Published on May 09, 2024

Unlocking Africa’s Potential through the World Bank’s IDA

The World Bank’s International Development Association, or ‘IDA‘, is the world’s largest source of grants and low-income loans for 75 low-income countries. With more than half of these countries located in Africa, IDA is a critical partner in supporting the continent’s economic transformation and achievement of the Global Goals.

Many African countries achieved rapid economic growth in the decade preceding the COVID-19 pandemic. However, a series of external shocks, including the pandemic and geopolitical tensions, have left many nations exposed and in urgent need of fiscal space to navigate these challenges and rebuild their economies.

This is precisely why African leaders gathered in Nairobi last week at the IDA for Africa Summit, advocating for a robust replenishment of IDA – which will end in December of this year.

The current landscape

Africa stands at a crossroads. By 2050, it is estimated that half of the world’s population will live on the continent. Home to rapidly growing cities, abundant natural resources, and a dynamic entrepreneurial spirit, Africa is ripe for investment.

However, these countries face a unique set of challenges which require an unprecedented increase in funding.

Addressing debt distress

Recent shocks like COVID-19 and rising living costs due to conflicts have made one in three IDA countries poorer than before the pandemic, with most of those in Africa. What’s more, more than half of African countries are at high risk of – or already under – debt distress. All countries take debt to grow their economies. Most high income countries have access to concessional funding or control development finance flows and tools to make economic decisions to buffer economic shocks.

At the same time, many developing countries in Africa are now spending more to pay back their debt than what they are receiving from the world in terms of development finance, effectively canceling out the potential impact of these investments.

Through IDA funding, low and middle income nations without access or control of financial tools, can reduce their reliance on high-cost debt and maintain financial stability.

Fighting climate change

High levels of expensive debt have left the African continent unable to cope with extreme weather events caused by global warming. African countries are disproportionately affected by climate change, despite contributing minimally to global emissions.

As leaders gathered in Nairobi, torrential floods and landslides ravaged Kenya, killing hundreds and displacing over 150,000 people. Meanwhile, in southern Africa, countries like Zambia and Zimbabwe are suffering from droughts which have completely wrecked agricultural production.

With IDA’s support, these countries can invest in climate resilience and transition towards renewable energy systems, utilizing Africa’s vast untapped solar resources and other renewable potentials.

Fostering economic prosperity transformation

Ultimately, African countries have been slow to transform over the past twenty years, making it harder to withstand shocks and rebuild from disasters. IDA’s support can help create a foundation for economic prosperity transformation and resilience, enabling more African countries to graduate from IDA support and become donors themselves, like Algeria and South Africa.

IDA has the opportunity to go beyond its individual investments and help strengthen the fundamental systems that will allow countries and people to not just survive, but thrive. This would not only demonstrate the success of IDA’s investments but also more importantly shore up the continent’s growing economic strength and ability to drive global, regional, and local development.

A call for global solidarity

As the IDA replenishment cycle is underway, it is imperative that its donors – especially G7 countries – meet the challenges of our times. Increasing funding to IDA is not just an investment in the future of African nations but in the health and prosperity of our global community.

This replenishment comes at a time when African leaders, institutions, and civil society are more united than ever in their calls for a fairer global financial system that truly benefits Africa. IDA can be at the heart of shifting the world’s relationship to Africa, and laying the groundwork for prosperity and progress.

IDA is more than just a funding mechanism—it is a lifeline for many countries and a building block for a prosperous and sustainable future. As African countries strive to achieve the Goals, the international community cannot waver in its support. The stakes are high, and the success of our collective efforts will not only define the future of an entire continent, but of the whole world.

Co-authors: Serah Makka, Africa Executive Director at The ONE Campaign; Razaq Fatai, Manager, Africa Policy & Advocacy at The ONE Campaign; Maura K. Leary, Director of Communications, African Center for Economic Transformation; and Céline Mulrean, Sustainability Consultant at Project Everyone