r__ - 24908 *-- - - 4 _* Volume 2 - - - -C - ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~7 4 -71F It~ The World Bank Annual Report 2002 Volume 2 THE WORLD BANK ~~Financial Statements THE WOLAKand Appendixes The World Bank Annual Report 2002 Volume 2 Financial Statements and Appendixes THE WORLD BANK Washington, D.C. Note The World Bank's Volume 1, Year in Review is published as a separate volume and is available on the Internet at www.worldbank.org. Copyright C 2002 The International Bank for Reconstruction and Development / THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, USA Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved The boundaries, colors, denominations, and other information shown on any map in this work do not imply on the part of the World Bank any judgment of the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions All queries on rights, licenses, and permissions should be addressed to the Office of the Publisher, World Bank, 1818 H Street NW, Washington D.C., 20433, fax 202-522-2422, e-mail pubrights@worldbank.org. ISSN 0252-2942 ISBN 0-8213-5158-3 Contents Letter of Transmittal v Management's Discussion and Analysis 1 International Bank for Reconstruction and Development Financial Statements 33 Special Purpose Financial Statements of the International Development Association 79 IBRD/IDAAppendixes 111 Letter of Transmittal This Annual Report, which covers the period from July 1, 2001, to June 30, 2002, has been prepared by the Executive Directors of both the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) in accordance with the respective bylaws of the two institutions. James D. Wolfensohn, President of the IBRD and IDA, and Chairman of the Board of Executive Directors, has submitted this report, together with the accompanying administrative budgets and audited financial statements, to the Board of Governors. Annual reports for the International Finance Corporation, the Multilateral Investment Guarantee Agency, and the International Centre for Settlement of Investment Disputes are published separately. Executive Directors Alternates Abdul Aziz Mohd. Yaacob Nguyen Doan Hung Girmai Abraham Richard H. Kaijuka Mahdy Ismail Aljazzaf Mohamed Kamel Amr Yahya Abdulla M. Alyahya Abdulrahman M. Almofadhi Carole Brookins Robert B. Holland, III Eckhard Deutscher Eckhardt Biskup Pierre Duquesne Emmanuel Moulin Yuzo Harada Masanori Yoshida Neil E Hyden Dong-Soo Chin Finn Jonck Inkeri Hirvensalo Terrie O'Leary Sharon Weber Franco Passacantando Helena Cordeiro Philippe M. Peeters Emin Dedeoglu Moises Pineda Jose H. Machillanda Jaime Ruiz Luis Antonio Balduino Ahmed Sadoudi Inaamul Haque Tom Scholar Rosemary B. Stevenson Balmiki Prasad Singh Akbar Ali Khan Mario Soto-Platero Roberto Garcia-Lopez Pieter Stek Tamara Solyanyk Bassary Toure Paulo F. Gomes Pietro Veglio Jerzy Hylewski Zhu Guangyao Chen Huan (vacant) Eugene Miagkov As of June 30, 2002 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2002 Section 1: Overview 3 Section 2: Basis ofReporting 5 Section 3: Development Activities 8 Loans 8 Guarantees 15 Other Activities 1 5 Section 4: Liquidity Management 16 Section 5: Funding Resources 17 Equity 1 7 Borrowings 20 Section 6: Financial Risk Management 21 Credit Risk 22 Market Risk 24 Operating Risk 26 Section 7: Critical Accounting Policies 28 Section 8: Results of Operations 28 Glossary of Termts 31 IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 1 Throughout Management's Discussion and Analysis, terms in boldface type are defined in the Glossary of Terms on page 31. The Management Discussion and Analysis contains forward looking statements which may be identified by such terms as "anticipates", "believes", "expects", "intends" or words of similar meaning. Such statements involve a number of assumptions and estimates that are based on cur- rent expectations, which are subject to risks and uncertainties beyond IBRD's control. Conse- quently, actual future results could differ materially from those currently anticipated. Acronyms for Regions AFR Africa EAP East Asia and Pacific ECA Europe and Central Asia LCR Latin America and the Caribbean MNA Middle East and North Africa SAR South Asia 1. OVERVIEW The International Bank for Reconstruction and Devel- of its equity with those of its loans, the fluctuations opment (IBRD) is an international organization estab- captured in the cumulative translation adjustment for lished in 1945 and is owned by its member countries. purposes of financial statement reporting do not sig- IBRD's main goals are promoting sustainable eco- nificantly impact IBRD's risk-bearing capacity. nomic development and reducing poverty. It pursues Lendin commitments in FY 2002 were $11.5 billion these goals primarily by providing loans, guarantees which was higher thnth FY 2001 leve $1.5 bl- and related technical assistance for projects and pro-was hhe tathF20 level of $10. 5 bil- . . . . . .,~~pr lion and the FY 2000 level of $10.9 billion. grams in its developing member countries. IBRD's ability to intermediate funds from international capital In the context of assessing changes in IBRD's operat- markets for lending to its developing member coun- ing environment, it is management's practice to rec- tries is an important element in achieving its develop- ommend each year the allocation of net income to ment goals. IBRD's objective is not to maximize augment reserves, waivers of loan charges to benefit profit, but to earn adequate net income to ensure its eligible borrowers, and grants from net income to sup- financial strength and to sustain its development activ- port developmental activities. ities. Box 1 presents selected financial data for the last five fiscal years. FY 2002 operating income was $1,924 million, $780 million higher than the preceding year. This increase The financial strength of IBRD is based on the support in operating income correspondingly increased IBRD's it receives from its shareholders and on its array of return on equity and net return on average earning financial policies and practices. Shareholder support assets before the effects of FAS 133.a The major rea- for IBRD is reflected in the capital backing it has son for the increase in operating income was a reduc- received from its members and in the record of its bor- tion in the provision for loan losses of $691 million, as rowing members in meeting their debt-service obliga- arrears clearances from borrowers in the nonaccrual tions to it. IBRD's financial policies and practices have portfolio more than offset a further deterioration in led it to build reserves, to diversify its funding sources, the credit quality of the accrual portfolio. See discus- to hold a large portfolio of liquid investments, and to sion in Section 6, Financial Risk Management-Coun- limit a variety of risks, including credit, market and try Credit Risk. liquidity risks. Loan interest income investment income, ancl bor- IBRD's principal assets are its loans to member coun- rowing costs were all affected by the decrease in inter- tries. The majority of IBRD's outstanding loans are est rates in FY 2002. Loan interest income, net of priced on a cost pass-through basis, in which the cost funding costs, increased by $182 million due primarily of funding the loans, plus a lending spread, is passed to the interest rate repricing lag inherent in the cost through to the borrower. pass-through loans and the decrease in the interest To raise funds, BDisewaiver rate on old loans. In contrast, investment To raise funds, IBRD Issues debt securities in a variety inoento udn ot erae y$0 ilo of currencies to both institutional and retail investors. icome net of funding costs decreased by $k108 millon These borrowings, together with IBRD's equity, are due primarily tfliower maFY 2002 as compared to FY used to fund its lending and investment activities, as investmentiportfolio insFYn2002ea s are t well as general operations. 2001. Borrowings funding these investments are not marked to market. IBRD holds its assets and liabilities primarily in U.S. dollars, euro and Japanese yen. IBRD mitigates its exposure to exchange rate risks by matching the cur- rencies of its liabilities and equity with those of its a. For the purposes of this document, FAS 133 refers to assets. However, the reported levels of its assets, liabil- Statement of Financial Accounting Standards No. 133, ities, income and expense in the financial statements "Accounting for Derivative Instruments and Hedging Activi- are affected by exchange rate movements of major ties", along with its related amendments, and International currencies compared to IBRD's reporting currency, Accounting Standard No. 39, "Financial Instruments: Recog- the U.S. dollar. Because IBRD matches the currencies nition and Measurement". These standards were adopted by IBRD in FY 2001. IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 3 Box 1: Selected Financial Data As of or for the Year Ended June 30 In millions of US dollars, except ratio and return data in percentages Current Value Basis 2002 2001 Net Income 2,853 1,460 of which current value adjustment 881 367 Net Return on Average Earning Assets 1.86 0.893 Return on Equity 10.07 4.98a Equity-to-Loans Ratio 23.10 21.43 Cash and Liquid Investmentsb 25,056 24,407 Loans Outstanding 126,454 123,062 Borrowings Outstandingc 114,502 110,290 Total Equity 32,466 29,744 Reported Basis 2002 . 2001 2000 1999 1998 Loan Income 6,861 8,143 8,153 7,649 6,881 Provision for Loan Losses 15 (676) 166 (246) (251) Investment Income 734 1,540 1,589 1,684 1,233 Borrowing Expenses (4,903) (7,152) (7,128) (6,846) (6,144) Net Noninterest Expense (783) (711) (789) (723) (476) Operating Income 1,924 1,144 1,991 1,518 1,243 Effects of applying FAS 133 854 345 Net Income 2,778 1,489 1,991 1,518 1,243 Net Return on Average Earning Assetsd, e 1.30 0.78 1.34 1.05 0.96 after the effects of FAS 133 1.87 0.87f Gross Return on: Average Earning Assetsd 5.13 6.61 6.53 6.47 6.29 Average Outstanding Loansd 5.60 6.67 6.71 6.58 6.43 Average Cash and Investments 2.87 6.28 5.74 6.00 5.63 Cost of Average Borrowings (after swaps)e 4.23 6.18 5.92 5.92 6.01 after the effects of FAS 133 3.53 6.12f Interest Coverage e 1.39 1.16 1.28 1.22 1.20 after the effects of FAS 133 1.69 1.18f Return on Equity e 7.09 4.33 7.73 6.16 5.29 after the effects of FAS 133 9.75 4.63f Equity-to-Loans Ratiog 22.90 21.51 21.31 20.71 21.49 Total Assets 227,745 222,841 228,539 230,445 204,808 Cash and Liquid Investmentsb, h 25,056 24,407 24,331 30,122 24,837 Loans Outstanding 121,589 118,866 120,104 117,228 106,576 Accumulated Provision for Loan Losses (4,078) (3,959) (3,400) (3,560) (3,240) BorrowingsOutstandingc 110,263 106,757 110,379 115,739 103,477 Total Equity 32,313 29,570 29,289 28,021 26,514 a. Excludes the one-time cumulative effect of the adoption of the current value basis of accounting. b. Excludes restricted cash. c. Outstanding borrowings, before swaps, net of premium/discount. d. Includes income from commitment charges. e. Amounts are presented before the effects of FAS 133 to facilitate comparison to prior years. f Excludes the one-time cumulative effect of the adoption of FAS 133. g Before the effects of FAS 133. See Section S, Funding Resources-Equity for additional discussion. h. Includes investments designated as held-to-maturity forfiscal year 1998. 4 THE WORLD BANK ANNUAL REPORT 2002 On August 8, 2002, the Executive Directors approved In implementing its risk management strategy, IBRD the allocation of $1,291 million of FY 2002 net makes extensive use of derivatives to manage the income to the General Reserves, and recommended to interest rate and currency risks associated with its IBRD's Board of Govemors the transfers of $540 mil- financial assets and liabilities. IBRD uses derivative lion from unallocated net income to other develop- instruments for asset/liability management of individ- ment purposes. In addition, the Executive Directors ual positions and portfolios, and to reduce borrowing approved that for FY 2003, the interest waiver will be costs. maintained at 5 basis points for old loans and 25 basis IBRD's funding operations are designed to meet a points for new loans. Waivers of 50 basis points on IBR funiz ation s are desing lo cost commtmet care fr Y 200 weeas .an major organizational objective of providing lower cost tamied at the FY 2002 level. funds to borrowing members. Because of the extent of IBRD's long-dated funding, the reported volatility 2. BASIS OF REPORTING under FAS 133 may be more acute than for many other financial institutions. FAS 133 adjustments may Financial Statement Reporting significantly affect reported results in each accounting period, depending on changes in market rates. How- IBRD prepares its financial statements in accordance ever, IBRD believes that its funding and asset/liability with generally accepted accounting principles management strategies accomplish its objectives of (GAAP) in the United States of America and Interna- protection from market risk and provision of lower tional Accounting Standards (together referred to in cost funding, and that a current value basis provides this document as the 'reported basis'). more meaningful information for risk management and management reporting. As allowed by FAS 133, IBRD has marked all deriva- tive instruments, as defined by FAS 133, to fair value, IBRD believes that a current value presentation better with changes in the fair value being recognized imme- reflects the economic value of all of its financial diately in earnings. instruments. The basis for the current value model is the present value of expected cash flows based on an Although FAS 133 allows hedge accounting for cer- appropriate discount rate. The model incorporates tain qualifying hedginga relationships, when these cri- available market data in determining the cash flow and teria are applied to IBRD's financial instrument discount rates for each instrument. The current value portfolios, certain of the hedged instruments would be financial statements do not purport to present the net carried at fair value, while other similar hedged instru- realizable, liquidation, or market value of IBRD as a ments would be carried at amortized cost. Upon adop- whole. tion of the new standards, IBRD elected not to define any qualifying hedging relationships. While IBRD Current Value Basis believes that its hedging strategies achieve its objec- tives, the application of FAS 133 qualifying hedge cri- The Condensed Current Value Balance Sheets in teria would not make fully evident the risk Table I present IBRD's estimates of the economic management strategy that IBRD employs. value of its financial assets and liabilities, after consid- ering interest rate, currency and credit risks. The cur- Management Reporting rent year's Condensed Current Value Balance Sheet is presented with a reconciliation to the reported basis. For management reporting purposes, IBRD prepares current value financial statements. IBRD's Condensed Current Value Comprehensive Statements of Income, with a reconciliation to the reported basis at June 30, 2002, are presented in a. Hedging is a risk management technique of entering into Table 2. offsetting commitments to eliminate or minimize the impact A summary of the effects on net income of the current of adverse movements in the value or cash flow of a financial value adjustments in the balance sheet is presented in instrument. Table 3. IBRD MANAGEMENT'S DISCUSSION AND ANAI.YSIS: JUNE 30, 2002 5 Table 1: Condensed Current Value Balance Sheets at June 30, 2002 and June 30, 2001. In millions of Us. dollars June 30, 2002 June 30, 2001 Reversal of Current Current Reported FAS 133 Value Value Current Value Basis Effects Adjustment Basis Basis Due from Banks $ 1,083 $1,083 $ 685 Investments 26,076 26,076 24,490 Loans Outstanding 121,589 $4,865 126,454 123,062 Less Accumulated Provision for Loan Losses and Deferred Loan Income (5,514) (5,514) (4,459) Swaps Receivable Investments 9,932 9,932 11,043 Borrowings 66,052 $(2,821) 2,821 66,052 63,326 Other Asset/Liability 727 (1) 1 727 728 Other Assets 7,800 (473) 7,327 7,673 Total Assets $227,745 $(2,822) $7,214 $232,137 $226,548 Borrowings $110,263 $ (354) $4,593 $114,502 $110,290 Swaps Payable Investments 10,819 10,819 10,791 Borrowings 66,994 (1,254) 1,254 66,994 68,051 Other Asset/Liability 758 1 (1) 758 701 Other Liabilities 6,598 6,598 6,971 Total Liabilities 195,432 (1,607) 5,846 199,671 196,804 Paid in Capital Stock 11,476 11,476 11,476 Retained Earnings and Other Equity 20,837 (1,215) 1,368 20,990 18,268 Total Liabilities and Equity $227,745 $(2,822) $7,214 $232,137 $226,548 Table 2: Condensed Current Value Comprehensive Statements of Income for the years ended June 30, 2002 and June 30, 2001 In millions of US. dollars FY2002 FY2001 Adjustments Current Value Current Value to Current Comprehensive Comprehensive Reported Basis Value Basis Basis Income from Loans $6,861 $6,861 $ 8,143 Income from Investments, net 734 $ 48 782 1,489 Other Income 277 277 326 Total Income 7,872 48 7,920 9,958 Borrowing Expenses 4,903 4,903 7,152 Administrative Expenses 1,052 1,052 1,028 Provision for Loan Losses (15) 15 - Other Expenses 8 8 9 Total Expenses 5,948 15 5,963 8,189 Operating Income 1,924 33 1,957 1,769 Current Value Adjustments 881 881 367 Provision for Loan Losses-Current Value 15 15 (676) Effects of applying FAS 133 854 (854) - Net Income $2,778 $ 75 $2,853 $ 1,460 6 THE WORLD BANK ANNUAL REPORT 2002 Table 3: Summary of Current Value Adjustments In millions of US. dollars Balance Sheet Effects as of June 30, 2002 Total Income Statement Effect Other Less Prior Loans Borrowings Asset/Liability Year Effects FY 2002 FY 2001 Total Current Value Adjustments on Balance Sheet $4,865 $(3,499) $2 $ (801). $567 $ 685 Unrealized Gains (losses) on Investmentsb (48) 51 Currency Translation Adjustmentc 362 (485) Transition Adjustment 116 Total Current Value Adjustments $881 $ 367 a. Includes $116 million representing a one-time cumulative effect of recording the adoption, on July 1, 2000, of the current value basis of accounting. b. Unrealized gains on the investment portfolio have been moved from Operating Income under the reported basis and included as part of current value adjustments for current value reporting. c. The currency translation effects have been moved firom Other Comprehensive Income under the reported basis and included in Comprehensive Current Value Net Income for purposes of current value reporting. Current Value Balance Sheets the rate at which IBRD would currently originate a simi- lar loan. Loan Portfolio Investment Portfolio All of IBRD's loans are made to or guaranteed by coun- tries that are members of IBRD. IBRD does not currently Under both the reported and current value basis, the sell its loans, nor does management believe there is a mar- investment securities and related financial instruments ket for loans comparable to those made by IBRD. The held in IBRD's trading portfolio are carried and reported current value amount of loans incorporates management's at fair value. Fair value is based on market quotations; best estimate of the probable expected cash flows of these instruments for which market quotations are not readily instruments to IBRD. available have been valued using market-based methodol- ogies and market information. The current value of all loans is based on a discounted cash flow method. The estimated cash flows from princi- Borrowings Portfolio pal repayments and interest are discounted using the applicable market yield curves for IBRD's funding cost The current value of borrowings includes the value of the plus IBRD's lending spread adjusted for interest waivers debt securities and the financial derivative instruments plus IBR'sledi sred,adusedfoiteeswi associated with the borrowings portfolio. The current The current value also includes IBRD's assessment of the value is calculated based on market data using market- appropriate credit risk, considering its history of payment based methodologies. The current value of IBRD's instru- receipts from borrowers. IBRD has always eventually col- ments in this portfolio is predominantly based on dis- lected all contractual principal and interest due on its counted cash flow techniques. The $3,499 million loans. However, IBRD has suffered losses resulting from ($3,397 million-June 30, 2001) increase in the borrow- the difference between the discounted present value of ings portfolio due to current value adjustments results payments for interest and charges, according to the loan's from the fact that the average cost of the borrowings port- contractual terms, and the actual timing of cash flows. To folio is higher than the rate at which IBRD could cur- recognize the risk inherent in these and any other poten- rently obtain funding. tial overdue payments, IBRD adjusts the value of its loans through its loan loss provision. Current Value Comprehensive Statements of Income The $4,865 million ($4,196 million-June 30,2001) posi- Current Value Adjustments tive adjustment to IBRD's loan balance from the reported The net current value adjustment of $881 rnillion for the basis to the current value basis reflects the fact that the year