1 

Executive Summary

The U.S. Department of the Treasury (Treasury) presents this report consistent with section 1701 

of the International Financial Institutions Act, as amended by the Omnibus Appropriations Act, 

1999 (P.L. 105-277, Div. A §101(d) [Title V, §583]), which directs the Chairman of the National 

Advisory Council on International Monetary and Financial Policies (designated to be the 

Secretary of the Treasury pursuant to Executive Order 11269) to report to Congress on six 

topics: 

 

(1) An assessment of the effectiveness of the major policies and operations of the 

international financial institutions; 

(2) The major issues affecting United States participation; 

(3) The major developments in the past year; 

(4) The prospects for the coming year; 

(5) The progress made and steps taken to achieve United States policy goals (including major 

policy goals embodied in current law) with respect to the international financial 

institutions; and 

(6) Such data and explanations concerning the effectiveness, operations, and policies of the 

international financial institutions, such recommendations concerning the international 

financial institutions, and such other data and material as the Chairman may deem 

appropriate. 

The international financial institutions (IFIs) play an essential role in ensuring financial stability, 

enhancing global security, promoting economic growth, fighting poverty and addressing climate 

change, enhancing food security, and responding to other crisis and emergency situations. 

During the financial crisis, the IFIs mobilized significant resources to support emerging and 

developing market economies and to buttress trade finance. As a result of their robust response, 

however, the MDBs faced a funding shortfall, compelling them to seek new financial resources 

from their member countries or face a precipitous decline in lending levels. As a result, four 

MDBs concluded General Capital Increase (GCI) negotiations in 2010. These are the first 

capital increases for many institutions in over two decades. It is critical to retain America’s 

leadership in these vital institutions which advance out national security, national interests and 

values. Looking ahead, the MDBs also will have an important role in supporting peaceful and 

orderly transition in Egypt and Tunisia, especially the economic reforms necessary to promote 

broader gains in living standards. 

This report covers the calendar year 2010 and looks at prospects for 2011. It also includes the 

Report on IDA’s Contributions to Graduation consistent with the Foreign Operations, Export 

Financing, and Related Programs Appropriations Act, 2001 (P.L. 106-429, §101(a) [Title VIII, 

§803], Nov. 6, 2000; 22 U.S.C. § 262r-6(b)(2)). 
2 

International Monetary Fund

Key U.S. Policy Goals Advanced by the IMF 

International Financial Stability: The International Monetary Fund (IMF) plays a vital role in 

safeguarding the international financial system and promoting financial stability. It also 

promotes the key U.S. goal of strong, stable global growth through effective surveillance of the 

overall global economy as well as individual economies. The IMF played a critical role in the 

recent financial crisis by mitigating the impact of the crisis and preventing contagion. It was 

able to respond quickly and flexibly and to provide its members with timely policy advice and 

financing for those countries experiencing balance of payments crises. 

Effective Surveillance: Surveillance is at the core of the IMF’s mandate. The IMF is charged 

with providing effective bilateral surveillance over country’s policies as well as oversight of the 

world economy to ensure coordination of policies. The June 2007 Decision on Bilateral 

Surveillance over Members’ Policies (which updated the 1977 Decision on Surveillance over 

Exchange Rate Policies) provided a framework for strengthening exchange rate surveillance and, 

since the Decision, the clarity and sophistication of exchange rate assessments in Article IV 

consultations has improved significantly. Following the global financial crisis, the IMF took 

steps to strengthen multilateral surveillance, adding new tools such as the Fiscal Monitor and the 

Early Warning Exercise to better identify risks to the global system. More recently, the Fund has 

begun taking steps to improve multilateral surveillance, a topic that will be addressed in the 

upcoming Triennial Surveillance Review, and this year the Fund will also launch a new 

surveillance product that assesses spillovers from the five largest economies. The United States 

has continued to press for strengthened surveillance, and Treasury leadership was critical in 

enabling the IMF Executive Board to reach agreement on the 2007 Decision on Bilateral 

Surveillance. Treasury has pressed for increased candor, transparency, and evenhandedness of 

IMF exchange rate surveillance as part of the G-20 Working Group on the International 

Monetary System. In addition, Treasury has been engaged in a careful multilateral effort in the 

G-20 and supported by the IMF to establish stronger norms for exchange rate policy and the use 

of prudential measures to limit risk from large capital flows, and to identify and mitigate sources 

of future economic imbalances. 

Strong, Sustainable and Balanced Growth: The IMF is providing support to the G-20 Framework 

for Strong, Sustainable, and Balanced Growth, through an independent assessment on progress 

towards external sustainability and timely identification of large imbalances requiring corrective 

or preventive action; undertaking analysis on appropriate policy responses to capital inflow 

surges in emerging markets and proposing a framework on managing capital flow volatility; 

establishing a new metric for assessing reserve adequacy; and strengthening IMF surveillance, 

particularly exchange rate surveillance, by giving the IMF capacity to influence policy choices, 

publish its analysis, and provide advice on the appropriate use of prudential tools and policies to 

adjust large imbalances. 

Transparency/Accountability: The IMF promotes transparency through its strong data standards, 

which it collects and publishes. Effective bilateral and multilateral IMF surveillance requires 

provision of timely, full and accurate data. Transparency is a key determinant of the Fund’s 

effectiveness in contributing to global monetary stability and in building broader economic 
3 

knowledge. The IMF’s collection and publication of comparable data – including on exchange 

rates and reserves under the existing mandate – remains a top U.S. priority. The IMF has begun 

collecting and disseminating comparable cross-country data in new areas, such as the Financial 

Soundness Indicators, but more progress is needed. In subsequent reviews of data provision for 

surveillance, the United States would welcome efforts to improve data reporting in areas that 

promote understanding of cross-border flows and the composition of global foreign exchange 

reserves. 

Budget Discipline: When IMF lending declined in the mid-2000s, the resulting steep drop in 

income forced IMF management and shareholders to rethink how to place the institution’s 

finances on a sustainable footing. The United States insisted that significant budget cuts 

accompany any proposed changes to the IMF’s income model, and that the IMF move away 

from relying primarily on lending income to generating funds from various sources. As a result, 

over 2008-2010 the IMF executed a budget that included a 10 percent staff cut and reduced the 

annual budget by $100 million (10 percent of the total budget). This was accomplished despite 

the intense pressure caused by the global financial crisis. This year, the IMF plans to establish 

an endowment funded from the proceeds of the sale of its gold resources, which was completed 

in December 2010. The endowment will be set up to help finance the IMF’s operating budget 

and thus put its finances on a more sustainable path in the long term. The United States will 

press the IMF to ensure that the endowment incorporates best practices with regard to both 

investment strategy and governance structure, thus protecting IMF resources. 

Assessment of the Effectiveness of the IMF’s Major Policies and Operations 

The International Monetary Fund (IMF) is a critical forum for multilateral consultation and 

cooperation on monetary and financial issues, as well as for promoting international financial 

and monetary policy. In the sections below, we discuss the IMF’s critical functions in crisis 

prevention, response, and resolution, as well as foreign-exchange surveillance and financialsector surveillance. 

Effective crisis response: During the recent global financial crisis, the world confronted the 

greatest challenge to the global economy in generations. The IMF continues to play a central 

role in international efforts to resolve and prevent the spread of the global economic and 

financial crisis by providing its members with timely policy advice and financing for those which 

are experiencing balance of payments crises. New lending commitments in FY 2009 were more 

than $170 billion and over $66 billion in FY 2010 (ending September 30, 2010). 

