IDA 12 Lending Projections

International Development Association May 1998

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IDAl2 Lending Projections

A set ofIDA12 lending projections (for the period FYOO-02) was presented and discussed at the February 1998 meeting ofIDA Deputies TIris note provides further background information on the basis for these projections A summary of these projections is shown in the tables below details for all eighty IDA-eligible countries are included in Annex I As requested by Deputies an additional note is attached with information on blend borrowers (Annex II)

Developments since the February meeting suggest that significant IDA funding will be required to support economic recovery in Liberia during the IDA12 period and for continued IDA lending to Bosnia l As a result the projections now incorporate these countries into the respective regional subtotals2 IDA12 lending projections for specific countries therefore total SDR 159 billion including lending for these two countries and for DR Congo which is also expected to reactivate in FYOO-02 Therefore the proposed SDR 160 billion resource envelope will leave only SDR 01 billion in contingencies for potential reactivating countries (Afghanistan Myanmar Nigeria Somalia and Sudan) or for potential new borrowers

IDA Lending (SnR billion)

IDAIO IDA 1 1 IDA 12 (FYOO-02) FY94-96 FY97-99 Projection Actual Estimate Amount

Africa 53 53 76 48 East Asia 25 20 18 11 South Asia 35 39 44 28 ECA 08 13 10 6 MNA 03 04 03 2 LAC 07 05 08 5

Total 132 133 159 99 Potential Reactivators 01 1 Grand Total 132 133 160 100

Two main factors explain the expected country-specific lending level ofSDR 159 billion in IDAI2 performance improvements and enhanced operational capacity in countries with sound performance

I Lending to Bosnia in IDA 12 is subject to an assessment of its continued eligibility for IDA lending This is expected to be included in a CAS progress report to be discussed by the Board in the fIrst quarter of FY99

2 In the February presentation of these projections possible allocations for these two countries were presented in a separate category for potential reactivators The presentation in this note reflects current developments more accurately

-2-

bull Perfonnance improvements already incorporated in CAS base case lending programs are particularly significant in Africa but are also a factor in South Asia and LAC

bull In addition the Banks renewal effort has facilitated the strengthening of operational capacity-through decentralization enhanced budgetary flexibility and new instruments This effect is particularly noteworthy in Bangladesh Ethiopia and Vietnam These are countries with sound sustained policy perfonnance where IDAs lending is low relative to their size and policy perfonnance The lend~g levels projected for these three countries in IDA12 are consistent with those envisaged in their respective CAS base case scenarios

The IDA12 projections are anchored in CASs and other planning processes which are based on current country perfonnance and institutional constraints as well as IDA priorities These projections reflect a judgment on the policy outlook and absorptive capacity of each IDA recipient in the context ofIDAs administrative budget constraints

IDA Lending Projections (SDR billion)

IDA 1 1 CAS Program IDA 12 IDAIO FY97-99 Base - High FYOO-02 Projection

FY94-96 Estimate Range SOR billion of Total

Countries with Current CAS (3S) 99 104 132-156 130 Sl (ow Africa) (41) (41) (56 -71) (56) (35)

Countries without Current CAS (37) 33 29 29 IS (ow Africa) (12) (12) (21) (13)

TOTAL 132 133 159 99

(ow Africa) (53) (53) (77) (4S)

Potential Reactivators without CAS (5) 01 1 Grand Total 132 133 160 (100)

Thirty-eight countries have current CAS3 1ending programs (Annex I Table 1) Of these 28 have already been discussed by the Board and 10 are at advanced stages of preparation These countries account for 81 (SDR 130 billion) ofprojected lending during IDA12 They include all major IDA borrowers except Zambia 4 and account for over three-quarters oftota estimated

3 Actual CASs fmalized from February 97 through May 98 and planned CASs through December 98 for which preliminary lending levels are available The specific three-year period covered by each CAS varies with its date Most of the current CASs include lending programs covering FY98-00 or FY99-0 I Depending on the size of the lending program the quality of the portfolio and for IBRD borrowers Bank exposure all countries are classified into one of four categories Countries in Category 1 are on an annual CAS cycle For Category 2 countries CASs are prepared every second year For Category 3 countries CASs are prepared every third year For Category 4 countries CASs are prepared less frequently

4 Zambia is a Category 2 country The latest CAS was in July 1996 and a new CAS is currently planned for March 1999

- 3middot

IDAII lending The aggregate base case CAS lending programs for these 38 countries amount to SDR 132 billion which is the main basis for the IDA12 lending projections

IDA12 lending projections for the remaining 37 currently IDA-eligible countries without a current CAS lending program amount to SDR 29 billion These are generally smaller borrowers for which CASs are required only every third year or less frequently Projections for these countries have been made on the basis of current business plans-which are in turn consistent with IDAs performance-based allocations (Annex I Table 2) As mentioned above no countryshyspecific provisions have been made at this point for the possible reactivation of lending in Afghanistan Myanmar Nigeria Somalia and Sudan or for potential new IDA borrowers A limited contingency of SDR 01 billion is included in the proposed SDR 160 billion resource envelope to meet a small part of any possible reactivating need

IDA12 lending projections for all countries represent current base case lending scenarios However there is significant upside potential associated with performance improvements above current expectations For instance in nearly 60 percent of current CASs a high case lending program is also specified This assumes significant improvements over base case policy performance If all these countries were to achieve high case lending mode IDA funding needs would increase by SDR 24 billion-over the base case SDR 132 billion aggregate for countries with current CASso This would raise IDA12 lending projections for specific countries from SDR 159 billion to SDR 183 billion On the other hand there are also potential downside risks largely related to possible performance deterioration which could result in lower lending levels in some countries On balance however we believe that the likelihood of aggregate high and low cases lending levels materializing is such that they roughly offset each other in terms of lending volume Therefore the aggregate projection for IDA12 represents a robust most likely lending outcome

The bulk ofIDA12 lending is projected to be absorbed by IDA-only countries-SDR 126 billion or 78 of the total compared with SDR 87 billion or 65 in IDAIl

Current Borrowers IDA-Only Countries

Blend Countries oIw India

China Egypt Seven ECA countries

Total Potential Reactivators Grand Total

IDA Lending by Type of Borrower (SDR billion)

IDA 10 IDA I I FY94-96 FY97-99 est

Amount Amount 82 62 87 6S

49 38 47 3S 21 16 19 14 14 11 07 5 02 1 02 1 07 5 11 8

132 100 133 100

132 100 133 100

IDA 12 FYOO-02 Proj

Amount 126 78

34 21 19 12

08 5

159 99 01 1

160 100

There will be 15 blend borrowers in IDAI2 compared with 17 in IDAll as China and Egypt will graduate from IDA at the end ofFY99 As was the case in IDAl1 no lending is envisaged in Nigeria because of po licyl institutional performance concerns Lending to 7 blend ECA countries is projected to decline from the estimated IDA11 peak ofSDR 11 billion This is the result of the phase out of exceptionally high transition fmancing in a number of countries and particularly of an expected decline of lending to Bosnia following the extraordinarily high levels ofIDA11 Overall lending to ECA countries during IDA12 is still expected to be at levels in line with those ofIDA-only countries with cmparable policy performance However as they become increasingly creditworthy for IBRD lending to these countries will continue to decline For instance in the case ofFYR Macedonia IDA lending is expected to cease after IDA12

Lending to India is expected to remain at the same nominal level as in IDA11-SDR 19 billion compared to SDR 21 billion during IDAlO This is premised on continued strong policy and portfolio performance On this basis Indias share ofIDA12 lending would be some 12 down from 16 in IDAlO and about 14 in IDAl1

Summary Table IDA Lending Projections and-CAS-P~og~ams (SDR billion) lt

IDAIO IDAll CAS Program FY94-96 FY97-99 Base - High Actual Estimate Range

Countries with Current CAS aI 99 IDA 132-156

Africa 41 41 56-71 South Asia 35 38 46-51 East Asia 10 12 14-18 ECA 06 06 071-074 LAC 06 04 05-06 MNA 01 02 03

