2007 TRUST FUNDS Annual Report

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized 2007 TRUST FUNDS Annual Report THE WORLD BANK

2 The World Bank Group 2007 Trust Funds Annual Report Year ended June 30, 2007 Trust Fund Operations Department Concessional Finance and Global Partnerships The World Bank 1818 H Street N.W., Washington DC 20433, USA

3 The World Bank Group International Bank for Reconstruction and Development (IBRD)ª International Development Association (IDA)ª International Finance Corporation (IFC) Multilateral Investment Guarantee Agency (MIGA) International Center for Settlement of Investment Disputes (ICSID) ªIBRD and IDA are collectively known as The World Bank or The Bank

4 Abbreviations and Acronyms AAA Analytic and Advisory Activities GAVI Global Alliance for Vaccines and Immunization ACBF Africa Capacity Building Foundation IEG Independent Evaluation Group ACGF Africa Catalytic Growth Fund IFAD International Fund for Agricultural Development ADB Asian Development Bank IFC International Finance Corporation AfDB African Development Bank IFFIm International Finance Facility for Immunisation AHI Avian and Human Influenza IFRC International Federation of Red Cross and Red ARTF Afghanistan Reconstruction Trust Fund IMF International Monetary Fund ASTAE Asia Sustainable Alternative Energy infodev Information for Development Program APOC Africa Program for Onchocerciasis Control ISDR International Strategy for Disaster Reduction BioCF BioCarbon Fund ISPP Indonesia Strategic Poverty Partnership BETF Bank-Executed Trust Fund IRTF Iraq Reconstruction Trust Fund BNPP Bank - Netherlands Partnership Program JSDF Japan Social Development Fund BRF Brazilian Rain Forest KCP Knowledge for Change Program CAP Cities Alliance Program LDC Least Developed Countries Fund for Climate Change CAS Country Assistance Strategy LICUS Low Income Countries Under Stress CDCF Community Development Carbon Fund MDF Multi Donor Fund for Aceh and Nias CEBTF China Education Blending Trust Fund MDG Millennium Development Goals CGAP Consultative Group to Assist the Poor MDRP Multi-country Demobilization and Reintegration Program CGIAR Consultative Group on International Agricultural Research MDTF Multi Donor Trust Fund CLIFF Community Infrastructure Finance Facility MIGA Multilateral Investment Guarantee Agency CPA Comprehensive Peace Agreement NBI Nile Basin Initiative CSP Consolidation Support Program NBTF Nile Basin Trust Fund DCF Danish Carbon Fund NCDMF Netherlands Clean Air Development Mechanism Facility DGF Development Grant Facility NECF Netherlands European Carbon Facility DRF Debt Reduction Facility NELSAP Nile Equatorial Subsidiary Action Program DS Debt Service NGO Non-Governmental Organization EFA-FTI Education For All Fast Track Initiative NSDS National Strategies for the Development of Statistics ENSAP Eastern Nile Subsidiary Action Program OCP Onchocerciasis Control Program ENTRO Eastern Nile Technical Regional Office ODA Official Development Assistance EPDF EFA-FTI Program Development Fund OiE Organisation Mondiale de la Santé Animale (World Organization for Animal Health) ERPA Emissions Reduction Purchase Agreement OTF Ozone Trust Fund ESMAP Energy Sector Management Assistance Program PACT Partnership for Capacity Building in Africa ESSP Emergency Services Support Project PCF Post-Conflict Fund FAO Food and Agriculture Organization PCF Prototype Carbon Fund FDI Foreign Direct Investment PHRD Policy and Human Resources Development Fund FIAS Foreign Investment Advisory Service PPIAF Public-Private Infrastructure Advisory Facility FIF Financial Intermediary Fund PREM Poverty Reduction & Economic Management GEF Global Environment Facility PRSP Poverty Reduction Strategy Paper GEFSEC Global Environment Facility Secretariat PRSTF Poverty Reduction Strategy Trust Fund

5 GFA GAVI Fund Affiliate PSI Private Sector Infrastructure GFATM Global Fund to fight AIDS, Tuberculosis, and Malaria RETF Recipient-Executed Trust Fund GFDRR Global Facility for Disaster Reduction and Recovery SCCF Special Climate Change Fund GoNU Government of National Unity SPLM Sudan People s Liberation Movement GoSS Government of Southern Sudan SSATP Sub-Saharan Africa Transport Policy Program GRSF Global Road Safety Facility Stop TB Global Partnership to Stop Tuberculosis GPEP Global Program to Eradicate Poliomyelitis TFET Trust Fund for East Timor GPOBA Global Partnership on Output-based Aid TFESSD Trust Fund for Environmentally and Socially Sustainable Development GPP Global Programs and Partnerships TFGWB Trust Fund for Gaza and West Bank HDN Human Development Network TFL Trust Fund for Lebanon HIPC Heavily Indebted Poor Countries Initiative TFMF Trust Fund Management Framework IBRD International Bank for Reconstruction and Development TFSCB Trust Fund for Statistical Capacity Building Program ICF Italian Carbon Fund UNAIDS United Nations Program on HIV/AIDS ICR Implementation and Completion results Report UNDP United Nations Development Programme ICSID International Centre for Settlement of Investment Disputes UNEP United Nations Environment Programme ICT Information and Communications Technology UNFPA United Nations Population Fund ICT4D Information and Communications Technology for Development UNECA United Nations Economic Commission for Africa IDA International Development Association VPU Vice Presidential Unit IDF Institutional Development Fund WBG World Bank Group GDLN Global Development Learning Network WBI World Bank Institute FIRST Financial Sector Reform and Strengthening Initiative WHO World Health Organization FY Fiscal Year WSP Water and Sanitation Program

