Multilateral Development Institutions

Foreign aid to developing countries stimulates the virtuous cycle of development. Foreign aid includes a variety of cross-border grants, loans, and technical and other assistance. Governments and multilateral organizations provide significant aid to developing countries. Other sources of aid include transnational corporations, nongovernmental organizations (NGOs), civil society organizations (CSOs), private foundations, and individuals. Four of the most important multilateral development institutions are the World Bank Group, regional development banks, the International Monetary Fund, and a number of specialized agencies, funds, and programs within the United Nations System.

The World Bank Group is a member-owned international organization that provides development assistance to emerging market and developing countries. Its headquarters is in Washington, DC, but many of its 10,000 employees are stationed in its 120 offices throughout the world. The World Bank consists of five mutually supporting institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the International Center for Settlement of Investment Disputes (ICSID), and the Multilateral Investment Guarantee Agency (MIGA). Today the World Bank's overriding mission is twofold—to “end extreme poverty” and “promote shared prosperity.”[1]

To achieve these goals the World Bank works with local stakeholders such as governments, civil society organizations, and businesses to develop a Country Assistance Strategy (CAS). A CAS is a country-specific plan that addresses the individual country's most pressing development needs. For example, a CAS might focus on improving one or more features of a country's infrastructure such as transportation, sanitation, water supply, energy, or information and communication technologies. A CAS might also support other economic, political, or social needs such as education, health care, agricultural development, resource management, good governance, or banking and finance. World Bank assistance includes loans, interest-free credits, grants, technical assistance, and other services that support poverty reduction and sustainable economic development. Different institutions within the World Bank Group cater to different categories of borrowers. For example, the International Bank for Reconstruction and Development (IBRD) makes loans to the more creditworthy emerging market and developing countries. The International Development Association (IDA), on the other hand, extends concessional loans and grants to the poorest and least creditworthy developing countries.[2]

Regional development banks (RDBs) are member-owned, multilateral lending institutions. Some member nations are located within the geographic region served by the bank, while others are located outside the region. RDBs' loanable funds are derived from financial contributions by member countries, interest payments on past loans, and the sale of securities to foreign investors. RDBs extend loans to support poverty reduction programs and sustainable economic development. In 2012 the four major RDBs operating in the global economy were the African Development Bank Group (AfDB Group), which consisted of 78 member nations; the Asian Development Bank (ADB), which consisted of 67 members; the Inter-American Development Bank (IDB), which consisted of 48 members; and the European Bank for Reconstruction and Development (EBRD), which consisted of 64 members. EBRD is concerned not only with promoting sustainable development, but also with facilitating the economic transition of former communist countries in eastern and central Europe and western Asia toward open market economies. Smaller RDBs promote economic development in the Caribbean, Central America, and the Islamic world.

The International Monetary Fund (IMF) is a multilateral organization designed to stabilize the international monetary system. Through surveillance, technical assistance, and financial assistance, the IMF supports programs to strengthen nations' financial institutions, policies, and practices. The IMF, in conjunction with the World Bank, has also supported poverty reduction initiatives, including the Heavily Indebted Poor Countries (HIPC) Initiative. Since 1996 the HIPC Initiative has offered external debt relief to the world's poorest countries. In 2005 the Multilateral Debt Relief Initiative (MDRI) was created to supplement the HIPC Initiative. MDRI funding comes from the IMF, the World Bank, and the African Development Bank. In 2012, thirty-nine of the world's poorest countries were eligible or potentially eligible for debt relief.[3]

The United Nations (UN) is the world's leading public forum for discussing issues of global concern. The United Nations' mission centers on preserving peace, promoting economic development, and supporting human rights. Under the umbrella of the United Nations System, a variety of largely autonomous and self-financing specialized agencies, programs, and funds work to improve the human condition. Those most concerned with sustainable development are the International Labor Organization (ILO); the World Health Organization (WHO); the United Nations Educational, Scientific, and Cultural Organization (UNESCO); the United Nations Conference on Trade and Development (UNCTAD); the United Nations Population Fund (UNFPA); the United Nations Development Program (UNDP); and the United Nations Environment Program (UNEP). Technically, the World Bank and the IMF are also specialized agencies within the UN System.[4]

  • [1] World Bank, The World Bank Group Goals: End Extreme Poverty and Promote Shared Prosperity (Washington, DC: World Bank, 2013), 7.
  • [2] World Bank, “What We Do,” July 22, 2013; World Bank, “Our Work,” January 31, 2012; International Bank for Reconstruction and Development, Management’s Discussion & Analysis and Financial Statements, June 30, 2012, 2-3; International Development Association, Management’s Discussion & Analysis and Financial Statements, June 30, 2012, 3-4; World Bank, “Country Assistance Strategies,” May 24, 2012
  • [3] IMF, “Debt Relief under the Heavily Indebted Poor Countries (HIPC) Initiative,” January 10, 2013
  • [4] United Nations Department of Public Information, “The United Nations System,” October, 2011; UN, “Structure and Organization,”
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