June 03, 2024

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World Bank Vice President for Development Finance Akihiro Nishio speaks during an interview with The Korea Herald held in central Seoul, Monday. (World Bank Group)

Akihiro Nishio, the World Bank’s vice president for development finance, said Korea becoming the host country for the International Development Association's 21st replenishment cycle could uplift the spirit of contribution for the global solidarity fund.

The IDA21 replenishment final meeting, arranged by the International Development Association, a development finance institution under the multilateral lender World Bank Group, seeks to help the world’s poorest countries improve by providing loans and grants.

On Monday, the World Bank announced the final meeting for the IDA 21st replenishment cycle is to be held in Seoul in December. It is the first time for the final meeting to be held here.

The proposed overarching theme for IDA21 is “Ending Poverty on a Livable Planet: Acting with Urgency and Ambition.”

“It is very significant because Korea was one of the original borrowers from the IDA,” Akihiro Nishio, the World Bank’s vice president for development finance, said in an interview held with The Korea Herald in central Seoul on Monday.

Korea received its first IDA loan in 1962 during the reconstruction process following the Korean War. In 1973, it stopped borrowing from the IDA and it became a donor to the association in 1977.

“People are excited about the prospect that Korea will host the meeting as it was such a successful case of a former IDA recipient country that has become an IDA donor country. This is a very positive boost to the replenishment,” Nishio said.

The selection comes after Finance Minister Choi Sang-mok called to host the final meeting in Korea in a World Bank meeting held in Washington, April.

The most recent final IDA replenishment meeting was held virtually in Japan, while previous editions took place in Stockholm, Sweden and Yogyakarta, Indonesia.

In the IDA20 cycle, Korea had pledged to contribute $516 million, marking a 14 percent increase compared to IDA19. Korea was the 15th largest contributor among 59 donor countries to IDA20.

“Korea has been steadily increasing its contribution to the IDA and we very much hope that the increasing trend will continue,” Nishio said. “We need some significant increase in donor contributions, so we hope Korea would consider that.”

The COVID-19 pandemic, climate change and inflationary risks from heightened geopolitical tensions are threatening the IDA’s mission to fight extreme poverty. One-third of the 75 IDA countries are poorer than they were before the pandemic, according to the development association.

“Inflation has been a huge drag on our efforts,” Nishio said, referring to how the recent wars have disrupted the global supply chain.

“In these poor countries, especially in Africa where the household expenditures on food is very high, that is a serious squeeze on their economic situation.”

Though the IDA must accelerate its pace of progress in its combat against poverty, Nishio projects replenishment could be tough this year due to competition for donor resources.

“This year, it is quite challenging because there are all kinds of claims on donor resources, for instance, helping the refugees in the countries dealing with the wars,” he said.

Yet, the IDA’s role is more important than ever, the international development expert viewed.

“Some people will say, ‘So much money has flown into these countries but nothing much has happened.’ But that is not true. Significant progress has been made in many countries in Africa, Asia and elsewhere,” Nishio said.

Countries such as Georgia, Armenia, Bosnia and Herzegovina have experienced growth in their economies and have ceased to borrow from the IDA in recent years. Thirty-six countries had graduated from the IDA as of 2022.

“The time to act is now, as we need to make up for this lost ground quickly. If we do not act now then there is a real risk that these countries will fall into more poverty, leading to instability,” Nishio said.

By Im Eun-byel (silverstar@heraldcorp.com)