6 Contents Preface Financial Highlights and Aggregate Trends in the Fiscal 2007 World Bank Group-Administered Trust Fund Portfolio...2 Financial Highlights...2 Cash Contributions...4 Donor Rankings based on Fiscal 2007 Cash Contributions...6 Disbursements...8 Funds Held in Cash, Investments and Promissory Notes Composition of the Fiscal 2007 Trust Fund Portfolio Trust Funds and Results...20 Annexes A H:...22 Description of Selected Trust Fund Programs...22 Annex A...23 Debt Service and Debt Reduction...23 Heavily Indebted Poor Countries Initiative (HIPC)...23 Debt Reduction Facility for IDA-only Countries (DRF)...24 Annex B...25 Sustainable Development...25 B.1. Environment and Sustainable Agriculture...25 Global Environment Facility (GEF)...25 Least Developed Countries Fund for Climate Change (LDC)...27 Special Climate Change Fund (SCCF)...27 Carbon Finance: Prototype Carbon Fund (PCF)...28 Carbon Finance: Netherlands Clean Development Mechanism Facility (NCDMF)...28 Carbon Finance: The Netherlands European Carbon Facility (NECF)...29 Carbon Finance: Community Development Carbon Fund (CDCF)...29 Carbon Finance: BioCarbon Fund (BioCF)...30 Carbon Finance: Italian Carbon Fund (ICF)...30 Carbon Finance: Danish Carbon Fund (DCF)...31 Trust Fund for Environmentally and Socially Sustainable Development (TFESSD)...31 Pilot Program to Conserve the Brazilian Rain Forest (BRF)...32 Consultative Group on International Agricultural Research (CGIAR)...33 Nile Basin Initiative (NBI)...33 B.2. Infrastructure...35 Public-Private Infrastructure Advisory Facility (PPIAF)...35 Foreign Investment Advisory Service (FIAS)...36 Global Partnership on Output-Based Aid (GPOBA)...36 Energy Sector Management Assistance Program (ESMAP)...37 Water and Sanitation Program (WSP)...38 Cities Alliance Program (CAP)...39 i

7 Sub-Saharan Africa Transport Policy Program (SSATP)...40 Asia Sustainable and Alternative Energy (ASTAE) Program...41 Information for Development (infodev) Program...41 Global Road Safety Facility (GRSF)...42 Annex C...44 Health and Human Development...44 Global Fund to Fight AIDS, Tuberculosis, and Malaria (GFATM)...44 Global Partnership to Stop Tuberculosis (Stop TB)...45 Global Program to Eradicate Poliomyelitis (GPEP)...46 African Program for Onchocerciasis Control (APOC)...46 Education for All-Fast Track Initiative: Catalytic Fund (EFA-FTI)...47 Education for All-Fast Track Initiative: Program Development Fund (EPDF)...48 China Education Blending Trust Fund (CEBTF)...48 Avian and Human Influenza (AHI) Facility...48 Bangladesh Health, Nutrition and Population Sector Multi-Donor Trust Fund...49 Annex D...52 Poverty Reduction and Social Development...52 Japan Social Development Fund (JSDF)...52 Poverty Reduction Strategy Trust Fund (PRSTF)...53 Indonesia Strategic Poverty Partnership (ISPP)...53 Africa Catalytic Growth Fund (ACGF)...54 Annex E...55 Capacity Building and Technical Advisory Services...55 Policy and Human Resource Development (PHRD) Fund...55 Bank-Netherlands Partnership Program (BNPP)...56 Africa Capacity Building Foundation (ACBF)...56 World Bank Institute (WBI) Partnerships...57 Global Development Learning Network (GDLN)...58 Trust Fund for Statistical Capacity Building (TFSCB)...59 Knowledge for Change Program (KCP)...59 Annex F...61 Post-Conflict Reconstruction and Natural Disasters...61 Post-Conflict Fund (PCF)...61 Low-Income Countries Under Stress (LICUS) Implementation Trust Fund...62 Iraq Reconstruction Trust Fund (IRTF)...63 Afghanistan Reconstruction Trust Fund (ARTF)...64 West Bank and Gaza: Trust Fund for Gaza and West Bank (TFGWB)...64 West Bank and Gaza: The Emergency Services Support Project (ESSP)...65 Timor Leste: Trust Fund for East Timor (TFET)...65 Timor-Leste: Consolidation Support Program (CSP)...66 Multi-Country Demobilization and Reintegration Program (MDRP)...67 Multi-Donor Fund for Aceh and Nias (MDF)...67 Sudan Multi-Donor Trust Funds...68 Global Facility for Disaster Reduction and Recovery (GFDRR)...69 Trust Fund for Lebanon (TFL)...70 Annex G...71 Financial and Private Sector Development...71 Financial Sector Reform and Strengthening (FIRST) Initiative...71 ii

8 Consultative Group to Assist the Poor (CGAP)...72 Annex H...73 Trust Funds Administered by IFC and MIGA...73 International Finance Corporation (IFC)...73 Multilateral Investment Guarantee Agency (MIGA)...75 Annex I Introduction Trust Funded Operations Financial Highlights Trust Funds Held as Cash and Investments Cash and Investments Promissory Notes Contributions and Disbursements by Program Contributions by Donor Disbursements by Managing Unit Disbursements by Category...90 Annex J...91 Trust Fund Glossary...91 Annex K...93 Webpage Addresses...93 iii