It is important that the IMF maintains its ability to respond quickly and flexibly to crises when 

they occur. In 2010, financial stresses in Europe’s periphery posed major risks to the global 

economic and financial system and to the U.S. recovery. Working closely with the European 

Union, which made funds available to its members through the European Financial Stabilization 

Mechanism and the European Financial Stability Facility, the IMF has played a key role in 

lending and policy advice to address financial volatility and establish foundations for fiscal 

adjustment and structural reforms. Europe will continue to actively manage the challenges faced 

by countries such as Greece, Portugal, and Spain with support from the IMF. 
4 

The United States, in cooperation with the IMF and the broader international financial 

community, including the G-20, has consistently promoted a strengthened framework for crisis 

resolution and prevention. In 2009, the IMF created the Flexible Credit Line (FCL) to make it 

easier for the IMF’s strongest-performing emerging market member countries to access 

resources rapidly to prevent the spread of a crisis. In 2010, the IMF modified this instrument to 

make more funds available for a longer period of time. Also in 2010, the IMF Board approved 

FCLs for Mexico, Poland, and Colombia, totaling approximately $73 billion. Combined with 

policy actions by authorities in these countries, the FCL instrument is credited with supporting a 

reduction in risk perception and contributing to stabilization in financial market conditions in 

those countries. 

Finally, a critical component of the international community’s response to the global financial 

crisis was ensuring that the IMF had adequate resources to address the needs of low-income 

countries (LICs). LICs were impacted by the crisis through sharp drops in exports, foreign direct 

investment, and remittances. In 2009, the United States strongly advocated, and the IMF 

Executive Board approved, a package to greatly increase the resources available to LICs and to 

reform LIC facilities to increase their flexibility. Resources from the sale of IMF gold and other 

internal sources were mobilized to more than double the Fund’s medium-term concessional 

lending capacity through 2014. Using these resources, the IMF tripled concessional lending in 

2009 and early 2010. 

Surveillance: IMF surveillance of members’ exchange rates is at the core of the IMF’s 

responsibilities. Despite the improvements discussed above that have been made since 2007, the 

IMF still has scope to perform better in fulfilling the important task of bilateral exchange rate 

surveillance. Treasury continues to work with the IMF to further strengthen IMF surveillance of 

exchange rate policies, focusing in particular on increasing the candor and transparency of IMF 

exchange rate assessments.1 For the IMF to fulfill its central role in the international monetary 

system, it must continue to strengthen its efforts to exercise clear surveillance over IMF 

members’ exchange rate policies, and it must be prepared to make tough judgments, especially 

when evaluating large countries that have systemic implications. Without such candid 

surveillance, the global imbalances that contributed to the recent crisis risk going unaddressed 

and posing a threat to future global economic stability. 

Most recently, Treasury has pressed for a stronger focus on exchange rates and IMF surveillance 

as part of the G-20 Working Group on International Monetary System Reform. We have 

advocated for greater transparency of Fund analysis on exchange rates, enhanced surveillance of 

external balances, capital flows, and reserve adequacy, and a clearer definition of IMF members’ 

obligations to promote a stable system of exchange rates. 

The IMF also has a critical surveillance role in the G-20 Framework for Strong, Sustainable and 

Balanced Growth (Framework). It was agreed in November 2010 at the G-20 Seoul Summit 

that the Framework would be strengthened by using the full range of available policies to 

 

1

 For further discussion on IMF exchange rate surveillance, see link below to Appendix 2: Report to Congress on 

IMF Bilateral and Multilateral Surveillance over Member’s Policies of the Report to Congress on International 

Economic and Exchange Rate Polices, October 15, 2009 (http://www.treasury.gov/resourcecenter/international/exchange-rate-policies/Documents/Appendix%202%20Final%20October%2015%202009.pdf ) 
5 

promote external sustainability and reduce large current account imbalances to sustainable levels. 

The aim of the enhanced Framework process is to foster the global adjustment process that is 

underway in a manner that protects and strengthens global growth while also reducing external 

imbalances to manageable levels, thus enhancing the sustainability of the recovery. To offset the 

need for deficit countries to save more, surplus economies will need to ensure strong growth of 

domestic demand. If the focus is on external sustainability and the reduction of large imbalances 

to more sustainable levels, that would prompt the kinds of adjustment policies that the global 

economy needs. 

Indicative guidelines consisting of a range of indicators were developed in the first half of 2011. 

Using these guidelines has enabled timely identification of large imbalances requiring corrective 

or preventive action. The first assessment using these guidelines is currently underway. 

The IMF has been called on to provide an independent assessment (as part of the Framework) on 

progress towards external sustainability. The G-20 Finance Ministers will present to Leaders at 

the G-20 Cannes Summit in November 2011 a report that evaluates the collective consistency of 

G-20 medium-term policies to meet the goals of strong, sustainable, and balanced growth, and an 

assessment of progress in meeting commitments made in Seoul. 

The IMF also works with other international organizations to promote stronger financial systems 

around the world. The joint IMF-World Bank Financial Sector Assessment Program (FSAP) has 

emerged as a critical instrument for financial sector surveillance and advice. Results from the 

FSAP are used to generate assessments of compliance with key financial sector standards such as 

the Basel Committee on Banking Supervision’s Core Principles for Effective Banking 

Supervision, the International Organization of Securities Commission’s Objectives and 

Principles of Securities Regulation, and the IMF’s own Code of Good Practices on Transparency 

in Monetary and Financial Policies. The FSAP assessment results are summarized in Financial 

System Stability Assessments (FSSA), which are often provided to the public. 

As of end-September 2010, over 130 countries had completed FSAP assessments or updates and 

another 35 are in the pipeline or underway. The United States completed an FSAP in July 2010. 

And in September 2010, it was agreed that financial stability assessments for jurisdictions with 

systemically important financial sectors, which include the United States, must take place at least 

once every five years as a mandatory part of Fund surveillance. 

Major Issues Affecting U.S. Participation in the IMF 

Quotas: The United States participates in the IMF through a quota subscription. Quotas are the 

metric used by the IMF to assign voting rights, to determine contributions to the IMF’s general 

resources, and to determine access to IMF financing. In April 2008, IMF members reached 

agreement on a quota reform package as a first step to modernize the IMF’s governance structure 

to keep pace with the rapid growth and greater economic weight of dynamic emerging market 

countries in the global economy. On June 24, 2009, the Supplemental Appropriations Act, 2009 

(Public Law 111-32), was enacted, providing authorization and appropriations for an increase in 

the U.S. quota share in the IMF by the dollar equivalent of 4.97 billion SDRs (about $7.71 

billion as of June 24, 2009) as well as an increase in the U.S. participation in the New 
6 

Arrangements to Borrow (discussed below). This increase in the U.S. quota share was 

completed in March 2011. At the Pittsburgh Summit in September 2009, G-20 Leaders agreed 

to further reform in IMF quotas to shift at least five percent to dynamic and underrepresented 

emerging markets while maintaining the U.S. voting share at above 17 percent, thus preserving 

our ability to exercise a veto on major governance reforms. As discussed below, a reform 

package was agreed in the Fall of 2010. 

