Ida eligible country

What Is an IDA-eligible Country?

An IDA-eligible country is a nation that qualifies for financial assistance, primarily in the form of highly concessional lending and grants, from the International Development Association (IDA). The IDA is an institution within the World Bank Group that focuses on supporting the world's poorest countries. Eligibility for IDA resources falls under the broader category of development finance, aiming to foster sustainable economic development and poverty reduction. An IDA-eligible country typically has a low Gross National Income (GNI) per capita and/or lacks the creditworthiness to borrow from the International Bank for Reconstruction and Development (IBRD), the World Bank's main lending arm.

History and Origin

The International Development Association (IDA) was established on September 24, 1960, as a response to the growing recognition that many developing countries required financial assistance on terms more flexible than those offered by the original International Bank for Reconstruction and Development (IBRD)⁴⁴. The IBRD, formed in 1944 to help rebuild post-World War II Europe, provided loans at near-market rates, which were often too burdensome for the poorest nations⁴³.

Discussions about a "soft-loan" window within the World Bank gained traction in the 1950s, supported by the U.S. government and proposals from the United Nations⁴². The aim was to create an agency that could provide financing to low-income countries on highly concessional terms to enable them to afford the capital needed for growth⁴¹. With an initial funding of $912.7 million, the IDA was launched with 15 signatory countries⁴⁰. Within eight months of its launch, IDA had 51 members and began allocating credits³⁹. Since its inception, IDA has been instrumental in supporting economic and social development across the world's poorest nations. More historical details can be explored on the official History of the International Development Association website.

Key Takeaways

• An IDA-eligible country is one that qualifies for highly concessional loans and grants from the International Development Association.
• Eligibility is primarily determined by a country's GNI per capita and its creditworthiness to borrow from the IBRD.³⁷, ³⁸
• IDA's financing terms include zero or very low interest charges, with repayments stretching over long periods, often 25 to 38 years.³⁵, ³⁶
• The IDA supports a wide range of development initiatives, including basic health services, clean water, education, and infrastructure projects.³³, ³⁴
• Many countries have "graduated" from IDA eligibility as their economies developed, with some even becoming donors themselves.³¹, ³²

Interpreting the IDA-eligible Country Status

The designation of a country as IDA-eligible signifies its status as one of the world's poorest nations or a small economy lacking sufficient creditworthiness to access standard market-rate financing. This status is not static; it is reassessed annually based on criteria set by the IDA. The primary benchmark for IDA eligibility is a country's GNI per capita falling below an established operational cut-off, which was $1,335 in the fiscal year 2025²⁹, ³⁰.

Beyond income, the IDA also considers a country's ability to borrow from the International Bank for Reconstruction and Development (IBRD). Some countries, referred to as "blend" countries, may be IDA-eligible based on income but also have some creditworthiness for IBRD borrowing²⁸. The IDA's focus areas, such as human capital development, job creation, and climate adaptation, reflect the specific development challenges faced by IDA-eligible countries²⁶, ²⁷. Understanding this status helps international organizations, donor countries, and development practitioners tailor foreign aid and programs to address the unique needs of these nations.

Hypothetical Example

Consider the hypothetical country of "Agriland," an agrarian economy with a GNI per capita of $1,000. Due to its low per capita income and limited access to international capital markets for commercial loans, Agriland would be classified as an IDA-eligible country. This status would allow Agriland to apply for highly concessional credits and grants from the IDA to fund critical development initiatives.

For instance, Agriland could secure an IDA credit to build new irrigation systems, improving agricultural productivity and food security. This loan would come with minimal or no interest and a repayment period of 30 years, significantly easing the financial burden compared to a commercial loan. The IDA's support would be crucial for Agriland's long-term economic development efforts, helping it to invest in areas that commercial lenders might deem too risky or unprofitable.

Practical Applications

The classification of an IDA-eligible country has several practical applications in international finance and development. These countries are the primary recipients of financial and technical assistance designed to spur growth and alleviate poverty.

