International Development Association

International Development Association

Management's Discussion & Analysis and

Financial Statements June 30, 2019

Management's Discussion and Analysis

Contents

Section I: Executive Summary

Section II: Overview

Financial Results and Portfolio Performance

4

Key Performance Indicators

6

Introduction

7

Presentation

7

Financial Business Model

7

Governance and Risk Management

8

Basis of Reporting

8

Section III: IDA's Financial Resources

IDA18 Funding Allocation of IDA18 Resources

10 10

Section IV: Financial Results

Summary of Financial Results

14

Adjusted Net Income

18

Section V: Development Activities, Products and

Lending Framework

20

Programs

Financial Terms

21

Loans, Grants and Guarantee Activity

23

Section VI: Other Development Activities and

Guarantees

25

Programs

Risk Management Instruments

25

Debt Relief

26

Trust Funds Administration

26

Buy-down of Loans ? Partnership for Polio

27

Section VII: Investment Activities

Liquid Asset Portfolio Non-Trading Portfolio

28 29

Section VIII: Borrowing Activities

Concessional Partner Loans

30

Market Debt

30

Other Short-Term Borrowings

30

Section IX: Risk Management

Risk Governance

31

Risk Oversight and Coverage

31

Management of IDA's Risks

33

Section X: Fair Value Analysis

Fair Value Analysis and Results

41

Section XI: Critical Accounting Policies and the Use of Estimates

Fair Value of Financial Instruments Provision for Losses on Loans and Other Exposures

43 43

Provision for HIPC Debt Initiative and MDRI

44

Section XII: Governance and Internal Controls

General Governance

45

Audit Committee

46

Business Conduct

46

Auditor Independence

46

External Auditors

47

Senior Management Changes

47

Internal Controls

47

Appendix

Glossary of Terms

48

List of Tables, Figures and Boxes

49

Management's Discussion and Analysis

Section I: Executive Summary

Box 1: Selected Financial Data

This Management's Discussion & Analysis (MD&A) discusses the results of the International Development Association's (IDA) financial performance for the fiscal year ended June 30, 2019 (FY19). For information relating to IDA's development operations' results and corporate performance, refer to the World Bank Corporate Scorecard and Sustainability Review.

In millions of U.S. dollars, except ratio in percentage

Lending Highlights (Sections IV & V) Loans, Grants and Guarantees

Commitments a Gross disbursements Net disbursements

2019

$ 21,932 17,549 12,221

As of and for the fiscal years ended June 30,

2018

2017

2016

2015

$ 24,010 14,383 9,290

$ 19,513 12,718 8,154

$

16,171

13,191

8,806

$ 18,966 12,905 8,820

Balance Sheet (Section IV) Total assets b Net investment portfolio Net loans outstanding Borrowing portfolio c Total equity

$ 188,553 32,443

151,921 10,149

162,982

$ 184,666 33,735

145,656 7,318

163,945

$ 173,357 29,673

138,351 3,660

158,476

$ 167,985 29,908

132,825 2,906

154,700

$ 163,234 28,418

126,760 2,150

147,149

Income Statement (Section IV)

Interest revenue, net of borrowing expenses Transfers from affiliated organizations and others

Development Grants

Net (Loss) Income

$ 1,702

258 (7,694) (6,650)

$ 1,647

203 (4,969) (5,231)

$ 1,521

599 (2,577) (2,296)

$

1,453

990

(1,232) 371

$ 1,435

993 (2,319)

(731)

Adjusted Net Income d (Section IV)

225

(391)

(158)

423

(94)

Capital Adequacy (Section IX) Deployable Strategic Capital Ratio

35.3%

37.4%

37.2%

NA

NA

a. Excludes commitments relating to IFC-MIGA Private Sector Window (PSW) activities.

b. Effective June 30, 2019, derivatives are presented net by counterparty, after cash collateral received, on the Balance Sheet. The presentation of the prior periods has been updated for comparability (For further details, see Note A: Summary of Significant Accounting and Related Policies in the Notes to the Financial Statements for the fiscal year ended June 30, 2019).

c. Includes related derivative balances.

d. Effective June 30, 2019, IDA introduced a new income measure to reflect the economic results of its operations. See Table 10 in Section IV: Financial Results. Prior period numbers have been calculated and presented for comparability.

IDA Management's Discussion and Analysis: June 30, 2019 2

Management's Discussion and Analysis

Section I: Executive Summary

Section I: Executive Summary

With its many years of experience and its depth of knowledge in the international development arena, IDA plays a key role in achieving the World Bank Group's (WBG1) goal of helping countries achieve better development outcomes.

Owned by its 173 members, IDA, an entity rated triple-A by the major rating agencies and one of the five institutions of the WBG, has been providing financing and knowledge services to many of the world's developing countries for more than 58 years. IDA was created to supplement the activities and objectives of the International Bank for Reconstruction and Development, by providing development financing to lower income countries on more flexible terms.

IDA contributes to both the WBG's twin goals of ending extreme poverty and promoting shared prosperity by providing loans, grants, and guarantees to countries to help meet their development needs and by leveraging its experience and expertise to provide technical assistance and policy advice. It also supports countries with disaster risk financing and insurance against natural disasters and health-related crises, and facilitates financing through trust fund partnerships.

IDA and its affiliated organizations seek to help countries achieve improvements in growth, job creation, poverty reduction, governance, the environment, climate adaptation and resilience, human capital, infrastructure and debt transparency. To meet its development goals, the WBG is increasing its focus on country programs in order to improve growth and development outcomes. We are expanding support for countries at lower levels of income and fragile and conflict-affected states. The aim is to effectively address issues central to the WBG mission, while taking into account the global slowdown in growth and the surge in debt that is not bringing true benefits.

The fiscal year ended June 30, 2019 was the second year of the Eighteenth Replenishment of IDA's resources (IDA18). IDA18 represents an innovative policy and financing package for FY18 through FY20. The IDA18 financing framework represents a shift in IDA's approach to mobilizing finance since it combines contributions from members with market debt, helping IDA provide $75 billion2 in financing for its clients. Commitments from IDA were $21.9 billion during FY19. Cumulative commitments in FY18 and FY19, the first two years of IDA18, reached $45.9 billion, a 31% increase compared to the same period in IDA17 ($35.1 billion).

1 The other WBG institutions are the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). 2 U.S. dollar amounts are based on an IDA18 reference rate of USD/SDR 1.40207. The U.S. dollar amounts are provided for illustrative purposes only, as IDA's balance sheet is predominantly managed in Special Drawing Rights (SDR).

IDA Management's Discussion and Analysis: June 30, 2019 3

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