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12 Section 1 Financial Highlights and Aggregate Trends in Trust Funds Portfolio 1. Financial Highlights and Aggregate Trends in the Fiscal 2007 World Bank Group-Administered Trust Fund Portfolio Financial Highlights 1. Trust funds have emerged as an important vehicle for channeling Official Development Assistance (ODA). The World Bank Group (WBG)-administered trust funds have been the primary channel for trust-funded aid, in comparison to other multilateral agencies. Other major multilateral agencies channeling trust-funded aid include the United Nations Development Programme (UNDP), United Nations Children s Fund (UNICEF), Inter-American Development Bank (IADB), United Nations Population Fund (UNFPA), African Development Bank (AfDB) and Africa Development Fund (ADF). CY2006 Contributions to Trust Funds Administered by Multilateral Agencies 7,334 Contributions in US$ million 3,800 1,725 1, WBG (FY07) UNDP UNICEF UNFPA AfDB ADF IADB 2. In fiscal 2007, the WBG s trust fund portfolio grew at an accelerated pace in terms of the number of funds and donors, as well as the volume of contributions and disbursements. By all indications, the portfolio, which had grown exponentially during fiscal period, increased even more rapidly in fiscal Fiscal 2007 growth in TF cash contributions, disbursements, funds held in cash, investments and promissory notes, and the total number of active TF accounts surpassed the average annual growth experienced in the previous four years. Fiscal Year FY03 FY04 FY05 FY06 FY07 FY03-06 avg. annual growth FY07 annual growth Cash Contributions (US$ million) 3,899 4,939 4,750 5,214 7,334 10% 41% Disbursements (US$ million) 2,561 3,276 4,128 4,374 5,808 20% 33% Cash and Investments (US$ million) 1 6,887 8,587 9,308 10,554 13,768 15% 30% Promissory Notes (US$ million) n/a n/a 2,255 2,561 7,631 n/a 198% Number of Active Trust Funds ,015 0% 9% 1 FY03-05 figures reflect cash only, whereas those for FY06-07 reflect both cash and investments. 2

13 Section 1 Financial Highlights and Aggregate Trends in Trust Funds Portfolio Number of Trust Funds and Trust Fund Donors 3. Overall, the number of WBG-administered TFs has continued to grow. The total number of active main trust funds 2 rose from 929 at the end of fiscal 2006 to 1,015 at the end of fiscal Of these, 81 percent (821 funds) were managed by (IBRD/IDA, 18 percent (185 funds) by IFC, and about one percent (nine funds) by the Multilateral Investment Guarantee Agency (MIGA). It is important to note that a single initiative may actually be funded by several TF accounts, in order to facilitate the donors requirements. For instance, multiple accounts on a single initiative are created as a way to facilitate the Bank s administration of specific donor contributions, and various donors financial and budgetary requirements, time periods and areas of focus. More than half (522) of the total number of TFs were managed under 101 program and partnership initiatives, some of which are described in Annexes A-H; while the remaining were freestanding TFs that may or may not be linked to Bank operations. Number of WBG-Administered TFs at end MIGA, 9 IFC, 185 WORLD BANK (IBRD / IDA), Growth in the number of funds has been matched by a significant growth in the number of donors. In fiscal 2007, a total of 339 donor agencies contributed funds through WBG-administered trust funds. These represented 157 sovereign agencies from 78 countries, and 182 multilateral agencies, Funds, foundations, and other non-sovereign agencies. The number of non-sovereign agencies -- mainly Funds, foundations and other non-multilateral agencies -- more than doubled during the fiscal period. Donor Category FY03 FY04 FY05 FY06 FY07 Sovereign Number of Countries Number of Agencies Non-Sovereign Multilaterals Funds, Foundations, Agencies, etc Total Number of Different Agencies One main TF account can have multiple program windows and disbursing child funds created under it for Bank administration purposes. 3

14 Section 1 Financial Highlights and Aggregate Trends in Trust Funds Portfolio Cash Contributions 5. Cash contributions reached a new peak of US$7.33 billion in fiscal 2007, with an increase of US$2.12 billion (or 41 percent) during the year. This was a much higher growth rate than the average annual growth of 10 percent over the fiscal period. At the same time, almost US$20 billion in new pledges were committed by donors during the year through signed legal agreements (including US$5 billion in promissory notes), of which US$4.86 billion (24 percent) were encashed during the fiscal year. The amount of these new pledges in fiscal 2007 was about double that in fiscal Cash Contributions to WBG-Administered TFs FY ,334 FY2006 FY2005 FY2004 4,750 5,214 4,940 FY2003 3, ,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 $ million 6. The Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM) continued to receive the highest cash contributions from donors. GFATM attracted US$2.06 billion, or 28 percent of all fiscal 2007 contributions. The next four programs receiving highest amount of donor contributions or cash proceeds from capital markets were: the Global Environment Facility (GEF) receiving US$831 million, or 11 percent; the Global Alliance for Vaccines and Immunization (GAVI) receiving US$758 million, or 10 percent 3 ; the Afghanistan Reconstruction Trust Fund (ARTF) receiving US$463 million, or six percent; and IFC trust funds receiving US$288 million, or four percent of all fiscal 2007 contributions. Altogether, these top five programs received about US$4.4 billion, or 60 percent of all fiscal 2007 cash contributions. 7. Annual cash contributions from most donor groups increased between fiscal 2006 and fiscal Compared to the previous fiscal year, cash contributions from Sovereign Governments were about US$1.64 billion higher. Intergovernmental Organizations, including the European Commission, UN bodies, multinational and regional development banks, and international financial institutions, contributed US$211 million more than in the previous fiscal year. Cash contributions from private non-profit entities and for-profit organizations also grew significantly by US$230 million and US$59 million, respectively, compared to the previous fiscal year. In contrast, cash contributions from the WBG were slightly lower (by US$14 million) -- from US$421 million in fiscal 2006 to US$407 million in fiscal 2007 moving the WBG from being the fifth biggest donor 3 This included US$753 million proceeds from IFFIm s issuance of bonds and US$4 million from GAVI Fund Affiliate s investment income. 4