New Arrangements to Borrow (NAB): In addition to quota subscriptions, the IMF maintains 

multilateral borrowing arrangements with financially strong members. This allows the IMF to 

obtain temporary supplemental resources when the IMF’s existing resources are substantially 

drawn down in circumstances that threaten the stability of the international monetary system. 

In November 2009, existing and potential new NAB participants met in Washington and agreed 

to amend and increase the NAB by up to $600 billion. This agreement delivered on the G-20 

Leaders’ commitment in April 2009 to increase the size of the NAB by up to $500 billion. As 

part of this agreement, the United States led the way by committing to increase its participation 

in the NAB by up to $100 billion. The expanded NAB became effective on March 11, 2011, and 

was activated on April 1. U.S. participation in the NAB totals up to SDR 69 billion or about 

$110 billion. 

Major Developments in the Past Year 

Quota Reform: The IMF membership completed the Fourteenth General Quota Review in 2010. 

Reforming the governance structure of the IMF is a vital step in strengthening the legitimacy and 

effectiveness of the institution to better reflect today’s global economic realities. Quota reform 

underpins these efforts. 

The final quota and governance reform package agreed in November 2010 fully reflects U.S. 

priorities. First, the U.S. quota share will be virtually unchanged at 17.4 percent, and the U.S. 

ability to veto key IMF actions will be preserved. Second, the reform package ensures more than 

a six percent shift in quota shares to dynamic emerging market and developing countries, 

recognizing their growing role in the global economy, and more than a six percent shift from 

over-represented to under-represented members. This will result in the four largest emerging 

market countries (Brazil, Russia, India, and China) moving into the top 10 shareholders of the 

IMF. The quota shares and voting power of the poorest members will be protected. The quota 

reform agreement will achieve a doubling of total IMF quotas to approximately $740 billion by 

reallocating resources out of the NAB, preserving relative shares in the NAB and ensuring no 

change in the overall investment by the U.S. in the Fund. This will maintain the quota-based 

nature of the IMF and its ability to serve its membership in times of crisis. The IMF membership 

also agreed that a comprehensive review of the current quota formula will be completed by 

January 2013. 

Governance Reform: In November 2010, G-20 leaders also agreed on reforms of the IMF’s 

governance structure that represent a major step forward in making the IMF more effective, 

credible, and legitimate by better reflecting today’s global economy. Securing the legitimacy 

and good governance of the IMF is vital to our economic and national security interests. 

Specifically, G-20 leaders committed (and the IMF membership subsequently agreed) to 
7 

eliminate two advanced European chairs from the IMF’s Executive Board in order to make room 

for, and provide greater voice to, additional emerging market and developing country chairs. 

Strengthening Global Financial Safety Nets/Precautionary Facilities Reform: The IMF refined 

and expanded its precautionary lending toolkit in 2010. It modified the Flexible Credit Line 

(FCL) – a precautionary instrument that makes it easier for the IMF’s strongest-performing 

emerging market members to access resources rapidly – to provide greater levels of access to 

qualifying countries for a longer period of time. The IMF also created the Precautionary Credit 

Line (PCL), a precautionary instrument for countries with some vulnerabilities which do not 

qualify for the FCL but are still sound performers. The PCL entails lower access limits and 

stricter conditionality than the FCL, in order to ensure that IMF resources are safeguarded. 

Macedonia became the first recipient of a PCL in January 2011. Both instruments have helped 

to reduce risk perception and contribute to stabilization in financial market conditions. 

Post-Catastrophe Debt Relief (PCDR) Trust: In response to the Haiti earthquake, the IMF 

established the PCDR Trust to provide debt relief for very poor countries hit by the most 

catastrophic of natural disasters. The purpose of debt relief under the PCDR is to free up 

additional resources to fill the exceptional balance-of-payments needs arising from the 

catastrophe and the subsequent economic recovery efforts. The PCDR complements donor 

assistance and the IMF’s concessional financing under the Poverty Reduction and Growth Trust 

(PRGT). The PCDR financed the elimination of Haiti’s entire debt stock to the IMF (about $268 

million) that existed at the time of the 2010 earthquake. 

Major Prospects for the Coming Year 

International Monetary System: In 2011, the IMF will examine several issues related to the 

current international monetary system. The G-20 also will be discussing several of these issues 

in 2011 and the G-20 discussion will be informed primarily by the IMF’s work in this area. The 

key areas to be tackled by the IMF include: managing capital flow volatility, assessing reserve 

adequacy, and evaluating the remaining scope for further improving financial safety nets (FSNs). 

On managing volatile capital flows, the IMF will work to establish a framework to advise 

member countries, particularly emerging markets, about how to determine the appropriate 

response to a surge in capital inflows. The IMF seeks to increase its coverage of capital account 

issues in its standard bilateral surveillance and to provide more consistent advice to member 

countries. The IMF is also working to establish a new metric for determining reserve adequacy 

and will work to integrate this metric into its standard surveillance practices. While the IMF has 

already undertaken significant work to improve FSNs as detailed above, it will be exploring any 

steps it can take to further this agenda in 2011. 

Improving IMF Surveillance: In 2011, the IMF will undertake its Triennial Surveillance Review 

(TSR) to assess the IMF’s recent experience with surveillance and provide recommendations for 

strengthening future surveillance. The TSR will cover the period from late 2008 through mid2011 and will focus on both bilateral and multilateral surveillance (in contrast to the 2008 TSR, 

which concentrated on bilateral surveillance). The final TSR report also will take stock of new 

surveillance vehicles launched in response to the crisis, such as the Early Warning Exercise, the 
8 

Vulnerabilities Exercise for Advanced Economies, and the Fiscal Monitor, and provide feedback 

on the extent to which these products have strengthened the ability of the Fund to detect risks. 

In addition to the TSR, the IMF will launch two new surveillance products in 2011. Spillover 

reports, aimed at assessing the impact of outward spillovers from countries whose policies 

significantly affect stability of the system, will be produced for China, the United States, the 

United Kingdom, Japan, and the euro area, and will be released in conjunction with Article IV 

reports for each of these in 2011. The Vulnerabilities Exercise, an inter-departmental 

surveillance tool aimed at identifying underlying vulnerabilities in advanced and emerging 

economies, will be produced for Low-Income Countries this year. The TSR will take into 

account these new products and provide preliminary views on these initiatives. 

 

 

 
9 

Multilateral Development Banks

The Multilateral Development Banks (MDBs) are instrumental in advancing key U.S. objectives 

throughout the world in a way that significantly leverages U.S. investments. The MDBs are the 

most leveraged and sustained assistance tool that the United States has at its disposal. For 

example, the United States contributed $420 million to the World Bank during its last 

replenishment in 1988 and, in the ensuing two decades, this investment supported $325 billion in 

cumulative lending towards national security and poverty alleviation priorities. The enormous 

value that these institutions represent is reflected in the fact that $3.3 billion in U.S. FY12 

contributions will support $95 billion in MDB lending in FY12, half again as much as our entire 

150 account budget. 

Historically, the United States has been the largest shareholder at the World Bank, the Asian 

Development Bank (AsDB), and the Inter-American Development Bank (IDB), and is the largest 

non-regional shareholder at the other regional development banks. The United States led in the 

founding of the MDBs, and they have a long history of bipartisan support. As a result of our 

standing within the MDBs, the United States has exerted strong leadership in shaping the 

policies and the priorities of these institutions in line with our goals. Strong and effective U.S. 

leadership in these institutions, made possible by our contributions and support, has shaped 

exceptional responsiveness by the MDBs to the following key U.S. priorities: 

National Security: The MDBs help to support development and reform in countries of strategic 

importance. 