Countries without Current CAS 33 29 na

TOTAL 132 133

Potential Reactivators bl na Grand Total 132 133

IDA12

Annex I Page I

FYOO-02 Projection

130

56 44 16 06 05 03

29

159

01 160

a Actual CASs fmalized from February 97 through May 98 and planned CASs through December 98 for which preliminary lending levels are available The specific three-year period covered by each CAS varies with its date Most of the current CASs include lending programs covering FY98-00 or FY99-0 I Depending on the size of the lending program the quality of the portfolio and for IBRD borrowers Bank exposure all countries are classified into one of four categories Countries in 1 are on an annual CAS cycle For Category 2 countries CASs are prepared every second year For Category 3 countries CASs are prepared every third year For Category 4 countries CASs are prepared less frequently

bl Afghanistan Myanmar Nigeria Somalia and Sudan

-2-

bull Perfonnance improvements already incorporated in CAS base case lending programs are particularly significant in Africa but are also a factor in South Asia and LAC

bull In addition the Banks renewal effort has facilitated the strengthening of operational capacity-through decentralization enhanced budgetary flexibility and new instruments This effect is particularly noteworthy in Bangladesh Ethiopia and Vietnam These are countries with sound sustained policy perfonnance where IDAs lending is low relative to their size and policy perfonnance The lend~g levels projected for these three countries in IDA12 are consistent with those envisaged in their respective CAS base case scenarios

The IDA12 projections are anchored in CASs and other planning processes which are based on current country perfonnance and institutional constraints as well as IDA priorities These projections reflect a judgment on the policy outlook and absorptive capacity of each IDA recipient in the context ofIDAs administrative budget constraints

IDA Lending Projections (SDR billion)

IDA 1 1 CAS Program IDA 12 IDAIO FY97-99 Base - High FYOO-02 Projection

FY94-96 Estimate Range SOR billion of Total

Countries with Current CAS (3S) 99 104 132-156 130 Sl (ow Africa) (41) (41) (56 -71) (56) (35)

Countries without Current CAS (37) 33 29 29 IS (ow Africa) (12) (12) (21) (13)

TOTAL 132 133 159 99

(ow Africa) (53) (53) (77) (4S)

Potential Reactivators without CAS (5) 01 1 Grand Total 132 133 160 (100)

Thirty-eight countries have current CAS3 1ending programs (Annex I Table 1) Of these 28 have already been discussed by the Board and 10 are at advanced stages of preparation These countries account for 81 (SDR 130 billion) ofprojected lending during IDA12 They include all major IDA borrowers except Zambia 4 and account for over three-quarters oftota estimated

3 Actual CASs fmalized from February 97 through May 98 and planned CASs through December 98 for which preliminary lending levels are available The specific three-year period covered by each CAS varies with its date Most of the current CASs include lending programs covering FY98-00 or FY99-0 I Depending on the size of the lending program the quality of the portfolio and for IBRD borrowers Bank exposure all countries are classified into one of four categories Countries in Category 1 are on an annual CAS cycle For Category 2 countries CASs are prepared every second year For Category 3 countries CASs are prepared every third year For Category 4 countries CASs are prepared less frequently

4 Zambia is a Category 2 country The latest CAS was in July 1996 and a new CAS is currently planned for March 1999

- 3middot

IDAII lending The aggregate base case CAS lending programs for these 38 countries amount to SDR 132 billion which is the main basis for the IDA12 lending projections

IDA12 lending projections for the remaining 37 currently IDA-eligible countries without a current CAS lending program amount to SDR 29 billion These are generally smaller borrowers for which CASs are required only every third year or less frequently Projections for these countries have been made on the basis of current business plans-which are in turn consistent with IDAs performance-based allocations (Annex I Table 2) As mentioned above no countryshyspecific provisions have been made at this point for the possible reactivation of lending in Afghanistan Myanmar Nigeria Somalia and Sudan or for potential new IDA borrowers A limited contingency of SDR 01 billion is included in the proposed SDR 160 billion resource envelope to meet a small part of any possible reactivating need

IDA12 lending projections for all countries represent current base case lending scenarios However there is significant upside potential associated with performance improvements above current expectations For instance in nearly 60 percent of current CASs a high case lending program is also specified This assumes significant improvements over base case policy performance If all these countries were to achieve high case lending mode IDA funding needs would increase by SDR 24 billion-over the base case SDR 132 billion aggregate for countries with current CASso This would raise IDA12 lending projections for specific countries from SDR 159 billion to SDR 183 billion On the other hand there are also potential downside risks largely related to possible performance deterioration which could result in lower lending levels in some countries On balance however we believe that the likelihood of aggregate high and low cases lending levels materializing is such that they roughly offset each other in terms of lending volume Therefore the aggregate projection for IDA12 represents a robust most likely lending outcome

The bulk ofIDA12 lending is projected to be absorbed by IDA-only countries-SDR 126 billion or 78 of the total compared with SDR 87 billion or 65 in IDAIl

Current Borrowers IDA-Only Countries

Blend Countries oIw India

China Egypt Seven ECA countries

Total Potential Reactivators Grand Total

IDA Lending by Type of Borrower (SDR billion)

IDA 10 IDA I I FY94-96 FY97-99 est

Amount Amount 82 62 87 6S

49 38 47 3S 21 16 19 14 14 11 07 5 02 1 02 1 07 5 11 8

132 100 133 100

132 100 133 100

IDA 12 FYOO-02 Proj

Amount 126 78

34 21 19 12

08 5

159 99 01 1

160 100

There will be 15 blend borrowers in IDAI2 compared with 17 in IDAll as China and Egypt will graduate from IDA at the end ofFY99 As was the case in IDAl1 no lending is envisaged in Nigeria because of po licyl institutional performance concerns Lending to 7 blend ECA countries is projected to decline from the estimated IDA11 peak ofSDR 11 billion This is the result of the phase out of exceptionally high transition fmancing in a number of countries and particularly of an expected decline of lending to Bosnia following the extraordinarily high levels ofIDA11 Overall lending to ECA countries during IDA12 is still expected to be at levels in line with those ofIDA-only countries with cmparable policy performance However as they become increasingly creditworthy for IBRD lending to these countries will continue to decline For instance in the case ofFYR Macedonia IDA lending is expected to cease after IDA12

Lending to India is expected to remain at the same nominal level as in IDA11-SDR 19 billion compared to SDR 21 billion during IDAlO This is premised on continued strong policy and portfolio performance On this basis Indias share ofIDA12 lending would be some 12 down from 16 in IDAlO and about 14 in IDAl1

Summary Table IDA Lending Projections and-CAS-P~og~ams (SDR billion) lt

IDAIO IDAll CAS Program FY94-96 FY97-99 Base - High Actual Estimate Range

Countries with Current CAS aI 99 IDA 132-156

Africa 41 41 56-71 South Asia 35 38 46-51 East Asia 10 12 14-18 ECA 06 06 071-074 LAC 06 04 05-06 MNA 01 02 03

Countries without Current CAS 33 29 na

TOTAL 132 133

Potential Reactivators bl na Grand Total 132 133

IDA12

Annex I Page I

FYOO-02 Projection

130

56 44 16 06 05 03

29

159

01 160

a Actual CASs fmalized from February 97 through May 98 and planned CASs through December 98 for which preliminary lending levels are available The specific three-year period covered by each CAS varies with its date Most of the current CASs include lending programs covering FY98-00 or FY99-0 I Depending on the size of the lending program the quality of the portfolio and for IBRD borrowers Bank exposure all countries are classified into one of four categories Countries in 1 are on an annual CAS cycle For Category 2 countries CASs are prepared every second year For Category 3 countries CASs are prepared every third year For Category 4 countries CASs are prepared less frequently

bl Afghanistan Myanmar Nigeria Somalia and Sudan

- 3middot

IDAII lending The aggregate base case CAS lending programs for these 38 countries amount to SDR 132 billion which is the main basis for the IDA12 lending projections

IDA12 lending projections for the remaining 37 currently IDA-eligible countries without a current CAS lending program amount to SDR 29 billion These are generally smaller borrowers for which CASs are required only every third year or less frequently Projections for these countries have been made on the basis of current business plans-which are in turn consistent with IDAs performance-based allocations (Annex I Table 2) As mentioned above no countryshyspecific provisions have been made at this point for the possible reactivation of lending in Afghanistan Myanmar Nigeria Somalia and Sudan or for potential new IDA borrowers A limited contingency of SDR 01 billion is included in the proposed SDR 160 billion resource envelope to meet a small part of any possible reactivating need

IDA12 lending projections for all countries represent current base case lending scenarios However there is significant upside potential associated with performance improvements above current expectations For instance in nearly 60 percent of current CASs a high case lending program is also specified This assumes significant improvements over base case policy performance If all these countries were to achieve high case lending mode IDA funding needs would increase by SDR 24 billion-over the base case SDR 132 billion aggregate for countries with current CASso This would raise IDA12 lending projections for specific countries from SDR 159 billion to SDR 183 billion On the other hand there are also potential downside risks largely related to possible performance deterioration which could result in lower lending levels in some countries On balance however we believe that the likelihood of aggregate high and low cases lending levels materializing is such that they roughly offset each other in terms of lending volume Therefore the aggregate projection for IDA12 represents a robust most likely lending outcome