15 Section 1 Financial Highlights and Aggregate Trends in Trust Funds Portfolio in fiscal 2006 to seventh position in fiscal IBRD s cash contributions in fiscal 2007 were 12 percent (US$32 million) lower than in the previous fiscal year, mainly due to the declining schedule of IBRD contributions to IDA s HIPC debt relief program (from US$210 million in fiscal 2006 to zero in fiscal 2007). On the other hand, IFC s cash contributions in fiscal 2007 were 13 percent higher (by US$18 million) than in fiscal Cash Contributions from the WBG FY FY FY FY FY $ million 8. As in previous years, Sovereign Governments contributed the bulk of cash contributions to WBG-administered trust funds in fiscal Seventy-nine percent of cash contributions in fiscal 2007 were provided by Sovereign Governments, either directly or through their agencies. Intergovernmental Organizations constituted the next biggest group of donors, together providing 11 percent of all fiscal 2007 cash contributions, followed by the World Bank Group with six percent, Private Non-Profit Entities with three percent, and Private For-Profit Organizations with one percent of overall cash contributions. Of the US$407 million contributed from net income or surpluses of WBG institutions, 60 percent (US$245 million) came from IBRD and 40 percent (US$162 million) from IFC. FY 2007 Cash Contributions by Donor Types Donor Type US$ million percentage Sovereign Governments 5,799 79% Intergovernmental Organizations % World Bank Group 407 6% Private Non-Profit Entities 250 3% Private For Profit Organizations 88 1% Total Cash Contributions 7, % 9. In fiscal 2007, the United Kingdom was the top cash contributing donor to WBGadministered trust funds, with total cash contributions of US$1.19 billion. Among the category of Other Donors, the Gates Foundation contributed the most with total cash contributions of US$229 million, which were provided mainly for GFATM (US$200 million), the Water and Sanitation Program (US$14.2 million), and CGAP (US$6.2 million). 5

16 Section 1 Financial Highlights and Aggregate Trends in Trust Funds Portfolio Donor Rankings based on Fiscal 2007 Cash Contributions Cash Contribution by Donor (US$ million) Donors 12 Months ended June 30, Months ended June 30, Months ended June 30, Months ended June 30, 2006 Sovereign Countries and the European Community United Kingdom South Africa 7 1 Netherlands China 7 5 United States Czech Republic 7 1 European Community Others a/ Canada Subtotal 6,438 4,646 Japan Germany World Bank Group Institutions France IBRD Serbia IFC Sweden Subtotal Norway Spain Other donors Italy Gates Foundation Denmark UNEP Australia GFATM Secretariat Belgium IFRC 10 Switzerland UN Foundation 9 15 Finland UNAIDS 7 6 Ireland Endesa, S.A. 7 Austria Others b/ Russia Subtotal Luxembourg Portugal New Zealand Total contributions 7,334 5,214 a/ Includes 14 donors (notably Saudi Arabia, India, Argentina, Brazil, Kuwait, and South Korea) each contributing US$1-5 million for a total of about US32 million, and 37 other donors each contributing amounts below US$1 million for a total of about US$8 million. b/ Includes 25 donors (notably RWE AG, Trading Emissions PLC, Mitsui & Co. Ltd, Canadenis Acquisition Ltd, and Tamarisk Acquisition Corp) each contributing US$1-$5 million for a total of about US$56 million, and 147 other donors each contributing amounts below US$1 million for a total of about US$36 million. Most of these contributions went to Carbon Finance transactions. 6

17 Section 1 Financial Highlights and Aggregate Trends in Trust Funds Portfolio 10. In terms of cumulative cash contributions received over the past five fiscal years, the United States remained the top donor to WBG-administered trust funds with a total of US$3.46 billion, followed by the United Kingdom with US$3.17 billion, the European Community with US$2.55 billion, the Netherlands with US$2.29 billion, and Japan with US$2.22 billion. Donor Cumulative Cash Contributions FY2003- $ million ,458 3,171 2,551 2,292 2,217 2,184 1,421 1,164 1, USA UK EC Netherlands Japan WBG Canada France Germany Norway 11. In fiscal 2007, the bulk of IBRD s cash contributions went to trust funds supporting World Bank-administered post-conflict and capacity building programs. Twenty-nine percent of the IBRD s cash contributions (US$70 million) went to the Trust Fund for Lebanon, 20 percent (US$50 million) to the West Bank and Gaza Trust Fund, about 20 percent (US$48 million) to the Africa Capacity Building Foundation (ACBF), 12 percent (US$30 million) to the Low Income Countries Under Stress (LICUS) Implementation Fund, around seven percent (US$16 million) to the Institutional Development Fund (IDF), and more than four percent (US$10 million) each to the Debt Reduction Facility (DRF) and the Caribbean Catastrophe Risk Insurance Facility. The rest was split between the program for Onchocerciasis control (US$2 million), the Foreign Investment Advisory Service (FIAS, US$1.2 million), the Consultative Group to Assist the Poor (CGAP, US$0.5 million), and various other Development Grant Facility initiatives (DGF, US$7.1 million). 12. IFC s cash contributions were primarily devoted to technical assistance and advisory services managed by IFC itself. Of the US$162 million contributed by IFC in cash, 98 percent (US$159 million) went to a number of IFC-managed TFs for technical assistance and advisory services, two percent (US$3.2 million) to the Public-Private Infrastructure Advisory Facility (PPIAF), and one grant of less than half a million dollars to CGAP. 7

18 Section 1 Financial Highlights and Aggregate Trends in Trust Funds Portfolio Disbursements 13. Disbursements out of WBG-administered trust funds also continued to show exponential growth during fiscal TF disbursements during fiscal 2007 amounted to US$5.81 billion, an increase of US$1.43 billion (33 percent) compared to the previous fiscal year. This represented a significantly higher increase compared to the annualized growth rate of 20 percent in fiscal WBG TF Disbursements FY ,808 FY2006 FY2005 4,128 4,374 FY2004 3,277 FY2003 2, ,000 2,000 3,000 4,000 5,000 6,000 US$ million 14. As in previous years, TF disbursements in fiscal 2007 constituted an increasingly larger share of total WBG support delivered to IDA-eligible countries and IBRD countries. Annual TF disbursements as a proportion of total IDA, IBRD and TF disbursements grew from 12 percent in fiscal 2003 (US$2.56 billion) to 23 percent in fiscal 2007 (US$5.81 billion). As a share of all concessional finance provided through the WBG (i.e., as a share of TF and IDA disbursements), TF disbursements constituted 40 percent in fiscal This increase is largely attributable to the growth of vertical funds, such as the Global Environment Facility (GEF), the GFATM, and IFFIm/GAVI Fund Affiliate. In fiscal 2007, about 60 percent of TF resources were provided to regional and global activities, 29 percent to IDA countries, six percent to IBRD countries, and five percent to blend countries. Total IBRD, IDA and TF Disbursements (US$ Millions) 30,000 25,000 20,000 15,000 2,561 6,700 3,276 6,461 4,128 8,488 4,374 8,444 5,808 8,579 TFs IDA IBRD 10,000 5,000 12,150 10,391 10,094 12,223 11,055 0 FY03 FY04 FY05 FY06 FY07 8