 Afghanistan: In Afghanistan, the International Development Association (IDA) of the 

World Bank Group and the Asian Development Fund (AsDF) are the second and third 

largest donors after the United States. General David Petreaus has stated, “We need these 

critical enabling institutions and further U.S. support for them will ensure that they are 

able to contribute as significantly as they have in the past.” 

 The Middle East and North Africa: The United States is calling for a renewed 

engagement by the MDBs in the Middle East and North Africa. The MDBs should help 

lay the groundwork for more inclusive, sustainable economic growth and private sector 

job creation in countries such as Egypt and Tunisia. Collectively, MDBs could provide 

over $20 billion for Egypt and Tunisia for the period 2011-2013 in support of suitable 

reform efforts. Given their unparalleled expertise in supporting better governance in 

developing and transition economies, the MDBs have a comparative advantage in the 

promotion of these reforms as building blocks for a robust civil society, including 

accountability, transparency, and good governance. 

Supporting poor and vulnerable populations: MDB programs help to cushion the poor against 

the full impact of external shocks, as demonstrated during the global financial crisis when these 

institutions augmented support for domestic social safety nets, including education, health, and 

anti-poverty programs. 
10 

Some specific examples include: 

 Haiti: After the devastating and tragic earthquake that struck Haiti in January 2010, the 

MDBs rushed to provide rapid relief and assistance to the Haitian people. The World 

Bank pledged $479 million to support Haiti, of which two-thirds was delivered within a 

year. The IIDB, as part of the capital increase agreement, has committed to providing 

$2.2 billion in grants to Haiti over the coming decade out of its net income, and cancelled 

all of Haiti’s debt and converted future loan disbursements to grants. The International 

Finance Corporation (IFC) provided $49.6 million in financing to private business to 

improve advisory services to foster a better investment climate, improve access to finance 

and develop management skills for over 600 small businesses. 

 Infrastructure and Market Development in Africa: The United States is seeking 

additional focus and investment from the MDBs in African infrastructure. We are 

focusing especially on regional infrastructure projects, which are urgently needed to 

support the economic growth required for sustained poverty reduction. We are also 

urging the MDBs to provide more early-stage financing to develop a pipeline of bankable 

projects. The MDBs also need to help these countries focus on developing institutional 

and financial environments that will encourage more private financing as the needs of the 

continent far exceed the resources that the MDBs can provide. 

Critical global priorities: The MDBs are uniquely designed to help us address critical global 

priorities such as food security and climate change. These complex challenges, which know no 

geographical boundaries, imperil our prospects for global prosperity and poverty reduction if left 

unaddressed 

 Food Security: Food price spikes profoundly affect the stability of fragile nations. For 

the second time in three years, food prices are at an all time high. Moving forward, 

global food insecurity has emerged as a cornerstone of development for developing 

countries. This trend reinforces the vital role of the multilateral Global Agriculture and 

Food Security Program (GAFSP), a new trust fund housed at the World Bank. Since its 

launch in April 2010, GAFSP has allocated $337 million to eight countries – Bangladesh, 

Ethiopia, Haiti, Mongolia, Niger, Rwanda, Sierra Leone, and Togo. 

 Climate Change: Climate change is recognized by the U.S. military as a threat that could 

spur national security challenges. The World Bank has increased lending to renewable 

energy and energy efficiency projects, and expects to see continued rapid escalation of 

lending to projects involving clean sources of energy from its own resources and through 

the trust funds that the Bank administers. The African Development Bank (AfDB) 

created the Energy, Environment, and Climate Change Department. The AfDB aims to 

serve as the lead financier for energy-related investments in Africa, while supporting 

low-carbon development in the continent. In 2010, the AsDB allocated $1.76 billion to 

clean energy investments, and advanced new initiatives to promote technology 

innovation, transfer, and diffusion, including the Asia Clean Technology Exchange. The 

European Bank for Reconstruction and Development (EBRD) is investing in energy 
11 

efficiency and supporting market incentives to encourage the regional transition to a low 

carbon economy.

U.S. economic growth: By supporting growth in poor and emerging economies, the MDBs are 

helping to create the next generation of emerging markets for U.S. exports and businesses. MDB 

assistance has helped emerging markets grow and these countries are now key export markets for 

the United States. 

 Level playing field for business opportunities: The MDBs provide critical financing for 

large infrastructure projects which are needed both to improve lives and improve 

prospects for economic development. MDBs are uniquely able to invest in large 

infrastructure projects, and the level playing field for business opportunities created by 

MDB lending – from which U.S. companies benefit – can stand in contrast to bilateral 

investments from China, which is often the only alternative available. 

The 2010 section on MDBs is divided into two main sections. Section 1, Institutional Reform 

and Effectiveness, addresses elements that are common across several of the MDBs; Section 2, 

Multilateral Development Banks: Priorities, Performance, and Reforms, focuses individually on 

each institution. 

Section 1: Institutional Reform and Effectiveness 

Without question, 2010 was an exceptional year for the MDBs. After their robust response to 

support countries during the financial crisis, four of the MDBs requested capital increases in 

2010 to bolster their depleted resources so that they could resume normal lending operations. 

These requests coincided with scheduled, recurring replenishments for the special facilities 

housed at the World Bank and AfDB that provide grants and low-cost loans to the world’s 

poorest countries. As part of these capital increase negotiations, the United States successfully 

pressed hard for robust reforms focused extensively on ensuring the adoption and strengthening 

of policies and procedures needed to promote the sound and effective use of resources, including 

stronger financial discipline, improved governance and accountability, and enhanced 

development impact and effectiveness. We believe that the MDBs’ effectiveness has been 

strengthened in a positive and enduring way by the adoption of reforms in conjunction with 

recent capital increase negotiations. 

Each MDB also has an independent evaluation department that assesses project effectiveness, 

which helps to feed into management reforms to improve outcomes. Although all of the MDBs 

integrate lessons learned into the development of new projects, some of them have taken steps 

recently to enhance the formal mechanisms of incorporating these lessons at the project 

development stage. Finally, the MDBs continue to move forward with improvements in the 

frameworks that they use to design projects and report results. 

In general, several recent third party assessments – including a recent report by the Center for 

Global Development and Brookings and 2008 and 2010 reports on multilateral aid by the 

Organization for Economic Cooperation Development Assistance Committee – confirmed that 
12 

the MDBs are among the most effective development institutions globally, measured across a 

range of effectiveness indicators such as selectivity, transparency, and focus on the poor. 