ended June 30, 2002 ($367 million-June 30, 2001) loans in the portfolio, on average, carry a higher rate of represents the change in the current value of all of IBRD's interest than the present discount rate, which represents financial instruments during the fiscal year. The current IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 7 value adjustment reflects changes in both interest 3. DEVELOPMENT ACTIVITIES rates and currency exchange rates. For the year ended IBRD offers loans, related derivative products, and June 30, 2001, the current value adjustment included IBRantees toans rowing d er counts and a transition adjustment of $116 million, which was guarantees to lts borrowpng member countries to help the cumulative effect of the adoption of the current meet their development needs. It also provides techni- value basis of accounting on July 1, 2000. cal assistance and other advisory services to support poverty reduction in these countries. During the year ended June 30, 2002, the net increase in the current value adjustments on the balance sheet Loans was $567 million. This increase is the result of a $669 From its establishment through June 30, 2002, IBRD million increase in the mark to current value on the had approved loans, net of cancellations, totaling loan portfolio, offset by a $102 million increase in the $325,333 million to borrowers in 129 countries. A mark to current value on borrowings. summary of cumulative lending and the portfolio For purposes of the current value presentation, all position is contained in Table 4. unrealized gains and losses are presented as current Table 4: Lending Status at June 30, value adjustments. Therefore, the change in the mark-to-market unrealized losses on the investments In millions of US. dollars of $48 million as well as a reduction in the provision 2002 2001 for loan losses of $15 million are presented as part of Cumulative Approvals3 325,333 314,969 the adjustment related to current value. Cumulative Repaymentsb 164,007 151,262 The increase in the current value adjustment from FY 2001 to FY 2002, after taking into consideration the Outstanding 121,589 118,866 $116 million transition adjustment, is due primarily to Undisbursedc 36,353 37,934 changes in exchange rates. During FY 2002, both the Total Loans 157,942 156,800 Japanese yen and the euro appreciated against the U.S. dollar. In contrast, both of these currencies depreciated against the U.S. dollar in FY 2001. This a. Netiofrcancellations. resuled i a psitiv chage o $847millon de to b. Multicurrenc-y pool lban repayments are included at resulted in a positive change of $847. millon due to exchange rates in effect on the date of original disburse- the currency translation adjustments. ment. AU other amounts are based on US. dollar equiva- This increase was offset by a $118 million decrease in lents at the time of receipt. the total current value adjustment related to the net c. Includes loans approved, but not effective. change in the mark on the loan and borrowings portfo- lios. This decrease was due, in part, to the smaller The amount of loans outstanding at June 30, 2002 was decline in U.S. dollar interest rates in FY 2002 than in $2,723 million higher than that at June 30,2001 due FY 2001 (see Figure 1). primarily to positive currency translation adjustments and the capitalization of interest and charges related Figure 1: U.S Dollar Interest Rates to certain consolidation loans. This increase was par- tially offset by negative net disbursements. The undis- 7 bursed balance was reduced by cancellations and 6 - - disbursements, partially offset by new commitments 6] and positive currency translation adjustments. During FY 2002, commitments of new loans to mem- u 4 ber countries were $11,452 million, which was higher 6/30/2002 than commitments of $10,487 million in FY 2001, 3 - 6/30/2001 and $10,919 million in FY 2000. 2 - - - 6/30/2000 In FY 2002, Europe and Central Asia accounted for the largest share of commitments. Figure 2 presents l . - ' ' [ ' ' ; ' 1--I-' ' X ' the regional composition of commitments for FY 2002 H WORD BANK A Un AL r RP t o 2 0 0 C and FY 2001. 8 THE WORLD BANK ANNUAL REPORT 2002 Figure 2: Commitments by Region have met their major objectives, and these evaluations are reported directly to the Executive Directors. In nillions of U.S dollars Lending Instruments IBRD lending generally falls into one of two catego- 000C - 4,895 4,807 ries: investment or adjustment lending. In the past, the 5,000 4,1688 majority of IBRD loans were for investment projects or programs. Figure 3 presents IBRD lending by cate- 4,000 gory for the last seven fiscal years, as a percentage of 3,000 total loans approved. 2,154- Current operating guidelines state that combined 2,000 -2 2,035 IBRD and International Development Association 2,00 (IDA) adjustment lending, excluding debt and debt- 982 1,136 893 service reduction loans, will normally not exceed 25% 1,000 *452 355 of total IBRD and IDA lending on a 3-year rolling 1 42 a average basis. This guideline was established in 1992 0 ._- ' as a pragmatic step based on the share of adjustment AFR EAP C~A LCR MNA SAR lending at that time, recognizing that the 25% thresh- EFY 2002 OFY 2001 old level may be exceeded if world economic condi- tions worsened. It is not a rigid limit. Under IBRD's Articles of Agreement (the Articles), as applied, the total amount outstanding of direct loans Figure 3: IBRD Lending Commitments made by IBRD, participation in loans and callable guarantees may not exceed the statutory lending limit. 100- At June 30, 2002, outstanding loans and callable guar- antees (net of the accumulated loan loss provision) totaled $117,984 million, equal to 56% of the statu- Investment tory lending limit. 75 IBRD's lending operations have conformed generally to five principles derived from its Articles. These prin- ciples, taken together, seek to ensure that IBRD loans 50- are made to member countries for financially and eco- nomically sound purposes to which those countries have assigned high priority, and that funds lent are uti- lized as intended. The five principles are described in Adjustment Box 2. Within the scope permitted by the Articles, application of these principles must be developed and adjusted in light of experience and changing condi- 0 tions. FY96 FY97 FY98 FY99 FYOO FYOI FY02 Lending Cycle In FY 2002, new IBRD adjustment commitments The process of identifying and appraising a project and accounted for 64% of total commitments (38%-FY approving and disbursing a loan often extends over 2001; 41 %-FY 2000). This was about the same as in several years. However, on numerous occasions IBRD FY 1999 at the time of the East Asia crisis. For IBRD has shortened the preparation and approval cycle in and IDA together, the share of adjustment lending was response to emergency situations such as natural disas- 50% in FY 2002. Country-specific developments and ters. adverse market conditions were the main reasons for this trend. The Executive Directors are aware that the Generally, the appraisal of projects is carried out by guideline has been exceeded in recent years, and may IBRD's operational staff (economists, engineers, finan- possibly be exceeded again in subsequent years. cial analysts, and other sector and country specialists). With certain exceptions, each loan must be approved Investment Lending by IBRD's Executive Directors (See Box 3, Adaptable IBRD has several lending instruments that support Program Loans and Learning and Innovation Loans). investment activities, either discrete projects or pro- grams of investment. Investment lending committed Loan disbursements are subject to the fulfillment of for FY 2002 totaled $4,068 million ($6,550 million- conditions set out in the loan agreement. During FY 2001; $6,493 million-FY 2000). Box 3 presents a implementation of IBRD-supported operations, expe- description of each investment lending instrument and rienced IBRD staff review progress, monitor compli- a breakdown of IBRD's investment lending approved ance with IBRD policies and assist in resolving any in FY 2002 and in each of the two preceding fiscal problems that may arise. After completion, an inde- ears pendent IBRD unit evaluates the extent to which they Y IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 9 Box 2: Lending Operations Principles (i) IBRD makes loans to governments, governmental authorities or private enterprises in the territories of member countries. A loan that is not made directly to the member in whose territories the project is located must be guaranteed as to principal, interest and other charges by the member or its central bank or a comparable agency of the member acceptable to IBRD. A guarantee by the member itself has been obtained in all such cases to date. (ii) IBRD's loans are designed to promote the use of resources for productive purposes in its member countries. Projects financed by IBRD loans are required to meet IBRD's standards for technical, eco- nomic, financial, institutional and environmental soundness. (iii) In making loans, IBRD must act prudently and pay due regard to the prospects of repayment. Deci- sions to make loans are based upon, among other things, studies by IBRD of a member country's eco- nomic structure, including assessments of its resources and ability to generate sufficient foreign exchange to meet debt-service obligations. (iv) IBRD must be satisfied that in the prevailing market conditions (taking into account the member's overall external financing requirements), the borrower would be unable to obtain financing under conditions which, in the opinion of IBRD, are reasonable for the borrower. IBRD is intended to pro- mote private investment, not to compete with it. (v) The use of loan proceeds is supervised. IBRD makes arrangements to ensure that funds loaned are used only for authorized purposes and, where relevant, with due attention to considerations of cost- effectiveness. This policy is enforced primarily by requiring borrowers (a) to submit documentation establishing, to IBRD's satisfaction, that the expenditures financed with the proceeds of loans are made in conformity with the applicable lending agreements and (b) to maximize competition in the procurement of goods and services by using, wherever possible, international competitive bidding or, when it is not appropriate, other procedures that ensure maximum economy and efficiency. Adjustment Lending currency chosen by the borrower: variable-spread loans and fixed-spread loans. Variable-spread loans IBRD also makes adjustment loans designed to sup- have a variable spread over LIBOR that is adjusted port the introduction of basic changes in economic, every six months. Fixed-spread loans have a fixed financial and other policies of key importance for the spread over LIBOR that is fixed for the life of the economic development of member countries. Dis- loan. In addition, IBRD offers to its clients two types bursements on these loans are conditioned on certain of non-standard loans (special structural and sector performance objectives. Adjustment lending com- adjustment loans, and loans with a deferred drawdown mitted for FY 2002 totaled $7,383 million ($3,937 option) and derivative products. The current product million-FY 2001; $4,426 million-FY 2000.) Box 4 mix is intended to provide borrowers with the flexibil- provides a description of each adjustment lending ity to select terms that are both compatible with their instrument and the details of IBRD's adjustment lend- debt management strategy and suited to their debt- ing approved in FY 2002 and each of the two preced- servicing capability. At June 30, 2002 36% (29%- ing fiscal years. June 30, 2001) of loans outstanding carried currently Enclave Lending available financial terms. On rare occasions, IBRD will lend for a large, foreign Variable-Spread Loans exchange generating project in a member country usu- ally eligible only for loans from the International IBRD offers varable-spread loans in U.S. dollars, Japa- Development Association (IDA). In these circum- nese yen, euro, and other currencies which JBRD can stances appropriate risk mitigation measures are incor- efficiently intermediate.Variable-spread loans carry a porated (including off-shore escrow accounts and lending rate that is reset semi-annually. The lending debt-service reserves acceptable to IBRD) to ensure rate consists of a base rate, which is six-month LIBOR that the risks to IBRD are minimized. At June 30, for the applicable currency plus a variable spread. The 2002, IBRD had $192 million in outstanding loans for spread consists of: (a) IBRD's weighted average cost enclave projects ($166 million-June 30, 2001). No margin for funding for the preceding semester allo- new enclave lending was approved during FY 2002 or cated to these loans relative to LIBOR; and (b) IBRD's FY 2001. standard lending spread. This spread is set semi-annu- ally, in January and July. Most variable spread loans Financial Terms of Loans mature over a period that ranges from 15 to 20 years Currently Available Financial Terms and carry a 3- to 5-year grace period for principal. As of June 30, 2002, IBRD offers the following two basic types of loan terms, each denominated in the 10 THE WORLD BANK ANNUAL REPORT 2002 Fixed-Spread Loans five-year maturity with a three-year grace period on principal, and a front-end fee of one percent of the Duringxed-sp loan, designed in trow- principal amount payable on effectiveness. Special the fixed-spread loan, designed in response to borrow- stutrladseco adutmn lon ar no eliibl ers' desires for more flexible financial products. Fixed- structurai and sector adjustment loans are not eligil. e spread loans can be tailored to meet the needs of indi- vidual projects and programs and support borrowers' Loans with a Deferred Drawdown Option debt management strategies. Fixed-spread loans are currently offered in U.S. dollars, Japanese yen and euro During the second quarter of FY 2002, IBRD an an ote cuec in whic IRD can eficenl approved a Deferred Drawdown Option (DDO) for intermediate, use with IBRD adjustment loans. A DDO would give IBRD borrowers the option of deferring the loan's dis- These fixed-spread loans carry an interest rate of six- bursement for up to three years. Loans with a DDO month LIBOR for the applicable currency, plus a are subject to a commitment fee of 100 basis points, spread that is fixed at loan signing for the life of the which is 25 basis points higher than that for most loan. The fixed spread consists of (a) IBRD's projected IBRD loans. Also, the front-end fee of 100 basis funding cost margin relative to U.S. dollar LIBOR, points, which is normally payable at the time a loan with a basis swap adjustment for non-U.S. dollar loans; becomes effective, is only payable for a DDO loan at (b) a market risk premium; and (c) IBRD's standard the time it is disbursed. At June 30, 2002, no loans lending spread. with a DDO had been approved by IBRD. Borrowers selecting this product may change the cur- Derivative Products rency or interest rate basis over the life of the loan and Along with the approval of the introduction of the have more flexibility in selecting loan repayment fixed-spread loan product with its various risk man- terms. A borrower may choose to include the follow- ing conversion features in the loan contract: agement alternatives such as rate fixing and currency conversion, the Executive Directors also approved the * option to change the currency at market offer of new derivative products for its borrowers to rates of all or a part of the undisbursed or dis- respond to their needs for access to better risk man- bursed loan amounts (for a fee); agement tools in connection with existing IBRD loans. * option to fix the interest rate at market rates These derivative products include currency and inter- on all or a part of the disbursed amounts for est rate swaps, and interest rate caps and collars. On a on all or a part of the disbursed amounts for caebycs bais comoit-lne swp ma als rate fixings for up to the full maturity of the case-by-case das.s, commodity-nked swaps may also loan, and for amounts up to the outstanding loan amount (without charge); IBRD will pass through the market cost of the instru- ment to the borrower, and will charge a transaction fee * option to unfix or re-fix the interest rate at comparable to the fee charged on the fixed-spread market rates on all or part of disbursed loan copral totefecagdontefxdsra amaktrs fonr a orpt d loan conversion features (and 37.5 basis points for amounts (for a fee); commodity swaps). These instruments may be exe- * option to cap or collar the floating interest cuted either under a master derivatives agreement rate on all or a part of disbursed loan which substantially conforms to industry standards, or amounts, with a market premium (for a fee). in individually negotiated transactions. IBRD is in the Any conversion requests accepted by IBRD will be process of making these instruments available. executed at market rates. Previously Available Financial Terms Transaction fees range from 12.5 to 25 basis points of In previous years, IBRD offered loans with a variety of the notional transaction amount. Repayment terms other financial terms including: multicurrency pool are more flexible than for prior products, subject to loans, fixed-rate single currency loans, and non-stan- certain constraints on the average repayment maturity dard single currency loans (prior to the introduction of and final maturity on a country basis. Within these special structural and sector adjustment loans). constraints, borrowers have flexibility to configure At June 30, 2002, 64% (7]1/%-June 30, 2001) of loans grace periods and maturity profiles in a manner consis- outstanding carried these previously available financial tent with the purpose of the loan. Repayment profiles ts. may be level repayment of principal, an annuity type terms. schedule, a bullet repayment or a customized sched- Multicurrency Pool Loans ule. Repayment profiles cannot be changed after a Multicurrency pool loans were available from 1980 to loan is signed. 2001. Loans negotiated prior to July 1982 were Special Structural and Sector Adjustment Loans offered at fixed rates. In 1982, IBRD mitigated its interest rate risk by moving from a fixed rate to a vari- Special structural and sector adjustment loans were able rate on these loans. introduced in FY 1999 and tailored to be part of a broad financial support package for borrowing coun- For variable-rate multicurrency pool loans, the lending tries. Their terms include a six-month U.S. dollar rate is adjusted every six months to reflect the previ- LIBOR interest rate plus a minimum fixed spread, ous semester's average cost of outstanding borrowings currently set at 400 basis points. These loans have a allocated to fund these loans, weighted by the average IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 1 Box 3: Investment Lending Commitments (in millions of U.S. dollars) Specific Investment 0 1,000 2,000 3,000 4,000 5,000 6,000 Adaptable Program FY2000 FY2001 C FY2002 * Specific Investment Loans fund the creation, rehabilitation and maintenance of economic, social and institutional infra structure. 0 200 400 600 800 1,000 1,200 * Adaptable Program Loans provide phased support for long- Emergency Recovery term development programs through a series of operations. _ : : : : : Succeeding operations are committed on the basis of satis- factory performance on agreed milestones, indicators, peri- * . . . odic reviews, and the evaluation of implementation progress and emerging needs. Authority for approval of sub sequent adaptable program loans under programs approved 0 200 400 600 800 1,000 1,200 by the Executive Directors is with IBRD's management, subject to oversight and review by the Executive Directors. Sector Investment and Maintenance * Emergency Recovery Loans restore assets and productivity immediately after a major emergency (such as war, civil dis turbance, or natural disaster) that seriously disrupts a mem ber country's economy. * Sector Investment and Maintenance Loans aim to bring sector 0 200 400 600 800 expenditures, policies and performance in line with a coun try's development priorities. Technical Assistance _1. . * Technical Assistance Loans are used to build institutional I . . capacity in the borrowing country. They are used to build i . . . capacity in entities concerned with promoting economic and social development, as well as public sector reform. 