19 Section 1 Financial Highlights and Aggregate Trends in Trust Funds Portfolio Funds Held in Cash, Investments and Promissory Notes 15. At the end of fiscal 2007, the WBG was holding a total stock of US$21.4 billion in trust fund assets, of which US$13.77 billion were in the form of cash and investments, and US$7.63 million in promissory notes. Ninety-six percent (US$13.16 billion) of the cash and investments at the end of fiscal 2007 were for the IBRD/IDA-administered portfolio, four percent (US$560 million) for the IFC-administered portfolio, and less than half a percent (US$41 million) for the MIGA-administered portfolio. About 48 percent (US$6.6 billion) of all funds held in cash and investments belonged to the three largest global programs: GFATM (US$3.25 billion), GEF (US$2.45 billion), and the HIPC Debt Initiative (US$851 million). Cash and Investments Held under Trust by WBG at end (US$ million) IFC, 560 MIGA, 41 World Bank (IBRD/IDA), 13, In addition to cash and investments, promissory notes have become an increasingly important form of trust fund assets since fiscal Contributions pledged by donors through promissory notes, which have increasingly been received under certain trust-funded programs, tripled during fiscal 2007 alone. Promissory notes held at the end of fiscal 2007 amounted to US$7.63 billion, up 198 percent from US$2.56 billion at the end of fiscal This significant increase was mainly attributable to legally binding and irrevocable payment obligations pledged by donors for the IFFIm/GAVI Fund Affiliate. More than 93 percent (US$7.11 billion) of all promissory notes held belonged to three programs: IFFIm/GFA US$4.16 billion, Carbon Funds US$1.69 billion, and GEF US$1.26 billion. 4 In certain programs, contributions pledged by donors are settled through deposit of demand notes, or other forms of financial instrument. These are recorded as promissory notes when received, and are then encashed and recorded as cash contributions, based on schedules agreed with the donors. 9

20 Section 1 Financial Highlights and Aggregate Trends in Trust Funds Portfolio Funds Held in Cash, Investments and Promissory Notes in FY ,768 7,631 FY2006 FY2005 FY2004 FY ,554 9,308 8,587 6,887 2,255 2, ,000 10,000 15,000 20,000 25,000 $ millions Cash and Investments PNs 17. The stock of funds held in cash and investments was invested in accordance with the Bank s investment guidelines. At the end of fiscal 2007, the fair market value of the TF cash and investments portfolio stood at US$13.77 billion -- an increase of US$3.2 billion (30 percent) from US$10.55 billion at the end of fiscal Thirty-six percent (US$4.96 billion) of this portfolio was invested in money market and cash instruments, 23 percent (US$3.17 billion) in domestic government bonds, 11 percent (US$1.47 billion) in mortgage-backed securities, 17 percent (US$2.4 billion) in asset-backed securities, and 13 percent (US$1.75 billion) in agency bonds. The investment income earned from such investments is credited to TF accounts based on the arrangements with donors. 18. The rate of return on the cash and investments portfolio improved significantly in fiscal The return on the cash and investments portfolio, based on market value of the portfolio, was 5.48 percent in fiscal 2007 compared with 2.36 percent in fiscal The average return was 3.37 percent for the three years ended fiscal 2007, and 2.95 percent for the five years ended fiscal FY 2007 TF Cash and Investments Portfolio stood at $ 13,768 million 100% 15* % ,346 60% 40% 20% ,171 4,961 2,355 5,162 0% $13,768million Money Market and Cash Mortgage backed Securities(MBS) Agency Bonds * FY2006 $10,554million Domestic Govt Bonds Asset Backed Securities(ABS) Sovereign/Government Guarantees 10

21 Section 2 Composition of TF Portfolio 2. Composition of the Fiscal 2007 Trust Fund Portfolio By Region, Sector, and Type of Fund Composition by Region and Country Context 1. In fiscal 2007, as in previous years, the largest share of disbursements under World Bank-administered trust funds went to countries in Africa. Nearly a third of TF disbursements were made to Africa (31 percent), followed by East Asia and Pacific (14 percent), South Asia (12 percent), Europe and Central Asia (6 percent), Latin America and the Caribbean (4 percent), and Middle East and North Africa (3 percent). The remaining third of disbursements were made under global and regional programs (29 percent). 2. IDA-eligible countries received the lion s share of TF disbursements, followed by global and regional programs, and then IBRD countries. More than half of TF disbursements were made to IDA-eligible countries (52 percent) in fiscal 2007, followed by global and regional facilities (35 percent), and IBRD countries (13 percent). IDA-eligible countries in Africa received more than half of all fiscal 2007 TF disbursements (52 percent), followed by those in South Asia (24 percent), East Asia and Pacific (16 percent), Europe and Central Asia (5 percent), Latin America and the Caribbean (2 percent), and Middle East and North Africa (1 percent). In IBRD-eligible countries, those in East Asia and Pacific dominated TF disbursements (36 percent) in part due to large multi-donor TFs established for post-disaster recovery. IBRDeligible countries in Europe and Central Asia received the second largest share (25 percent), followed by Latin America and the Caribbean (19 percent), Africa (10 percent), and Middle East and North Africa (10 percent). Fiscal 2007 TF Disbursements by Region and Country Context Global/ Region IDA IBRD TF Total % of Total Regional AFR 1, ,825 31% EAP % ECA % LCR % MNA % SAR % Global - - 1,686 1,686 29% Total 3, ,025 5, % Note: Disbursement data for GFATM is based on data from the Global Fund. As a result, the total disbursement is $5.811b instead of $5.808b, as reported in other tables. Composition by Sector 3. In fiscal 2007, TF disbursements in terms of sectoral distribution followed the pattern observed in previous years. Over fiscal , disbursements were heavily focused on health, debt service, post-conflict/disaster recovery, and the environment. The 11