• Targeted Aid Distribution: Governments and multilateral organizations, including multilateral development banks, use the IDA-eligible list to direct aid efficiently to where it is most needed, ensuring that funds reach the world's most vulnerable populations.
• Policy Dialogue: IDA engages with eligible countries on their fiscal policy, economic reforms, and development strategies, providing not just funds but also expert advice and technical assistance.²⁴, ²⁵
• Debt Management: For IDA-eligible countries, the concessional terms of IDA financing help manage their overall debt sustainability, preventing them from incurring unmanageable debt burdens that could hinder future growth.²², ²³
• Investment Prioritization: IDA-financed operations address critical sectors such as education, health, clean water, sanitation, and infrastructure, paving the way for job creation and higher incomes.²¹
• Crisis Response: The IDA also plays a vital role in supporting eligible countries during crises, including natural disasters, pandemics, and conflicts, providing rapid financing and support.¹⁹, ²⁰

The full list of countries currently eligible to receive IDA resources and the specific criteria can be found on the IDA Borrowing Countries page of the World Bank's website.

Limitations and Criticisms

While IDA funding is crucial for poverty reduction and development, the status of an IDA-eligible country and the associated aid mechanisms are not without limitations or criticisms. One primary concern revolves around the concept of "aid dependency." Critics argue that a continuous reliance on foreign aid, even on concessional terms, can sometimes impede a country's ability to develop robust domestic revenue generation and self-sustaining economic structures.

Another challenge lies in the "graduation" process. As an IDA-eligible country develops and its GNI per capita increases, it eventually "graduates" from IDA eligibility, transitioning to IBRD-only borrowing or direct access to capital markets¹⁷, ¹⁸. This transition, while a sign of progress, can sometimes pose difficulties as countries lose access to highly concessional financing, which may impact ongoing poverty reduction programs or large-scale infrastructure projects¹⁶. The potential loss of preferential terms and benefits needs careful management to ensure a smooth transition and continued development trajectory¹⁵. The UN offers guidance on navigating this transition, as detailed in the UN Guide to Least Developed Country Graduation.

Furthermore, the effectiveness of aid can be influenced by governance issues within recipient countries, including corruption or inefficient allocation of funds, though IDA has frameworks in place to mitigate these risks.

IDA-eligible country vs. Least Developed Country (LDC)

While both "IDA-eligible country" and "Least Developed Country" (LDC) identify nations in need of development support, they are distinct classifications with different criteria and implications.

The core confusion arises because both classifications target economically vulnerable nations with the goal of fostering development finance. However, IDA eligibility is strictly tied to access to World Bank concessional financing, while LDC status is a broader UN classification for comprehensive international support.

FAQs

What is the primary criterion for a country to be IDA-eligible?

The primary criterion is a country's Gross National Income (GNI) per capita. Currently, a country must have a GNI per capita below an established operational cut-off ($1,335 for fiscal year 2025) to be considered for IDA eligibility.⁷

Do all IDA-eligible countries receive grants?

Not all IDA-eligible countries receive only grants. The IDA provides a mix of highly concessional lending (credits) and grants. The specific terms are determined based on factors like the country's risk of debt distress and overall economic situation. Countries at high risk of debt distress may receive a higher proportion of grants.⁵, ⁶

Can a country lose its IDA-eligible status?

Yes, a country can "graduate" from IDA eligibility. This typically happens when a country's GNI per capita consistently rises above the established operational cut-off and it gains sufficient creditworthiness to borrow from the International Bank for Reconstruction and Development (IBRD) or from commercial capital markets.³, ⁴

How often are IDA-eligible countries assessed?

The World Bank updates the GNI per capita threshold for IDA eligibility annually. While the threshold is updated yearly, the formal "graduation" of a country from IDA occurs every three years, in line with IDA financing cycles, after a detailed examination of the country-specific situation.¹, ²