0 '200 400 600 800 * Learning and Innovation Loans support small, pilot-type 0 200 400 600 800 investment and capacity-building projects that, if success- .mig and Innovation ful, could lead to larger projects that would mainstream the _ : ~~~~~~~~~~~learning and results of the loan. These loans do not exceed $5 million and are normally implemented over two to three years. Approvals of specific individual loans are at the man- agement level rather than at the Executive Director level. _ ' i + I I i j I I I | j 4 , * Financial Intermediary Loans provide long-term resources to 0 200 400 600 800 local financial institutions, helping to develop sound finan- cial sector policies and institutions, promoting the opera- Financial Intermediary tional efficiency of those institutions, and improving the terms of credit available to enterprises and households. No loans of this type were committed during FY 2002 or FY 2001. _ I I i I I -r i, - 1-1--- i i 1 I 0 200 400 600 800 12 THE WORLD BANK ANNUAL REPORT 2002 Box 4: Adjustment Lending Commitments (in millions of U.S. dollars) Structural Adjustment _ . I i | | j g i j $ i FY2000 [ FY2001 D FY2002 M 0 600 1,200 1.800 2,400 * Structural Adjustment Loans support specific policy changes Sector Adjustment and institutional reforms. These loans require agreement on a satisfactory macroeconomic framework and policy actions that can be monitored on a specific schedule. . < , -< - = g * Sector Adjustment Loans support comprehensive policy changes and institutional reforms in major sectors. They also require agreement on a satisfactory macroeconomic framework and its 0 600 1,200 1,800 2,400 implementation, and a specific program that can be monitored. Programmatic Structural Adjustment * Programmatic Structural Adjustment Loans support governmen- Programmatic tal programs of structural and social reforms that involve con- . . tinuous, incremental policy changes and institution building through a series of loans. These loans rely on a solid foundation of completed or parallel analytic and advisory work in related .____ _____ _____ _____ __ _ areas. 0 > 600 1,200 1,800 2,400 * Special Structural and Sector Adjustment Loans are f'ast-disburs- ing loans which provide support to countries facing a sectoral Special Structural and Sector Adjustment or economy-wide crisis with a substantial structural dimension. No loans of this type were committed during FY 2001. * Debt Reduction Loans help eligible, highly-indebted member countries reduce commercial debt and debt service to a man- ageable level as part of a medium-term financing plan. IBRD I i-- 1 i~, i i d i i idid not make any commitments of this type during FY 2000- 0 600 1,200 1,800 2,400 2 * Rehabilitation Loans support government policy reform pro- Debt Reduction grams to assist the private sector where foreign exchange is required for urgent rehabilitation of key infrastructure and pro- ductive facilities. IBRD did not make any commitments of this No approval FY2000-2002 type during FY 2000-2002. 0 600 1,200 1,800 2,400 Rehabilitation j Xo approvals FY2000-2002 0 600 1,200 1,800 2,400 IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 13 currency composition of the pool. IBRD adds its lend- single currency pools continued to carry their fixed ing spread to that average cost. rate. The currency composition of multicurrency pool loans Fixed-rate Single Currency Loans is determined on the basis of a pool, which provides a A fixed-rate single currency loan product was available currency composition that is the same for all loans in fixed-rate single currency loans the pool. Pursuant to a policy established by the Exec- from 1995 to 1999 Fixed-rate single currency loans utive Directors and subject to their periodic review, at carry lending rates fixed on semi-annual rate fixing least 90% of the U.S. dollar equivalent value of the dates for amounts disbursed during the preceding six pool is in a fixed ratio of one U.S. dollar to 125 Japa- months. For the interim period from the date each dis- nese yen to one euro. bursement is made until its rate fixing date, interest accrues at the rate applicable to variable-spread loans. Single Currency Pool Loans The fixed lending rate consists of a base rate, which During FY 1997, IBRD offered borrowers the option reflects market interest rates for the applicable cur- Di nc t . t . c . rency on the rate-fixing date for the equivalent loan to elect to modiry their currency choice by converting mauiypsasredThsradcnstof() multicurrency pool loans to single currency loan terms maturity plus a spread. The spread consists of: (a) snlcurdg r formu- fIBRD's funding cost margin relative to the base rate or forgltheserloans;o(b)tarriskhepremiumgtoacompensate lation for loans with single currency pool terms is the ' same as that for multicurrency pool loans. Any fixed- IBRD for market risks it incurs in funding these loans; rate multicurrency pool loans that were converted to and (c) IBRD's standard lending spread. Table 5: Portfolio by Loan Product In milJions of US. dollars FY 2002 FY 2001 FY 2000 Percentage Percentage Percentage Principal of Total Principal of Total Principal of Total Loan Product Balance Loans Balance Loans Balance Loans Variable-Rate Multicurrency Pool Loans Outstanding $ 28,076 23% $30,258 25% $ 35,542 30% Undisbursed 2,070 6 3,177 8 4,567 10 Single Currency Pool Loans Outstanding 25,586 21 30,521 26 35,422 29 Undisbursed 78 ' 125 * 241 1 Variable-Spread Loans Outstanding 32,732 27 27,183 23 22,277 19 Undisbursed 23,128 64 25,090 66 28,486 64 Fixed-Rate Single Currency Loans Outstandinga 16,172 13 15,420 13 13,636 11 Undisbursed 3,139 9 4,844 13 8,273 18 Special Structural and Sector Adjustment Loans Outstanding 4,505 3 4,301 3 3,801 3 Undisbursed 800 2 500 1 1,000 2 Non-Standard Loans Outstanding 7,000 6 7,000 6 7,000 6 Undisbursed - - - - - - Fixed-Spread Loans Outstanding 7,017 6 3,200 3 968 1 Undisbursed 7,138 19 4,198 11 2,187 5 Other Loansb Outstanding 501 1 983 1 1,458 1 Undisbursed - - - - - - Total ** .Outstandingloans $121,589 100% $118,866 100% $120,104 100% Undisbursed loans $ 36,353 100% $ 37,934 100% $ 44,754 100% a. Includes fixed-rate single currency loans for which the rate had not yet been fixed at fiscal year-end. b. Includes loans issued prior to 1980, loans to IFC, co-financing loans, and fixed-rate multicurrency pool loans. * Indicates amounts less than 0.5%. '* May differ from the sum of individual figures due to rounding. 14 THE WORLD BANK ANNUAL REPORT 2002 Non-standard Loans Guarantees In response to the global financial crises during FY IBRD offers the three basic types of guarantees 1998 and FY 1999, IBRD approved and disbursed sev- described in Box 5. These guarantees are generally eral large loans totaling $7,000 million on non-stan- offered on loans from private investors for projects in dard single currency loan terms. These loans carry a countries eligible to borrow from IBRD. IBRD applies six-month U.S. dollar LIBOR interest rate plus a fixed the same country creditworthiness and project. evalua- spread ranging from 75 to 00 basis points and a front- tion criteria to guarantees as it applies to loans. IBRD end fee. None of these loans is eligible for waivers of has also provided guarantees of securities issued by interest or commitment charges. These loans were entities eligible for IBRD loans. issued prior to the introduction of special structural IBRD guarantees can be customized to suit varying and sector adjustment loans discussed previously. country and project circumstances. They can be tar- Table 5 presents a breakdown of IBRD's loan portfolio geted to mitigate specific risks, generally risks relating by loan product. For more information, see the Notes to political, regulatory and government performance, to Financial Statements-Note C. which the private sector is not normally in a position to absorb or manage. IBRD Standard Loan Charges and Waivers Each guarantee requires the counter-guarantee of the For most loans in its portfolio, IBRD charges a lending member government. Guarantees are priced within a rate composed of its average cost of borrowings plus a limited range to reflect the risks involved, and prepa- spread. Until July 31, 1998, that spread was 50 basis ration fees may be charged where there are excep- points. However, during FY 1999 the lending spread tional costs involved for IBRD. IBRD prices guarantees was increased to 75 basis points for new loans. Also, a consistent with the way it prices its loans. front-end fee of 100 basis points, payable for each such loan at the time it becomes effective, was intro- In exceptional cases, IBRD may offer enclave guaran- duced. In addition, most loans carry a commitment tees for loans for foreign-exchange generating projects charge of 75 basis points on undisbursed amounts. in a member country usually eligible only for credits However, the fixed-spread loans carry a commitment from IDA. These partial risk guarantees for export-ori- charge of 85 basis points for the first four years and 75 ented projects will be provided only if the project is basis points thereafter to compensate IBRD for addi- expected to generate foreign exchange outside the tional funding and refinancing risk associated with this country and IBRD determines that the country will product. have adequate foreign exchange to meet its obligations under the counter-guarantee if the guarantee is called. Waivers of a portion of interest owed by all eligible A project covered by an enclave guarantee includes borrowers are determined annually and have been in security arrangements with appropriate risk mitigation effect for each of the previous eleven fiscal years. Eli- measures, such as offshore revenue escrow accounts gibility for the partial waiver of interest is limited to and debt-service reserves acceptable to IBRD, to mini- borrowers that have made full payments of principal, mize IBRD's exposure and the risk of a call on the interest and other charges within 30 calendar days of guarantee. Fees charged for enclave guarantees are the due dates during the preceding six months, on all higher than those charged for non-enclave guaran- their loans. Waivers of a portion of the commitment tees.The commitment of enclave guarantees is initially charge owed on the undisbursed portion of loans are limited to an aggregate guaranteed amount of $300 also determined annually and have been in effect for million. As of June 30, 2002 no enclave guarantees each of the last thirteen fiscal years. All borrowers were outstanding. receive the commitment charge waiver on their loans (except special structural and sector adjustment loans IBRD's exposure at June 30, 2002 on its guarantees and other non-standard loans). Table 6 presents a (measured as their present value in terms of their first breakdown of IBRD's loan charge waivers. Further call date) are detailed in Table 7. For additional infor- details are provided in the Notes to Financial State- mation see the Notes to Financial Statements-Note C. ments-Note C. Table 7: Guarantee Exposure Table 6: Loan Charge Waivers In millions of U.S. dollars Basis points FY 2002 FY 2001 FY 2000 Interest Period Commencing Partial risk 465 473 468 Partial credit 551 501 663 FY 2003 FY 2002 FY 2001 Policy based 406 402 245 Commitment charge waivers 50 50 50 Total 1,422 1,376 1,376 Interest waiversa Old loans 5 5 15 New loans 25 25 25 Other Activities Average eligibility 97% 96% Consultation: In addition to its financial operations, IBRD provides technical assistance to its member a. On loans to eligible borrowers, countries, both in connection with, and independently IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 15 of, lending operations. There is a growing demand asset-backed securities, and futures and options con- from borrowers for strategic advice, knowledge trans- tracts pertaining to such obligations. fer, and capacity building. Such assistance includes assigning qualified professionals to survey develop- Liquidity risk arises in the general funding of IBRD's mental opportunities in member countries, analyzing activities and in the management of its financial posi- their fiscal, economic and developmental environ- tions. It includes the risk of being unable to fund its ment, assisting member countries in devising coordi- p nated development programs, appraising projects and the risk of being unable to liquidate a position in a suitable for investment and assisting member coun- tmely manner at a reasonable price. The objective of tries in improving their asset and liability management liquidity management is to ensure the availability of techniques. sufficient cash flows to meet all of IBRD's financial commitments. Research and Training: To assist its developing member As one component of liquidity management, IBRD countries, IBRD-through the World Bank Institute one componention lineiot cre nt InD and its partners-provides courses and other training maintains a $400 million line of credit with an inde- activities related to economic policy development and pendent financial institution. This facility is used to administration for governments and organizations that cover any overnight overdrafts that may occur due to work closely with IBRD. failed trades. For further details about this facility, see the Notes to Financial Statements-Note D. Trust Fund Administration: IBRD, alone or jointly with IDA, administers on behalf of donors, funds restricted Under IBRDs liquidity management policy, aggregate for specific uses. These funds are held in trust and are liquid asset holdings should be kept at or above a spec- not included in the assets of IBRD. See the Notes to ified prudential minimum. That minimum is equal to Financial Statements-Note I. the highest consecutive six months of debt service obligations for the fiscal year, plus one-half of net Investment Management: IBRD has leveraged its trea- approved loan disbursements as projected for the fis- sury management knowledge, expertise, and infra- cal year. The FY 2003 prudential minimum liquidity structure to provide investment management services level has been set at $18 billion, representing a $2.1 to several external institutions, including central banks billion decrease from that set for FY 2002. IBRD also of member countries. One of the objectives of provid- holds liquid assets over the specified minimum to pro- ing these services to central banks is to assist them in vide flexibility in timing its borrowing transactions and developing portfolio management skills. These funds to meet working capital needs. are not included in the assets of IBRD. See the Notes to Financial Statements-Note 1. Liquid assets are held in three distinct sub-portfolios: stable; operational; and discretionary, each with differ- ent risk profiles, funding, structures and performance 4. LIQUIDITY MANAGEMENT benchmarks. IBRD's liquid assets are held principally in obligations The stable portfolio is principally an investment port- of governments and other official entities, time depos- folio holding the prudential minimum level of liquid- its and other unconditional obligations of banks and ity, which is set at the beginning of each fiscal year. financial institutions, currency and interest rate swaps, The operational portfolio provides working capital for IBRD's day-to-day cash flow requirements. Figure 4: Liquid Asset Portfolio Composition (In millions of US. dollars) June 30, 2002 June 30, 2001 Stable Portfolio Stable Portfolo $20,766 $20 101 83% 83% Operational Portfolio Operational Portfolio $4,120 $4,080 17% 17% 16 THE WORID BANK ANNUAL REPORT 2002 Box 5: Guarantee Instruments * Partial risk guarantees cover debt-service defaults on a loan that may result from nonperformance of govern- ment obligations. These are defined in the contracts negotiated between the government or a government- sponsored entity and the private company responsible for implementing the project. The IBRD guarantee is limited to backing the government's obligations; the obligations of the private company contained in the project agreements are not covered and thus the private lenders assume the risk of nonperformance by the private company. * Partial credit guarantees are used for public sector projects when there is a need to extend loan maturities and guarantee specified interest or principal payments on loans to the government or its instrumentalities. This approach may be most appropriate when the lenders are not willing to accept the sovereign risk of the host govemment for a term long enough to meet the needs of the project. By guaranteeing later maturities, such partial credit guarantees help induce the market to extend the term to the maximum risk it can bear. * Policy-based guarantees are partial credit guarantees that cover a portion of debt-service on a borrowing by an eligible member country from private foreign creditors in support of agreed structural, institutional and social policies and reforms. These guarantees are an extension of partial credit guarantees for projects. The guaranteed portion of the debt-service could consist of a combination of interest and principal payments, but the actual structure is determined on a case-by-case basis. Eligibility for IBRD adjustment lending is a necessary condition for eligibility for this type of instrument. The terms of this instrument are the same as project-based partial credit guarantees. Maturity and level of fees will be standard if the guarantee is made in situations comparable to those under which a structural adjustment loan would be made; however, if the guarantee is made in connection with a special structural adjustment loan, then it will be at special struc- tural adjustment loan equivalent terms. This guarantee product was launched in FY 1999. Initially, IBRD is proceeding with a pilot program of up to $2,000 million. As of June 30, 2002, $409 million had been approved. Once the $2,000 million level is reached, the Executive Directors will review the program. The discretionary portfolio provides flexibility for the The lower returns in FY 2002 are due primarily to the execution of IBRD's borrowing program and can be lower interest rate environment in FY 2002 as com- used to take advantage of attractive market opportuni- pared to FY 2001. ties. The discretionary portfolio was gradually liqui- dated over the first half of FY 2000 and was not used 5. FUNDING RESOURCES during FY 2001 or FY 2002. Figure 4 represents Equity IBRD's liquid asset portfolio size and structure at the Total shareholders' equity as reported in IBRD's bal- end of FY 2002 and FY 2001, excluding investment Tota sharehole e0, as reporte il l- assets associated with certain other postemployment ance sheet at June 30, 2002, was $32,3h3 million benfit. A th en ofFY 002 th agregte izeof compared with $29,570 million at June 30, 2001. The benefits. At the end of FY 2002 the aggregate size of inceas fro Y 200 prmrl relcsteices the IBRD liquid asset portfolio stood at $24,886 mil- increase from FY 2002 prmarly reflects the Increase lion, an increase of $705 million from FY 2001. Of this amount, $1.3 billion of assets in the stable portfo- IBRD's equity base plays a critical role in securing its lio were managed by external firms. This portfolio is financial objectives. By enabling IBRD to absorb risk largely composed of assets denominated in U.S. dol- out of its own resources, its equity base protects share- lars. holders from a possible call on callable capital. The The performance of the liquid asset portfolio in adequacy of IBRD's equity capital is judged on the 2002 compared to FY 2001 is presented in Table 8. basis of its ability to generate future net income suffi- These returns exclude investment assets funding cer- cient to absorb plausible risks and support normal loan tain other postemployment benefits. growth, without reliance on additional shareholder capital. Table 8: Liquid Asset Portfolio Performance For management purposes, IBRD closely monitors Financial Return (%) equity as defined and utilized in the equity-to-loans FY 2002 FY 2001 ratio. Table 9 presents the composition of this mea- sure of equity at June 30, 2002 and 2001. IBRD Overall Portfolio 2.86 6.29 The equity-to-loans ratio is a summary statistic that Stable Portfolio 3.00 6.55 IBRD uses as one measure of the adequacy of its risk- Operational Portfolio 2.29 5.39 bearing capacity. IBRD also uses a stress test as a mea- sure of income-generating capacity and capital ade- quacy. See discussion in Section 6, Financial Risk Management-Managing Risk-Bearing Capacity. IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 17 Table 9: Equity Capital In millions of US. dollars June 30, 2002 June 30, 2001 Usable Capital Paid-in Capital $ 11,476 $ 11,476 Net Receivable for Maintenance of Value (936) (1,102) Restricted Paid-in Capital (2,300) (2,473) Total Usable Capital 8,240 7,901 Special Reserve 293 293 General Reserve, including prospective allocation of FY 2002/FY 2001 net income 19,132 17,841 Cumulative Translation Adjustmenta (764) (1,126) Equity used in Equity-to-Loans Ratio-Reported Basisa $ 26,901 $ 24,909 Current Value Adjustments 1,368 801 Current Value Equity used in Equity-to-Loans Ratio $ 28,269 $ 25,710 Loans and Guarantees Outstanding, net of Accumulated Provision for Loan Losses and Deferred Loan Income $117,498 $115,783 Current Value Loans and Guarantees Outstanding, net of Accumulated Provi- sion for Loan Losses and Deferred Loan Income $122,363 $119,979 Equity-to-Loans Ratio-Reported Basisa 22.90% 21.51% Current Value Equity-to-Loans Ratio 23.10% 21.43% a. Excluding cumulative translation amounts associated with the FAS 133 adjustment. As presented in Figure 5, IBRD has maintained a rela- transfer to general reserves of $1,291 million approved tively stable equity-to-loans ratio on both a reported on August 8, 2002 was included in this ratio