Michael Ahern (Cork East, Fianna Fail)

This is a short but important Bill which provides for this country's contribution to the most recent round of funding for the International Development Association, IDA, which is the concessionary lending arm of the World Bank. The IDA provides grants or long-term loans at zero interest rates to the poorest developing countries. These are countries where per capita income is less than US$875 — above this limit other sources of funding should be available.

The Bill makes provision for the payment of Ireland's share of the amount agreed at the IDA 13 replenishment discussions, the 13th round of funding for the organisation, which was agreed in 2003. Ireland pledged a contribution of€50 million payable over the period to 2008,subject to the approval of the Oireachtas. The Bill I am introducing today providesaccordingly.

The International Bank for Reconstruction and Development, better known as the World Bank, was established in 1944. Its first task was to rebuild Europe after the war. The bank then turned its attention to the developing countries where there was a profound need for economic and social development. As the 1950s progressed, it became clear that the poorest developing countries could not afford to borrow the money they needed for capital development on the terms offered by the commercial banks or even the World Bank. They had very great needs but little ability to repay. It was clear that they required access to money on easier terms than were available through the existing channels.

As a result a group of World Bank member countries decided to set up the International Development Association in 1960 as part of the World Bank family of institutions to lend to very poor developing nations on highly concessionary terms. Its founders saw the IDA as a way for the "haves" of the world to help the "have-nots". The IDA now lends about US$6 billion to US$7 billion a year for different types of development projects, especially those that address people's basic needs such as primary education, basic health services and clean water and sanitation. The IDA also funds projects that protect the environment, improve conditions for private business, build needed infrastructure and support reforms aimed at liberalising countries' economies. All these projects are intended to pave the way to economic growth, job creation, higher incomes and a better quality of life.

However, the founders also wanted the IDA to be imbued with the discipline of a bank, not least so that borrowers would be able to adopt the discipline of working with other financial institutions. A continuing challenge in more effectively and efficiently addressing the great needs of IDA client countries is to develop mechanisms for pooling knowledge and harmonising requirements with the other multilateral institutions, both within and outside the Bretton Woods group of institutions, the bilateral development agencies and the client countries.

Much of the effort of the IDA is concentrated in Africa, which has some of the most intractable problems in the world at present. At current rates of increase, the population of sub-Saharan Africa is expected to grow to over one billion by 2020, despite declining birth-rates and the increasing number of deaths from AIDS. Both the IDA and the World Bank have had a very significant impact on the problem of HIV-AIDS, which is without doubt the greatest health problem in the developing world.

The HIV-AIDS pandemic has killed 23 million of the 63 million people it has infected to date and left 14 million orphans worldwide. It has left countries in Africa, in particular, without many of working age; it has killed care-givers and teachers. Africa faces continuing loss of human capital and human life with severe impacts on economic growth. In some countries, life expectancy has been cut by up to ten years by the disease. The World Bank and the IDA are the largest institutional investor in AIDS projects. The IDA also supports efforts to ensure co-ordination with other multilateral and bilateral donors in providing a platform for addressing the pandemic.

Africa's development issues are complex and interwoven. The IDA continues to examine these issues systematically and to seek ways to respond in a flexible and timely manner. Conflict has also imposed a large cost on African countries, both in human and in economic terms. Alongside efforts to address key underlying economic and social factors such as poverty, unemployment, and low education levels, the IDA has begun to examine how best to contribute to the reduction of conflict in the region and is actively pursuing ways to re-engage with, and to re-deploy resources to, countries emerging from conflict. In addition, the IDA has stepped up its involvement in countries' efforts to improve governance and ensure greater political participation.

While the mission of the International Development Association remains the provision of "soft" money to the poorest countries, there will always be a need for periodic inflows of new money from those countries, including Ireland, which are prepared to inject capital into the IDA. This is a much smaller group of countries than the 184 countries that are members of the World Bank. The IDA is funded largely by contributions from the governments of the richer member countries whose cumulative contributions since 1960 amount to some US$109 billion. More money is needed for the IDA approximately every three years to replenish its funds. Funding for the 13th IDA replenishment will allow the IDA to lend some $23 billion, of which donors' contributions will provide a little over half. The remaining funds come largely from repayments of previous IDA credits, as well as other non-donor resources. These periodic replenishments of IDA resources are inevitably the product of long and complex discussions, not only about the capital needs but on other issues such as the future operation of the institution.

The agreement for the 13th replenishment of the IDA includes two major changes — the issue of the replacement of loans by grants and the establishment of performance standards. In July 2002, after lengthy discussion, the IDA donors agreed to a complex plan to convert 18% to 21% of future IDA loans to grants. Under this plan, certain countries will receive 100% of their assistance for HIV-AIDS and natural disaster reconstruction projects on grant terms.

Countries emerging from conflict and countries which are vulnerable to debt and where per capita income is less than $1 per day will receive 40% of their assistance on grant terms separate from and in addition to funds for HIV-AIDS and natural disasters. Other countries with a per capita income of less than $1 per day will receive 23% of their assistance in the form of grants, again separate from and in addition to funds to deal with HIV-AIDS and natural disasters. It is as yet too early to assess the effect of this change.

One consideration in the move from loans to grant aid is that the need for capital replenishments is increased. At present, a proportion of IDA funding is generated by repayments of loans from client countries. Money going out in grants will not come back in through repayments, so additional new money will be needed to fund programmes in the future.

The introduction of a framework for measuring results is another innovation of the IDA 13 replenishment arrangement. The objective is to better assess the effectiveness of IDA programmes in contributing to key development outcomes, including those reflected in the millennium development goals which were agreed at the Monterrey conference on financing for development in March 2002. The IDA 13 arrangement called for the development of a system that reflects country priorities, links to the millennium development goals and assesses IDA's contribution to development results.

The Irish have been generous in dealing with requests for measures to assist others less well-off than ourselves in the past and I have no doubt the House will wish to follow that path today.

The Bill is straightforward. The original legislation providing for this country's contribution to the IDA is the International Development Association Act 1960. Section 1 of this Bill amends section 3 of the 1960 Act to provide for the contribution of a sum not exceeding €50 million to the 13th replenishment of the IDA. Section 2 contains the Short Title and collective citation.

I commend the Bill to the House.