22 Section 2 Composition of TF Portfolio focus on health and environment is explained by the recent exponential growth in vertical funds such as the GEF, IFFIm, GFATM, 5 the Ozone Phase-out Trust Fund, and the Carbon Funds. The post-conflict and post-disaster recovery programs included multi-donor TFs for Aceh, Afghanistan, East Timor, Iraq, and West Bank-Gaza. Sector/Theme FY03 FY04 FY05 FY06 FY07 FY03-07 Health ,145 2,368 5,000 Debt Service 801 1, ,722 Post Conflict/Disaster Recovery ,887 Environment ,830 Other Bank-Executed ,786 Other Recipient-Executed ,195 Others ,145 Infrastructure and Finance IFC, MIGA and ICSID Education TOTAL 2,561 3,276 4,128 4,374 5,808 20,147 Composition by Type of Fund 4. The IBRD/IDA-administered portfolio is characterized by three broad categories of TFs, based on the types of services provided and the execution role assumed by the Bank: Bank-Executed Trust Funds (BETFs) are those for which the Bank has spending authority, in support of: (i) key elements of the Bank s own work program, including analytical and advisory activities (AAA), (ii) project-related activities, in conjunction with IBRD/IDA-financed or free-standing operations, and (iii) partnership secretariats and TF administration activities. Recipient-Executed Trust Funds (RETFs) are those which the Bank passes on to a third-party recipient for development activities, typically financing the investment and recurrent needs of service delivery, capacity building and technical assistance. They are either explicitly linked to Bank-financed operations or designed as stand-alone funds, and are most similar to IDA and IBRD lending programs supporting country-based initiatives. For these funds, the Bank normally plays an operational role including appraisal and supervision of funded activities. Financial Intermediary Funds (FIFs) comprise a heterogeneous mix of TFs not covered by either BETFs or RETFs. 6 They include funds with financial engineering and 5 In the case of GFATM, the funds disbursed do not flow through the Bank s country programs, but are implemented separately by external agencies. 6 FIFs are highly diverse in terms of their objectives, their financial and operational design, and the roles the Bank plays in their implementation. For some FIFs, the Bank s primary role is that of a financial trustee with limited functions (holding funds and disbursing them to external entities). The Bank s provision of limited fiduciary 12

23 Section 2 Composition of TF Portfolio complex financial schemes, or arrangements in which the Bank provides specific administrative or financial services with a limited fiduciary or operational role. They typically encompass multi-donor financial initiatives designed to implement international agreements in support of global partnerships and programs. The major funds in this category include the Heavily Indebted Poor Countries Initiative (HIPC), the Global Environment Facility (GEF), the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM), Carbon Funds, and the International Finance Facility for Immunization (IFFIm). 5. In volume terms, FIFs represented the largest category of trust funds in fiscal 2007, with 54 percent of total disbursements. RETFs formed the second largest category (36 percent of total disbursements), and BETFs accounted for the smallest portion of overall disbursements (6 percent). While most TFs fell within one of the three main categories, 149 of the total 821 IBRD/IDA-administered TFs (or 18 percent) were hybrids supporting combinations of Recipient- and Bank-Executed grants. 7 Disbursements by TF Category (US$ million) FY03 FY04 FY05 FY06 FY07 % Increase FY03-07 % of FY07 Total Disb Bank-Executed % 6% Recipient-Executed Linked to Lending Projects % 17% Linked to GEF Projects % 3% Stand-Alone % 17% Financial Intermediary Other Bank Group 984 1,151 1,488 1,456 2, % 36% Debt Relief % 5% Limited Fiduciary Arrangements ,318 1,589 2, % 48% Other % 1% 1,318 1,791 2,238 2,476 3, % 54% IFC % 4% MIGA % 0% ICSID n/a 0% % 4% TOTAL 2,561 3,276 4,128 4,374 5, % 100% 6. Annual disbursements from BETFs virtually doubled from US$184 million in fiscal 2003 to US$330 million in fiscal In fiscal 2007, these included US$25 million from the Consultant Trust Fund (CTF) program, US$24 million from the Water and Sanitation Program (WSP), US$18 million from the Public-Private Infrastructure Advisory Facility (PPIAF), and services through FIFs does not necessarily preclude it from providing an operational input. In each case, the Bank s role is a function of the design of the specific partnership and the associated FIF. 7 TFs typically contain fund, program, and activity/grant-level disbursing accounts. 13

24 Section 2 Composition of TF Portfolio US$11 million from the Trust Fund for Environmentally and Socially Sustainable Development (TFESSD). In fiscal 2007, BETFs accounted for 57 percent of Bank spending on technical assistance, and 27 percent of spending on economic and sector work (ESW), thus providing important support to the Bank s day-to-day operational work in lower- and middle-income countries. 7. Disbursements channeled through RETFs more than doubled from US$984 million in fiscal 2003 to US$2.1 billion in fiscal 2007, broadly reinforcing IBRD/IDA lending patterns across sectors and thematic areas. Over the fiscal period, 66 percent of RETF disbursements were through multi-donor or pooled arrangements. 8 Ninety-two percent of RETF disbursements in fiscal 2007 were for cofinancing of IBRD/IDA and stand-alone projects, with the remaining eight percent for GEF-related projects. The share of RETF disbursements linked to IBRD/IDA-financed operations increased from 32 percent in fiscal 2003 to 46 percent in fiscal 2007; US$961 million was disbursed in fiscal 2007 to support the preparation or cofinancing of Bank lending operations. Stand-alone fund disbursements in fiscal 2007 (US$970 million) were primarily devoted to post-crisis and fragile states and to country-level efforts in support of global/regional priorities. 8. In fiscal 2007, RETFs continued to serve as a versatile instrument of Bank support in a diversity of country settings. For instance, RETF support included post-conflict assistance as well as blending grant and IBRD financing in support of global public goods in middle income countries. RETF disbursements to fragile states (especially post-conflict countries) nearly doubled from US$386 million in fiscal 2003 to US$749 million in fiscal RETF flows to IBRD-eligible countries rose from US$159 million in fiscal 2003 to US$292 million in fiscal This represented a significant, albeit slightly declining, share of RETF disbursements overall, decreasing from 16 percent in fiscal 2003 to 14 percent in fiscal By sector, 30 percent of RETF disbursements in fiscal 2007 supported activities in Law, Justice and Public Administration, 15 percent each went for Health and other social services, and for Education, and 10 percent for agriculture, fishing and forestry. 8 In fiscal 2007, 85 percent (185) of 219 RETFs were supported by single donors, but accounted for only 53 percent of total RETF disbursements. The remaining 34 multi-donor RETFs accounted for the bulk of the volume growth. 9 Cumulative RETF disbursements to fragile states-related activities totaled $3 billion over the FY03-07 period. Of this, more than fifty percent went to Afghanistan. 14