at June basis (excluding cumulative translation adjustments 30, 2002 ($618 million-June 30, 2001). associated with the FAS 133 adjustments) and a cur- rent value basis. Capital The authorized capital of IBRD at June 30, 2002 was Figure 5: Equity-to-Loans Ratio $ 190,811 million, of which $189,505 million had 25.0% - been subscribed. Of the subscribed capital, $11,476 24.0% million had been paid in and $178,029 million was 23.0% - callable. Of the paid-in capital, $8,240 million was 22.0% Reported Basis available for lending and $3,236 million was not avail- 21.0% able for lending. The terms of payment of IBRD's cap- 20.0% ital and the restrictions on its use that are derived 9.0% 1 from the Articles and from resolutions of IBRD's 19.0% 1 Current Value Basis Board of Governors are as follows: 18.0% 17.0% (i) $2,611 million of IBRD's capital was initially paid 16.0% in gold or U.S. dollars or was converted from the 15.0% , .,- r r currency of the subscribing members into U.S. e0 r- 00 oy g sdollars. This amount may, under the Articles, be freely used by IBRD in its operations. (ii) $8,865 million of IBRD's capital was paid in the national currencies of the subscribing members. This ratio rose slightly to 22.90% at June 30, 2002,UdrteAicsthsaonisubctomi- from 21.51 % one year earlier. In accordance with the r l . a * s financial policy defining this ratio, the amount of tenance of value obligations and may be loaned 18 THE WORLD BANK ANNUAL REPORT 2002 only with the consent of the member whose cur- be required on any such call or calls to pay more than rency is involved. In accordance with such con- the unpaid balance of its capital subscription. sents, $5,201 million of this amount was being At June 30, 2002, $103,604 million (58%) of the used in IBRD's lending operations at June 30, A ue3,20,$0,64mlin(8)o h 2002 in FeBRus ary 2002,th oas of Eute3 uncalled capital was callable from the member coun- 2002. In February 2002, the Board of Executive treofIRthtaelsmmbsofheDvop Directors endorsed three new options to increase tries of IBRD that are also members of the Develop- the usability of the national currency portion of mentzAsisn Commit (Co of t e v the members' paid-in capital within the parame- Organizatlon for Economic Cooperation and D)evel- thersembers so in-th cati l and Rel tis of rhe opment (OECD). This amount was equal to 93.2% of Board of Governors referred to above. These IBRD's outstanding borrowings after swaps at June 30, options are: 2002. Table 10 sets out the capital subscriptions of those countries and the callable amounts. . IBRD may invest a member's currency in Table 10: Capital Subscriptions of DAC Members of OECD appropriate assets denominated in that mem- Countries ber's currency; * IBRD may swap a member's currency into In millions of US. dollars other currencies for investment or for making Total Capital Uncalled Portion loans; and Member Countr/ Subscription of Subscription * IBRD may use a member's currency for local currency lending to that member, either United States $ 31,965 $ 29,966 directly or through loans to IFC. Japan 15,321 14,377 Germany 8,734 8,191 All of these new options require the consent of France 8,372 7,851 the member whose currency is involved. As of United Kingdom 8,372 7,832 June 30, 2002, no member's currency has been Canada 5,404 5,069 used for any of these new options. Italy 5,404 5,069 (iii) $151,604 million of IBRD's capital may, under Netherlands 4,283 4,018 the Articles, be called only when required to Belgium 3,496 3,281 meet obligations of IBRD for funds borrowed or Spain 3,377 3,171 on loans guaranteed by it. This amount is thus not Switzerland 3,210 3,012 available for use by IBRD in making loans. Pay- Australia 2,951 2,770 ment on any such call may be made, at the option Sweden 1,806 1,696 of the particular member, either in gold, in U.S. Denmark 1,623 1,525 dollars or in the currency required to discharge Austria 1,335 1,254 the obligations of IBRD for which the call is Norway 1,204 1,132 made. Finland 1,033 971 (iv) $26,425 million of IBRD's capital is to be called New Zealand 873 821 only when required to meet obligations of IBRD Portugal 659 620 for funds borrowed or on loans guaranteed by it, Ireland 636 599 pursuant to resolutions of IBRD's Board of Gov- Greece 203 189 ernors (though such conditions are not required Luxembourg 199 190 by the Articles). Of this amount, 10% would be Total $110,460 $103,604 payable in gold or U.S. dollars and 90% in the cur- rencies of the subscribing members. While these a. See details regarding the capital subscriptions of all mem- resolutions are not legally binding on future bers of IBRD at June 30, 2002 in Financial Statements- Boards of Governors, they do record an under- Statement of Subscriptions to Capital Stock and Voting standing among members that this amount wil Power not be called for use by IBRD in its lending activ- ities or for administrative purposes. The United States is IBRD's largest shareholder. No call has ever been made on IBRD's callable capital. Under the Bretton Woods Agreements Act, the Par Any calls on unpaid subscriptions are required to be Value Modification Act and other U.S. legislation, the uniform, but the obligations of the members of IBRD Secretary of the U.S. Treasury is permitted to pay up to make payment on such calls are independent of to $7,663 million of the uncalled portion of the sub- each other. If the amount received on a call is insuffi- scription of the United States, if it were called by cient to meet the obligations of IBRD for which the IBRD, without any requirement of further congres- call is made, IBRD has the right and is bound to make sional action. The balance of the uncalled portion of further calls until the amounts received are sufficient the U.S subscription, $22,303 million, has been to meet such obligations. However, no member may authorized by the U.S. Congress but not appropriated. Further action by the U.S. Congress would be required to enable the Secretary of the Treasury to pay any por- IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 19 tion of this balance. The General Counsel of the U.S chased $756 million and called $3,323 million of its Treasury has rendered an opinion that the entire outstanding borrowings. uncalled portion of the U.S. subscription is an obliga- Use of Derivatives tion backed by the full faith and credit of the United States, notwithstanding that congressional appropria- IBRD engages in a combination of interest rate and tions have not been obtained with respect to certain currency swaps to convert direct borrowings into a portions of the subscription. For a further discussion desired interest rate structure and currency composi- of capital stock, restricted currencies, maintenance of tion as shown in Figures 6a and 6b for FY 2002. Inter- value and membership refer to the Notes to Financial est rate and currency swaps are also used for asset/ Statements-Summary of Significant Accounting and liability management purposes to match the pool of Related Policies and Note A. liabilities as closely as possible to the interest rate and currency characteristics of liquid assets and loans. Borrowings Figure 6a: Effect of Swaps on Interest Rate Structures Source of Funding Borrowings excluding swaps IBRD diversifies its sources of funding by offering its Floating securities to institutional and retail investors globally. 15% Under its Articles, IBRD may borrow only with the approval of the member in whose markets the funds are raised and the member in whose currency the bor- rowing is denominated, and only if each such member agrees that the proceeds may be exchanged for the currency of any other member without restriction. Fixed Funding Operations 85% In FY 2002, medium- and long-term debt raised directly in financial markets by IBRD amounted to Borrowings including swaps $22,050 million compared to $17,033 million in FY Floating 2001. Table 11 summarizes IBRD's funding opera- 63% - tions for FY 2002 and FY 2001. Funding raised in any given year is used for IBRD's general operations, L including loan disbursements, refinancing of maturing debt and prefunding of future lending activities. The - Fixed increase in funding in FY 2002 was primarily attribut- '141-- - 37% able to the replacement of both maturing issues and issues called. AU proceeds from new funding are ini- Figure 6b: Effect of Swaps on Currency Composition tially invested in the liquid asset portfolio until they Borrowings excluding swaps are required for IBRD's operations. Debt is allocated on a-periodic basis to the different debt pools funding jpy loans as necessary, in accordance with operating guide- 15% lines. In FY 2002, IBRD followed a strategy of selec- Euro Others tive bond issuance, composed of cost-effective private 16% 16% placements, largely pre-sold institutional public issues and retail targeted transactions. Table I 1: Funding Operations Indicators FY 2002 FY 2001 USD Total Medium- and Long-term 53% Borrowingsa (USD million) $22,050 $17,033 Average Maturityb (years) 3.3 6.5 Number of Transactions 472 232 Number of Currencies 10 9 jpyOthers a. Includes one-year notes and represents net proceeds on a Euro 6% 1% trade date basis. 10% b. Average maturity to first call date. IBRD strategically repurchases, calls or prepays its p. debt to reduce the cost of borrowings and to reduce exposure to refunding requirements in a particular year or meet other operational needs. In response to USD market conditions, during FY 2002, IBRD repur- 83% 20 THE WORLD BANK ANNUAL REPORT 2002 In FY 2002, the majority of new funding continued to thiness of IBRD borrowers, this department is respon- be initially swapped into floating rate U.S. dollars, with sible for assessing loan portfolio risk, determining the conversion to other currencies or fixed-rate funding adequacy of provisions for loan losses, and monitoring being carried out subsequently in accordance with borrowers that are vulnerable to crises in the near funding requirements. term. The Chief Credit Officer represents IBRD's Chief Financial Officer on the Operations Committee, which reviews IBRD's Country Assistance Strategies Of the borrowings outstanding after swaps at June 30, and selected planned adjustment loans. 2002, 63% was at variable rates (56% at June 30, 2001). The currency composition continues to be con- Market risks, liquidity risks and counterparty credit centrated in U.S. dollars, with its share at the end of risks in IBRD's financial operations are identified, June 30, 2002 at 83% of the borrowings portfolio, measured and monitored by the Corporate Finance after swaps (84% at June 30, 2001). This reflects Department, which is independent from IBRD's busi- IBRD borrowers' preference for U.S. dollar-denomi- ness units. The Corporate Finance Department works nated loans and the corresponding currency composi- with IBRD's financial managers, who are responsible tion of the liquid asset portfolio. for the day-to-day management of these risks, to establish and document processes that facilitate, con- A more detailed analysis of borrowings outstanding is trol and monitor risk. These processes are built on a provided in the Notes to Financial Statements- foundation of initial identification and measurement Note D. of risks by each of the business units. Under the direc- tion of the Asset/Liability Management Committee, policies and procedures for measuring and managing 6. FINANCIAL RISK MANAGEMENT such risks are formulated, approved and communi- IBRD assumes various kinds of risk in the process of cated throughout IBRD. Senior managers represented providing development banking services. Its activities on the Committee are responsible for maintaining can give rise to four major types of financial risk: sound credit assessments, addressing transaction and credit risk; market risk (interest rate and exchange product risk issues, providing an independent review rate); liquidity risk; and operating risk. The major function and monitoring the loans, investments and inherent risk to IBRD is country credit risk, or loan borrowings portfolios. portfolio risk. The processes and procedures by which IBRD man- Governance Structure ages its risk profile continually evolve as its activities change in response to market, credit, product, and The risk management govemance structure includes ohaeirdev onse Exetcuedit, p arttc- an Asset/Liability Management Committee chaired by athe Audit Tte members,rectorsi partic- the Chief Financial Officer. This committee makes ularly the Audit Committee members, periodically recommendations in the areas of financial policy, the review trends in IBRD's risk profiles and performance, recommenaatlons ~ ~ ~ ~ ~ ~ ~a wel ase anya siniicn develpment iny risk manage-.. .. adequacy and allocation of risk capital, and oversight as well as any signifcant revelopments sn .sk manage- of financial reporting. Two subcommittees that report ment policies and controls. to the Asset/Liability Management Committee are the Managing Risk-Bearing Capacity Market Risk and Currency Management Subcommit- IBRD assesses its risk-bearing capacity using a variety tee and the Credit Risk Subcommittee. The Market of metrics, including a stress test and an equity-to- Risk and Currency Management Subcommittee devel- loans ratio, to measure its income generating capacity ops and monitors the policies under which market and and capital adequacy. commercial credit risks faced by IBRD are measured, reported and managed. The subcommittee also moni- The stress test measures the level of loan grow-th tors compliance with policies governing commercial which could be supported by IBRD in the wake of a credit exposure and currency management. Specific significant credit shock, without further deterioration areas of activity include establishing guidelines for lim- in IBRD's capital position. The nonaccrual event used iting balance sheet and market risks, the use of deriva- in the stress test is an estimate of the amount of the tive instruments, and monitoring matches between loan portfolio that could enter nonaccrual status (pay- assets and their funding. The Credit Risk Subcommit- ment arrears in excess of six months) in the next three tee monitors the measurement and reporting of credit years at a 95% confidence level. risk and reviews the impact on the loan loss provision of any changes in risk ratings or movements between IBRD's equity supports its risk-bearing capacity for its the accrual and nonaccrual portfolios. lending operations. IBRD strives to immunize its risk- bearing capacity from fluctuations in interest and Country credit risk, the primary risk faced by IBRD, is exchange rates. Therefore, IBRD uses the equity-to- identified, measured and monitored by the Country loans ratio (on a current value basis) as one tool to Credit Risk Department, led by the Chief Credit monitor the sensitivity of its risk-bearing capacity to Officer. This unit is independent from IBRD's busi- movements in interest and exchange rates. One of ness units and reports to IBRD's senior management. IBRD's financial risk management objectives is to seek In addition to continuously reviewing the creditwor- to protect the equity-to-loans ratio from movements IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 21 arising from market risks. To the extent that the dura- Portfolio concentration risk, which arises when a small tion of its equity capital is matched to that of its loan group of borrowers account for a large share of loans portfolio, this ratio is protected against interest rate outstanding, is a key concern for IBRD and is carefully movements. To the extent that the currency composi- managed through a single borrower exposure limit. tion of its equity capital is matched with that of its According to an approach approved by the Executive loan portfolio, this ratio is protected from exchange Directors in 1997, the single borrower exposure limit rate movements. is set at the lower of an equitable access limit and a As presented in Figure 5 in Section 5, Funding concentration risk limit. The equitable access limit is Resources, IBRD has maintained a relatively stable equal to 10% of IBRD's subscribed capital, reserves equity-to-loans ratio on both the current value and and unallocated surplus, and the concentration limit is reported basis. estimated by stress testing IBRD's income-generating capacity and risk-bearing capital (taking into account Credit Risk not only current exposure - loans outstanding plus the present value of guarantees - but also projected expo- sure over the ensuing three- to five-year period). The IBRD's Credit Risk Department continuously reviews single borrower exposure limit is determined by the the creditworthiness of its borrowing member coun- Executive Directors each year at the time they con- tries. These reviews are taken into account in deter- sider IBRD's reserves adequacy and the allocation of mining IBRD's overall country programs and lending its net income from the preceding fiscal year. For FY operations, used to estimate the appropriate level of 2003, the concentration risk limit is $13.5 billion, provisions for loan losses, and used to assess the ade- unchanged from FY 2002. The equitable access limit quacy of IBRD's income-generating capacity and risk- is $21.0 billion. As depicted in Figure 7, IBRD's larg- bearing capital. In keeping with standard practice, est exposure (including the present value of guaran- probable losses inherent in the portfolio due to coun- tees) to a single borrowing country was $11.9 billion try credit risk are covered by the accumulated provi- at June 30, 2002. sion for loan losses, while unexpected losses due to country credit risk are covered by income-generating Figure 7: an rikbern capta. Top Eight Country Exposures at June 30, 2002 capacity and risk-bearing capital. (in billions of US.dollars) The credit quality of the nonaccrual portfolio improved in FY 2002, but there was a further deterio- 16 ration in the credit quality of the accrual portfolio. Exposure Limit ($13.5 billon) The Republic of Congo and C6te d'Ivoire cleared all 14 overdue payments to IBRD, and all loans to these bor- 12 rowers were restored to accrual status. In addition, as 10 an exception to IBRD practice, all overdues of the Federal Republic of Yugoslavia were cleared through 8- *** consolidation loans. The loan loss provision for FY 6 2002 also reflects the clearance of all overdue pay- 4 ments from the Democratic Republic of Congo on 4 July 3, 2002 and from the Syrian Arab Republic on 2 July 1, 2002. 