Some key areas to highlight include: 

Extractive Industries Transparency: Treasury and U.S. Executive Directors at the 

international financial institutions (IFIs) have taken every opportunity to stress the importance of 

resource revenue transparency. The MDBs require all companies to disclose revenues paid to 

host governments and have provided technical assistance and advisory services to promote 

extractive industries (EI) transparency. Treasury reports annually on the activities of the IFIs in 

promoting EI transparency. http://www.treasury.gov/resource-center/international/developmentbanks/Documents/Treasury%20Extractive%20Industries%20Report%20June%202010.pdf

Safeguards: Treasury has firmly and successfully pressed the MDBs to reduce the negative 

footprints associated with their projects, and seek out opportunities to make positive 

environmental impacts and significantly scale up efforts to help borrowing countries address the 

impact of climate change. Treasury also has urged the MDBs to substantially reduce support for 

coal projects. http://www.treasury.gov/resource-center/international/developmentbanks/Pages/guidance.aspx

Treasury reports annually on MDBs and the environment (including climate change), 

developments in MDB environmental safeguards, changes in MDB inspection mechanisms, 

outcomes of key inspections, and U.S. votes on environmental grounds on MDB projects. 

http://www.treasury.gov/resource-center/international/developmentbanks/Documents/2009%20MDB%20Environment%20Report%20to%20Congress.pdf

Accountability: In 2010, there were several developments leading to improved accountability at 

the MDBs. For example, the AfDB revised its Operating Rules and Procedures of the 

Independent Review Mechanism to increase the independence of the mechanism and to simplify 

the procedure for submitting a complaint. In March 2010, the EBRD adopted a new 

accountability mechanism, called the Project Complaint Mechanism (PCM), which replaced the 

Independent Recourse Mechanism that had been in place since July 2004. The PCM was 

established to assess and review complaints about bank-financed projects independently from 

banking operations. Also of note, the IDB Board reformed the Bank’s Inspection Mechanism to 

assure its independence, mandate, and accessibility. As a result, stakeholders will be able to 

ensure that all IDB projects meet the standards of the IDB’s own policies, which is a vital 

element of accountability. 

Below we summarize major developments and coming prospects for each institution, with a 

description of progress made and steps taken to achieve U.S. policy goals. 
13 

Section 2: Multilateral Development Banks: Priorities, Performance, and Reforms 

WORLD BANK GROUP

The Year Ahead: Key developments that we are monitoring closely in the coming year include 

the introduction of new lending instruments, with an interest in elevating the importance of 

results and updated policies. The World Bank will play a major role in supporting economic 

transformation in the transition countries of the Middle East and North Africa, where the Bank 

could provide up to $3.25 billion to support Egypt and Tunisia over the coming year. The World 

Bank has embarked on a two-year process of updating and consolidating its environmental and 

social safeguard policies into an integrated environmental and social policy framework. The 

World Bank is also preparing an updated energy sector strategy. The United States is working 

with the Bank to ensure that the strategy reinforces our efforts to promote lower carbon 

development paths. For example, our 2009 guidance to MDBs for engaging with developing 

countries on coal-fired power generation is helping to shape the World Bank’s views on lending 

for such projects. 

In addition, the development of the “World Bank Framework and IFC Strategy for Engagement 

in the Palm Oil Sector” will guide future engagement in the sector following the September 2009 

moratorium on new investments in palm oil, which presents significant social and environmental 

risks. The United States is also seeking to strengthen the IFC’s environmental and social 

performance standards and, in the coming year, the IFC will update its Policy and Performance 

Standards on Environmental and Social Sustainability and its Access to Information Policy. . 

As a result of our efforts, the new disclosure policy is expected to result in IFC disclosing more 

project-level information, including on environmental, social, and development outcomes during 

all stages of the project. 

Bank Performance over the Past Year: In World Bank fiscal year 2010 (July 2009-June 

2010), the World Bank Group provided $75 billion in new commitments. This assistance 

included: 

 $44 billion by the International Bank from Reconstruction and Development (IBRD) in loans 

and technical assistance to middle income countries, where 70 percent of the world’s poor 

live. Latin America and the Caribbean received the greatest share of IBRD’s new lending, 

with $13.7 billion, followed by Europe and Central Asia with $10.2 billion, and South Asia 

with $6.7 billion. Among sectors, the Energy and Mining sector received the highest share of 

commitments (20 percent), followed by the Finance sector (19 percent) and the Public 

Administration, Law, and Justice sector (18 percent). The themes receiving the largest 

commitments were Financial and Private Sector Development ($15.6 billion), Human 

Development ($5.6 billion), and Public Sector Governance ($4.6 billion). 

 $14.5 billion by the International Development Association (IDA) in highly concessional 

credits and grants to the 79 poorest countries, including 39 in Africa. In FY10, Africa 

received $7.2 billion, or 49 percent of total IDA commitments. South Asia ($4.6 billion) and 

East Asia ($1.7 billion) also received large shares of committed funding. India and Vietnam 

were the largest single country recipients of IDA funding in FY10. Commitments for 
14 

infrastructure rose to $5.3 billion this fiscal year, a nine percent increase over FY2009. The 

sectors receiving the largest commitments were Public Administration, Law, and Justice 

($2.7 billion) and Health and Social Services ($2.1 billion). The themes receiving the largest 

commitments were Human Development ($2.9 billion), Rural Development ($2.6 billion), 

and Financial and Private Sector Development ($2.1 billion). 

 $12.6 billion in investments by the International Finance Corporation (IFC), the private 

sector arm of the World Bank, to support the private sector in developing countries. IFC 

increased its investments in the poorest countries and delivered over $18 billion of financing, 

including funds mobilized from the private sector. IFC deepened its engagement with the 

poorest countries by providing, not only investments, but also technical advice and 

contributions to IDA’s replenishment. 

 $1.5 billion in guarantees by the Multilateral Investment Guarantee Agency (MIGA) to 

provide political risk insurance. MIGA guarantees against losses related to currency transfer 

restrictions, expropriation, war and civil disturbance, breach of contract, and non-honoring of 

sovereign financial obligations. In FY10, MIGA targeted a wide range of projects across all 

regions – from bank liquidity in Serbia and Latvia, to guarantees on complex port projects in 

Turkey, China, and Senegal, and support for investments in frontier markets such as Sierra 

Leone and Ethiopia. MIGA also continued to support financial flows from banks to their 

subsidiaries in Europe and Central Asia which were harmed by the financial crisis. In 

addition, MIGA entered the emerging-market private equity business by providing 

conditional guarantees for funds seeking to raise private capital. The agency signed its third 

contract with a private equity fund this year. All three funds focus on small-scale investments 

in sub-Saharan Africa. 

The World Bank is steadily strengthening its processes for measuring and generating results. 

Specifically, the Bank is adopting a results framework that has been applied by IDA (the Bank’s 

concessional window) to its much larger hard loan facility. In addition, management, for the first 

time, agreed to implement a corporate scorecard to assess the Bank’s performance and report on 

development results across the institution. Finally, the Bank is moving forward with human 

resource reforms to more strongly link the performance evaluation process with results. 

General Capital Increase and Key Institutional Reforms: 

World Bank/IBRD: In April 2010, Governors endorsed a general capital increase (GCI) for the 

IBRD of $58.4 billion, of which six percent, or $3.5 billion, is in the form of paid-in capital. 

They also endorsed a package of agreed reforms to voice and participation, including a selective 

capital increase of $27.8 billion, of which $1.6 billion would be paid in. The paid-in portion of 

the U.S. share of these capital increases is $866 million over five years. Reform commitments 

negotiated as part of the GCI included: 

 IDA Transfers: Shareholders agreed to a new rules-based approach to net-income transfers 

from the IBRD to IDA, which will help make support to IDA more predictable and 

sustainable while maintaining prudent reserve levels. This helped to ensure that total internal 

resources devoted to the sixteenth replenishment of IDA (IDA-16) will increase by at least 40 
15 

percent over the fifteenth replenishment of IDA (IDA-15). The World Bank will maintain its 

robust transfers of income to the concessional window of $2 billion over three years. 