The bulk ofIDA12 lending is projected to be absorbed by IDA-only countries-SDR 126 billion or 78 of the total compared with SDR 87 billion or 65 in IDAIl

Current Borrowers IDA-Only Countries

Blend Countries oIw India

China Egypt Seven ECA countries

Total Potential Reactivators Grand Total

IDA Lending by Type of Borrower (SDR billion)

IDA 10 IDA I I FY94-96 FY97-99 est

Amount Amount 82 62 87 6S

49 38 47 3S 21 16 19 14 14 11 07 5 02 1 02 1 07 5 11 8

132 100 133 100

132 100 133 100

IDA 12 FYOO-02 Proj

Amount 126 78

34 21 19 12

08 5

159 99 01 1

160 100

There will be 15 blend borrowers in IDAI2 compared with 17 in IDAll as China and Egypt will graduate from IDA at the end ofFY99 As was the case in IDAl1 no lending is envisaged in Nigeria because of po licyl institutional performance concerns Lending to 7 blend ECA countries is projected to decline from the estimated IDA11 peak ofSDR 11 billion This is the result of the phase out of exceptionally high transition fmancing in a number of countries and particularly of an expected decline of lending to Bosnia following the extraordinarily high levels ofIDA11 Overall lending to ECA countries during IDA12 is still expected to be at levels in line with those ofIDA-only countries with cmparable policy performance However as they become increasingly creditworthy for IBRD lending to these countries will continue to decline For instance in the case ofFYR Macedonia IDA lending is expected to cease after IDA12

Lending to India is expected to remain at the same nominal level as in IDA11-SDR 19 billion compared to SDR 21 billion during IDAlO This is premised on continued strong policy and portfolio performance On this basis Indias share ofIDA12 lending would be some 12 down from 16 in IDAlO and about 14 in IDAl1

Summary Table IDA Lending Projections and-CAS-P~og~ams (SDR billion) lt

IDAIO IDAll CAS Program FY94-96 FY97-99 Base - High Actual Estimate Range

Countries with Current CAS aI 99 IDA 132-156

Africa 41 41 56-71 South Asia 35 38 46-51 East Asia 10 12 14-18 ECA 06 06 071-074 LAC 06 04 05-06 MNA 01 02 03

Countries without Current CAS 33 29 na

TOTAL 132 133

Potential Reactivators bl na Grand Total 132 133

IDA12

Annex I Page I

FYOO-02 Projection

130

56 44 16 06 05 03

29

159

01 160

a Actual CASs fmalized from February 97 through May 98 and planned CASs through December 98 for which preliminary lending levels are available The specific three-year period covered by each CAS varies with its date Most of the current CASs include lending programs covering FY98-00 or FY99-0 I Depending on the size of the lending program the quality of the portfolio and for IBRD borrowers Bank exposure all countries are classified into one of four categories Countries in 1 are on an annual CAS cycle For Category 2 countries CASs are prepared every second year For Category 3 countries CASs are prepared every third year For Category 4 countries CASs are prepared less frequently

bl Afghanistan Myanmar Nigeria Somalia and Sudan

There will be 15 blend borrowers in IDAI2 compared with 17 in IDAll as China and Egypt will graduate from IDA at the end ofFY99 As was the case in IDAl1 no lending is envisaged in Nigeria because of po licyl institutional performance concerns Lending to 7 blend ECA countries is projected to decline from the estimated IDA11 peak ofSDR 11 billion This is the result of the phase out of exceptionally high transition fmancing in a number of countries and particularly of an expected decline of lending to Bosnia following the extraordinarily high levels ofIDA11 Overall lending to ECA countries during IDA12 is still expected to be at levels in line with those ofIDA-only countries with cmparable policy performance However as they become increasingly creditworthy for IBRD lending to these countries will continue to decline For instance in the case ofFYR Macedonia IDA lending is expected to cease after IDA12

Lending to India is expected to remain at the same nominal level as in IDA11-SDR 19 billion compared to SDR 21 billion during IDAlO This is premised on continued strong policy and portfolio performance On this basis Indias share ofIDA12 lending would be some 12 down from 16 in IDAlO and about 14 in IDAl1

Summary Table IDA Lending Projections and-CAS-P~og~ams (SDR billion) lt

IDAIO IDAll CAS Program FY94-96 FY97-99 Base - High Actual Estimate Range

Countries with Current CAS aI 99 IDA 132-156

Africa 41 41 56-71 South Asia 35 38 46-51 East Asia 10 12 14-18 ECA 06 06 071-074 LAC 06 04 05-06 MNA 01 02 03

Countries without Current CAS 33 29 na

TOTAL 132 133

Potential Reactivators bl na Grand Total 132 133

IDA12

Annex I Page I

FYOO-02 Projection

130

56 44 16 06 05 03

29

159

01 160

a Actual CASs fmalized from February 97 through May 98 and planned CASs through December 98 for which preliminary lending levels are available The specific three-year period covered by each CAS varies with its date Most of the current CASs include lending programs covering FY98-00 or FY99-0 I Depending on the size of the lending program the quality of the portfolio and for IBRD borrowers Bank exposure all countries are classified into one of four categories Countries in 1 are on an annual CAS cycle For Category 2 countries CASs are prepared every second year For Category 3 countries CASs are prepared every third year For Category 4 countries CASs are prepared less frequently

bl Afghanistan Myanmar Nigeria Somalia and Sudan

Summary Table IDA Lending Projections and-CAS-P~og~ams (SDR billion) lt

IDAIO IDAll CAS Program FY94-96 FY97-99 Base - High Actual Estimate Range

Countries with Current CAS aI 99 IDA 132-156

Africa 41 41 56-71 South Asia 35 38 46-51 East Asia 10 12 14-18 ECA 06 06 071-074 LAC 06 04 05-06 MNA 01 02 03

Countries without Current CAS 33 29 na

TOTAL 132 133

Potential Reactivators bl na Grand Total 132 133

IDA12

Annex I Page I

FYOO-02 Projection

130

56 44 16 06 05 03

29

159

01 160

a Actual CASs fmalized from February 97 through May 98 and planned CASs through December 98 for which preliminary lending levels are available The specific three-year period covered by each CAS varies with its date Most of the current CASs include lending programs covering FY98-00 or FY99-0 I Depending on the size of the lending program the quality of the portfolio and for IBRD borrowers Bank exposure all countries are classified into one of four categories Countries in 1 are on an annual CAS cycle For Category 2 countries CASs are prepared every second year For Category 3 countries CASs are prepared every third year For Category 4 countries CASs are prepared less frequently

bl Afghanistan Myanmar Nigeria Somalia and Sudan

Annex I

Table 1 IDA Lending Projections (SDRm) - Countries with Current CAS Page 2

[Please note that these are working assumptions Performance and lending opportunities over the IDA 12 period will determine actual commitments]

IDA 10 IDA I I Current CAS IDA 12 (FYOO-02)

FY94-96 FY97-99 3 FY BaseHigh Case Projection

Actual Estimate Date Period Lending Level SDRm PCPA

Albania 130 88 Jul-98 aJ 99-01 111 III 11

Armenia 162 148 Aug-97 98-00 193 105 9

Bangladesh 706 865 Mar-98- -99-0 1350middot18((-middot 1-295- 4

Bolivia 190 202 Jun-98 aJ 99-01 220 205 9

Cambodia 121 121 Feb-97 97-99 110-160 110 4

Cape Verde 21 37 Dec-97 98-00 47-59 25 21

Cote dIvoire 790 417 Sep-97 98-00 593 520 12

Ethiopia 257 561 Sep-97 98-00 890-1220 890 5

Georgia 133 191 Oct-97 98-00 151 135 8

Ghana 455 187 Sep-97 98-00 400-481 455 9

Guinea 99 109 Dec-97 98-00 167-200 120 6

Guinea-Bissau 14 51 Jun-97 98-00 48-67 15 5

Honduras 190 70 Oct-98 aJ 99-01 170-185 170 9

India 2108 1900 Jan-98 98-00 1905 1900 1

Kenya 303 174 Dec-97 99-01 355 445 5

Kyrgyz Republic 174 116 May-98 99-01 130 130 9

Lesotho 35 22 May-98 aJ 98-00 67-78 67 11

Madagascar 148 251 Feb-97 97-99 244-333 175 4

Malawi 238 183 May-98 aJ 99-01 240-311 295 10

Mali 193 247 May-98 aJ 99-01 220-322 190 6

Mauritania 86 73 Jun-97 98-00 64-119 65 9

Mongolia 66 62 Jun-98 aJ 99-01 102 100 13

Mozambique 372 190 Dec-97 99-01 355-430 385 8

Nepal 70 295 Nov-97 bl 98-00 440 440 7

Nicaragua 173 134 Apr-98 99-01 144-222 145 11 Niger 77 125 Nov-97 99-01 180-270 190 7

