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Multilateral Development Banks

Volume 671: debated on Tuesday 11 February 2020

Delivering the sustainable development goals (SDGs) will make the world wealthier, healthier, greener and more equal. Multilateral development banks, such as the World Bank and the African Development Bank, provide financing and expertise at scale, playing a central role in helping the world’s poorest countries to meet the SDGs, supporting UK development, security and prosperity priorities. The World Bank’s International Development Association (IDA) and the African Development Bank’s African Development Fund (ADF), which provide support to the world’s poorest countries, are replenished by donors every three years. Given the close fit with UK priorities, the UK has been the largest donor to recent IDA and ADF replenishments.

In December, IDA concluded negotiations of its 19th replenishment (IDA19), covering the period from July 2020 to June 2023. Participants agreed that the replenishment would support $82 billion of development financing. IDA has a track record of achieving results and IDA19 is expected to support:

immunisations for up to 140 million children;

safe childbirth for up to 80 million women; and

an additional 10 gigawatts of renewable energy generation capacity.

Following successful engagement from the UK and others, IDA19 includes significant commitments from the World Bank to further enhance IDA’s impact. These include: enhancing its support for fragile and conflict-affected countries; increasing to 30% the proportion of support to tackling climate change; more focus on jobs and skills; and increasing attention on inclusion with a new focus on supporting people with disabilities and an enhanced focus on gender equality.

Given IDA’s close fit with UK priorities, and the results and commitments it is expected to deliver, the Government pledged £3.062 billion support to this replenishment. This represents an inflation-adjusting increase on our pledge to the previous IDA replenishment, and the UK remains the largest donor.

In December, negotiations on the 15th replenishment of the African Development Fund (ADF15) also concluded. The ADF is the African Development Bank’s (AfDB) concessional lending and grant-giving arm, that operates in the poorest countries in Africa. The total ADF15 resource envelope for the period January 2020 to December 2022 is the equivalent to almost £6 billion.

The fund has a track record of delivering results in the poorest countries in Africa. With these resources ADF15 is expected to deliver the following results over the replenishment:

improved access to transport for up to 20 million people;

improvements in agriculture for up to 6 million people;

new electricity connections for up to 5 million people;

up to an additional 170 megawatts of renewable energy capacity;

up to 4,150 kilometres of roads built; and

up to more than 1 million jobs created.

The UK has pledged to contribute £633.09 million to this replenishment, which includes a performance incentive component of £102 million to support the AfDB to meet its reform objectives (including those set out below).

In October, shareholders and management of the AfDB concluded negotiations for a seventh general capital increase (GCI7) [1]. This will enable the bank to increase its overall annual lending to Governments and the private sector, from approximately £5.5 billion currently, to over £13 billion in 2030, supporting progress towards the SDGs in Africa. The cost to the UK to buy new shares allocated to it as part of this capital increase is £1,576,230,660. Some £94,569,682 will be paid in over eight years and the remaining £1,481,660,970 is a contingent liability that can be called on if needed. It is worth noting that no contingent liabilities have been called in by the AfDB previously.

Through the negotiations the UK and others secured a range of reform and policy commitments from the AfDB, including: a $25 billion investment in climate finance between 2020 and 2025; improved operations in fragile states by recruiting and deploying more expert staff to fragile environments; and new strategies on staffing, climate change and energy, governance, gender and the private sector.

Consistent with the International Development Act 2002, and before any financial contributions are made, the Government will lay statutory orders relating to the IDA19 and ADF15 replenishments and the AfDB capital increase for the consent of the House of Commons. Consistent with HM Treasury guidance, the Government will also lay a departmental minute relating to the callable capital associated with the AfDB capital increase.

[1]A general capital increase is where shareholders provide additional capital in line with their existing shareholdings.