0 . l - In the case of Republic of Congo, C6te d'lvoire, and e ° the Democratic Republic of Congo, the clearance of u m arrears was accomplished using bridge financing pro- vided by an international financial institution. On the same day that arrears of the respective countries were Since the current exposure data presented are at a cleared, IDA disbursed development credits to those point in time, evaluating these exposures relative to countries in support of the authorities' economic the limit requires consideration of the repayment pro- reform and poverty reduction program. Some or all of files of existing loans, as well as disbursement profiles the proceeds of these development credits were used and projected new loans and guarantees. to repay the bridge financing. The development cred- its were funded by IDA resources other than transfers Overdue and Non-performing Loans from IBRD. Taking developments in both the nonac- It is IBRD's policy that if a payment of principal, crual and accrual portfolios into account, the provi- interest or other charges on an IBRD loan or IDA sioning requirements were reduced by $15 million in credit becomes 30 days overdue, no new loans to that FY 2002. However, without the impact of the signifi- member country, or to any other borrower in that cant events in the nonaccrual portfolio noted above, country, will be presented to the Executive Directors provisioning requirements would have increased con- for approval, nor will any previously approved loan be siderably in FY 2002. All loans to Bosnia and Herze- signed, until payment for all amounts 30 days overdue govina were also restored to accrual status in FY 2002. or longer has been received. In addition, if such pay- 22 THE WORLD BANK ANNUAL REPORT 2002 ment becomes 60 days overdue, disbursements on all criteria limited eligibility for such treatment to a coun- loans to or guaranteed by that member country are try: that has emerged from a current or former mem- suspended until all overdue amounts have been paid. ber of IBRD; that is assuming responsibility for a share Where the member country is not the borrower, the of the debt of such member; that because of a major time period for suspension of the approval and signing armed conflict in its territory involving extensive of new loans to or guaranteed by the member country destruction of physical assets, has limited creditwor- is 45 days and the time period for suspension of dis- thiness for servicing the debt it is assuming; and for bursements is 60 days. It is the policy of IBRD to place which a rescheduling/refinancing would result in a sig- all loans made to or guaranteed by a member of IBRD nificant improvement in its repayment capacity, if in nonaccrual status, if principal, interest or other appropriate supporting measures are taken. IBRD charges on any such loan are overdue by more than six does not believe that any other borrowers with loans months, unless IBRD determines that the overdue in nonaccrual status currently meet these eligibility amount will be collected in the immediate future. criteria. IBRD maintains an accumulated provision for loan losses to recognize the probable losses inherent in Commercial Credit Risk both the accrual and nonaccrual portfolios. The meth- IBRD's commercial credit risk is concentrated in odology for determining the accumulated provision investments in debt instruments issued by sovereign for loan losses is discussed in Section 7, Critical governments, agencies, banks and corporate entities. Accounting Policies. The majority of these investments are in AAA and AA In 1991, the Executive Directors adopted a policy to rated instruments. assist members with protracted arrears to IBRD to In the normal course of its business, IBRD utilizes var- mobilize sufficient resources to clear their arrears and ious derivatives and foreign exchange financial instru- to support a sustainable growth-oriented adjustment ments to meet the financial needs of its borrowers, to program over the medium term. Under this policy, generate income through its investment activities and IBRD will develop a lending strategy and will,process to manage its exposure to fluctuations in interest and loans, but not sign or disburse such loans, during a pre- currency rates. clearance performance period with respect to mem- bers that: (a) agree to and implement a medium-term Derivative and foreign exchange transactions involve growth-oriented structural adjustment program credit risk. The effective management of credit risk is endorsed by IBRD; (b) undertake a stabilization pro- vital to the success of IBRD's funding, investment and gram, if necessary, endorsed, or financially supported, asset/liability management activities. The monitoring by the International Monetary Fund; (c) agree to a and managing of these risks is a continuous process financing plan to clear all arrears to IBRD and other due to changing market environments. multilateral creditors in the context of a medium-term IBRD controls the credit risk arising from derivatives structural adjustment program; and (d) make debt- and foreign exchange transactions through its credit service payments as they fall due on IBRD loans dur- approval process, the use of collateral agreements and ing the performance period. The signing, effectiveness risk limits, and monitoring procedures. The credit and disbursement of such loans will not take place approval process involves evaluating counterparty until the member's arrears to IBRD have been fully creditworthiness, assigning credit limits and determin- cleared. ing the risk profile of specific transactions. Credit lim- On May 8, 2001, based on a precedent established in its are calculated and monitored on the basis of 1975 after Bangladesh became independent from potential exposures taking into consideration current Pakistan, and followed with respect to Bosnia and market values, estimates of potential future move- Herzegovina in 1996, IBRD's Executive Directors ments in those values and collateral agreements with authorized IBRD to enter into an agreement with the counterparties. If there is a collateral agreement with Federal Republic of Yugoslavia (FRY) with respect to a the counterparty to reduce credit risk, then the plan for the clearance of arrears under loans to the amount of collateral obtained is based on the credit former Socialist Federal Republic of Yugoslavia for rating of the counterparty. Collateral held includes which FRY has accepted liability. Under the arrears cash and government securities. clearance plan, FRY's principal and interest arrears IBRD treats the credit risk exposure as the replace- were consolidated into six new IBRD loans in January ment cost of the derivative or foreign exchange prod- 2002. See the Notes to Financial Statements-Note C uct. This is also referred to as replacement risk or the for additional information. mark-to-market exposure amount. While contractual It is IBRD's practice not to reschedule interest or prin- principal amount is the most commonly used volume cipal payments on its loans or participate in debt measure in the derivative and foreign exchange mar- rescheduling agreements with respect to its loans kets, it is not a measure of credit or market risk. IBRD's treatment of FRY is an exception to that prac- Mark-to-market exposure is a measure, at a point in tice, based on criteria approved by the Executive time, of the value of a derivative or foreign exchange Directors in connection with the financial assistance contract in the open market. When the mark-to-mar- package for Bosnia and Herzegovina in 1996. These IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 23 ket is positive, it indicates the counterparty owes sensitivity characteristics of the portfolio of liabilities IBRD and, therefore, creates an exposure for IBRD. supporting each lending product in accordance with When the mark-to-market is negative, IBRD owes the the particular requirements for that product and counterparty and does not have replacement risk. within prescribed risk parameters. The current value When IBRD has more than one transaction outstand- iinformation is used in the asset/liability management ing with a counterparty, and the parties have entered process. into a master derivatives agreement which contains Table 13 details the current value information of each legally enforceable close-out netting provisions, the loan product, the liquid asset portfolio, and the debt "net" mark-to-market exposure represents the netting allocated to fund these assets. of the positive and negative exposures with the same Use of Derivatives counterparty. If this net mark-to-market is negative, then IBRD's exposure to the counterparty is consid- As part of its asset/liability management process, ered to be zero. For the contractual value, notional IBRD employs derivatives to manage and align the amounts and related credit risk exposure amounts by characteristics of its assets and liabilities. IBRD uses instrument, see the Notes to Financial Statements- derivative instruments to adjust the interest rate Note F. repricing characteristics of specific balance sheet assets and liabilities, or groups of assets and liabilities with Table 12 provides details of IBRD's estimated credit similar repricing characteristics, and to modify the exposure on its investments and swaps, net of collat- currency composition of net assets and liabilities. eral held, by counterparty rating category. Interest Rate Risk The increase in the proportion of AAA and A rated There are two potential sources of interest rate risk to investments, compared to the prior year, is mainly due IBRD. The first is the interest rate sensitivity associ- to the increase of investments in obligations of AAA ated with the net spread between the rate IBRD earns rated agencies and official entities, and the downgrad- on its assets and the cost of borrowings, which fund ing of Japanese government securities during FY 2002. those assets. The second is the interest rate sensitivity After the effects of netting arrangements, the swap of the income earned from funding a portion of IBRD credit exposure of $1,534 million is offset by collateral assets with equity. The borrowing cost pass-through of $756 million, which results in a total net swap formulation incorporated in the lending rates charged exposure of $778 million. on most of IBRD's existing loans has traditionally Market Risk helped limit the interest rate sensitivity of the net IBRD faces risks which result from market move- spread earnings on its loan portfolio. Such cost pass- IBRD ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~thog loans currntl accoun forul approximatelyve ments, primarily interest and exchange rates. In com- 71% of the existing outrstandilount for approximately parison to country credit risk, IBRD's exposure to th e of FY 2001). Alcst pass-th oloans, market risks is small. IBRD has an integrated asset/ia- the end of FY 2001) All cost pass-through loans, bility management framework to flexibly assess and lncludang single currency and multcurrency pool hedge market risks associated with the characteristics ., , . . . . of the products in IBRD's portfolios. pose some residual interest rate risk, given the six month lag inherent in the lending rate calculation. Asset/Liability Management Since pool loan terms are no longer available for new Aheobjectiveofasset/L iability man commitments, this risk will diminish as the existing The objective of asset/liability management for IBRD lanmaue is to ensure adequate funding for each product at the loans mature. most attractive available cost, and to manage the cur- rency composition, maturity profile and interest rate Table 12: Credit Exposure by Counterparty Rating In millions of US. dollars At June 30, 2002 At June 30, 2001 At June 30, 2000 Investments Agencies, Net Total Exposure Total Exposure Total Exposure Counterparty Banks & Swap on Investments % of on Investments % of on Investments % of Rating Sovereigns Corporates Exposure and Swaps Total and Swaps Total and Swaps Total AAA 490 10,536 191 11,217 47 $ 9,225 39 $12,307 49 AA 940 7,746 567 9,253 38 13,527 56 10,917 44 A 1,277 2,240 20 3,537 15 1,169 5 1,802 7 Total 2,707 20,522 778 24,007 100 $23,921 100 $25,026 100 24 THE WORLD BANK ANNUAL REPORT 2002 Table 13: Financial Instrument Portfolios In millions of US. dollars At June 30, 2002 At June 30, 2001 Current Current Carrying Contractual Value Carrying Contractual Value Value Yield Mark Value Yield Mark Loansa $121,589 5.06% $4,865 $118,866 6.35% $4,196 Variable-Rate Multicurrency Pool Loans 28,076 5.03 1,766 30,258 5.07 1,567 Single Currency Pool Loansb 25,585 8.12 1,987 30,492 8.61 2,209 Variable-Spread Loans c 33,031 2.44 54 27,614 4.93 33 Fixed-Rate Single Currency Loans 15,873 6.59 969 14,989 6.69 337 Nonstandard Single Currency Loansd 11,505 4.22 15 11,30] 6.89 18 Fixed-Spread Loans 7,017 4.00 57 3,200 4.91 9 OtherFixed Rate Loans 502 7.86 17 1,012 8.26 23 Liquid Asset Portfolioe, f $24,886 2.11%/o $ 24,181 4.33% Borrowings (including swaps)e $114,261 3.61% $3,499 $114,850 5.32% $3,397 Variable-Rate Multicurrency Pools 17,875 4.09 1,780 19,150 4.55 1,510 Single Currency Pools 16,996 7.03 1,260 20,635 7.76 1,385 Variable-Spread 22,106 1.96 (229) 21,968 4.48 (187) Fixed-Rate 13,727 5.83 774 12,958 6.16 221 Nonstandard Single.Currency 11,916 1.79 (74) 11,390 4.43 (59) Fixed-Spread 5,055 3.13 (85) 1,694 4.83 (9) Other Debtg 26,586 2.27 73 27,055 4.74 536 a. Contractual yield is presented before the application of interest waivers. b. Excludes fixed-rate single currency pool loans, which have been classified in other fixed-rate loans. c. Includes fixed-rate single currency loans for which the rate had not yet been fixed at fiscal year-end. d. Includes Special Structural and Sector Adjustment Loans. e. Carrying amounts and contractual yields are on a basis which includes accrued interest and any unamortized amounts, but does not include the effects of applying FAS 133. f The liquid asset portfolio is carried and reported at market value and excludes investment assets associated with certain other postemployment benefits. g Includes amounts not yet allocated at June 30, 2002 and June 30, 2001. Another potential risk arises because the cost pass- $5.4 billion in FY 2015. Strategies for managing this through currency pool products have traditionally risk include changing the rate fixity of the over-funded been funded with a large share of medium- and long- portion of the debt from fixed to floating rates beyond term fixed-rate debt, to provide the borrowers with a 2010 through the use of forward starting swaps. IBRD reasonably stable interest basis. Given that the cumu- has begun executing these swaps and to date has paid lative impact of interest rate changes over time has $105 million since FY 2000. IBRD expects these for- resulted in a decline in the level of interest rates, the ward starting swaps to be transacted in a phased man- cost of these historical fixed-rate borrowings in the ner over the next three years. The present value of the multicurrency pool and the single currency pools is remaining over-funded portion of the above market currently considerably higher than IBRD's new bor- debt is approximately $277 million as of June 30, rowing costs. The amount of debt allocated to the 2002. The loss attributable to the combined position multicurrency debt pool will exceed the balance of will be passed as a rate adjustment to the multicur- the multicurrency loan pool after FY 2010. The debt rency pool loans. which funds these loans have maturities that extend Interest rate risk on non-cost pass-through products, beyond those of the loans and presents a risk of loss to which currently account for 29% of the existing loan IBRD because this debt carries fixed interest rates. portfolio (26% at the end of FY 2001) is managed by Over-funding reaches a maximum of approximately p IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 25 using interest rate swaps to closely align the rate sensi- processing, settlement systems and procedures and the tivity characteristics of the loan portfolio with those of execution of legal, fiduciary and agency responsibili- their underlying funding. As the portfolio of fixed- ties. IBRD, like all financial institutions, is exposed to spread loans increases, the proportion of non-cost many types of operating risks. IBRD attempts to miti- pass-though products will grow. The interest rate risk gate operating risk by maintaining a system of internal on IBRD's liquid portfolio is managed within specified controls that is designed to keep operating risk at duration-mismatch limits and is further limited by appropriate levels in view of the financial strength of stop-loss limits. IBRD and the characteristics of the activities and mar- kets in which IBRD operates. In the past, IBRD has Becaus equt f apportion of stnding loans, suffered certain minor financial losses from operating IBRD's ilevel of operating incomeiest to me- risk and while it maintains an adequate system of ments n the level of nominal interest rates. in gen internal controls, there can be no absolute assurance eral, lower nominal interest rates result in lower that IBRD will not suffer such losses in the future. lending rates which, in tum, reduce the nominal earn- ings on IBRD's equity. IBRD uses the CoSoa control framework and a self- assessment methodology to evaluate the effectiveness Interest rate risk also arises from a variety of other fac- of ise inte al cools or fiancal reportin,ndsi tors, including differences in the timing between the has anton-goinrogrm fin pancileptorass allmao contractual maturity or repricing of IBRD's assets, na- busine ungit. protamins pa attestato report bilities and derivative financial instruments. On float- frmits exteRn audit s at a sstion that, ing rate assets and liabilities, IBRD is exposed from its external auditors that IBRD's assertion that, timing rate mathets betwn theID r-Set dteosea ton ias of June 30 of each fiscal year, its system of internal tAing matches b nt reseT datesaon its control over its external financial reporting meets the flpoa et oing ratemreceivable s mandpayabhes, T mI t e it . criteria for effective internal control over external exposure to these timing mismatches, 11RD has devel- financial reporting as described in COSO, is fairly oped a framework to analyze and assess the mismatch stte inalmtra.epcs risk and, during FY 2002, IBRD executed some over- stated m all material respects. lay interest rate swaps to reduce this mismatch risk. Economic and Monetary Union in Europe Exchange Rate Risk Since January 1, 1999, in the normal course of busi- In order to minimize exchange rate risk in a multicur- ness as a multicurrency organization, IBRD has been rency environment, IBRD matches its borrowing obli- conducting euro-denominated transactions in paying gations in any one currency (after swap activities) with and receiving, investments, bond issuance, loan dis- assets in the same currency, as prescribed by the Arti- bursements, loan billing and new lending commit- cles. In addition, IBRD's policy is to minimize the ments. exchange rate sensitivity of its equity-to-loans ratio. It IBRD adopted a gradual approach to redenominate carries out this policy by undertaking currency conver- national currency unit balance sheet items and IBRD- sions periodically to align the currency composition of administered donor trust funds to euro during the its equity to that of its outstanding loans. This policy is transition period, before their automatic conversion to designed to minimize the impact of market rate fluc- euro on January 1, 2002. tuations on the equity-to-loans ratio, thereby preserv- ing IBRD's ability to better absorb potential losses As of June 30, 2001, the accounting records for the from arrears regardless of the market environment. investments and borrowings portfolios had been rede- nominated. All remaining accounting records were Figure 8 presents the currency composition of signifi- redenominated as of January 1, 2002. cant balance sheet components (net of swaps) at the end of FY 2002 and FY 2001. Operating Risk a. In 1992, the Committee of Sponsoring Organizations of Operating risk is the potential for loss arising from the Treadway Commission (COSO) issued its Internal Con- internal activities or external events caused by break- trol-Integrated Framework, which provided a common defini- downs in information, communication, physical safe- tion of internal control and guidance on judging its guards, business continuity, supervision, transaction effectiveness. 26 THE WORLD BANK ANNUAL REPORT 2002 Figure 8: Relative Currency Composition of Significant Balance Sheet Components At June 30, 2002 51%/ Others 2% 3% JY 1% EUR 0 :8%.. 2% USD 6 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 1 00%5/ Assets Liabilities & Equity * Loans 81% E5 Borrowings&Other 79% I Investnents & Other 19% Ea Equity 21% 100% 100% At June 30, 2001 1% Others 2% 2% 1% 2% EUR :7%Si 12% USD 65% .16%1.. / 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Assets Liabilities & Equity * Loans 82% E Borrowings & Other 80% E3 Investnents &Other 18% El Equity 20% I100% 100% IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 27 7. CRITICAL ACCOUNTING POLICIES IBRD's financial position as reported in the balance sheet. The Notes to IBRD's financial statements contain a summary of IBRD's significant accounting policies. IBRD believes its estimates of fair value are reasonable The following is a description of those accounting pol- given its processes for obtaining external prices and icies which involve significant management judgments parameters; ensuring that models are reviewed and that are difficult, complex or subjective and relate to validated both internally and externally; and applying matters that are inherently uncertain. its approach consistently from period to period. Provision for Loan Losses IBRD's accumulated provision for loan losses reflects 8. RESULTS OF OPERATIONS probable losses in its nonaccrual and accrual portfo- To a large extent, the change in IBRD's net income lios. Management determines the appropriate level of was affected by changes in the credit standing of bor- accumulated provisions for loan losses on a borrower- rowing countries and the interest rate environment. by-borrower basis for both the nonaccrual and accrual portfolios at the balance sheet date. The appropriate Interest Rate Environment level of provisions for each borrower is estimated as During FY 2002, interest rates for most currencies the sum product of its expected default frequency (or were significantly lower than those in FY 2001. In probability of default to IBRD), its loans outstanding addition, interest rates declined in both years. The (plus the present value of guarantees), and the U.S. dollar short-term interest rates (six-month assumed severity of loss given default. LIBOR) depicted in Figure 9 illustrate these trends. Judgments on borrowers' expected default frequencies and severities are based on many factors such as assess- Figure 9: LIBOR Interest Rates - U.S. Dollar ments of borrowers' past and prospective economic 7.5 performance and economic policy framework. IBRD periodically reviews such factors and reassesses the 7.0 adequacy of the accumulated provision for loan losses 6.5 accordingly. Actual losses may differ from expected 6 losses due to unforeseen changes in any of the factors 6.0 that affect borrowers' creditworthiness. 5.5 The accumulated provision for loan losses is separately 5.0 reported in the balance sheet as a deduction from , 4.5 IBRD's total loans. Increases or decreases in the accu- 4.0 mulated provision for loan losses are reported in the Statement of Income as provision for loan losses. 