Pakistan 477 594 Apr-97 bl 98-00 670 520 1

Rwanda 54 98 Apr-98 99 60 75 4

Senegal 192 308 Jan-98 99-01 226-467 280 II Sierra Leone 99 65 Jun-97 98-00 93-167 80 6

Sri Lanka 132 195 Jul-98 aJ 99-01 250 265 5

Tanzania 229 418 Jun-97 98-00 444-667 420 5

Tajikistan 3 95 Jul-98 aJ 99-01 122-150 122 7

Togo 74 120 Dec-97 bl 98-00 171 125 10

Uganda 274 325 May-97 98-00 556 600 10

Vietnam 851 988 Sep-98 aJ 99-01 1200-1500 1400 6

Yemen 135 241 Oct-97 bl 98-00 309 310 7

Zimbabwe 48 136 May-97 98-00 200-222 165 5

Iotal 9876 10396 13197-15646 13045

aJ Not yet discussed by the Board

bl Progress report

Annex I

Table 2 IDA Lending Projections (SDRm) - Countries without current CAS Page 3

[Please note that these are working assumptions Performance and lending opportunities over the IDA 12 period will determine actual commitments]

IDAIO IDA I I IDA 12 (FYOO-02) FY94-96 FY97-99 Date of Projection Actual Estimate Latest CAS SDRm PCPA

Afghanistan NA Angola 16 60 Mar-96 90 3 Azerbaijan 106 161 Sep-96 170 7 Benin 80middotmiddot IgO-middot May-94-middot l5()middot 9 Bhutan 4 10 NA 10 5 Bosnia-Herzegovina 7 369 Aug-97 a 100 8 Burkina Faso 90 167 Jul-96 185 6 Burundi 24 May-95 25 1 CAR 12 Dec-92 25 2 Cameroon 358 220 Feb-96 165 4 Chad 113 52 Feb-96 85 4 China 1413 711 Mar-97 bl

Comoros 13 27 Nov-93 10 7 Congo Rep of 76 Dec-96 15 2 Djibouti 15 NA 40 20 Dominica 2 NA 5 23 DR Congo Jun-91 500 4 Egypt 189 192 May-97 bl

Eq Guinea NA Eritrea 12 101 Feb-96 85 8 FYR Macedonia 110 81 May-96 60 9 Gambia 10 24 Jun-93 40 12 Grenada 3 NA 5 18 Guyana 54 21 Nov-93 30 12 Haiti 93 73 Jul-96 195 9 Kiribati NA Laos 89 70 Feb-96 130 9 Liberia NA 300 36 Maldives 9 NA 10 13 Moldova 64 May-96 75 6 Myanmar NA Nigeria Jul-94 Samoa 10 NA 15 30 Sao Tome amp Pro 4 Apr-91 5 13 Solomon Islands NA 10 9 Somalia NA St Lucia 4 NA 3 5 St Vincent NA 3 7 Sudan NA Tonga NA

Vanuatu NA 5 10 Zambia 406 401 Jul-96 335 12 Caribbean RegiOECS II 2 May-95 15 na

Total 3303 2932 2895

aJ The current CAS does not envisage lending beyond FY99 IDA lending in IDA 12 is subject to an assessment of Bosnias continued eligibility for IDA lending This is expected to be included in a CAS progress report to be

discussed by the Board in the first quarter ofFY99 bl Includes no IDA lending beyond FY99 because of expected IDA graduation

1 Background

The Blend Borrowers

Annex II Page 1

Of the 141 countries eligible to borrow from IDA or IBRD 61 are eligible to borrow only from IBRD 63 only from IDA and the rest are eligible to borrow from both These 17 blend borrowers are heterogeneous and have very different financing needs Some for example are creditworthy for substantial IBRD lending while others are only marginally creditworthy Some require IDA funding to support rapid economic transition while others have a long term need for concessional funds to address persistent and widespread poverty (see Table below)

These countries are eligible for IDA because (apart from the footnoted exceptions) they have per capita income less than $925 in 1996 and limited creditworthiness to borrow from IBRD These countries creditworthiness for IBRD varies-ranging from marginal to moderate-and this (along with IBRD exposure limits) determines the amount each of them can actually borrow from IBRD And because creditworthiness for IBRD does not imply commensurate access to commercial lending their actual access to other external funds also varies widely

Blend Borrowers FY9S-97 (Ranked by Per Capita Income)

FY95-97 FY95-97 Million 1996 Net 1996 1996 IDA Lending IDA people Private

GNPCap Population PCPA aI Blend Ratio bI below Capital flows COUNTRY ill (million (SDR) (Percent SIIday Per Ca~ita Sl

Nigeria 240 1144 00 - 33 6 India 380 9432 08 56 490 7 Azerhaijan 480 76 57 100 - 79 Pakistan 490 1335 07 32 16 14 Kyrgyz Republic 570 46 118 100 1 10 Bosnia and Herzegovina 595 44 110 100 - -Moldova 600 43 05 - 0 27 Zimbabwe 610 112 17 100 5 4 Armenia 620 38 145 100 - 5 China cI 750 12113 03 16 351 41 Georgia 850 504 113 100 - 7 Macedonia FYR 920 21 160 70 - 4 Egypt Arab Rep W 1090 593 ll 86 5 24 st Vincent dI 2360 01 - - Dominica dI 3090 01 95 50 -Grenada dI 3130 01 95 50 - -st Lucia dI 3430 02 80 50 - Average for IDA-only 391 NA 504 - - -~ Per capita per annum y The relative amount of IDA funds that a blend country borrows is sometimes expressed as its blend ratio

which is defined as the ratio ofiDA lending to total IDA+IBRD lending in a particular time period A low share ofIDA in the total produces a hard blend China for example had the hardest blend during FY95-97 at 16 percent

2f China and Egypt will graduate from IDA eligibility in FY99 ~ These small islands of the Caribbean were first made IDA-eligible on an exceptional basis in FY85

This exception has also been included in subsequent replenishments

Annex II Page 2

The blend borrowers are at widely different stages of the development process Some of them-India Nigeria Azerbaijan and Pakistan-are poorer than many IDA-only borrowers like Honduras Cote dIvoire and Sri Lanka Some blend countries have very large populations living in absolute poverty For instance there are more people living on less than $1 a day in India than in all the IDA-only countries in Africa combined

The largest blend countries (China India Pakistan Nigeria and Egypt) each have very different characteristics and two (China and Egypt) will cease borrowing from IDA at the end of FY99 Some of the other blend countries have a number of common characteristics

bull The economies in transition The Eastern European and the FSU countries of Armenia Azerbaijan Bosnia-Herzegovina Georgia Kyrgyz Republic FYR Macedonia and Moldova are dismantling their inefficient state-controlled economies and trading arrangements In several of them the costs of post-conflict reconstruction have pushed their income levels so far below their potential that they are temporarily IDA-eligible Even though five of them have not yet borrowed from IBRD they are all classified as blends because they are expected to attain creditworthiness within a few years

bull The small Caribbean islands The four Caribbean countries of St Vincent and the Grenadines Dominica Grenada and St Lucia have per capita GNPs significantly higher than the IDA eligibility cutoff but their small and undiversified economies severely limit their creditworthiness for IBRD In 1985 Executive Directors agreed that such small island economies could be eligible for a blend oflDA and IBRD ftmding on an exceptional basis and this exception was retained by donors in subsequent replenishments including IDAl1Y From FY94 through FY97 they together borrowed $29 million from IDA and $45 million from IBRD

2 IDAs Policy for Lending to Blend Countries

Since allocations to all countries including blend borrowers are performance based actual lending to the latter has shown marked variations-and is expected to continue to do so IDA policies and priorities-notably the focus on poverty-apply equally to blend and IDA-only borrowers But the amount of lending to each blend borrower is adapted to take account of its access to IBRDmiddotwitha -view to conserving IDA middotftmds to the extent possible for the borrowers and purposes lacking any access to non-concessional ftmds

The policy for allocating IDA ftmds to each blend borrower relies on an iterative process-the result of which is reflected in the respective Country Assistance Strategy