25 Section 2 Composition of TF Portfolio Sector Shares in FY07 Disbursements IBRD/IDA Lending (%) RETFs(%) Law, Justice & Public Administration Health, Other Social Services Education 8 15 Agriculture, Fishing & Forestry 7 10 Industry & Trade 5 8 Finance 7 4 Water, Sanitation & Flood Protection 12 7 Energy and Mining 7 3 Other 0 2 Transportation 20 5 Information & Communication 1 1 TOTAL Over the fiscal period, the distribution of RETF commitments across IDAeligible countries did not follow a discernible pattern with regards to country performance or needs. 10 From an aid architecture perspective, the TF Management Framework recently approved by the World Bank s Executive Directors underscored the importance of monitoring the distribution of RETF commitments 11 and disbursements, particularly in IDA countries. The analysis conducted for this report did not suggest any relationship between RETF commitments and country policy and institutional performance. However, it indicated a significant positive correlation between TF commitments and income levels for IDA- eligible countries that were not emerging from conflict. The relationship remains the same albeit weaker when post-conflict countries are included. Put simply, the richer the IDA-eligible country, the higher the TF commitments. While this may raise concerns about the degree to which TFs are needs-oriented, it is important to note that a substantial portion of TF commitments go to post-disaster and postconflict settings. Such emergency response needs could be weighted more heavily than more traditional investment needs. 10. For all IDA-eligible countries, RETF disbursements are much more clearly and positively correlated with country performance. Higher disbursements in better performing IDA-eligible countries can be explained by higher levels of institutional capacity. It is important to note, however, that when the blend countries are excluded from the analysis, poorer performing IDA countries benefit from a higher level of RETF disbursements. This is mainly explained by high levels of commitments and disbursements in Afghanistan, which accounts for 14 percent of total RETF disbursements during fiscal period. 12 In addition, TFs in post-conflict or post-disaster settings tend to benefit from more intensive supervision and implementation support, as well as other drivers that may be associated with turnaround cases. 10 Performance was measured using IDA s Country Performance Rating, which reflects inter alia policy and institutional performance. Income was measured in terms of GNI per capita. 11 RETF commitment is the grant amount indicated in the grant agreement signed between the Bank and Recipient. 12 During the fiscal period TF disbursements were made to eight IDA post-conflict countries, which accounted for 18 percent of total RETF disbursements. 15

26 Section 2 Composition of TF Portfolio 11. Annual disbursements under FIFs grew by 137 percent during fiscal , from US$1.31 billion in fiscal 2003 to US$3.1 billion in fiscal This rapid growth in FIFs signaled the emergence of vertical funds and innovative finance mechanisms as primary instruments for supporting key sectoral initiatives. About half (US$1.61 billion) of FIF disbursements in fiscal 2007 were made under the GFATM. IFFIm/GFA, with US$735 million, accounted for 24 percent of total fiscal 2007 disbursements, GEF (US$335 million) for 11 percent; HIPC (US$224 million) for seven percent, and other remaining FIFs (US$226 million) for seven percent. Disbursements from Financial Intermediary Funds in FY07 US$ million percentage GFATM 1,607 51% IFFIm/GFA % GEF % HIPC 224 7% Others 226 7% Total 3, % 12. To varying degrees, all three categories of trust funds supported an increasing number of global programs and partnerships (GPPs). In the fiscal period, the number of GPPs increased significantly from 112 to 178, and the share of TF disbursements supporting GPPs also increased from 35 percent to 45 percent. Seventy-five percent of disbursements under FIFs and over a fourth of RETF disbursements supported GPPs in fiscal The bulk of these were in support of Environment (15 percent), Education (14 percent), and Health, Nutrition and Population (13 percent). FY03 FY04 FY05 FY06 FY07 Number of GPPs (excl. Instit l Collaborations) Share of total TF disbursements linked to GPPs 35% 38% 44% 46% 45% 13. The size of individual trust funds varied considerably across the portfolio, and was a function of fund type, donor interests, and recipient needs. FIFs are frequently larger than US$100 million in size, while BETFs and RETFs cover the full spectrum from the minimum US$200,000 to billions of dollars. Ninety-seven FIFs (10 percent of the total number of TFs) accounted for 54 percent of total TF disbursements in fiscal On the other hand, even though BETFs accounted for only six percent of total fiscal 2007 disbursements, they were supported by 419 TFs (41 percent of the total number). Overall, 24 percent (243) of the 1,015 funds managed in fiscal 2007 were relatively low-value TFs under US$1 million. 16

