International Development Association

Definition

The International Development Association (IDA) is a part of the World Bank Group that provides low-interest loans and grants to the world's poorest countries to help them achieve economic and social development. It is a key component of the Bretton Woods Institutions, which were established after World War II to promote global economic stability and growth.

5 Must Know Facts For Your Next Test

1. The IDA provides financing to the world's 76 poorest countries, where 70% of the world's population living in extreme poverty reside.
2. IDA resources come from contributions from wealthier member countries, as well as funding raised in the capital markets.
3. IDA loans have a zero or very low-interest charge and repayments are stretched over 30 to 38 years, with a 5 to 10-year grace period.
4. The IDA focuses on projects that boost economic growth, reduce inequalities, and improve people's living conditions.
5. The IDA is a critical source of development finance, providing about $25 billion annually in grants and low-interest loans.

Review Questions

• Explain the purpose and role of the International Development Association within the broader context of the Bretton Woods Institutions.
  • The International Development Association (IDA) is a key component of the Bretton Woods Institutions, which were established after World War II to promote global economic stability and growth. The IDA's purpose is to provide low-interest loans and grants to the world's poorest countries to help them achieve economic and social development. By offering concessional financing, the IDA aims to boost economic growth, reduce inequalities, and improve living conditions in these countries, which are home to the majority of the world's population living in extreme poverty. As such, the IDA plays a vital role in the Bretton Woods Institutions' broader mission of fostering international monetary cooperation and facilitating the economic progress of developing nations.
• Analyze the sources of funding and the lending terms used by the International Development Association to support its development projects.
  • The International Development Association (IDA) obtains its resources from contributions made by wealthier member countries, as well as funding raised in the capital markets. The loans provided by the IDA are characterized by highly concessional terms, including a zero or very low-interest charge and repayment periods stretched over 30 to 38 years, with a 5 to 10-year grace period. These generous lending terms are designed to make the IDA's financing more accessible and affordable for the world's poorest countries, which often lack the resources and creditworthiness to obtain financing on commercial terms. By offering this type of concessional financing, the IDA aims to support development projects that can boost economic growth, reduce inequalities, and improve the living conditions of the most vulnerable populations in these countries.
• Evaluate the significance of the International Development Association's role in the broader context of the World Bank Group's efforts to promote global economic development and alleviate poverty.
  • The International Development Association (IDA) is a critical component of the World Bank Group's efforts to promote global economic development and alleviate poverty. As the part of the World Bank Group that provides low-interest loans and grants to the world's poorest countries, the IDA plays a vital role in supporting projects and initiatives that can drive economic growth, reduce inequalities, and improve the living conditions of the most vulnerable populations. By offering concessional financing terms, the IDA helps to make development resources accessible to countries that would otherwise struggle to obtain financing on commercial terms. This, in turn, enables these countries to invest in critical infrastructure, human capital, and social services that can lay the foundation for sustainable economic and social progress. Ultimately, the IDA's work is crucial to the World Bank Group's overarching mission of ending extreme poverty and promoting shared prosperity around the world.

Related terms

World Bank Group: The World Bank Group is a family of five international organizations that provide financing, advice, and research to developing countries to aid their economic and social progress.

Bretton Woods Institutions: The Bretton Woods Institutions refer to the International Monetary Fund (IMF) and the World Bank, which were established in 1944 to promote international monetary cooperation, financial stability, and economic development.

Concessional Financing: Concessional financing refers to loans or grants provided on terms more generous than market rates, often with lower interest rates, longer repayment periods, and a grace period for repayment.