Sri Lanka, middle income countries, in line to get more World Bank aid

WASHINGTON, Oct 19 2007 (LBO) – World Bank chief Robert Zoellick’s new push to lend to middle income nations is opening up new opportunities for countries like Sri Lanka to tap low cost funding, if good economic policies are followed.

Zoellick said the bank was already working with the Gates Foundation. He said approaches by several potential private donors had made him take the idea seriously.

Zoellick said 70 percent of the worlds poor who earn less than two dollars a day was in middle income countries, with India and China leading the way.

The poorest countries get money from the International Development Association (IDA) window of the Bank which has a large grant component.

Others get money from International Bank for Reconstruction and Development (IBRD) which is also much cheaper than commercial borrowing.

“Our role should not just be with developed countries and the poorest countries but there is a critical role for many of the countries in between,” Zoellick said here at his first media briefing before the start of the World Bank-IMF annual meetings this weekend.

“China, India and middle income borrowers of the IBRD still represent 70 percent of the poor.

“So if we are really going to get to the issues of the poor we need to develop partnerships with these countries.”

Zoellick, a former US Trade Representative said he was looking for feedback from the 185 Governors (finance ministers of member countries) for his ideas at this year’s annual meetings.

Sri Lanka now gets a mix of IDA and IBRD funds and authorities have claimed that Sri Lanka is becoming less eligible for such concessionary funds as rising per capita income takes the island towards a middle income nation as defined by World Bank.

China and India were among the biggest recipients of World Bank money. However a bulk of IBRD lending is policy related. Budgetary support loans are conditional on good economic policies.

With good economic policies Sri Lanka has been able to draw around 300 million dollars of World Bank funding a year in the past. However Bank lending to Sri Lanka fell to a mere 72 million dollars in the last financial year.

India in contrast got 3.7 billion dollars up from 1.4 billion dollars. South Asia overall received 50 percent more World Bank support in the period.

In 2006, Brazil, China, India, Mexico, and Turkey got 52 percent of the total IBRD commitments.

South Asia drew about 60 percent of the commitments in IDA funds.

Sri Lanka is just raising 500 million dollars in commercial loans from the international market.

Zoellick said he was also looking to channel private sector funds via the World Bank and diversify its fund base. In addition to donor money, the World Bank also raises money through bond issues.