11 The per capita GNPs of these countries ranged from S2360 to S3430 in 1996 Three other small-island countries in the Pacific (Tonga Vanuatu and Samoa) also benefit from the small island per capita GNP exception These countries are not considered creditworthy for ffiRD and so are not blend borrowers Their per capita GNPs ranged from S1200 to SI640 in 1996 IDA has not lent to these countries since 1993 when Samoa borrowed SOR 45 million

Annex II Page 3

bull total IBRDIIDA lending volume is estimated in relation to the countrys need for development finance and its policy and portfolio performance in the context of an overall country strategy aimed at poverty reduction

bull the lending to be financed by IBRD is determined based on creditworthiness debt service capacity and exposure and other portfolio considerations including appropriate availability ofIBRD-funds-relative to other-sources offunding-

bull the lending to be financed by IDA is determined so as to ensure consistency with that of other blend countries (Le allowing for differences in performance per capita income and population) and taking into account other factors such as access to alternative sources of concessional financing and the IDA donors guidelines on the allocation of overall IDA funds

bull in addition for India IDA lending is subject to an upper lending limit agreed by donors in the context of replenishment agreements Since Indias performance has been good or very good this upper limit has been binding in the past

3 IDA12 Lending to Blend Countries

The lending projections for IDA12 include SDR 34 billion (21 percent) for blend countries (see table in Note on IDA12 Lending Projections page 3) No lending is envisaged to either China or Egypt India accounts for SDR 19 billion and Pakistan for SDR 05 billion (equivalent to annual per capita lending ofSDR 07 and 13 respectively) No lending is projected in Nigeria-for performance reasons-and lending to Zimbabwe is projected to be about SDR 02 billion in line with the current CAS The rest is accounted for by ECA blend countries-including expected continued IDA lending albeit reduced from the exceptionally high IDAll levels to FYR Macedonia and Bosnia-and by lending to small islands

As noted above lending to India in IDA12 is expected to be SDR 19 billion With IDA12 country-specific lending projections at SDR 159 billion Indias share of the total amount to 12 This represents a continuation of the steady decline in Indias share ofIDA (from 40 ofIDA lending through IDA6 to 21 from IDA6 through IDA9 to 16 in IDAI0 and to about 14 in IDAl1) The projected lending level ofSDR 19 billion to India in IDA12 compares with SDR 21 billion in IDAI0 and the expected SDR 19 billion in IDAII This therefore represents a declining trend in real terms

The proposed IDA12 allocation for India takes into account the following factors

bull Per capita income today is US$380 there are over 300 million poor people and social indicators are among the lowest in the world For the period 1990-1998 infant mortality was 68 per 1000 live births child malnutrition was 63 of children under 5 and illiteracy was 48 of the population aged 15 and above

Annex II Page 4

bull Indias policy perfo11l1ance places it in the top quintile among IDA borrowers India received especially high ratings for its policies on social safety nets environment inflation foreign exchange regime external balance and debt management

bull The quality ofIDAs portfolio in India is well above average Projects at-risk comprised 18 percent ofIndias IDA portfolio in FY97 much lower than the 33 percent average for all IDA projects Virtually all of these activities are in the poorest states or targetted in poor areas One-third of existing IDA projectsareinagricultureshyand irrigation one-fifth in health population and nutrition with the remainder in education water supply and environment

bull The need for IDA support for social sector policy refo11l1 and investment is substantial Given the constraint on IDA lending the Region will try to carry out its lending for agriculture and irrigation now the largest sector with IBRD lending as described in the recent CAS

Like in any other IDA country IDA lending to India will be dependent on sustained good policy perfo11l1ance and would be reduced if perfo11l1ance were to deteriorate It will focus on supporting programs in education health and nutrition While the recent CAS indicates that India has requested that IBRD lending be increased to about US$20 billion per year-which would result in a significant hardening of the blend ratio-it should be noted that such IBRD lending level would represent a ceiling because of portfolio concentration considerations

Annex I

Table 2 IDA Lending Projections (SDRm) - Countries without current CAS Page 3

[Please note that these are working assumptions Performance and lending opportunities over the IDA 12 period will determine actual commitments]

IDAIO IDA I I IDA 12 (FYOO-02) FY94-96 FY97-99 Date of Projection Actual Estimate Latest CAS SDRm PCPA

Afghanistan NA Angola 16 60 Mar-96 90 3 Azerbaijan 106 161 Sep-96 170 7 Benin 80middotmiddot IgO-middot May-94-middot l5()middot 9 Bhutan 4 10 NA 10 5 Bosnia-Herzegovina 7 369 Aug-97 a 100 8 Burkina Faso 90 167 Jul-96 185 6 Burundi 24 May-95 25 1 CAR 12 Dec-92 25 2 Cameroon 358 220 Feb-96 165 4 Chad 113 52 Feb-96 85 4 China 1413 711 Mar-97 bl

Comoros 13 27 Nov-93 10 7 Congo Rep of 76 Dec-96 15 2 Djibouti 15 NA 40 20 Dominica 2 NA 5 23 DR Congo Jun-91 500 4 Egypt 189 192 May-97 bl

Eq Guinea NA Eritrea 12 101 Feb-96 85 8 FYR Macedonia 110 81 May-96 60 9 Gambia 10 24 Jun-93 40 12 Grenada 3 NA 5 18 Guyana 54 21 Nov-93 30 12 Haiti 93 73 Jul-96 195 9 Kiribati NA Laos 89 70 Feb-96 130 9 Liberia NA 300 36 Maldives 9 NA 10 13 Moldova 64 May-96 75 6 Myanmar NA Nigeria Jul-94 Samoa 10 NA 15 30 Sao Tome amp Pro 4 Apr-91 5 13 Solomon Islands NA 10 9 Somalia NA St Lucia 4 NA 3 5 St Vincent NA 3 7 Sudan NA Tonga NA

Vanuatu NA 5 10 Zambia 406 401 Jul-96 335 12 Caribbean RegiOECS II 2 May-95 15 na

Total 3303 2932 2895

aJ The current CAS does not envisage lending beyond FY99 IDA lending in IDA 12 is subject to an assessment of Bosnias continued eligibility for IDA lending This is expected to be included in a CAS progress report to be

discussed by the Board in the first quarter ofFY99 bl Includes no IDA lending beyond FY99 because of expected IDA graduation

1 Background

The Blend Borrowers

Annex II Page 1

Of the 141 countries eligible to borrow from IDA or IBRD 61 are eligible to borrow only from IBRD 63 only from IDA and the rest are eligible to borrow from both These 17 blend borrowers are heterogeneous and have very different financing needs Some for example are creditworthy for substantial IBRD lending while others are only marginally creditworthy Some require IDA funding to support rapid economic transition while others have a long term need for concessional funds to address persistent and widespread poverty (see Table below)

These countries are eligible for IDA because (apart from the footnoted exceptions) they have per capita income less than $925 in 1996 and limited creditworthiness to borrow from IBRD These countries creditworthiness for IBRD varies-ranging from marginal to moderate-and this (along with IBRD exposure limits) determines the amount each of them can actually borrow from IBRD And because creditworthiness for IBRD does not imply commensurate access to commercial lending their actual access to other external funds also varies widely

Blend Borrowers FY9S-97 (Ranked by Per Capita Income)

FY95-97 FY95-97 Million 1996 Net 1996 1996 IDA Lending IDA people Private

GNPCap Population PCPA aI Blend Ratio bI below Capital flows COUNTRY ill (million (SDR) (Percent SIIday Per Ca~ita Sl

Nigeria 240 1144 00 - 33 6 India 380 9432 08 56 490 7 Azerhaijan 480 76 57 100 - 79 Pakistan 490 1335 07 32 16 14 Kyrgyz Republic 570 46 118 100 1 10 Bosnia and Herzegovina 595 44 110 100 - -Moldova 600 43 05 - 0 27 Zimbabwe 610 112 17 100 5 4 Armenia 620 38 145 100 - 5 China cI 750 12113 03 16 351 41 Georgia 850 504 113 100 - 7 Macedonia FYR 920 21 160 70 - 4 Egypt Arab Rep W 1090 593 ll 86 5 24 st Vincent dI 2360 01 - - Dominica dI 3090 01 95 50 -Grenada dI 3130 01 95 50 - -st Lucia dI 3430 02 80 50 - Average for IDA-only 391 NA 504 - - -~ Per capita per annum y The relative amount of IDA funds that a blend country borrows is sometimes expressed as its blend ratio

which is defined as the ratio ofiDA lending to total IDA+IBRD lending in a particular time period A low share ofIDA in the total produces a hard blend China for example had the hardest blend during FY95-97 at 16 percent

