World Bank pledges $1 bn to boost India’s social safety net

Topics Covered: Important International institutions, agencies and fora, their structure, mandate.

World Bank pledges $1 bn to boost India’s social safety net

What to study?

For Prelims: About WB group.

For Mains: Significance and the need for this funding.

Context: World Bank has approved 1 billion USD aid to India to accelerate “India’s COVID-19 Special Protection Response Programme”.

Of the 1 billion USD aid, around 550 million USD is to be credited by the IDA (International Development Association) and 220 million USD by the IBRD (International Bank of Reconstruction and Development). The final maturity amount of the loan is 18.5 years. It also includes a grace period of five years.

About IDA:

Established in 1960, IDA aims to reduce poverty by providing loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions.

IDA complements the World Bank’s original lending arm—the International Bank for Reconstruction and Development (IBRD).

IBRD and IDA share the same staff and headquarters and evaluate projects with the same rigorous standards.

IDA lends money on concessional terms. This means that IDA charges little or no interest and repayments are stretched over 25 to 40 years, including a 5- to 10-year grace period. IDA also provides grants to countries at risk of debt distress.

How IDA funds are allocated?

To be eligible for funds, countries must first meet the following criteria:

Relative poverty defined as GNI per capita must be below an established threshold (updated annually). In fiscal year 2020, this was $1,175.
Lack of creditworthiness to borrow on market terms and therefore have a need for concessional resources to finance the country’s development program.

Countries are then assessed to determine how well they implement policies that promote economic growth and poverty reduction. This is done through the Country Policy and Institutional Assessment. This assessment and portfolio performance together constitute the IDA Country Performance Rating.