 Budget Discipline: The World Bank agreed to overhaul its budget process to ensure that 

decisions on pricing, compensation, and administrative costs are closely integrated and 

aligned with the Bank's strategic priorities. The Bank agreed to synchronize year-end 

discussions on budget, pricing, and net income by fiscal year-end 2010. The Bank also 

agreed to develop pricing principles that link loan pricing to lending-related cost coverage by 

fiscal year-end 2010. Loan pricing principles have been developed to link pricing to lendingrelated administrative costs, while discussion around coverage of additional costs is ongoing. 

 Managing for Results: The World Bank agreed to better align internal resources to support 

the strategy to address the Bank’s comparative advantages for supporting poverty reduction 

and economic development. Management, for the first time, has agreed to implement a 

corporate scorecard to assess the Bank’s performance and report on development results 

across the institution. 

 Human Resources: The World Bank adopted human resource reforms to more strongly link 

the performance evaluation process with results. Reforms will continue to focus on 

managing for high performance and realizing the potential of Bank staff through investment 

in their professional development. Crucially, a system for identifying and supporting 

leadership talent has been re-introduced, building on recent efforts to ensure that strong 

pipelines are available for all key positions. The governance and focus of the Bank’s 

learning agenda will be overhauled to better support managers and high potential staff in 

developing needed leadership and management skills. Enhancements will be made to the 

Bank’s performance management processes and tools, and to the hiring process. 

More information on the World Bank’s reform agenda can be found at 

http://siteresources.worldbank.org/DEVCOMMINT/Documentation/22553917/DC2010-

0004(4)InternalReform.pdf. Additional information is contained in the paper: Strengthening 

Governance and Accountability - Review, Results, and Roadmap, which can be found at 

http://siteresources.worldbank.org/DEVCOMMINT/Documentation/22553919/DC2010-

0007(E)Governance.pdf.

International Finance Corporation: In July 2010, the IFC Executive Directors recommended that 

the Board of Governors formally approve a $200 million Selective Capital Increase (SCI) 

consisting of $70 million in unallocated shares and $130 million worth of new shares. This will 

increase the representation of developing members from 33.41 percent to 39.48 percent. The 

United States will not participate in the SCI, and as a result our share will decline from 24 

percent to 21 percent. This decline, however, will not materially affect our rights at the IFC. 

Details of the SCI can be found in the Condensed Consolidated Statements – September 30, 

2010, at http://www.ifc.org/ifcext/treasury.nsf/AttachmentsByTitle/FinancialSatementsFY11-

Q1/$FILE/IFC+-+FY11+Q1+financials.pdf. 

IDA Replenishment: The International Development Association (IDA) is the World Bank 

Group’s concessional window for poor countries. It has a three-year replenishment cycle in 

which fresh resources are contributed to support grants and concessional arrangements for its 
16 

countries of operation. In December 2010, IDA Deputies from 51 donor countries concluded 

negotiations for the sixteenth replenishment of IDA. The IDA-16 replenishment mobilized a 

total of $49.2 billion in development resources for the world’s 79 poorest countries for the threeyear IDA-16 period (mid-2011 through mid-2014). This is a 20 percent increase over IDA-15 

resources. The U.S. share of the replenishment is 8.3 percent ($4.1 billion), compared to 8.9 

percent ($3.7 billion) for IDA-15. IDA will enhance its approach to gender, climate change, and 

fragile states in its policy framework, project design, and country dialogue. IDA-16 will 

introduce a $2 billion crisis response window to provide resources for countries hit by natural 

disasters, such as Haiti, and severe, external economic shocks, such as global food price spikes 

or regional financial crises. The final report on IDA-16 and other relevant documents can be 

found at http://go.worldbank.org/O5NIRLMEE0. 

AFRICAN DEVELOPMENT BANK

The Year Ahead: The African Development Bank (AfDB) has an ambitious agenda that 

addresses several key U.S. priorities. The AfDB will also play a key role in Egypt and Tunisia, 

and can provide up to $3 billion over the next 18 months to support transition in these vital 

countries. The AfDB plans to strengthen disclosure requirements to meet the highest standards 

of other multilateral institutions, including the release of project results, an increased 

presumption that information should be disclosed, the release of board meeting minutes, and 

more routine posting of bank documents on its Web site. The AfDB is also committed to 

improving risk management practices by establishing a credit committee, and elevating and 

consolidating the risk function under a Head of Risk. These are important steps to address 

vulnerabilities. The Bank will explicitly define its “risk appetite” to underscore the trade-offs 

between lending to the private sector in fragile, low-income economies and maintaining its 

capital base into the future. The Bank also will ensure its ability to undertake an increasing 

number of audits and investigations as its loan portfolio expands. 

In addition, the AfDB is establishing a comprehensive income model by providing a cohesive 

framework to lock in transfers to its concessional window (AfDF) and promoting financial 

sustainability through coordinated decisions on reserve accumulation, lending levels, loan 

pricing, and the administrative budget. It is also strengthening performance metrics through the 

expansion of the Results Framework into a bank-wide effort and increased automated results 

reporting. The Bank is also developing specific performance metrics that will guide resource 

allocation for regional projects. Finally, we are looking for revisions to the environmental and 

social safeguards policy, in consultation with civil society organizations, to ensure that the 

environmental and social impacts of investment projects are appropriately assessed and 

mitigated. 

Bank Performance over the Past Year: The AfDB Group committed $6 billion in CY2010, of 

which $1.7 billion was sovereign lending to middle income countries, $1.6 billion was for in 

private sector operations in both middle and low income countries, and $2.2 billion was 

committed by the AfDF for the poorest countries in Africa. AfDB Group lending in 2010 

includes $2.3 billion to North Africa, $0.9 billion to West Africa, $0.9 billion to East Africa, 

$0.8 billion to South Africa, and $0.4 billion to Central Africa. The large majority of AfDB 
17 

Group lending – $2.3 billion – was for infrastructure (including regional infrastructure). The 

AfDB Group also provided $0.5 billion for the financial sector, $0.3 billion for industry, $0.2 

billion for the social sector, and $0.1 billion for multi-sector projects. 

General Capital Increase and Key Institutional Reforms: In May 2010, the AfDB Board of 

Governors endorsed a tripling of the Bank’s capital resources from UA 24 billion ($38 billion) to 

UA 67.7 billion ($106 billion). The paid-in portion of the U.S. share of this capital increase is 

$264 million. AfDB Management and shareholders agreed to significant reform commitments as 

part of the GCI, including: 

 Managing for Results: The AfDB adopted the “One Bank” Results Measurement Framework 

that includes indicators to measure policy-based operations, regional operations, and private 

sector operations as part of a single reporting framework that covers all of the Bank’s 

interventions. For better alignment with country outcomes, the framework incorporates a set 

of intermediate outcomes that can be linked to the Bank’s programs. The AfDB also made 

progress in firming up tools and procedures for enhancing the quality-at-entry of Bank 

operations and country strategies. 

 Income Management: The AfDB adopted a new loan pricing system that will restore the 

financial integrity of the AfDB’s sovereign loan pricing model. Periodic reviews will ensure 

that loan charges are sufficient to cover operating costs, build reserves, and contribute to lowincome country support. 

Detailed information relating to the capital increase and reform agenda can be found at 

http://www.afdb.org/en/topics-and-sectors/topics/capital-increase/documents/. 

