Development aid in a changing world

By Axel Van Trotsenburg

Poor countries have to prepare to adjust as traditional donor countries face fiscal hardships at home

The World Bank’s fund for the poorest, IDA, was created more than 50 years ago to meet an urgent need—to make sure the world’s most vulnerable have a real chance at a decent life. A lot has happened since then.

With IDA’s help, hundreds of millions of people have escaped the vicious cycle of abject poverty—through the creation of jobs, access to clean water, food security, schools, roads, electricity.

In fact, for the first time ever, researchers found last year that the number of people living in absolute poverty—less than US$1.25 a day—dropped in every region of the world, from 1.9 billion in 1990 to 1.3 billion in 2008.

IDA has worked relentlessly with poor countries to fight poverty in often very challenging circumstances. In Africa, which receives half of IDA’s interest-free loans and grants, IDA helped put over 15 million children in school in the last decade, protect citizens against malaria with 33 million mosquito nets, and provide 6 million people with access to safe drinking water.

While we have made good, even remarkable progress on reducing poverty, the number of poor people living on less than US$1.25 a day is still unacceptable.

Nor can we assume that development gains are here to stay. The growing number of extreme climate-related events and other natural disasters—from the 2010 earthquake in Haiti to last year’s massive tsunami in Japan, from the ongoing drought in the Sahel to recent Superstorm Sandy—shows that no one is immune to disaster. Conflict, financial crises, unemployment, and hunger—which often respect no borders—further complicate matters.

Yet in the face of such adversity, some question the very role of development assistance and the relevance of multilateral agencies whose mission it is to end poverty. At such a tumultuous time, the global development community finds itself at an important crossroads. The path we take has serious implications for the world we’ll all inhabit in the years to come.

Now is not the time to disengage. It’s time to double-down and make sure we actually deliver on the Millennium Development Goals: giving children and pregnant women a chance at survival, making sure kids get to school and women have the same opportunities as men, protecting the environment, and ultimately, ending poverty.

For the World Bank, donors, borrowers, and civil society, that means making smart choices about using scarce resources for maximum effect, in line with local needs. That means keeping in mind that even when a country reaches a certain income level, there may still be millions of people living in severe poverty, who will still need continued support.

A hallmark of IDA is its ability to adapt to changing circumstances. We have learned that sustainable poverty reduction hinges on putting the country in the driver’s seat, combines the aid and expertise of multiple sectors and organisations, and most of all, is flexible. IDA’s flexibility allows us to react quickly, particularly during times of crisis and in difficult, fragile environments.

Our work in the Horn of Africa last year illustrates IDA’s ability to respond with nimble, targeted solutions. When 12 million people were suffering from one of the worst droughts in 60 years, we swiftly made US$250 million available through our Crisis Response Window. In record time, this provided badly needed support for nutrition, health, energy, agriculture, and sanitation projects for millions of people in Ethiopia, Kenya, and Djibouti.

As much as the global economy is subject to constant change, we have to prepare ourselves for even more rapid and profound changes, especially in a development finance landscape where several traditional donor countries are facing fiscal hardships at home.

IDA continues to undergo an extensive renewal in the face of evolving global and country challenges. Indeed, we are engaged with donors and borrowers on these very issues, as we explore ways to address frontier issues, such as IDA’s financial sustainability, fragility, and results. The challenge is to keep the world engaged in our joint effort to make sure millions of impoverished are not left behind and are able to improve their living standards.

It is important that we broaden the coalition of potential donors and create new partnerships with emerging market economies around the world. We need to harness their knowledge and experience in lifting people out of poverty.

Donors and borrowers from Africa and all regions of the world met November 13-15 in Abidjan, Côte d’Ivoire, to review IDA’s progress on delivering better results on gender, climate, conflict and fragility, and crisis response to communities in need. It was an opportunity to brainstorm with our development partners on how to be even more effective and responsive amid a challenging and changing global aid architecture.

What will it take to continue to lift more and more people out of poverty? Flexibility, persistence, and continued strong commitment and engagement by all who care.

Axel Van Trotsenburg is the World Bank’s Vice President for Concessional Finance