Rodrik
Ford Foundation Professor of International Political Economy, Kennedy School of Government at Harvard University
Jeffrey Sachs
University Professor and Director, Center for Sustainable Development, Columbia University
Lord Nicholas Stern
IG Patel Chair of Economics and Government London School of Economics and Political Science
Lawrence H Summers
Charles W Eliot University Professor and President Emeritus at Harvard University
Andrés Velasco
Dean, School of Public Policy, London School of Economics and Political Science
Gernot Wagner
Climate Economist, Columbia Business School, Columbia University
Leonard Wantchekon
James Madison Professor of Political Economy and Professor of Politics and International Affairs at Princeton University
Ernesto Zedillo
Director of the Yale Center for the Study of Globalization, Professor of International Economics and Politics, Professor of International and Area Studies, Yale University / Former President of Mexico