3.5 Additional information on IBRD's loan loss provision- 3.0 FY 2002 ing policy and the status of nonaccrual loans can be 2.5 - found in the Notes to Financial Statements-Summary 2.0 of Significant Accounting and Related Policies, and 1.5 Note C. 1 e 0 "' Fair Value of Financial Instruments Under the current value basis of reporting, IBRD car- Operating Income ries all of its financial assets and liabilities at estimated IBRD's operating income can be seen as broadly com- values. Under the reported basis, IBRD carries its investments and derivatives, as defined by FAS 133, pnsing a spread on earning assets, plus the contribu- on a fair value basis. When possible, fair value is deter- tion of equity, less provisions for loan losses and mined by quoted market prices. If quoted market administrative expenses. Table 14 shows a breakdown prices are not available, then fair value is based on dis- of income, net of funding costs. counted cash flow models using market estimates of FY 2002 versus FY 2001 cash flows and discount rates. FY 2002 operating income was $1,924 million, $780 All the financial models used for input to IBRD's million higher than in FY 2001. The majority of this financial statements are subject to both internal and increase was due to a reduction in the provision for external verification and review by qualified person- loan loss expense of $691 million, as arrears clearances nel. These models use market sourced inputs, such as from borrowers in the nonaccrual portfolio more than interest rate yield curves, exchange rates, and option offset a further deterioration in the credit quality of volatilities. Selection of these inputs may involve some judgment. Imprecision in estimating these factors, and the accrual portfolio. (See Notes to Financial State- changes in assumptions, can impact net income and ments - Note C). 28 THE WORLD BANK ANNUAL REPORT 2002 Table 14: Net Income In millions of US. dollars FY 2002 FY 2001 FY 2000 Loan interest income, net of funding costs Debt funded $ 848 $ 509 $ 678 Equity funded 1,714 1,871 1,771 Total loan interest income, net of funding costs 2,562 2,380 2,449 Other loan income 98 11 49 Loan loss provision 15 (676) 166 Investment income, net of funding costs 32 140 116 Net noninterest expense (783) (711) (789) Operating Income 1,924 1,144 1,991 Effects of applying FAS 133 854 345 Net Income-Reported Basis $2,778 $1,489 $1,991 FY 2001 versus FY 2000 * Other loan income increased by $87 million due .Y 2001 oprtnnoews114mprimarily to the interest income on loans to three FY 2001 operating income was $1,144 millilon, $847 conre whc wer retrdt cra ttsi million lower than in FY 2000. The majority of this countries wmch were restored to accrual status m change was due to the increase of $842 million in the provision for loan loss expense. This increase in the FY 2001 versus FY 2000 provision reflects a reassessment of the probable losses inherent in the accruing portfolio. The factors that * Loan Interest nmcome net of funding costs cotrbue to th inres in provisioning reqire decreased by $69 million primarily due to the contriutedothencreaeinrovisio g r - mhigher interest waiver rate on old loans in FY ments were the movement of loans made to or guaran- 2001. teed by two borrowers into nonaccrual status, and a net deterioration in the creditworthiness of the accrual * Investment income, net of funding costs, portfolio. increased by $24 million due primarily to changes in U.S. dollar short-term interest rates. The aver- Net Interest Income age duration of the investment portfolio is about three months. In FY 2001, mark-to-market gains FY 2 002 versus FY 2 001 on the investment portfolio were higher than * Loan interest income, net of funding costs, those of FY 2000 because interest rates declined increased $182 million due primarily to the inter- more during the fourth quarter of FY 2001 than est rate repricing lag inherent in the cost pass- in the same period of FY 2000. Borrowings fund- through loans, and the decrease in the waiver rate ing these investments are not marked to market. on old loans. While interest rates in FY 2002 were significantly lower than those in FY 2001, as * Other loan income decreased by $38 million due shown in figure 9, the decline was reflected more to the effects of loans to two countries being rapidly in the cost of borrowings than in the placed in nonaccrual status in FY 2001 as well as return on loans. a reduction In commitment fee icome. * Investment income net of funding costs decreased Net Noninterest Expense by $108 million in FY 2002 due primarily to The main components of net noninterest expense are changes in U.S. dollar short-term interest rates. presented in Table 15. The average duration of the investment portfolio is about three months. In FY 2001, the mark-to- FY 2002 versus FY 2001 market gains on investments were higher than in Net noninterest expense increased by $72 million due FY 2002 due to the sharper decline in U.S. dollar primarily to a reduction in the actuarially determined interesl rates in the fourth quarter of FY 2001 as amount of pension income in FY 2002. In addition, compared to the same period in FY 2002. Bor- total gross administrative expenses were $24 million rowings funding these investments are not higher in FY 2002 than in FY 2001. marked to market. IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 29 Table 15: Net Noninterest Expense In millions of US. dollars FY 2002 FY 2001 FY 2000 Gross Administrative Expenses Staff Costs $ 439 $ 474 $ 489 Consultant Fees 86 62 88 Operational Travel 91 77 92 Other Expenses 436 415 408 Total Gross Administrative Expenses 1,052 1,028 1,077 Less: Contribution to Special Programs 176 147 126 Total Net Administrative Expenses 876 881 951 Contribution to Special Programs 176 147 126 Service Fee Revenues (155) (146) (118) Income from Staff Retirement Plan (93) (155) (166) Net Other Income (21) (16) (4) Total Net Noninterest Expense $ 783 $ 711 $ 789 FY 2001 versus FY 2000 FAS 133 Adjustments Net noninterest expense decreased by $78 million. As discussed earlier, IBRD has marked all derivative Overall gross administrative expenses decreased by instruments, as defined by FAS 133, to market. IBRD $49 million (see Notes to Financial Statements-Note generally uses derivatives to modify fixed U.S. dollar H) due primarily to a decrease in the overall adminis- and non-U.S. dollar borrowings to variable U.S. dollar trative expense budget, along with a slightly larger borrowings. When IBRD borrows in minor curren- share of the total costs incurred being allocated to cies, it immediately swaps the borrowings into major IDA, based on an agreed-upon cost sharing formula currencies to take advantage of the arbitrage opportu- which considers certain operational volume indicators. nities which may exist. During FY 2002, the effects of The remaining decrease in net noninterest resulted applying FAS 133 were $854 million compared to primarily from an increase in service fee revenues. $345 million for FY 2001. This increase in the effects of applying FAS 133 was due primarily to a significant drop in the interest rates for certain minor currencies in FY 2002 as compared to FY 2001. 30 THE WORLD BANK ANNUAL REPORT 2002 GLOSSARY OF TERMS Asset-backed Securities: Asset-backed securities are Old Loans: Loans for which the invitation to negoti- instruments whose cash flow is based on the cash ate was issued prior to July 31, 1998. flows of a pool of underlying assets managed by a Options: Options are contracts that allow the holder trust. of the option the right, but not the obligation, to pur- Cross-Currency Interest Rate Swaps: Cross-currency chase or sell a financial instrument at a specified price interest rate swaps are currency swaps where one set within a specified period of time from or to the seller of cash flows reflects a fixed rate of interest and the of the option. The purchaser of an option pays a pre- other reflects a floating rate of interest. mium at the outset to the seller of the option, who then bears the risk of an unfavorable change in the Currency Swaps: Currency swaps are agreements . rc f the fiacl Insrmn uderynh between two parties to exchange cash flows denomi- option. nated in different currencies at one or more certain times in the future. The cash flows are based on a pre- Repurchase and Resale Agreements and Securities determined formula reflecting rates of interest and an Loans: Repurchase agreements are contracts under exchange of principal. which a party sells securities and simultaneously agrees to repurchase the same securities at a specified Equity-to-Loans Ratio: This ratio is the sum of usable ftree t aprcfxed ie. The rse ofithis atransac capitalplus th specia and gneral rserves,cumula future date at a fixed price. The reverse of this transac- cilutsclderree a tion is called a resale agreement. A resale agreement tive translation adjustment (excluding amounts associ- involves the purchase of securities with a simulta- ated with the FAS 133 adjustment) and the proposed neous agreement to sell back the same securities at a transfer from unallocated net income to general stated price on a stated date. Securities loans are con- reserves divided by the sum of loans outstanding the tracts under which securities are lent for a specified present value of guarantees, net of the accumulated period of time at a fixed price. provision for loan losses and deferred loan income. Return on Equity: This return is computed as net Forward Interest Rate Swaps: A forward interest rate incom div y: The aetrag equitydaasnce swap is an agreement under which the cash flow the year. exchanges of the underlying interest rate swaps would e year. begin to take effect from a specified date. Risk-bearing Capacity: The ability to absorb risks in the balance sheet while continuing normal operations Futures and Forwards: Futures and forward contracts wihu hain tocl.ncllbecptl are contracts for delivery of securities or money mar- ket instruments in which the seller agrees to make Short Sales: Short sales are sales of securities not held delivery at a specified future date of a specified instru- in the seller's portfolio at the time of the sale. The ment at a specified price or yield. Futures contracts are seller must purchase the security at a later date and traded on U.S. and international regulated exchanges. bears the risk that the market value of the security will G emteobliga- move adversely between the time of the sale and the Government and Agency Obligations: These obg- time the security must be delivered. tions include marketable bonds, notes and other obli- gations issued by governments. Statutory Lending Limit: Under IBRD's Articles of Agreement, as applied, the total amount outstanding Interest Rate Swaps: Interest rate- of loans, participations in loans, and callable guaran- ments involving the exchange of periodic interest pay- tes 'a no exee theu ofsucrbdaptl ments of differing character, based on an underlying reserves and surplus. notional principal amount for a specified time. Swaptions: A swaption is an option that gives the holder the right to enter into an interest rate or cur- Maintenance of Value: Agreements with members rency swap at a certain future date. provide for the maintenance of the value, from the Time Deposits: Time deposits include certificates of time of subscription, of certain restricted currencies. deposit, bankers' acceptances, and other obligations Additional payments to (or from) IBRD are required issued or unconditionally guaranteed by banks and in the event the par value of the currency is reduced other financial institutions. (or increased) to a significant extent, in the opinion of IBRD. Net Disbursements: Loan disbursements net of repayments and prepayments. New Loans: Loans for which the invitation to negoti- ate was issued on or after July 31, 1998. IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2002 31 32 THE WORLD BANK ANNUAL REPORT 2002 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT FINANCIAL STATEMENTS JUNE 30, 2002 Management's Assertion Regarding Effectiveness of Internal Controls Over External Financial Reporting 35 Report of Independent Accountants on Management's Assertion Regarding Effectiveness of Internal Controls Over External Financial Reporting 36 Report of Independent Accountants 37 Balance Sheet 38 Statement of Income 40 Statement of Comprehensive Income 41 Statement of Changes in Retained Earnings 41 Statement of Cash Flows 42 Summaty Statement of Loans 44 Statement of Subscriptions to Capital Stock and Voting Power 4 7 Notes to Financial Statements 51 33 MANAGEMENT'S ASSERTION REGARDING EFFECTIVENESS OF INTERNAL CONTROLS OVER EXTERNAL FINANCIAL REPORTING The World Bank 1818 H Street N.W. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRuCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Addres: INDEVAS Management's Assertion Regarding Effectiveness of Internal Controls Over External Financial Reporting July 31, 2002 The International Bank for Reconstruction and Development (IBRD) maintains a system of internal control over external financial reporting, which is designed to provide reasonable assurance to management and the board of directors regarding the preparation of reliable published financial statements. The system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified. Even an effective internal control system, no matter how well designed, has inherent limitations - including the possibility of the circumvention or overriding of controls - and therefore can provide only reasonable assurance with respect to external financial statement preparation. Further, because of changes in conditions, internal control system effectiveness may vary over time. IBRD assessed its internal control system as of June 30, 2002 in relation to criteria for effective internal control over external financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, IBRD believes that, as of June 30, 2002, its system of internal control over external financial reporting met those criteria. 9l3 James D. Wolfensohn President effrey A. Goldstein ary L. Perlin Managing Director Senior Vice President and Chief Financial Officer Fayezul H. Choudhury Charles A. McDono gh Vice President and Controller Director, Accounting D partment IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 35 REPORT OF INDEPENDENT ACCOUNTANTS ON MANAGE- MENT'S ASSERTION REGARDING EFFECTIVENESS OF INTERNAL CONTROLS OVER EXTERNAL FINANCIAL REPORTING DeloitteTouche Tohrnatsu (international Firm) Suite 500 555 1 2th Street, N.W. Washington, DC 20004-1207 Tel: (202) 879-5600 Fax: (202) 879-5309 WWWW.us.deloitte.corn D eloitte Touche Tohmatsu (International Firm) President and Board of Governors Intemational Bank for Reconstruction and Development We have examined management's assertion, included in the accompanying "Management's Assertion Regarding Effectiveness of Internal Control Over Extemal Financial Reporting", that, as of June 30, 2002, the International Bank for Reconstruction and Development met the criteria for effective intemal control over extemal financial reporting described in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management is responsible for maintaining effective control over external financial reporting. Our responsibility is to express an opinion on mnanagement's assertion based on our examination. Our examination was made in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of intemal control over extemal financial reporting, testing, and evaluating the design and operating effectiveness of internal control over external financial reporting, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Because of inherent limitations in any intemal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of intemal control over external financial reporting to future periods are subject to the risk that intemal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies may deteriorate. In our opinion, management's assertion that, as of June 30, 2002, the International Bank for Reconstruction and Development met the criteria for effective intemal control over external financial reporting described in "Intemal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission is fairly stated, in all material respects. 1)44e fe T14t (4 4 p0 ) July 31, 2002 36 THE WORLD BANK ANNUAL REPORT 2002 REPORT OF INDEPENDENT ACCOUNTANTS DeloitteToucheTohmatsu (international Firm) Suite 500 555 12th Street, N.W. Washington, DC 20004-1207 Tel: (202) 879-5600 Fax: (202) 879-5309 www.us.deloitte.con Deloitte Touche Tohmatsu (International Firm) President and Board of Governors International Bank for Reconstruction and Development We have audited the accompanying balance sheets of the International Bank for Reconstruction and Development as of June 30, 2002 and 2001, including the summary statement of loans and the statement of subscriptions to capital stock and voting power as of June 30, 2002, and the related statements of income, comprehensive income, changes in retained earnings, and cash flows for each of the three fiscal years in the period ended June 30, 2002. These financial statements are the responsibility of the International Bank for Reconstruction and Development's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and Intemational Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the International Bank for Reconstruction and Development as of June 30, 2002 and 2001, and the results of its operations and its cash flows for each of the three fiscal years in the period ended June 30, 2002 in conformity with accounting principles generally accepted in the United States of America and International Accounting Standards. -0iL*e -C eW444 t c MtjCXj f;) August 8, 2002 IBRD FINANCIAL STA1EMENTS: JUNE 30, 2002 37 BALANCE SHEET June 30, 2002 and June 30, 2001 Expressed in millions of US. dollars 2002 2001 Assets Due from Banks Unrestricted currencies $ 415 $ 50 Currencies subject to restrictions-Note A 668 635 1,083 685 Investments-Trading (including securities transferred under repurchase or security lending agreements of $nil million-June 30, 2002; $206 milUon June 30, 2001)-Notes B and F 24,256 24,168 Securities Purchased Under Resale Agreements-Note B 1,820 322 Nonnegotiable, Noninterest-bearing Demand Obligations on Account of Subscribed Capital 1,632 1,838 Amounts Receivable from Currency and Interest Rate Swaps Investments-Notes B and F 9,932 11,043 Borrowings (including $2,821 million due to FAS 133-June 30, 2002; $2,032 million-June 30, 2001)-Notes D and F 66,052 63,326 Other Asset/Liability (including $1 million due to FAS 133-June 30, 2002; $2 million-June 30, 2001)-Notes E and F 727 728 76,711 75,097 Amounts Receivable to Maintain Value of Currency Holdings on Account of Subscribed Capital 355 197 Other Receivables Amounts receivable from investment securities traded 427 508 Accrued income on loans 1,663 2,036 2,090 2,544 Loans Outstanding (see Summary Statement of Loans, Notes C and F) Total loans 157,942 156,800 Less undisbursed balance 36,353 37,934 Loans outstanding 121,589 118,866 Less: Accumulated provision for loan losses 4,078 3,959 Deferred loan income 1,436 500 Net loans outstanding 116,075 114,407 Other Assets Unamortized issuance costs of borrowings 473 489 Miscellaneous-Note J 3,250 3,094 3,723 3,583 Total assets $227,745 $222,841 38 THE WORLD BANK ANNUAL REPORT 2002 2002 2001 Liabilities Borrowings-Notes D and F Short-term $ 4,918 $ 6,918 Medium- and long-term (including $354 million due to FAS 133-June 30, 2002; $45 million-June 30, 2001). 105,345 99,839 110,263 106,757 Securities Sold Under Repurchase Agreements, Securities Lent Under Securities Lending Agreements, and Payable for Cash Collateral Received-Note B - 207 Amounts Payable for Currency and Interest Rate Swaps Investments-Notes B and F 10,819 10,791 Borrowings (including $1,254 million due to FAS 133-June 30,2002; $1,362 million-June 30, 2001)-Notes D and F 66,994 68,051 Other Asset/Liability (including $(1) million due to FAS 133-June 30, 2002, $nil million-June 30, 2001)-Notes E and F 758 701 78,571 79,543 Amounts Payable to Maintain Value of Currency Holdings on Account of Subscribed Capital 61 8 Other Liabilities Amounts payable for investment securities purchased 975 686 Accrued charges on borrowings 2,316 3,232 Payable for Board of Governors-approved transfers-Note G 1,437 1,093 Liabilities under other postretirement benefits plans-Note J 144 129 Accounts payable and miscellaneous liabilities 1,665 1,616 6,537 6,756 Total liabilities 195,432 193,271 Equity Capital Stock (see Statement of Subscriptions to Capital Stock and Voting Power, Note A) Authorized capital (1,581,724 shares-June 30, 2002 and June 30, 2001) Subscribed capital (1,570,895 shares-June 30, 2002 and June 30, 2001) 189,505 189,505 Less uncalled portion of subscriptions 178,029 178,029 11,476 11,476 Amounts to Maintain Value of Currency Holdings-Note A (641) (912) Retained Earnings (see Statement of Changes in Retained Earnings, Note G) 22,227 19,851 Accumulated Other Comprehensive Loss-Note L (749) (845) Total equity 32,313 29,570 Total liabilities and equity $227,745 $222,841 The Notes to Financial Statements are an integral part of these Statements. IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 39 STATEMENT OF INCOME For the fiscal years ended June 30, 2002, June 30, 2001 and June 30, 2000 Expressed in millions of US. dollars 2002 2001 2000 Income Income from loans-Note C Interest $6,779 $ 8,052 $8,041 Commitment charges 82 91 112 Income from investments-Note B Trading Interest 725 1,476 1,575 Net gains (losses) Realized 39 (10) 3 Unrealized (48) 51 3 Income from securities purchased under resale agreements-Note B 22 29 12 Income from Staff Retirement Plan-Note J 93 155 166 Other income-Notes H and 1 184 171 133 Total income 7,876 10,015 10,045 Expenses Borrowing expenses-Note D Interest 4,793 7,021 6,979 Amortization of issuance and other borrowing costs 110 131 149 Interest on securities sold under repurchase agreements and payable for cash collateral received-Note B 4 6 4 Administrative expenses-Notes H and 1 876 881 951 Contributions to special programs-Note H 176 147 126 Provision for loan losses-Note C (15) 676 (166) Other expenses 8 9 11 Total expenses 5,952 8,871 8,054 Operating Income 1,924 1,144 1,991 Effects of applying FAS 133-Note M 854 126 - Income before cumulative effect of change in accounting principle 2,778 1,270 1,991 Cumulative effect of change in accounting principle-Note M - 219 - NetIncome $2,778 $ 1,89 $1,991 The Notes to Financial Statements are an integral part of these Statements. 