2f China and Egypt will graduate from IDA eligibility in FY99 ~ These small islands of the Caribbean were first made IDA-eligible on an exceptional basis in FY85

This exception has also been included in subsequent replenishments

Annex II Page 2

The blend borrowers are at widely different stages of the development process Some of them-India Nigeria Azerbaijan and Pakistan-are poorer than many IDA-only borrowers like Honduras Cote dIvoire and Sri Lanka Some blend countries have very large populations living in absolute poverty For instance there are more people living on less than $1 a day in India than in all the IDA-only countries in Africa combined

The largest blend countries (China India Pakistan Nigeria and Egypt) each have very different characteristics and two (China and Egypt) will cease borrowing from IDA at the end of FY99 Some of the other blend countries have a number of common characteristics

bull The economies in transition The Eastern European and the FSU countries of Armenia Azerbaijan Bosnia-Herzegovina Georgia Kyrgyz Republic FYR Macedonia and Moldova are dismantling their inefficient state-controlled economies and trading arrangements In several of them the costs of post-conflict reconstruction have pushed their income levels so far below their potential that they are temporarily IDA-eligible Even though five of them have not yet borrowed from IBRD they are all classified as blends because they are expected to attain creditworthiness within a few years

bull The small Caribbean islands The four Caribbean countries of St Vincent and the Grenadines Dominica Grenada and St Lucia have per capita GNPs significantly higher than the IDA eligibility cutoff but their small and undiversified economies severely limit their creditworthiness for IBRD In 1985 Executive Directors agreed that such small island economies could be eligible for a blend oflDA and IBRD ftmding on an exceptional basis and this exception was retained by donors in subsequent replenishments including IDAl1Y From FY94 through FY97 they together borrowed $29 million from IDA and $45 million from IBRD

2 IDAs Policy for Lending to Blend Countries

Since allocations to all countries including blend borrowers are performance based actual lending to the latter has shown marked variations-and is expected to continue to do so IDA policies and priorities-notably the focus on poverty-apply equally to blend and IDA-only borrowers But the amount of lending to each blend borrower is adapted to take account of its access to IBRDmiddotwitha -view to conserving IDA middotftmds to the extent possible for the borrowers and purposes lacking any access to non-concessional ftmds

The policy for allocating IDA ftmds to each blend borrower relies on an iterative process-the result of which is reflected in the respective Country Assistance Strategy

11 The per capita GNPs of these countries ranged from S2360 to S3430 in 1996 Three other small-island countries in the Pacific (Tonga Vanuatu and Samoa) also benefit from the small island per capita GNP exception These countries are not considered creditworthy for ffiRD and so are not blend borrowers Their per capita GNPs ranged from S1200 to SI640 in 1996 IDA has not lent to these countries since 1993 when Samoa borrowed SOR 45 million

Annex II Page 3

bull total IBRDIIDA lending volume is estimated in relation to the countrys need for development finance and its policy and portfolio performance in the context of an overall country strategy aimed at poverty reduction

bull the lending to be financed by IBRD is determined based on creditworthiness debt service capacity and exposure and other portfolio considerations including appropriate availability ofIBRD-funds-relative to other-sources offunding-

bull the lending to be financed by IDA is determined so as to ensure consistency with that of other blend countries (Le allowing for differences in performance per capita income and population) and taking into account other factors such as access to alternative sources of concessional financing and the IDA donors guidelines on the allocation of overall IDA funds

bull in addition for India IDA lending is subject to an upper lending limit agreed by donors in the context of replenishment agreements Since Indias performance has been good or very good this upper limit has been binding in the past

3 IDA12 Lending to Blend Countries

The lending projections for IDA12 include SDR 34 billion (21 percent) for blend countries (see table in Note on IDA12 Lending Projections page 3) No lending is envisaged to either China or Egypt India accounts for SDR 19 billion and Pakistan for SDR 05 billion (equivalent to annual per capita lending ofSDR 07 and 13 respectively) No lending is projected in Nigeria-for performance reasons-and lending to Zimbabwe is projected to be about SDR 02 billion in line with the current CAS The rest is accounted for by ECA blend countries-including expected continued IDA lending albeit reduced from the exceptionally high IDAll levels to FYR Macedonia and Bosnia-and by lending to small islands

As noted above lending to India in IDA12 is expected to be SDR 19 billion With IDA12 country-specific lending projections at SDR 159 billion Indias share of the total amount to 12 This represents a continuation of the steady decline in Indias share ofIDA (from 40 ofIDA lending through IDA6 to 21 from IDA6 through IDA9 to 16 in IDAI0 and to about 14 in IDAl1) The projected lending level ofSDR 19 billion to India in IDA12 compares with SDR 21 billion in IDAI0 and the expected SDR 19 billion in IDAII This therefore represents a declining trend in real terms

The proposed IDA12 allocation for India takes into account the following factors

bull Per capita income today is US$380 there are over 300 million poor people and social indicators are among the lowest in the world For the period 1990-1998 infant mortality was 68 per 1000 live births child malnutrition was 63 of children under 5 and illiteracy was 48 of the population aged 15 and above

Annex II Page 4

bull Indias policy perfo11l1ance places it in the top quintile among IDA borrowers India received especially high ratings for its policies on social safety nets environment inflation foreign exchange regime external balance and debt management

bull The quality ofIDAs portfolio in India is well above average Projects at-risk comprised 18 percent ofIndias IDA portfolio in FY97 much lower than the 33 percent average for all IDA projects Virtually all of these activities are in the poorest states or targetted in poor areas One-third of existing IDA projectsareinagricultureshyand irrigation one-fifth in health population and nutrition with the remainder in education water supply and environment

bull The need for IDA support for social sector policy refo11l1 and investment is substantial Given the constraint on IDA lending the Region will try to carry out its lending for agriculture and irrigation now the largest sector with IBRD lending as described in the recent CAS

Like in any other IDA country IDA lending to India will be dependent on sustained good policy perfo11l1ance and would be reduced if perfo11l1ance were to deteriorate It will focus on supporting programs in education health and nutrition While the recent CAS indicates that India has requested that IBRD lending be increased to about US$20 billion per year-which would result in a significant hardening of the blend ratio-it should be noted that such IBRD lending level would represent a ceiling because of portfolio concentration considerations

1 Background

The Blend Borrowers

Annex II Page 1

Of the 141 countries eligible to borrow from IDA or IBRD 61 are eligible to borrow only from IBRD 63 only from IDA and the rest are eligible to borrow from both These 17 blend borrowers are heterogeneous and have very different financing needs Some for example are creditworthy for substantial IBRD lending while others are only marginally creditworthy Some require IDA funding to support rapid economic transition while others have a long term need for concessional funds to address persistent and widespread poverty (see Table below)

These countries are eligible for IDA because (apart from the footnoted exceptions) they have per capita income less than $925 in 1996 and limited creditworthiness to borrow from IBRD These countries creditworthiness for IBRD varies-ranging from marginal to moderate-and this (along with IBRD exposure limits) determines the amount each of them can actually borrow from IBRD And because creditworthiness for IBRD does not imply commensurate access to commercial lending their actual access to other external funds also varies widely

Blend Borrowers FY9S-97 (Ranked by Per Capita Income)

FY95-97 FY95-97 Million 1996 Net 1996 1996 IDA Lending IDA people Private

GNPCap Population PCPA aI Blend Ratio bI below Capital flows COUNTRY ill (million (SDR) (Percent SIIday Per Ca~ita Sl

Nigeria 240 1144 00 - 33 6 India 380 9432 08 56 490 7 Azerhaijan 480 76 57 100 - 79 Pakistan 490 1335 07 32 16 14 Kyrgyz Republic 570 46 118 100 1 10 Bosnia and Herzegovina 595 44 110 100 - -Moldova 600 43 05 - 0 27 Zimbabwe 610 112 17 100 5 4 Armenia 620 38 145 100 - 5 China cI 750 12113 03 16 351 41 Georgia 850 504 113 100 - 7 Macedonia FYR 920 21 160 70 - 4 Egypt Arab Rep W 1090 593 ll 86 5 24 st Vincent dI 2360 01 - - Dominica dI 3090 01 95 50 -Grenada dI 3130 01 95 50 - -st Lucia dI 3430 02 80 50 - Average for IDA-only 391 NA 504 - - -~ Per capita per annum y The relative amount of IDA funds that a blend country borrows is sometimes expressed as its blend ratio

which is defined as the ratio ofiDA lending to total IDA+IBRD lending in a particular time period A low share ofIDA in the total produces a hard blend China for example had the hardest blend during FY95-97 at 16 percent

