§ The Earl of Sandwich asked Her Majesty's Government:
§ How the United Kingdom and other G8 countries make up the shortfall in International Development Association financing as a result of reduced loan payments. [HL3263]
§ Baroness Amos: Reduced loan payments arise as a direct result of the increased use of grants in the International Development Association (IDA). Reduced loans or increased grants have two associated costs. The first is the lost income from the repayment of the loans that would have been made in the place of grants (the lost reflows), and the second is the lost administrative charges on IDA loans. For grants agreed during the thirteenth replenishment of IDA (IDA 13), the UK has supported a proposal, whereby lost administrative charges would be compensated through upfront contributions made by donors, and lost reflows would be compensated as and when these would have fallen due on a pay-as-you-go basis.
22WA§ In IDA 14, the issue of compensating IDA for the cost of grants will arise again, as grants are expected to remain an important funding instrument for IDA. Further proposals for grant compensation are being put forward by World Bank staff, and these will be discussed during the replenishment negotiations. A key objective for the UK will be to secure an agreement which recognises the importance of ensuring the long-term financial integrity of IDA.