African Development Fund Replenishment: The African Development Fund is the African 

Development Bank’s concessional window for poor countries. It has a three-year replenishment 

cycle in which fresh resources are contributed to support grants and concessional arrangements 

for its countries of operation. In September 2010, donors agreed on a replenishment level for the 

twelfth replenishment of the AfDF (AfDF-12) of UA 6.1 billion ($9.5 billion) for the three-year 

period (2011 through 2013). The replenishment represents a 10.6 percent increase in donor 

contributions over AfDF-11. The U.S. pledge for AfDF-12 is $585 million. This corresponds to 

an increase in the U.S. share of the replenishment from 8.1 percent for AfDF-11 to 9.6 percent 

for AfDF-12. This small increase in the U.S. share supports our objective of reasserting U.S. 

leadership in the AfDF, where we had previously fallen from the position of top donor to fourth 

largest donor. The Bank agreed to be more selective about fast-disbursing “policy-based 

operations” in lower performing countries where fiduciary risks are high and development results 

have been disappointing. The Bank will devote greater attention to climate change and food 

security as cross-cutting themes to be pursued within the AfDF’s infrastructure and regional 

integration activities. Documents relating to the replenishment can be found at 

http://www.afdb.org/en/about-us/african-development-fund-adf/adf-12/adf-12-replenishment/. 
18 

ASIAN DEVELOPMENT BANK

The Year Ahead: Unlike the other MDBs, the Asian Development Bank (AsDB) underwent 

capital increase negotiations in 2009, one year ahead of the others. The AsDB will begin 

negotiations for the tenth replenishment of the Asian Development Fund (AsDF-11) in 

September 2011. Major objectives for the U.S. include: ensuring sufficient resources for our 

national security priorities, such as Afghanistan; upgrading the AsDB’s impact evaluation 

capabilities; and ensuring the most efficient use of existing resources in the AsDF. 

Bank Performance over the Past Year: In CY 2010, the AsDB committed $10.5 billion, and 

the AsDF (the Bank’s concessional arm) committed $3.4 billion. Total operations, including cofinancing, guarantees, and technical assistance, reached $17.5 billion in 2010. Environmental 

sustainability was a key priority in AsDB operations. Fully 51 projects in 2010 had 

environmental sustainability as a theme, totaling $5 billion in approvals, a 55 percent increase 

over 2009. In addition, the AsDB provided critical support to U.S. foreign policy priorities. For 

example, Afghanistan received commitments of $250 million per year from the AsDF, all in the 

form of grants. 

General Capital Increase and Key Institutional Reforms: The AsDB continued to implement 

reforms negotiated as part of its GCI agreement in 2009. This included formalizing principles for 

the selection of the outside auditor, upgrading the capacity of the AsDB’s Risk Management 

Office, and strengthening the Bank’s human resources practices. The AsDB also joined an 

agreement for cross debarment of firms and individuals between MDBs. In addition, the AsDB 

initiated reviews of two major policies important to operational effectiveness, to be completed in 

2011: 1) the Public Communications Policy; and 2) the Accountability Mechanism. In both 

cases, the reviews include a period of public consultation. 

Detailed information on the GCI and reform agenda can be found at: 

http://www.adb.org/Documents/Brochures/InFocus/gci.asp.

EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT

The Year Ahead: The EBRD is in the process of determining how it can engage in the Middle 

East and North Africa to support emerging democratic states that seek to transition to more 

market-oriented economies. The Treasury Department will be heavily engaged in this process to 

help ensure that it unfolds in line with key U.S. priorities. Shareholders will focus on the 

integrity of EBRD operations during the upcoming review of the Bank’s information security 

policy, as well as the review of the code of conduct for members of the Board. In addition, 

shareholders will revise the Bank’s public information policy in order to improve the 

transparency and accountability of Bank operations. 

Bank Performance over the Past Year: In response to the continuing effects of the financial 

crisis, the EBRD committed $11.9 billion in loans and equity in 2010, an increase of 15 percent 

compared with 2009. The Bank also achieved a record number of projects, with 386 operations 

– an increase of 24 percent compared with 2009. Although the number of projects increased, the 

average project size dropped by nine percent, reflecting a concerted effort by the EBRD to reach 
19 

out to smaller enterprises with more limited access to finance. EBRD focused on increasing the 

proportion of investments in early transition countries, which accounted for nearly 30 percent of 

the EBRD investment operations, and the western Balkans, which accounted for a further 18 

percent of EBRD investment operations. The mobilization ratio increased from 1.3 in 2009 to 

1.5 in 2010 (i.e., for every dollar invested by the EBRD, the Bank mobilized an additional $1.5 

from other sources). 

The effectiveness of EBRD’s operations continued to be supported by an ex-ante assessment of a 

project’s likely impact on transition that is conducted by the Chief Economist’s Office, which 

provides an independent rating that is shared with the Board. This mechanism provides a critical 

incentive in the project development phase to formulate projects that are fully aligned with the 

Bank’s transition mandate. 

General Capital Increase and Key Institutional Reforms: In May 2010, the EBRD Board of 

Governors agreed to a capital increase of €10 billion ($14 billion) to respond to post-crisis 

demand. The capital increase consists of a €1 billion ($1.4 billion) transfer from unallocated 

reserves to paid-in capital, and a €9 billion ($12.5 billion) increase in temporary callable capital, 

subject to redemption once the extraordinary needs of the financial crisis have abated. The U.S. 

share of this temporary callable increase is approximately $1.2 billion. As part of the agreement, 

the United States pushed for renewed commitment to graduate the most advanced central 

European countries (the EU-7). 2 Details of the capital increase and reform agenda can be found 

in the Fourth Capital Resources Review (CRR4) 2011-2015 at 

http://www.ebrd.com/downloads/policies/capital/crr1115.pdf. 

In addition, the United States persuaded the EBRD to update and formalize its policy on 

providing financing to entities that produce or trade in goods and services utilized by the military 

in any country. The Bank had not previously provided definitions and guidelines for its longstanding policy prohibition regarding the financing of military-related activities or production. 

The new guidelines clarify how to assess transactions involving products that have both military 

and civilian uses. 

INTER-AMERICAN DEVELOPMENT BANK

The Year Ahead: Key priorities for the Inter-American Development Bank (IDB) in the 

coming year include careful attention to the time-bound schedule of reforms that were agreed to 

as part of the capital increase negotiations. Specific reforms that are due in the coming year 

include: 

 The IDB will develop a methodology for macroeconomic sustainability analysis to minimize 

the risk of lending in unsustainable economic climate. 

 The IDB will develop an action plan in response to the report by the Independent Advisory 

Group on Sustainability. This report contains a number of recommendations on how to 

strengthen implementation of the IDB’s environmental and social safeguards, and more 

broadly on how to promote sustainable development. 

 

2

 Estonia, Latvia, Lithuania, Poland, Slovakia, Hungary, and Slovenia. 
20 

Bank Performance over the Past Year: The IDB committed $12.7 billion in loans and grants 

in 2010. The IDB approved a record number of projects (170) last year. Of total lending, 42 

percent targeted infrastructure and environmental sectors. The Bank also raised the percentage 

of lending to its smaller and poorer borrowers to 33 percent of total lending in 2010, as compared 

to 24 percent in 2009. 

The IDB has been one of the most committed partners in leading reconstruction efforts in Haiti 

after the devastating 2010 earthquake, disbursing a record $177 million last year for critical 

projects in priority sectors. 