2f China and Egypt will graduate from IDA eligibility in FY99 ~ These small islands of the Caribbean were first made IDA-eligible on an exceptional basis in FY85

This exception has also been included in subsequent replenishments

Annex II Page 2

The blend borrowers are at widely different stages of the development process Some of them-India Nigeria Azerbaijan and Pakistan-are poorer than many IDA-only borrowers like Honduras Cote dIvoire and Sri Lanka Some blend countries have very large populations living in absolute poverty For instance there are more people living on less than $1 a day in India than in all the IDA-only countries in Africa combined

The largest blend countries (China India Pakistan Nigeria and Egypt) each have very different characteristics and two (China and Egypt) will cease borrowing from IDA at the end of FY99 Some of the other blend countries have a number of common characteristics

bull The economies in transition The Eastern European and the FSU countries of Armenia Azerbaijan Bosnia-Herzegovina Georgia Kyrgyz Republic FYR Macedonia and Moldova are dismantling their inefficient state-controlled economies and trading arrangements In several of them the costs of post-conflict reconstruction have pushed their income levels so far below their potential that they are temporarily IDA-eligible Even though five of them have not yet borrowed from IBRD they are all classified as blends because they are expected to attain creditworthiness within a few years

bull The small Caribbean islands The four Caribbean countries of St Vincent and the Grenadines Dominica Grenada and St Lucia have per capita GNPs significantly higher than the IDA eligibility cutoff but their small and undiversified economies severely limit their creditworthiness for IBRD In 1985 Executive Directors agreed that such small island economies could be eligible for a blend oflDA and IBRD ftmding on an exceptional basis and this exception was retained by donors in subsequent replenishments including IDAl1Y From FY94 through FY97 they together borrowed $29 million from IDA and $45 million from IBRD

2 IDAs Policy for Lending to Blend Countries

Since allocations to all countries including blend borrowers are performance based actual lending to the latter has shown marked variations-and is expected to continue to do so IDA policies and priorities-notably the focus on poverty-apply equally to blend and IDA-only borrowers But the amount of lending to each blend borrower is adapted to take account of its access to IBRDmiddotwitha -view to conserving IDA middotftmds to the extent possible for the borrowers and purposes lacking any access to non-concessional ftmds

The policy for allocating IDA ftmds to each blend borrower relies on an iterative process-the result of which is reflected in the respective Country Assistance Strategy

11 The per capita GNPs of these countries ranged from S2360 to S3430 in 1996 Three other small-island countries in the Pacific (Tonga Vanuatu and Samoa) also benefit from the small island per capita GNP exception These countries are not considered creditworthy for ffiRD and so are not blend borrowers Their per capita GNPs ranged from S1200 to SI640 in 1996 IDA has not lent to these countries since 1993 when Samoa borrowed SOR 45 million

Annex II Page 3

bull total IBRDIIDA lending volume is estimated in relation to the countrys need for development finance and its policy and portfolio performance in the context of an overall country strategy aimed at poverty reduction

bull the lending to be financed by IBRD is determined based on creditworthiness debt service capacity and exposure and other portfolio considerations including appropriate availability ofIBRD-funds-relative to other-sources offunding-

bull the lending to be financed by IDA is determined so as to ensure consistency with that of other blend countries (Le allowing for differences in performance per capita income and population) and taking into account other factors such as access to alternative sources of concessional financing and the IDA donors guidelines on the allocation of overall IDA funds

bull in addition for India IDA lending is subject to an upper lending limit agreed by donors in the context of replenishment agreements Since Indias performance has been good or very good this upper limit has been binding in the past

3 IDA12 Lending to Blend Countries

The lending projections for IDA12 include SDR 34 billion (21 percent) for blend countries (see table in Note on IDA12 Lending Projections page 3) No lending is envisaged to either China or Egypt India accounts for SDR 19 billion and Pakistan for SDR 05 billion (equivalent to annual per capita lending ofSDR 07 and 13 respectively) No lending is projected in Nigeria-for performance reasons-and lending to Zimbabwe is projected to be about SDR 02 billion in line with the current CAS The rest is accounted for by ECA blend countries-including expected continued IDA lending albeit reduced from the exceptionally high IDAll levels to FYR Macedonia and Bosnia-and by lending to small islands

As noted above lending to India in IDA12 is expected to be SDR 19 billion With IDA12 country-specific lending projections at SDR 159 billion Indias share of the total amount to 12 This represents a continuation of the steady decline in Indias share ofIDA (from 40 ofIDA lending through IDA6 to 21 from IDA6 through IDA9 to 16 in IDAI0 and to about 14 in IDAl1) The projected lending level ofSDR 19 billion to India in IDA12 compares with SDR 21 billion in IDAI0 and the expected SDR 19 billion in IDAII This therefore represents a declining trend in real terms

The proposed IDA12 allocation for India takes into account the following factors

bull Per capita income today is US$380 there are over 300 million poor people and social indicators are among the lowest in the world For the period 1990-1998 infant mortality was 68 per 1000 live births child malnutrition was 63 of children under 5 and illiteracy was 48 of the population aged 15 and above

Annex II Page 4

bull Indias policy perfo11l1ance places it in the top quintile among IDA borrowers India received especially high ratings for its policies on social safety nets environment inflation foreign exchange regime external balance and debt management

bull The quality ofIDAs portfolio in India is well above average Projects at-risk comprised 18 percent ofIndias IDA portfolio in FY97 much lower than the 33 percent average for all IDA projects Virtually all of these activities are in the poorest states or targetted in poor areas One-third of existing IDA projectsareinagricultureshyand irrigation one-fifth in health population and nutrition with the remainder in education water supply and environment

bull The need for IDA support for social sector policy refo11l1 and investment is substantial Given the constraint on IDA lending the Region will try to carry out its lending for agriculture and irrigation now the largest sector with IBRD lending as described in the recent CAS

Like in any other IDA country IDA lending to India will be dependent on sustained good policy perfo11l1ance and would be reduced if perfo11l1ance were to deteriorate It will focus on supporting programs in education health and nutrition While the recent CAS indicates that India has requested that IBRD lending be increased to about US$20 billion per year-which would result in a significant hardening of the blend ratio-it should be noted that such IBRD lending level would represent a ceiling because of portfolio concentration considerations

Annex II Page 2

The blend borrowers are at widely different stages of the development process Some of them-India Nigeria Azerbaijan and Pakistan-are poorer than many IDA-only borrowers like Honduras Cote dIvoire and Sri Lanka Some blend countries have very large populations living in absolute poverty For instance there are more people living on less than $1 a day in India than in all the IDA-only countries in Africa combined

The largest blend countries (China India Pakistan Nigeria and Egypt) each have very different characteristics and two (China and Egypt) will cease borrowing from IDA at the end of FY99 Some of the other blend countries have a number of common characteristics

bull The economies in transition The Eastern European and the FSU countries of Armenia Azerbaijan Bosnia-Herzegovina Georgia Kyrgyz Republic FYR Macedonia and Moldova are dismantling their inefficient state-controlled economies and trading arrangements In several of them the costs of post-conflict reconstruction have pushed their income levels so far below their potential that they are temporarily IDA-eligible Even though five of them have not yet borrowed from IBRD they are all classified as blends because they are expected to attain creditworthiness within a few years

bull The small Caribbean islands The four Caribbean countries of St Vincent and the Grenadines Dominica Grenada and St Lucia have per capita GNPs significantly higher than the IDA eligibility cutoff but their small and undiversified economies severely limit their creditworthiness for IBRD In 1985 Executive Directors agreed that such small island economies could be eligible for a blend oflDA and IBRD ftmding on an exceptional basis and this exception was retained by donors in subsequent replenishments including IDAl1Y From FY94 through FY97 they together borrowed $29 million from IDA and $45 million from IBRD

2 IDAs Policy for Lending to Blend Countries

Since allocations to all countries including blend borrowers are performance based actual lending to the latter has shown marked variations-and is expected to continue to do so IDA policies and priorities-notably the focus on poverty-apply equally to blend and IDA-only borrowers But the amount of lending to each blend borrower is adapted to take account of its access to IBRDmiddotwitha -view to conserving IDA middotftmds to the extent possible for the borrowers and purposes lacking any access to non-concessional ftmds

The policy for allocating IDA ftmds to each blend borrower relies on an iterative process-the result of which is reflected in the respective Country Assistance Strategy