40 THE WORLD BANK ANNUAL REPORT 2002 STATEMENT OF COMPREHENSIVE INCOME For the fiscal years ended June 30, 2002, June 30, 2001 and June 30, 2000 Expressed in millions of US. dollars 2002 2001 2000 Net income $2,778 $1,489 $1,991 Other comprehensive income-Note L Cumulative effect of change in accounting principle - 500 Reclassification of FAS 133 transition adjustment to net income (128) (169) Currency translation adjustments 224 (535) (4) Total other comprehensive income (loss) 96 (204) (4) Comprehensive income $2,874 $1,285 $1,987 STATEMENT OF CHANGES IN RETAINED EARNINGS For the fiscal years ended June 30, 2002, June 30, 2001 and June 30, 2000 Expressed in millions of US. dollars 2002 2001 2000 Retained earnings at beginning of the fiscal year $19,851 $19,027 $17,709 Board of Govemors-approved transfers to-Note G International Development Association (302) (320) (348) Trust Fund for Gaza and West Bank - (60) Trust Fund for East Timor - - (10) Heavily Indebted Poor Countries Debt Initiative Trust Fund (100) (250) (200) Capacity building in Africa - (30) (30) Trust Fund for Kosovo (35) (25) Trust Fund for Federal Republic of Yugoslavia - (30) Net income for the fiscal year 2,778 1,489 1,991 Retained earnings at end of the fiscal year $22,227 $19,851 $19,027 The Notes to Financial Statements are an integral part of these Statements. IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 41 STATEMENT OF CASH FLOWS For the fiscal years ended June 30, 2002, June 30, 2001 and June 30, 2000 Expressed in millions of US. dollars 2002 2001 2000 Cash flows from lending activities Loans Disbursements $(11,154) $(11,707) $(13,222) Principal repayments 10,745 9,623 9,973 Principal prepayments 1,323 70 499 Loan origination fees received 7 1 19 Net cash provided by (used in) lending activities 921 (2,013) (2,731) Cash flows from Board of Governors-approved transfers to International Development Association (2) (20) (50) Debt Reduction Facility for IDA-Only Countries (3) 3 (19) Trust Fund for Gaza and West Bank - (17) (83) Heavily Indebted Poor Countries Debt Initiative Trust Fund (100) (250) (200) Trust Fund for East Timor, Trust Fund for Kosovo, Trust Fund for Fed- eral Republic of Yugoslavia, and capacity building in Africa - (95) (65) Net cash used in Board of Governors-approved transfers (105) (379) (417) Cash flows from financing activities Medium- and long-term borrowings New issues 22,803 17,223 15,206 Retirements (21,691) (18,027) (19,211) Net short-term borrowings (2,112) 1,870 (917) Net currency and interest rate swaps-Borrowings (656) (1,402) (454) Net capital stock transactions 75 72 154 Net cash used in financing activities (1,581) (264) (5,222) Cash flows from operating activities Net income 2,778 1,489 1,991 Adjustments to reconcile net income to net cash provided by operating activities FAS 133 adjustment (854) (126) - Cumulative effect of change in accounting principle - (219) - Depreciation and amortization 189 979 884 Amortization of deferred loan income (65) (49) (30) Provision for loan losses (15) 676 (166) Income from Staff Retirement Plan (93) (155) (166) Changes in other assets and liabilities Decrease (increase) in accrued income on loans 400 138 (99) (Increase) decrease in miscellaneous assets (7) 82 (269) (Decrease) increase in accrued charges on borrowings (947) (49) 322 (Decrease) increase in accounts payable and miscellaneous liabilities (62) 54 135 Net cash provided by operating activities 1,324 2,820 2,602 Effect of exchange rate changes on unrestricted cash and liquid investments 90 (88) (23) Net increase (decrease) in unrestricted cash and liquid investments 649 76 (5,791) Unrestricted cash and liquid investments at beginning of the fiscal year 24,407 24,331 30,122 Unrestricted cash and liquid investments at end of the fiscal year $25,056 $24,407 $24,331 42 THE WORLD BANK ANNUAL REPORT 2002 2002 2001 2000 Composition of unrestricted cash and liquid investments: Investments-Trading $24,256 $24,168 $24,941 Unrestricted currencies 415 50 32 Net payable for investment securities traded/purchased-Trading (548) (178) (340) Net (payable) receivable from currency and interest rate swaps- Investments (887) 252 (403) Net receivable from securities purchased/sold under resale/repurchase agreements and payable for cash collateral received 1,820 115 101 $25,056 $24,407 $24,331 Supplemental disclosure Increase (decrease) in ending balances resulting from exchange rate fluctuations Loans outstanding $ 2,736 $(3,329) $ 16 Borrowings 4,093 (5,530) (1,173) Currency and interest rate swaps-Borrowings (2,230) 3,164 1,195 Capitalized loan front-end fees included in loans outstanding 102 77 110 Capitalized interest and charges related to certain consolidation loans included in loans outstanding 799 - The Notes to Financial Statements are an integral part of these Statements. IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 43 SUMMARY STATEMENT OF LOANS June 30, 2002 Expressed in millions of US. dollars Loans approved Undisbursed Percentage but not yet balance of Loans of total loans Borrower or guarantor Total loans effective I effective loans2 outstanding outstanding Algeria $ 1,715 $ 31 $ 405 $ 1,279 1.05% Argentina 10,394 15 1,887 8,492 6.98 Armenia 8 - - 8 0.01 Bahamas, The 1 I _ * Bangladesh 15 _ _ 15 0.01 Barbados 25 I 5 -10 0.01 Belarus 117 - 23 94 0.08 Belize 52 - 8 44 0.04 Bosnia and Herzegovina 546 - - 546 0.45 Botswana 9 - - 9 0.01 1Br-azil 1 ~~~ ~- 11,95'6 -~ 1,5f5-~ - 2,337-- -8--8104 ~ ~6-.-66 Bulgaria 1,092 - 158 934 0.77 Cameroon 199 - 41 158 0.13 Chad 39 - 30 9 0.01 Chile 884 99 102 683 0.56 China - 18,148 299 6,084 11,765 9.68 Colombia 2,841 - 793 2,048 1.68 Congo, Democratic Republic of 81 - - 81 0.07 Congo, Republic of 16 - * 16 0.01 Costa Rica 142 17 30 95 0.08 C6oe-d'lvio-ire - 494 - - -494- O- . Croatia 841 - 266 575 0.47 Cyprus 23 - - 23 0.02 Czech Republic 202 - - 202 0.17 Dominica 7 1 3 3 * Domrinican Republic - - 442 --- -103 3339- 0.28 Ecuador 1,103 42 203 858 0.70 Egypt, Arab Republic of 906 50 296 560 0.46 El Salvador 620 143 126 351 0.29 Estonia 53 - 18 35 0.03 Fijfi - --- - 14 1A- 14 ---0:01 Gabon 62 - 6 56 0.05 Ghana 5 - - 5 Grenada 11 1 6 4 * Guatemala 742 267 139 336 0.28 Guyana 55 Honduras 116 - - 116 0.10 Hungary 559 - 13 546 0.45 India 11,244 463 3,766 7,015 5.77 Indonesia 12,565 32 1,410 11,123 9.15 ran, Islamic epublicof -- 686 - -- -248 - - 438 0.36 Iraq 40 - - 40 0.03 Jamaica 501 15 50 436 0.36 'Jordan 1,029 5 122 902 0.74 Kazakhstan 1,506 - 364 1,142 0.94 44 THE WORLD BANK ANNuAL REPORT 2002 Loans approved Undisbursed Percentage but not yet balance of Loans of total loans Borrower or guarantor Total loans effective I effective loans2 outstanding outstanding Kenya $ 16 $ - $ - $ 16 o001%o Korea, Repubhc of 7,830 - 15 7,815 6.43 Latvia 287 2 26 259 0.21 'Lebanon 692 128 279 285 0.23 Lesotho 77 - 19 58 0.05 Libena 134 - - 134 0 11 Lithuania 371 48 48 275 0 23 Macedonia, former Yugoslav Republic of 215 16 72 127 0.10 Malawi 3 - - 3 * Malaysia 886 - 153 733 0 60 AIauritius ~~~~ ~ rro - = -- l-o ~~~ - -- - - -I-' - oo -- - - O--0.08 ~ Mexico 13,878 1,010 2,123 10,745 8.84 'Moldova 194 - 8 186 0 15 Morocco 2,954 102 231 2,621 2.16 Nigeria 1,350 - 4 1,346 1.11 Oman I _-_ Pakistan 2,896 - 76 2,820 2.32 Panama 408 - 123 285 0 23 Papua New Guinea 384 57 49 278 0 23 Paraguay 295 9 71 215 0 18 -Peru ~ ~ ~ 2 2700 - 1372563 - 2.11 Philippines 4,231 100 778 3,353 2.76 Poland 2,822 17 456 2,349 1 93 Romania 2,522 40 513 1,969 1.62 Russian Federation 8,255 569 950 6,736 5.54 St Kitts and Nievs 22 9 6 7 0 01 St Lucia 22 8 9 5 * St Vincent and the Grenadines 6 4 2 * * Seychelles 2 - - 2 * Slovak Republic 375 26 139 210 0 17 ~Sloveia W 89~ T~~-~~16 ~~73~ -- 0.06 South Africa 24 - 15 9 0.01 ,Sri Lanka 7 - - 7 0.01 'Swaziland 28 - 19 9 0.01 Syrian Arab Republic 14 - - 14 0.01 Tanzania 7 - - 7 J 01 Thailand 3,221 - 200 3,021 2.48 Trinidad and Tobago 113 - 23 90 0.07 Tunisia 2,041 - 615 1,426 1.17 Turkey 8,912 1,350 2,652 4,910 4 04 IBRD FINANC:AL STATEENTS: JUNE 30, 2002 45 SUMMARY STATEMENT OF LOANS (Continued) June 30, 2002 Expressed in millions of US dollars Loans approved Undisbursed Percentage but not yet balance of Loans of total loans Borrower or guarantor Total loans effective I effective loans2 outstanding outstanding Turkmenistan $ 64 $ - $ 32 $ 32 0.03% Ukraine 2,611 82 265 2,264 1.86 Uruguay 720 42 156 522 0.43 Uzbekistan 464 20 177 267 0.22 Venezuela, Republica Bolivariana de 963 - 199 764 0.63 Yugoslavia, Federal Republic of 2,070 - - 2,070 1.70 Zambia 13 - - 13 0 01 Zimbabwe 417 - 1 416 0 34 Subtotal4 157,772 6,634 29,719 121,419 99.86 Caribbean DevelopmentBank3 I - - I * International Finance Corporation 169 - - 169 0 14 Total-June 30, 20024 $157,942 $6,634 $29,719 $121,589 100 00% Total-June 30, 2001 $156,800 $6,933 $31,001 $118,866 Indicates amount less than $0 5 million or less than 0 005 percent NOTES I Loans totaling $3, 705 million ($5,475 million-June 30, 2001) have been approved by IBRD, but the related agreements have not been signed Loan agreements totaltng $2,929 million ($1,458 million-June 30, 2001) have been signed, but the loans do not become effective and disburse- ments thereunder do not start until the borrowers and guarantors, if any, take certain actions andfurnish certain documents to IBRD 2 Of the undisbursed balance, IBRD has entered into irrevocable commitments to dtsburse $81 1 million ($1,018 million-June 30, 2001) 3 These loans are for the benefit of The Bahamas, Barbados, Grenada, Guyana, Jamaica, Tnnidad and Tobago, and terntones of the United King- dom (Associated States and Dependencies) in the Canbbean Region, that are severally liable as guarantors to the extent of subloans made in their temtones 4 May differ from the sum of tndividual figures shown due to rounding The Notes to Financial Statements are an integral part of these Statements. 46 THE WORLD BANK ANNUAL REPORT 2002 STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER June 30, 2002 Expressed in millions of US. dollars Subscriptions lVoting Power Percentage Amounts Number Percentage of Total Amounts subject of of Member Shares total amounts paid in] to call1'2 votes total Afghanistan 300 0.02% $ 36.2 $ 3.6 $ 32.6 550 0.03% Albania 830 0.05 100.1 3.6 96.5 1,080 0.07 Algeria 9,252 0.59 1,116.1 67.1 1,049.0 9,502 0.59 Angola 2,676 0.17 322.8 17.5 305.4 2,926 0.18 Antigua and Barbuda 520 0.03 62.7 1.3 61.5 770 0.05 Argentina 17,911 1.14 2,160.7 132.2 2,028.4 18,161 1.12 Armenia 1,139 0.07 137.4 5.9 131.5 1,389 0.09 Australia 24,464 1.56 2,951.2 181.8 2,769.5 24,714 1.53 Austria 11,063 0.70 1,334.6 80.7 1,253.9 11,313 0.70 Azerbaijan _ 1,646 0.10 198.6 9.7 188.8 1,896 0.12 Bahamas, The 1,071 0.07 129.2 5.4 123.8 1,321 0.08 Bahrain 1,103 0.07 133.1 5.7 127.4 1,353 0.08 Bangladesh 4,854 0.31 585.6 33.9 551.6 5,104 0.32 Barbados 948 0.06 114.4 4.5 109.9 1,198 0.07 Belarus 3,323 0.21 400.9 22.3 378.5 3,573 0.22 Belgium 28,983 1.84 3,496.4 215.8 3,280.6 29,233 1.81 Belize 586 0.04 70.7 1.8 68.9 836 0.05 Benin 868 0.06 104.7 3.9 1(0.8 1,118 0.07 Bhutan 479 0.03 57.8 1.0 56.8 729 0.05 Bolivia 1,785 0.11 215.3 10.8 204.5 2,035 0.13 Bosnia and Herzegovina 549 0.03 66.2 5.8 60.4 799 0.05 Botswana 615 0.04 74.2 2.0 72.2 865 0.05 Brazil 33,287 2.12 4,015.6 245.5 3,770.1 33,537 2.07 Brunei Darussalam 2,373 0.15 286.3 15.2 271.1 2,623 0.16 Bulgaria 5,215 0.33 629.1 36.5 592.6 5,465 0.34 Burkina Faso 868 0.06 104.7 3.9 100.8 1,118 0.07 Burundi 716 0.05 86.4 3.0 83.4 966 0.06 Cambodia 214 0.01 25.8 2.6 23.2 464 0.03 Cameroon 1,527 0.10 184.2 9.0 175.2 1,777 0.11 Canada 44,795 2.85 5,403.8 334.9 5,068.9 45,045 2.79 Cape Verde 508 0.03 61.3 1.2 60.1 758 0.05 Central African Republic 862 0.05 104.0 3.9 100.1 1,112 0.07 Chad 862 0.05 104.0 3.9 100.1 1,112 0.07 Chile 6,931 0.44 836.1 49.6 786.6 7,181 0.44 China 44,799 2.85 5,404.3 _335.0 5,069.3 45,049 2.79 Colombia 6,352 0.40 766.3 45.2 721.1 6,602 0.41 Comoros 282 0.02 34.0 0.3 33.7 532 0.03 Congo, Democratic Republic of 2,643 0.17 318.8 25.4 293.5 2,893 0.18 Congo, Republic of 927 0.06 111.8 4.3 107.5 1,177 0.07 Costa Rica 233 0.01 28.1 1.9 26.2 483 0.03 C6ted'lvoire 2,516 0.16 303.5 16.4 287.1 2,766 0.17 Croatia 2,293 0.15 276.6 17.3 259.3 2,543 0.16 Cyprus 1,461 0.09 176.2 8.4 167.9 1,711 0.11 Czech Republic 6,308 0.40 761.0 45.9 715.0 6,558 0.41 Den-mark 13,451 0.86 1,622.7 97.8 1,524.9 13,701 0.85 Djibouti 559 0.04 67.4 1.6 65.9 809 0.05 Dominica 504 0.03 60.8 1.1 59.7 754 0.05 Dominican Republic 2,092 0.13 252.4 13.1 239.3 2,342 0.14 Ecuador 2,771 0.18 334.3 18.2 316.1 3,021 0.19 Egypt, Arab Republic of 7,108 0.45 857.5 50.9 806.6 7,358 0.46 IBRD FINANaIAL STATEMENTS: JuNE 30, 2002 47 STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (Continued) June 30, 2002 Expressed in millions of US. dollars Subscriptions Voting Power Percentage Amounts Number Percentage Of Total Amounts subject Of Of Member Shares total amounts paid in1I to call1'2 votes total El Salvador 14I 0.01% $ 17.0 $ 1.7 $ 15.3 391 0. 02 % Equatorial Guinea 715 0.05 86.3 2.7 83.5 965 0.06 Eritrea 593 0.04 71.5 1.8 69.7 843 0.05 Estonia 923 0.06 111.3 4.3 107.1 1,173 0.07 Ethiopia 978 0.06 118.0 _ 4.7 113.3 1,228 0.08 Fiji 987 0.06 119.1 4.8 114.3 1,237 0.08 Finland 8,560 0.54 1,032.6 61.9 970.8 8,810 0.54 France 69,397 4.42 8,371.7 520.4 7,851.3 69,647 4.31 Gabon 987 0.06 119.1 5.1 113.9 1,237 0.08 Gambia, The ___ ___ 543 0.03 65.5 1.5 _64.0 __ 793 0.05 Georgia -1,584 0.10 191.1 9.3 181.8 1,834 0.117 Germany 72,399 4.61 8,733.9 542.9 8,190.9 72,649 4.49 Ghana 1,525 0.10 184.0 12.7 171.2 1,775 0.11 Greece 1,684 0.11 203.1 14.1 189.1 1,934 0.12 Grenada ___ 531 0.03 64.1 1.4 62.7 781 0.05 Guatemala 2,001 0.13 241.4 12.4 229.0 2,251 0.14 Guinea 1,292 0.08 155.9 7.1 148.8 1,542 0.10 Guinea-Bissau 540 0.03 65.1 1.4 63.7 790 0.05 Guyana 1,058 0.07 127.6 5.3 122.3 1,308 0.08 Haiti ___ 1,067 0.07 128.7 5.4 123.3 1,317 0.08 1-oduras 641 0.04 77.3 2.3 75.0 891 006 Hungary ~~~~~~ ~~ ~ ~~8,050 0.1971.1 58.0 913.1 8,300 05 Iceland 1,258 S 0.08 151.8 6.8 144.9 1,508 0.09 India 44,795 2.85 5,403.8 333.7 5,070.1 45,045 2.79 Indonesia 14,981 0.95 1,80. 103,670 15,231 09 Iran, Islamic Republico 23,686 1.12,857.4 175.8 2,681.5 23,936 1.48 Iraq 2,808 0.18 338.7 27.1 311.6 3,058 0.19 Ireland 5,271 0.34 635.9 37.1 598.8 5,521 0.34 Israel 4,750 0.30 573.0 33.2 539.8 5,000 0.31 Italy ___ __ 44,795 2.85 5,403.8 334.8 5,069.0 45,045 2.79 Jamaica 2,578 0.16 311.0 16.8 294.2 2,828 0.17 Japan 127,000 8.08 15,320.6 944.0 14,376.7 127,250 7.87 ~Jordan 1,388 0.09 167.4 7.8 159.6 1,638 0.10 iKazakhstan 2,985 0.19 360.1 19.8 340.3 3,235 0.20 iKenya ___2,461 0.16 296.9 15.9 281.0 2,711 0.17 kirib~ati -465 0.03 56.1 0.9 55.2 715 0.04 Korea, Republic of 15,817 1.01 1,908.1 114.5 1,793.5 16,067 0.99 Kuwait 13,280 0.85 1,602.0 97.4 1,504.6 13,530 0.84 Kyrgyz Republic 1,107 0.07 133.5 5.7 127.9 1,357 0.08 Lao People's Democratic Republic 178 0.01 21.5 1.5 20.0 -- 428 0.03 atvia~ - . 1,384 0.09 167.0 7.8 159.2 1,-634 01Y Lebanon 340 0.02 41.0 1.1 39.9 590 0.04 Lesotho 663 0.04 80.0 2.3 77.6 913 0.06 Liberia 463 0.03 55.9 2.6 53.3 713 0.04 'Libya - __7,840 0.50 945.8 57.0 888.8 _ _ 8,090 _0.50~ Lithuania 1,507 0.10 181.8 8.7 173.1 1,757 0.11 Luxembourg 1,652 0.11 199.3 9.8 189.5 1,902 0.12 Macedonia, former Yugoslav Republic of 427 0.03 51.5 3.2 48.3 677 0.04 Madagascar 1,422 0.09 171.5 8.1 163.5 1,672 0.10 Malawi 1,094 0.07 132.0 5.6 126.4 1,344 0.08 48 TIHE WoRLD BAN'K ANNuAL REPoRT 2002 Subscriptions Voting Power Percentage Amounts Number Percentage of Total Amounts subject of of Member Shares total amounts paid inI to call I2 votes total Malaysia 8,244 0.52% $ 994.5 $ 59.5 $ 935.0 8,494 0.53% Maldives 469 0.03 56.6 0.9 55.7 719 0.04 Mali 1,162 0.07 140.2 6.1 134.1 1,412 0.09 Malta 1,074 0.07 129.6 5.4 124.1 1,324 0.08 Marshall Islands _____469 0.03 56.6 0.9 55.7 719 0.04 Mauntania 900 0.06 108.6 4.1 104.4 1,150 0.07 Mauritius 1,242 0.08 149.8 6.7 143.1 1,492 0.09 Mexico 18,804 1.20 2,268.4 139.0 2,129.4 19,054 1.18 Micronesia, Federated States of 479 0.03 57.8 1.0 56.8 729 0.05 Moldova 1,368 0.09 165.0 7.6 157.4 1,618 0.10 Mongolia 466 0.03 56.2 2.3 53.9 716 0.04 Morocco 4,973 0.32 599.9 34.8 565.1 5,223 0.32 Mozambique 930 0.06 112.2 4.8 107.4 1,180 0.07 Myanmar 2,484 0.16 299.7 16.1 283.6 2,734 0.17 'Namibia ____ 1,523 __ 0 0.10183.7 8.8 174.9 1,773 0.11 Nepal 968 0.06 116.8 4.6 112.1 1,218 0.08 Netherlands 35,503 2.26 4,282.9 264.8 4,018.1 35,753 2.21 New Zealand 7,236 0.46 872.9 51.9 821.0 7,486 0.46 Nicaragua 608 0.04 73.3 2.1 71.3 858 0.05 Niger 852 0.05 102.8 3.8 99.0 1,102 0.07 Nigeria 12,655 0.81 1,526.6 92.7 1,433.9 12,905 0.80 Norway 9,982 0.64 1,204.2 72.6 1,131.6 10,232 0.63 Oman 1,561 0.10 188.3 9.1 179.2 1,811 0.11 Pakistan 9,339 0.59 1,126.6 67.8 1,058.9 9,589 0.59 Palau 16 * 1.9 0.2 1.8 266 0.02 Panama 385 0.02 46.4 3.2 43.2 635 0.04 Papua New Guinea 1,294 0.08 156.1 7.1 149.0 1,544 0.10 Paraguay 1,229 0.08 148.3 6.6 141.6 1,479 0.09 Peru 5,331 0.34 643.1 37.5 605.6 5,581 0.35 Philippines 6,844 0.44 825.6 48.9 776.7 7,094 0.44 Poland 10,908 0.69 1,315.9 79.6 1,236.3 11,158 0.69 Portugal 5,460 0.35 658.7 38.5 620.2 5,710 0.35 Qatar 1,096 0.07 132.2 9.0 123.3 1,346 0.08 Romania 4,011 0.26 483.9 30.5 453.4 4,261 0.26 Russian Federation 44,795 2.85 5,403.8 333.9 5,070.0 45,045 2.79 Rwanda 1,046 0.07 126.2 5.2 120.9 1,296 0.08 St. Kitts and Nevis 275 0.02 33.2 0.3 32.9 525 0.03 St. Lucia 552 0.04 66.6 1.5 65.1 802 0.05 St. Vincent and the Grenadines 278 0.02 33.5 0.3 33.2 528 0.03 Samoa 531 0.03 64.1 1.4 62.7 781 0.05 San Marino 595 0.04 71.8 2.5 69.3 845 0.05 Sao Tome and Principe 495 0.03 59.7 1.1 58.6 745 0.05 Saudi Arabia 44,795 2.85 5,403.8 335.0 5,068.9 45,045 2.79 0 Senegal 2,072 0.13 250.0 13.0 237.0 2,322 0.14 lSeychelles ____ 263 0.02 31.7 0.2 31.6 513 0.03 IBRD FiNANcaAL STATEMENTs JuNE 30, 2002 49 STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (Continued) June 30, 2002 Expressed in millions of US. dollars Subscriptions Voting Power Percentage Amounts Number Percentage Of Total Amounts s-ubject Of Of Member Shares total amounts paid in1I to call1'2 votes total Sierra Leone 718 0.05% $ 86.6 $ 3.0 $ 83.6 968 0.06% Singapore 320 0.02 38.6 3.9 34.7 570 0.04 Slovak Republic 3,216 0.20 388.0 23.0 365.0 3,466 0.21 Slovenia 1,261 0.08 152.1 9.5 142.6 1,511 0.09 Solomon Islands 513 0.03 61.9 1.2 60.7 -763 0.05 So- malia -552 0.04 66.6 3.3 63.3 802 0.05 South Africa 13,462 0.86 1,624.0 98.8 1,525.2 13,712 0.85 Spain 27,997 1.78 3,377.4 206.8 3,170.6 28,247 1.75 'Sri Lanka 3,817 0.24 460.5 26.1 434.3 4,067 0.25 Sudan 850 0.05 102.5 _ 7.2 95.3 1,100 _ 0.07 Suriname 412 0.03 49.7 2.0 47.7 662 0.04 Swaziland 440 0.03 53.1 2.0 51.1 690 0.04 Sweden 14,974 0.95 1,806.4 110.2 1,696.2 15,224 0.94 Switzerland 26,606 1.69 3,209.6 197.2 3,012.4 26,856 1.66 Syrian Arab Republic 2,202 -. 0.14 265.6 14.0 _ 251.7 2,452 _ 0.15 Tajikistan 1,060 0.07 1795.3 122.5 1,30 ._ ~Tanzania 1,295 0.08 156.2 10.0 146.2 1,545 0.10 Thailand 6,349 0.40 765.9 45.2 720.7 6,599 0.41 Togo 1,105 0.07 133.3 5.7 127.6 1,355 0.08 Tonga 494 0.03 59.6 1.1I 58.5 744 0.05 Trinidad and Tobago 2,664 0.17 321.4 17.6 303.7 2,914 0.18 Tunisia 719 0.05 86.7 5.7 81.1 969 0.06 Turkey 8,328 0.53 1,004.6 59.8 944.8 8,578 0.53 Turkmenistan 526 0.03 63.5 2.9 60.5 776 0.05 Uganda 617 0.04 74.4 4.4 -70.1-- -867 0.05- Ujkraine- -10,9-08 0-.6-9 -1,3-15-.9- 79.3 1,236.6 11,i8 0o69 United Arab Emirates 2,385 0.15 287.7 22.6 265.1 2,635 0.16 United Kingdom 69,397 4.42 8,371.7 539.5 7,832.2 69,647 4.31 United States 264,969 16.87 31,964.5 1,998.4 29,966.2 265,219 16.41 ~Uruguay _-2,812- 0.18 ----- -339.2 -18.6 _- __ 32-0.7- 3,062 _ 0.19 Uz.b"ekst-an 2-,4 93 0.16 300.7 16.1 284.7 2,743 0.17 Vanuatu 586 0.04 70.7 1.8 68.9 836 0.05 Venezuela, Repiiblica Bolivariana de 20,361 1.30 2,456.2 150.8 2,305.5 20,611 1.27 Vietnam 968 0.06 116.8 8.1 108.7 1,218 0.08 Yemen, Republic of 2,212 0.14 266.8 14.0 252.8 2,462 0.15 Yugoslavia, Federal Republic of 1,597 0.10 192.7 16.9 175.7 1,847 0.11 Zambia 2,810 0.18 339.0 20.0 319.0 3,060 0.19 Zimbabwe 3,325 0.21 401.1 22.4 378.7 3,575 0.22 Total-June 30, 20022 1,70,95 100.00% $1950 1 476Z $178,29 61 6J45 100.00% Total-June_30, 2001 1,7085 100.00% $189,505 $11,476 $178,029 1 1 4 Indicates amounts less than 0.005 percent. NOTES 1. See Notes to Financial Statements-Note A. 2. May differ from the sum of individual figures shown due to rounding. The Notes to Financial Statements are an integral part of these Statements. 