2010 was a watershed year for the IDB in terms of promoting reforms to support the 

effectiveness of its assistance. Specifically, the Bank established a new “development 

effectiveness matrix” (DEM) in collaboration with its independent evaluation office. This new 

mechanism will help ensure the quality of the Bank’s loan portfolio, allowing only projects that 

meet a quantitative minimum development effectiveness threshold to be presented to the Board 

of Directors. A cost-benefit analysis, a monitoring and evaluation plan, and an assessment of 

project risks are among the components of the DEM. 

General Capital Increase and Key Institutional Reforms: In July 2010, the IDB Governors 

approved the Ninth General Capital Increase (IDB-9) of $70 billion, of which $1.7 billion will be 

paid-in. The paid-in portion of the U.S. share of the GCI is $510 million. This 70 percent 

increase in the IDB’s capital will enable the Bank to lend approximately $12 billion annually. 

This almost doubles the Bank’s pre-crisis capacity to lend, and is the first capital increase since 

1994. The Governors also agreed to provide an additional $479 million to replenish the Fund for 

Special Operations (FSO), which provides concessional financing to the region’s poorest five 

countries, including Haiti. Reform commitments included: 

 Managing for Results: As discussed above, the IDB adopted a new development 

effectiveness matrix (DEM) that employs stronger metrics and holds the Bank accountable 

by making the findings available to the public. 

 Budget Discipline: The IDB adopted a new Income Management Model (IMM), which 

instills a new discipline to the Bank’s fiscal operations and preserves the financial soundness 

of the Bank. The IMM allows for minimum transfers of $200 million annually to a grant 

facility for Haiti, providing desperately needed resources to one of the hemisphere’s 

countries in greatest need of assistance. 

 Improved Disclosure: The IDB adopted a new disclosure policy that is consistent with the 

highest standards applied by other MDBs. The new policy replaces a “positive list” of 

disclosed policies with a limited “negative list” and establishes an independent appeals 

mechanism. Other changes include: a presumption of disclosure; the release of 

Board/Committee minutes; and voluntary disclosure of Executive Directors’ statements and 

disclosure of project-level results. 
21 

The report on the GCI and reform agenda can be found at 

http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35291148. 

INTERNATIONAL FUND FOR AGRICULTURE AND DEVELOPMENT

The Year Ahead: Shareholders will have consultations on the ninth replenishment for the 

International Fund for Agriculture and Development (IFAD) in 2011. Areas of focus for IFAD-9 

will include sustainability, efficiency, and human resource management. The Board will review 

IFAD’s engagement with middle income countries. Under the IFAD-8 Replenishment, 

management was asked to develop a differentiated country approach and a graduation policy for 

middle income countries. 

Fund Performance over the Past Year: IFAD committed $845.6 million in loans and grants to 

fund rural development projects helping some of the poorest and improving food security. Most 

of IFAD’s financing was highly concessional or on a grant basis to the poorest countries. IFAD 

mobilized $1.6 billion in co-financing, an increase of 140 percent over 2009. Over 50 percent of 

IFAD’s commitments were in Sub-Saharan Africa. 

Key Institutional Reforms: In 2010, IFAD also adopted a new Climate Change Strategy under 

which climate-related risks will be integrated more systematically into IFAD’s rural 

development programs. IFAD will assess climate-related risks and opportunities in a wider 

development context including other environment-related issues, such as population pressures or 

local pollution. 

In addition, IFAD concluded two important reforms to strengthen its operations and oversight. 

First, it adopted a new policy on disclosure of documents that meets the standard of best practice 

among the international financial institutions by including a presumption of disclosure, a small 

negative list, and an appeals process. And second, IFAD revised its Project Procurement 

Guidelines to bring them into compliance with the World Bank’s existing international 

competitive bidding standards. 

NORTH AMERICAN DEVELOPMENT BANK

The Year Ahead: The North American Development Bank (NADB) is planning to raise more 

financing in the capital markets in 2011 – around $200 million, on par with its last issuance. 

This additional funding will aid in its growth strategy, particularly in supporting more climate 

change activities, and will allow NADB to deepen its support of border environmental 

infrastructure. 

Bank Performance over the Past Year: In 2010, NADB approved new lending commitments 

of $165.3 million (grants and loans combined) and disbursed $196.3 million (the highest level in 

its history). By end 2010, NADB’s financing reached $1.2 billion dollars in support of 149 

projects in the United States and Mexico. This represents a total investment of $3.2 billion 

dollars, which has helped NADB leverage $2 from public and private sector sources for every $1 

it invests. Of the 149 projects, NADB has built 19 water treatment plants, 32 water distribution 

systems, 52 wastewater treatment plants, 75 wastewater collection systems, 16 landfills, 16 
22 

closed dump sites, and almost 27 million square meters of paving – which has enabled a large 

portion of the population on both sides of the border to gain access to basic services. In February 

2010, NADB also issued its first bond, raising $250 million (at a coupon rate of 4.375 percent 

with a maturity date of February 11, 2020). The additional financing is helping NADB expand 

its portfolio into renewable energy and energy efficiency projects. 

On development effectiveness, the NADB and its sister organization – the Border Environmental 

Coordination Commission (BECC) – include results measurement matrices for all of their 

projects which track baseline conditions and proposed targets that reflect the 

environmental/health benefits of their interventions. In 2010, the institutions agreed to develop 

project close-out reports to summarize the lessons learned and track results as part of a more 

comprehensive results measurement process. 
23 

Report on IDA Contribution to Graduation 

The U.S. Department of the Treasury presents this report in compliance with the Foreign 

Operations, Export Financing, and Related Programs Appropriations Act, 2001, P.L. 106-429, 

§ 101(a) [Title VIII, § 803], Nov. 6, 2000 (22 U.S.C. § 262r-6(b)(2)). That section directs the 

Secretary of the Treasury to report to Congress on how International Development Association 

(IDA) financed projects contribute to the eventual graduation of a representative sample of 

countries from reliance on financing on concessionary terms and international development 

assistance. 

IDA provides highly concessional funds to the poorest countries, and ideally supports growth 

and development that ultimately enables them to graduate from IDA. The process of graduation 

from IDA is normally triggered when a country exceeds the operational per capita income 

guideline (currently $1,165). Some countries, such as China, have graduated based on their 

improved creditworthiness and access to commercial capital, even though per capita income 

remained below the operational guideline. The graduation process, in most cases, lasts for years 

and involves a phase-out of IDA funding along with a phase-in of IBRD lending. Before 

graduation, there is usually an intermediate stage where countries are designated as IDA-blend 

countries. There are 17 IDA-blend countries: Cape Verde, Zimbabwe, Papua New Guinea, 

Vietnam, Armenia, Azerbaijan, Bosnia-Herzegovina, Georgia, Uzbekistan, Bolivia, Dominica, 

Grenada, St. Lucia, St. Vincent, India, Maldives, and Pakistan. 

Thirty-five countries have graduated from IDA. Some of these countries, however, have 

subsequently become eligible once again for IDA funding. Most recently, Montenegro and 

Serbia graduated in 2007 and Albania and Indonesia graduated in 2008. Indonesia had graduated 

in 1980 but became IDA-eligible again in 1998 after the Asian financial crisis. 

A review of IDA’s graduation policy will be presented for discussion at the IDA16 Mid-Term 

Review in November 2012.