11 The per capita GNPs of these countries ranged from S2360 to S3430 in 1996 Three other small-island countries in the Pacific (Tonga Vanuatu and Samoa) also benefit from the small island per capita GNP exception These countries are not considered creditworthy for ffiRD and so are not blend borrowers Their per capita GNPs ranged from S1200 to SI640 in 1996 IDA has not lent to these countries since 1993 when Samoa borrowed SOR 45 million

Annex II Page 3

bull total IBRDIIDA lending volume is estimated in relation to the countrys need for development finance and its policy and portfolio performance in the context of an overall country strategy aimed at poverty reduction

bull the lending to be financed by IBRD is determined based on creditworthiness debt service capacity and exposure and other portfolio considerations including appropriate availability ofIBRD-funds-relative to other-sources offunding-

bull the lending to be financed by IDA is determined so as to ensure consistency with that of other blend countries (Le allowing for differences in performance per capita income and population) and taking into account other factors such as access to alternative sources of concessional financing and the IDA donors guidelines on the allocation of overall IDA funds

bull in addition for India IDA lending is subject to an upper lending limit agreed by donors in the context of replenishment agreements Since Indias performance has been good or very good this upper limit has been binding in the past

3 IDA12 Lending to Blend Countries

The lending projections for IDA12 include SDR 34 billion (21 percent) for blend countries (see table in Note on IDA12 Lending Projections page 3) No lending is envisaged to either China or Egypt India accounts for SDR 19 billion and Pakistan for SDR 05 billion (equivalent to annual per capita lending ofSDR 07 and 13 respectively) No lending is projected in Nigeria-for performance reasons-and lending to Zimbabwe is projected to be about SDR 02 billion in line with the current CAS The rest is accounted for by ECA blend countries-including expected continued IDA lending albeit reduced from the exceptionally high IDAll levels to FYR Macedonia and Bosnia-and by lending to small islands

As noted above lending to India in IDA12 is expected to be SDR 19 billion With IDA12 country-specific lending projections at SDR 159 billion Indias share of the total amount to 12 This represents a continuation of the steady decline in Indias share ofIDA (from 40 ofIDA lending through IDA6 to 21 from IDA6 through IDA9 to 16 in IDAI0 and to about 14 in IDAl1) The projected lending level ofSDR 19 billion to India in IDA12 compares with SDR 21 billion in IDAI0 and the expected SDR 19 billion in IDAII This therefore represents a declining trend in real terms

The proposed IDA12 allocation for India takes into account the following factors

bull Per capita income today is US$380 there are over 300 million poor people and social indicators are among the lowest in the world For the period 1990-1998 infant mortality was 68 per 1000 live births child malnutrition was 63 of children under 5 and illiteracy was 48 of the population aged 15 and above

Annex II Page 4

bull Indias policy perfo11l1ance places it in the top quintile among IDA borrowers India received especially high ratings for its policies on social safety nets environment inflation foreign exchange regime external balance and debt management

bull The quality ofIDAs portfolio in India is well above average Projects at-risk comprised 18 percent ofIndias IDA portfolio in FY97 much lower than the 33 percent average for all IDA projects Virtually all of these activities are in the poorest states or targetted in poor areas One-third of existing IDA projectsareinagricultureshyand irrigation one-fifth in health population and nutrition with the remainder in education water supply and environment

bull The need for IDA support for social sector policy refo11l1 and investment is substantial Given the constraint on IDA lending the Region will try to carry out its lending for agriculture and irrigation now the largest sector with IBRD lending as described in the recent CAS

Like in any other IDA country IDA lending to India will be dependent on sustained good policy perfo11l1ance and would be reduced if perfo11l1ance were to deteriorate It will focus on supporting programs in education health and nutrition While the recent CAS indicates that India has requested that IBRD lending be increased to about US$20 billion per year-which would result in a significant hardening of the blend ratio-it should be noted that such IBRD lending level would represent a ceiling because of portfolio concentration considerations

Annex II Page 3

bull total IBRDIIDA lending volume is estimated in relation to the countrys need for development finance and its policy and portfolio performance in the context of an overall country strategy aimed at poverty reduction

bull the lending to be financed by IBRD is determined based on creditworthiness debt service capacity and exposure and other portfolio considerations including appropriate availability ofIBRD-funds-relative to other-sources offunding-

bull the lending to be financed by IDA is determined so as to ensure consistency with that of other blend countries (Le allowing for differences in performance per capita income and population) and taking into account other factors such as access to alternative sources of concessional financing and the IDA donors guidelines on the allocation of overall IDA funds

bull in addition for India IDA lending is subject to an upper lending limit agreed by donors in the context of replenishment agreements Since Indias performance has been good or very good this upper limit has been binding in the past

3 IDA12 Lending to Blend Countries

The lending projections for IDA12 include SDR 34 billion (21 percent) for blend countries (see table in Note on IDA12 Lending Projections page 3) No lending is envisaged to either China or Egypt India accounts for SDR 19 billion and Pakistan for SDR 05 billion (equivalent to annual per capita lending ofSDR 07 and 13 respectively) No lending is projected in Nigeria-for performance reasons-and lending to Zimbabwe is projected to be about SDR 02 billion in line with the current CAS The rest is accounted for by ECA blend countries-including expected continued IDA lending albeit reduced from the exceptionally high IDAll levels to FYR Macedonia and Bosnia-and by lending to small islands

As noted above lending to India in IDA12 is expected to be SDR 19 billion With IDA12 country-specific lending projections at SDR 159 billion Indias share of the total amount to 12 This represents a continuation of the steady decline in Indias share ofIDA (from 40 ofIDA lending through IDA6 to 21 from IDA6 through IDA9 to 16 in IDAI0 and to about 14 in IDAl1) The projected lending level ofSDR 19 billion to India in IDA12 compares with SDR 21 billion in IDAI0 and the expected SDR 19 billion in IDAII This therefore represents a declining trend in real terms

The proposed IDA12 allocation for India takes into account the following factors

bull Per capita income today is US$380 there are over 300 million poor people and social indicators are among the lowest in the world For the period 1990-1998 infant mortality was 68 per 1000 live births child malnutrition was 63 of children under 5 and illiteracy was 48 of the population aged 15 and above

Annex II Page 4

bull Indias policy perfo11l1ance places it in the top quintile among IDA borrowers India received especially high ratings for its policies on social safety nets environment inflation foreign exchange regime external balance and debt management

bull The quality ofIDAs portfolio in India is well above average Projects at-risk comprised 18 percent ofIndias IDA portfolio in FY97 much lower than the 33 percent average for all IDA projects Virtually all of these activities are in the poorest states or targetted in poor areas One-third of existing IDA projectsareinagricultureshyand irrigation one-fifth in health population and nutrition with the remainder in education water supply and environment

bull The need for IDA support for social sector policy refo11l1 and investment is substantial Given the constraint on IDA lending the Region will try to carry out its lending for agriculture and irrigation now the largest sector with IBRD lending as described in the recent CAS

Like in any other IDA country IDA lending to India will be dependent on sustained good policy perfo11l1ance and would be reduced if perfo11l1ance were to deteriorate It will focus on supporting programs in education health and nutrition While the recent CAS indicates that India has requested that IBRD lending be increased to about US$20 billion per year-which would result in a significant hardening of the blend ratio-it should be noted that such IBRD lending level would represent a ceiling because of portfolio concentration considerations

Annex II Page 4

bull Indias policy perfo11l1ance places it in the top quintile among IDA borrowers India received especially high ratings for its policies on social safety nets environment inflation foreign exchange regime external balance and debt management

bull The quality ofIDAs portfolio in India is well above average Projects at-risk comprised 18 percent ofIndias IDA portfolio in FY97 much lower than the 33 percent average for all IDA projects Virtually all of these activities are in the poorest states or targetted in poor areas One-third of existing IDA projectsareinagricultureshyand irrigation one-fifth in health population and nutrition with the remainder in education water supply and environment

bull The need for IDA support for social sector policy refo11l1 and investment is substantial Given the constraint on IDA lending the Region will try to carry out its lending for agriculture and irrigation now the largest sector with IBRD lending as described in the recent CAS

Like in any other IDA country IDA lending to India will be dependent on sustained good policy perfo11l1ance and would be reduced if perfo11l1ance were to deteriorate It will focus on supporting programs in education health and nutrition While the recent CAS indicates that India has requested that IBRD lending be increased to about US$20 billion per year-which would result in a significant hardening of the blend ratio-it should be noted that such IBRD lending level would represent a ceiling because of portfolio concentration considerations