§ The Lord President of the Council (Baroness Amos)My right honourable friend the Secretary of State for International Development has made the following Statement.
In 2002, the UK agreed to contribute £900 million to the 13th replenishment of the International Development Association (IDA), the World Bank's concessional lending arm which is designed to meet the needs of the world's poorest countries. In addition to this contribution, the UK set aside another £100 million to be provided on condition that a satisfactory framework was agreed to compensate the IDA for the costs of introducing grants under its 13th replenishment (IDA 13). Both the initial £900 million contribution and the additional provisional contribution of £100 million were approved by Parliament on 3 December 2002.
I am pleased to announce that a satisfactory framework for compensating IDA 13 for the introduction of grants has now been agreed. Under this framework, donors will compensate IDA upfront for the administrative costs associated with providing grants. through making additional contributions to the next replenishment (IDA 14). (These are costs which arise early in the project cycle and, in the case of loans, would be covered by recipient countries.) Meanwhile, donors will compensate for the lost reflows from recipient countries as and when these would have fallen due. Given the 10-year grace period provided under IDA on repayment of loans, this would not have happened until 2013 at the earliest. Compensation payments will not therefore be required until this time, and the exact means of compensation will be discussed as part of future IDA replenishments.
An essential and fundamental principle of the agreed grants compensation framework is that donors should contribute to the cost of compensation in line with their share of IDA 13 (their "burden share"). If the UK were to contribute the full £100 million set aside to cover the costs of upfront compensation, we would effectively displace the contributions of other donors. We have therefore decided to cover both our burden share under IDA 13, and the structural financing gap inherent in this replenishment (equivalent to 9.37 per cent of total resource needs from donors), making a total UK contribution for upfront IDA 13 grants compensation of £64.8 million.