27 Section 2 Composition of TF Portfolio Trust Fund Category FY07 Disbursements Number of Active TFs US$ millions % FY07-end % IBRD/IDA-Administered TFs 5,568 96% % Bank Executed 330 6% % Recipient Executed 2,111 36% % Financial Intermediary 3,127 54% 97 10% Other Bank Group-Administered TFs 240 4% % TOTAL 5, % 1, % TF Value 13 Bank- Executed Recipient- Executed Financial Intermediary Non-Bank Total < 1$ million % $1 million - $ 5 million % Subtotal < $5 million % $5 million - $10 million % $10 million - $30 million % Subtotal $5 - $30 million % $30 million - $100 million % > $100 million % Subtotal > $30 million % TOTAL , % Issues of Fragmentation and Proliferation 19. The growing number of trust funds supporting similar or same initiatives within the same sector is indicative of aid fragmentation and donor proliferation within the portfolio. The number of different funds supporting initiatives by the Bank s Human Development Network (HDN), for instance, grew steadily over the past five years. By the end of fiscal 2007, HDN managed a total of 23 TFs for health and education initiatives, and disbursed more than US$500 million. The numbers are much higher in the Sustainable Development Network (SDN), which managed 161 TFs in diverse sectors such as the environment, infrastructure, agriculture and social development; and disbursed about US$2.35 billion. 13 TF amount as committed by donors through signed legal agreements. 17

28 Section 2 Composition of TF Portfolio Human Development Network VPU Sustainable Development Network VPU Number of TFs TF Disbursements (USD m illion) Number of TFs TF Disbursements (USD m illion) Fiscal Year Total TF Disbursements Total Number of TFs Fiscal Year Total TF Disbursements Total Number of TFs The Bank has worked with donor partners to manage the risks of fragmentation by encouraging a move towards multi-donor trust funds and joint dialogue with donors. Over fiscal 2007, HDN disbursed almost US$400 million (78 percent of its total TF disbursements) through eight multi-donor TFs (MDTFs); SDN disbursed more than US$1.88 billion (80 percent of its total TF disbursements) through 60 MDTFs. SDN has sought to improve coordination and joint dialogue among donors that support similar initiatives. Human Development Network VPU - MDTFs Sustainable Development Network VPU - MDTFs Number of MDTFs Fiscal Year MDTF Disbursements # of MDTFs MDTF Disbursements (USD m illion) Number of MDTFs Fiscal Year MDTF Disbursements # of MDTFs MDTF Disbursem ents (USD m illion) 21. The move towards pooling donor resources through MDTFs in the Human and Sustainable Development Networks is part of a larger trend across the Bank. Over the fiscal period, MDTFs accounted for the lion s share of total disbursements. The number of multi-donor funds increased from 118 to 285 during fiscal , accounting for US$14.35 billion, or 71 percent of total disbursements over the period. Most of these disbursements were made under Financial Intermediary Funds (US$8.91 billion) and Recipient- Executed Trust Funds (US$4.72 billion). At the same time, the number of single-donor funds 18

29 Section 2 Composition of TF Portfolio decreased from 815 to 730, accounting for the remaining US$5.8 billion, or 29 percent of fiscal disbursements -- mostly under Recipient-Executed Trust Funds (US$2.47 billion) and Financial Intermediary Funds (US$2 billion). As the Bank and donors continue to move increasingly toward MDTF arrangements, there will be need to develop standardized and streamlined processes for administering such funds, whether they support global programs or post-conflict efforts within specific countries. TF Disbursements FY03-07 US$ million 12,000 Multi-Donor TFs Single Donor TFs 9,000 6,000 4,723 8,913 3, ,039 Bank Executed 2,466 Recipient Executed 2,037 Financial Intermediary Other WBG

30 Section 3 Trust Funds and Results 3. Trust Funds and Results 1. While attributing country or global impact to trust-funded activities remains a challenge, overall they appear to be broadly achieving their intended objectives. A sample of TF Results, as reported by Bank task managers during fiscal 2007 (see Box 1), indicates that, in general, TFs are considered effective instruments for piloting and promoting sector reforms, organizational improvement, and knowledge exchange. Technical Assistance TFs: Box 1: Sample of TF Results Reported During 1. Development of integrated learning program on e-government, governance, public finance and trade; and establishment of two Global Development Learning Network (GDLN) hubs in Europe. The learning program proved to be a key focus for development of an international network in the field of governance, comprising over 11,000 people, including top level officials from government and public institutions, and the private sector. 2. Development of training programs and establishment of nine Distance Learning Centers (DLCs) in Western China and a network hub in Beijing. This led the Government to create the China Development of Distance Learning Network, with 75 courses on various developmental topics and over 15,000 participants. 3. Financing of infodev program experimentation, analytical work and capacity building under the themes of Access, Mainstreaming and Innovation and Entrepreneurship. These led to: (i) generation of knowledge on a variety of ICT4D issues; (ii) a variety of ICT pilot projects with demonstrated impact and scalability; (iii) innovations of ICT model strategies and applications; (iv) facilitation of ICT linkages among sector applications, investment, policy, regulation, technical innovation, infrastructure, etc.; and (v) facilitation of joint donor and other stakeholder actions that helped in development of common frameworks and solutions for ICT4D challenges. 4. Delivery of Living Standards Measurement and Panel Surveys, and establishment of data-users group in Albania. These led to: (i) creation of a reliable and sustainable system of household surveys for timely production of reliable statistical information to assist policy-makers in design, implementation and evaluation of economic and social programs; (ii) analytical capacity built within the Government to utilize statistical information generated; and (iii) institution-building with strengthening capacity in monitoring, targeting and evaluation of social programs. Cofinancing TFs supporting larger IBRD/IDA projects: 1. Capacity building TA and training supporting key reforms in Romania s public and private sectors, including legislation/regulations on local public finance, capital markets and tariffs aligned with EU norms. 2. Poverty Reduction Support Operations facilitating policy dialogue and legal/institutional reforms in Vietnam, including strengthening of public financial management systems linked to policy, planning and budgeting. These provided the enabling environment for broad-based growth and a remarkable record in poverty reduction. 3. Strengthening capacity to protect and manage natural forests through improved management planning, boundary demarcation, training and awareness programs in Vietnam. In addition, livelihoods of residents were developed to reduce dependency on protected areas. 4. In Bangladesh, issues of poverty alleviation, women s empowerment and improved nutrition were addressed, in which more services, interaction and learning of nutritional and health needs were facilitated. Supplementary food was also provided to about 60,000 under-nourished women, 22,000 lactating women and 99,000 malnourished infants. 20