International Development Association (IDA)

Definition

The International Development Association (IDA) is a financial institution that is part of the World Bank Group, aimed at providing low-interest loans and grants to the world’s poorest countries. Established in 1960, the IDA focuses on projects and programs that promote economic development and reduce poverty, emphasizing sustainability and social equity. It plays a critical role in facilitating access to financial resources for nations that struggle to obtain funds through traditional markets.

5 Must Know Facts For Your Next Test

1. The IDA provides funding primarily to countries with a per capita income below a certain threshold, targeting those most in need of financial assistance.
2. Funding from the IDA often supports areas like education, health, infrastructure, and agriculture, aiming to create sustainable economic growth.
3. IDA resources are replenished every few years through negotiations among donor countries, which contribute funds based on their ability to pay.
4. The IDA emphasizes partnerships with recipient countries to ensure that projects align with their specific developmental goals and local contexts.
5. The association also focuses on gender equality and environmental sustainability as part of its broader mission to improve living conditions for disadvantaged populations.

Review Questions

• How does the International Development Association (IDA) support poverty alleviation in low-income countries?
  • The IDA supports poverty alleviation by providing low-interest loans and grants specifically tailored for projects that enhance economic development in low-income countries. These financial resources are directed towards sectors such as education, health care, and infrastructure development, which are crucial for improving living standards. By focusing on these essential areas, the IDA helps create sustainable pathways out of poverty while fostering economic resilience in vulnerable nations.
• What role do Poverty Reduction Strategy Papers (PRSPs) play in the funding process of the IDA?
  • Poverty Reduction Strategy Papers (PRSPs) serve as essential documents for countries seeking assistance from the IDA. They outline the country's comprehensive strategies for tackling poverty through targeted policies and programs. The IDA requires these papers to ensure that its funding aligns with the specific needs and developmental goals of recipient nations, promoting ownership and accountability in addressing poverty-related challenges.
• Evaluate the impact of concessional financing provided by the IDA on long-term economic growth in recipient countries.
  • Concessional financing from the IDA significantly impacts long-term economic growth in recipient countries by enabling them to invest in critical areas without being burdened by high-interest debt. This type of funding allows governments to prioritize development projects that foster job creation, infrastructure improvements, and social services enhancements. By alleviating immediate financial pressures, concessional financing creates an environment where sustainable growth can occur, ultimately leading to improved living conditions and greater economic stability over time.

Related terms

World Bank Group: A group of five international organizations that provide financial and technical assistance to developing countries for development programs (e.g., education, health, public administration) that are expected to improve the economic prospects and quality of life for people in those countries.

Poverty Reduction Strategy Papers (PRSPs): Documents required by the IDA and other international financial institutions from countries seeking assistance, outlining a country's strategy to reduce poverty through various policies and programs.

concessional financing: Loans or grants provided at favorable terms, such as lower interest rates and longer repayment periods, typically aimed at supporting low-income countries in their development efforts.