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World Bank Boosts Ag Lending Ahead of MDG Meet

Matthew O. Berger

WASHINGTON, Sep 13 2010 (IPS) - With the Millennium Development Goals review summit just one week away, the World Bank is the latest international player to announce its strategy to help achieve those goals by their 2015 deadline.

The new funding, totaling nearly 10 billion dollars, is meant to help overcome what have been termed the food, fuel and financial crises which the Bank says have added to the obstacles faced by developing countries.

Progress toward the MDGs in some countries has been stalled or reversed in recent years, the Bank estimates, saying that 64 million more people are living in extreme poverty in 2010 as a result of these recent crises. Progress toward MDG one – to reduce by half both the number of people suffering from hunger and from extreme poverty – was almost completely reversed in 2008 as a result of the spike in food prices.

These findings, included in a report accompanying the funding announcement, echo others’ findings. The United Nations’ 2009 progress report on the MDGs, for instance, found that due to the economic crisis in 2009 an additional 35 million people fell to extreme levels of poverty and the number of chronically malnourished people reached one billion.

It is hoped that next week’s summit will lead to concrete and significant actions toward overcoming those setbacks – and the uneven progress toward the MDGs that is currently seen between the developing poor countries and the poorest of the poor.

For its part, the World Bank announced Monday it is committing to new financing of 8.3 billion dollars on agriculture, 750 million dollars on education and 600 million dollars on health.

This money will be provided by the institution’s International Development Association (IDA), which provides zero-interest loans and grants to help the world’s poorest countries.

The health funding will therefore be focused on 35 countries primarily in East and South Asia and in sub-Saharan Africa, while the education money will go mainly to sub-Saharan Africa.

Indeed, many places South Asia and sub-Saharan Africa are very much behind much of the rest of the developing world when it comes to reaching the health and education goals. One in seven children born in sub-Saharan Africa died before their fifth birthday in 2008 – accounting for half the child deaths worldwide – while South Asia accounted for another third of those deaths that year, according to a report released by UNICEF last week.

In terms of education, sub-Saharan Africa is again the main laggard – only 65 percent of primary school-aged children were in school in 2008, says UNICEF. Even more children, though a smaller percentage of the total primary school-aged population, were out of school that year in South Asia.

Agricultural aid key to MDGs

But the funding for agriculture could do the most good, say experts.

The World Bank itself has said that economic growth in the agriculture sector is twice as effective at reducing poverty than growth in other sectors

“If you want to do something serious about the MDGs you have to do something about smallholder agriculture,” Christopher Delgado, strategy and policy adviser in the Bank’s Agriculture and Rural Development Department, told IPS.

John McArthur, CEO of Millennium Promise, an NGO committed to helping achieve the MDGs, says that agriculture is key to jumpstarting economic growth in developing countries.

He points to recommendations by the MDG Africa Steering Group, which brought together heads of multilateral development organisations in 2007 to identify what steps are needed to achieve the goals. The group found that Africa alone needs agricultural aid to rise to eight billion dollars a year.

The World Bank is counted on to provide only a portion of that aid, but given that the 8.3 billion announced Monday is meant for the world generally, McArthur says the increase is “still not adequate”.

“But it’s not the fault of the World Bank; it’s the fault of the shareholders and financiers of the World Bank,” he told IPS. “The World Bank is clearly committed to the MDGs, but it is important to stress that they are operating in a very constrained environment since they are subject to the commitments of their funders.”

He notes that the 8.3 billion-dollar increase is “consistent with the need for increases in finance for agriculture”, but that overall the fact that the Bank is constrained by the commitments of its funders means it is seeing “incremental” success for now in its efforts to help attain the MDGs.

Delgado sees agriculture and rural lending continuing to increase in future years. In 1980, it was 30 percent of total Bank lending, then dipped to seven percent around the start of this decade before rebounding to about 12 percent now, he says.

Explaining that Bank lending is dependent on countries’ request, he says those numbers reflect the fluctuating place of agriculture among governments’ priorities. When food prices came down in the 1990s, governments moved on to other areas of concern, he explains, but around 2000, people began to realise there had been underinvestment. The food crisis in 2007 and 2008 “crystallised” that fact for governments.

“Because of that I think you’ll see continued expansion of agriculture lending,” he says.

Delgado explained that 45 percent of the 8.3 billion dollars announced Monday will be from IDA, meaning it will be highly concessional – “almost a grant”. The remaining money will come from the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC), and be split about evenly between them. This money comes as part of the Bank’s Agriculture Action Plan.

Also Monday, U.N. Secretary-General Ban Ki-moon said that 100 billion dollars would be needed to reach the MDGs by 2015. The world’s poorest 49 countries alone would need 26 billion dollars next year.