50 THE WoRLD BAN'.K ANNuAL REPoRT 2002 NOTES TO FINANCIAL STATEMENTS PURPOSE AND AFFILIATED ORGANIZATIONS 133, "Accounting for Derivative Instruments and The International Bank for Reconstruction and Devel- Hedging Activities", along with its amendments, as well opment (IBRD) is an international organization which as International Accounting Standard (IAS) 39, "Finan- commenced operations in 1946. The principal purpose cial Instruments: Recognition and Measurement". commenR D toperati ins1946. The pr.ic purpose These standards are collectively referred to as FAS 133 ofnt anRd isdut prootersstainaebler ecounomicvelopr- in this document. These standards require that deriva- ment and reduce poverty in its member countries, pri- tive instruments as defined by FAS 133 be recorded marily by providing loans, guarantees and related otve instrum et as dfined technical assistance for specific projects and for pro- grams of economic reform in developing member coun- IBRD uses derivative instruments in its investments and tries. The activities of IBRD are complemented by borrowings portfolios and for asset/liability manage- those of three affiliated organizations, the International ment purposes. In applying FAS 133 for purposes of Development Association (IDA), the International financial statement reporting, IBRD has elected not to Finance Corporation (IFC), and the Multilateral Invest- define any qualifying hedging relationships. Rather, all ment Guarantee Agency (MIGA). Each of these orga- derivative instruments, as defined by FAS 133, have nizations is legally and financially independent from been marked to fair value and all changes in the fair IBRD, with separate assets and liabilities, and IBRD is value have been recognized in net income. While the not liable for their respective obligations. IDA's main derivatives in the borrowings portfolio require an goal is to reduce poverty through promoting sustain- adjustment under FAS 133, as do the Other Asset/Lia- able economic development in the less developed areas bility swaps, no adjustment is required to the invest- of the world included in IDA's membership by provid- ments portfolio since those derivative instruments are ing a combination of grants and financing on conces- already recorded at fair value as part of the trading sionary terms. IFC's purpose is to encourage the growth portfolio. While IBRD believes that its hedging strate- of productive private enterprises in its member coun- gies achieve its objectives, the application of FAS 133 tries through loans and equity investments in such qualifying hedge criteria would not make fully evident the risk management strategy that IBRD employs. enterprises without a member's guarantee. MIGA was established to encourage the flow of investments for Translation of Currencies: IBRD's financial statements productive purposes among member countries and, in are expressed in terms of U.S. dollars solely for the pur- particular, to developing member countries by provid- pose of summarizing IBRD's financial position and the ing guarantees against noncommercial risks for foreign results of its operations for the convenience of its mem- investment in its developing member countries. bers and other interested parties. IBRD is an international organization which conducts SUMMARY OF SIGNIFICANT ACCOUNTING its operations in the currencies of all of its members. AND RELATED POLICIES IBRD's resources are derived from its capital, borrow- ings, and accumulated earnings in those various curren- IBRD's financial statements are prepared in conformity cies. IBRD has a number of general policies aimed at with the accounting principles generally accepted in the minimizing exchange rate risk in a multicurrency envi- United States of America and with International ronment. IBRD matches its borrowing obligations in Accounting Standards. On August 8, 2002, the Execu- ¢. AccountigStand rds. On A t 22 te E - any one currency (after swaps) with assets in the same tive Directors approved these financial statements for currency, as prescribed by its Articles of Agreement, issue. primarily by holding or lending the proceeds of its bor- The preparation of financial statements in conformity rowings (after swaps) in the same currencies in which with generally accepted accounting principles requires they are borrowed. In addition, IBRD periodically management to make estimates and assumptions that undertakes currency conversions to more closely match affect the reported amounts of assets and liabilities and the currencies underlying its Equity with those of the disclosure of contingent assets and liabilities at the date net loans outstanding. of the financial statements and the reported amounts of Assets and liabilities are translated at market exchange revenue and expenses during the reporting period, rates in effect at the end of the period. Income and Actual results could differ from these estimates. Signifi- expenses are translated at either the market exchange cant judgments have been used in the valuation of cer- rates in effect on the dates on which they are recog- tan financial instruments, the determination of the nized or at an average of the market exchange rates in adequacy of the Accumulated Provision for Loan effect during each month. Translation adjustments are Losses, the determination of net periodic income from charged or credited to Accumulated Other Compre- pension and other postretirement benefits plans, and hensive Income. the present value of benefit obligations. Valuation of Capital Stock: In the Articles of Agree- Certain reclassifications of the prior years' information ment, the capital stock of IBRD is expressed in terms of have been made to conform with the current year's pre- ment th caia stoc of IBR is exrse in temso hentaveibeen.made to conform with thecurrentyear'spre- "U.S. dollars of the weight and fineness in effect on July sentation. 1, 1944" (1944 dollars). Following the abolition of gold Accounting for Derivatives: IBRD has adopted State- as a common denominator of the monetary system and ment of Financial Accounting Standards (SFAS) No. the repeal of the provision of the U.S. law defining the IBRD FINANCIAI. STATEMENTS: JUNE 30, 2002 51 par value of the U.S. dollar in terms of gold, the pre- 1964 with respect to subsequent loans and no further existing basis for translating 1944 dollars into current additions are being made to it. dollars or into any other currency disappeared. The The General Reserve consists of earnings from prior fis- Executive Directors of IBRD have decided, until such cal years which, insts ofgent f the five time as the relevant provisions of the Articles of Agree- cal years which, in the judgment of the Executive ment are amended, that the words "U.S. dollars of the Directors, should be retained in IBRD's operations weight and fineness in effect on July 1, 1944" in Article The Pension Reserve consists of the difference between 11, Section 2(a) of the Articles of Agreement of IBRD actual funding of the Staff Retirement Plan (SRP) and are interpreted to mean the Special Drawing Right the SRP's accounting income. This Pension Reserve (SDR) introduced by the International Monetary Fund, would be reduced if in any future fiscal year pension as valued in terms of U.S. dollars immediately before accounting expenses were to exceed the actual funding the introduction of the basket method of valuing the of the SRP. SDR on July 1, 1974, such value being $1.20635 for one SDR. Surplus consists of earnings from prior fiscal years which are retained by IBRD until a further decision is Maintenance of Value: Article 11, Section 9 of the Arti- made on their disposition or the conditions of transfer cles of Agreement provides for maintenance of the for specified uses have been met. value (MOV), at the time of subscription, of such restricted currencies (see Note A), requiring (1) the The Cumulative FAS 133 Adjustments consist of the member to make additional payments to IBRD in the effects associated with the application of FAS 133 from event that the par value of its currency is reduced or prior years. At June 30, 2002, this amount includes the the foreign exchange value of its currency has, in the one-time cumulative effect of the adoption of FAS 133 opinion of IBRD, depreciated to a significant extent in on July 1, 2000, the reclassification and amortization of its territories and (2) IBRD to reimburse the member in the transition adjustments for fiscal year 2001, and the the event that the par value of its currency is increased. unrealized gains or losses on certain derivative instru- ments, as defined by FAS 133, for fiscal year 2001. Since currencies no longer have par values, mainte- nance of value amounts are determined by measuring Unallocated Net Income consists of earnings in the cur- the foreign exchange value of a member's currency rent fiscal year. Commencing in 1950, a portion or all against the standard of value of IBRD capital based on of the unallocated Net Income has been allocated to the 1974 SDR. Members are required to make pay- the General Reserve after an assessment by the Execu- ments to IBRD if their currencies depreciate signifi- tive Directors of IBRD's reserve needs. Upon recom- cantly relative to the standard of value. Furthermore, mendation by the Executive Directors, the Board of the Executive Directors have adopted a policy of reim- Governors, consisting of one Governor appointed by bursing members whose currencies appreciate signifi- each member, periodically approves transfers out of cantly in terms of the standard of value, unallocated Net Income and Surplus to various entities for development purposes consistent with IBRD's Arti- The net MOV amounts relating to restricted currencies cles of Agreement. out on loan, and amounts that have been reclassified from receivables for those countries that have been in Loans: All of IBRD's loans are made to or guaranteed arrears for two years or more, are included as a compo- by members, except loans to IFC. The majority of nent of equity under Amounts to Maintain Value of IBRD's loans have repayment obligations based on spe- Currency Holdings. For amounts on loan, these MOV cific currencies. IBRD also holds multicurrency loans amounts are shown as a component of Equity since which have repayment obligations in various currencies MOV becomes effective only as such currencies are determined on the basis of a currency pooling system. repaid to IBRD. Any loan origination fees incorporated in a loan's terms Retained Earnings: Retained Earnings consists of allo- are deferred and recognized over the life of the loan as cated amounts (Special Reserve, General Reserve, Pen- an adjustment of yield. However, incremental direct sion Reserve, Surplus and Cumulative FAS 133 costs associated with originating loans are expensed as Adjustments) and unallocated Net Income. incurred as such amounts are considered insignificant. The unamortized balance of loan origination fees is The Special Reserve consists of loan commissions set included as a reduction of Loans Outstanding on the aside pursuant to Article IV, Section 6 of the Articles of balance sheet, and the loan origination fees amortiza- Agreement, which are to be held in liquid assets. These tion is included in Interest under Income from Loans on assets may be used only for the purpose of meeting lia- the income statement. bilities of IBRD on its borrowings and guarantees in the event of defaults on loans made, participated in, or It is IBRD's practice not to reschedule interest or prin- guaranteed by IBRD. The Special Reserve assets are cipal payments on its loans or participate in debt included under Investments-Trading, and comprise rescheduling agreements with respect to its loans. In obligations of the United States Government, its agen- exceptional cases, however, such as when implementa- cies, and other official entities. The allocation of such tion of a financed project has been delayed, the loan commissions to the Special Reserve was discontinued in amortization schedule may be modified to avoid sub- stantial repayments prior to project completion. 52 THE WORLD BANK ANNUAL REPORT 2002 In addition, during fiscal year 2001, the Executive case basis after a suitable period of payment perfor- Directors approved a financial assistance package for mance has passed from the time of arrears clearance. the Federal Republic of Yugoslavia (FRY) in connection IBRD determines the Accumulated Provision for Loan with its succession to membership of the former Social- LBRD .determ ne seAcmulted Povision frik Ln ist Federal Republic of Yugoslavia (SFRY) in IBRD. Lstes balsed on an assentmeesnportfcolleibiludtyng rloans One component of that package was a plan for the th total loanuan g Te porteolin in ls clearance of arrears under all loans to the former SFRY i nonaccrual status. The accumulated provison is penl- for which the FRY had accepted liability. Under the odically adjusted based on a review of the prevailing arrears clearance plan, FRY's principal and interest cir n es Adjustments t the o accumlate prom I- arrears were consolidated into six new consolidated sion are recorded as a charge or addition to income. In loans, the context of determining the adequacy of the Accu- mulated Provision for Loan Losses, IBRD considers the IBRD's treatment of FRY is based on criteria approved present value of expected cash flows relative to the by the Executive Directors in connection with the contractual cash flows for loans. financial assistance package for Bosnia and Herzegovina Cash and Cash Equivalents: IBRD considers unre- in 1996. These criteria limit eligibility for such treat- stricted cash as well as financial instruments held in the ment to a country: (a) that has emerged from a current investment portfolio as elements of liquidity in the or former member of IBRD; (b) that is assuming Statement of Cash Flows since they are readily con- responsibility for a share of the debt of such member; of C l si wthey aretreadyc (c) that, because of a major armed conflict in its terri- vertible to known amounts of cash within ninety days. tory involving extensive destruction of physical assets, Investments: Investment securities are classified based has limited creditworthiness for servicing the debt it is on management's intention on the date of purchase, assuming; and (d) for which rescheduling/refinancing their nature, and IBRD's policies governing the level would result in a significant improvement in its repay- and use of such investments. At June 30, 2002 and ment capacity, if appropriate supporting measures are June 30, 2001, all investment securities were held in a taken. IBRD does not believe that any other borrowers Trading portfolio. Investment securities and related with loans in nonaccrual status currently meet these eli- financial instruments held in IBRD's Trading portfolio gibility criteria. are carried and reported at fair value. Unrealized gains Delays in receiving loan payments result in present and losses for investment securities and related financial Delas m ecellng oan aymets rsultm prsent instruments held in the Trading portfolio are included value losses to IBRD since it does not charge fees or instrument helinathe ntradinpt are. in lqud additional interest on any overdue interest or loan m Income Derivatve nstruments are used mi lquidity charges. These present value losses are equal to the dif- management to take advantage of profitable trading ference between the present value of payments for derivatives and asaproyat fir cash securitimes These interest and charges made according to the related deiaie r are tfi au.Fo iet ie lnts cntrctagers made presnt vle rofats IBRD enters into forward contracts for the sale or pur- expected future cash flows. Such present value losses chase of investment securities; these transactions are expetedfutre ashflos. Sch resnt alu loses recorded at the time of commitment. are considered in the determination of the Accumu- lated Provision for Loan Losses. IBRD has not written Securities Purchased Under Resale Agreemtents and off any of its outstanding loans. Securities Sold Under Repurchase Agreements and It is the policy of IBRD to place in nonaccrual status all Payable for Cash Collatal Received: Securities pur- loans made to or guaranteed by a member of IBRD if chased under resale agreements, securities lent under principal, interest, or other charges with respect to any securities lending agreements, and securities sold under such loan are overdue by more than six months, unless repurchase agreements are recorded at historical cost. IBRD management determines that the overdue IBRD receives securities purchased under resale agree- amount will be collected in the immediate future. In ments, monitors the fair value of the securities and, if addition, if development credits made by IDA to a necessary, requires additional collateral. member government are placed in nonaccrual status, all Borrowings: To ensure funds are available for lending loans made to or guaranteed by that member govern- and liquidity purposes, IBRD borrows in the worldwide ment will also be placed in nonaccrual status by IBRD. capital markets offering its securities to private and gov- On the date a member's loans are placed into nonac- ernmental buyers. IBRD issues short-term and crual status, unpaid interest and other charges accrued medium- and long-term debt instruments denominated on loans outstanding to the member are deducted from in various currencies with both fixed and adjustable the income of the current period. Interest and other interest rates. Borrowings are carried on the balance charges on nonaccruing loans are included in income sheet at their par value (face value), adjusted for any only to the extent that payments have actually been unamortized premiums or discounts, and include received by IBRD. If collectibility risk is considered to adjustments for embedded derivatives and fair value be particularly high at the time of arrears clearance, the hedges that existed at June 30, 2000, as required by member's loans may not automatically emerge from FAS 133. Issuance costs associated with a bond offering nonaccrual status, even though the member's eligibility are deferred and amortized over the period during for new loans may have been restored. A decision on which the related indebtedness is outstanding. The the restoration of accrual status is made on a case-by- unamortized balance of the issuance costs is included in IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 53 Other Assets on the balance sheet, and the issuance instruments are included in Note N. Fair value is based costs amortization is presented as a separate element on market quotations when possible. Financial instru- under Borrowing Expenses on the income statement. ments for which market quotations are not readily Amortization of discounts and premiums is included in available have been valued based on discounted cash Interest under Borrowing Expenses on the income flow models using market estimates of cash flows and statement. discount rates. All the financial models used for valuing IBRD's financial instruments are subject to both inter- IBRD uses derivatives in its borrowing and liability nal and periodic external verification and review by management activities to take advantage of cost saving qualified personnel. These models use market sourced opportunities across capital markets to mitigate risks as inputs such as interest rate yield curves, exchange rates, well as lower its funding costs. These derivatives are and option volatilities. Selection of these inputs may used to modify the interest rate and/or currency charac- involve some judgement, as does estimating prices teristics of the borrowing portfolio. The interest com- when no exteral parameters exist. ponent of these derivatives is recognized as an adjustment to the borrowing cost over the life of the Accounting and Reporting Developments: In April derivative contract and included in Interest under Bor- 2002, the Financial Accounting Standards Board rowing Expenses on the income statement. Prior to the (FASB) issued Statement of Financial Accounting Stan- adoption of FAS 133 on July 1, 2000, all derivatives dards No. 145, "Recission of FASB Statements No. 4, were recorded on an historical cost basis using synthetic 44 and 64, Amendment of FASB Statement No. 13, accounting; upon termination, the change in the deriva- and Technical Corrections" (SFAS No. 145). SFAS No. tive's market value was recorded as an adjustment to 145 requires gains and losses from extinguishments of the carrying value of the underlying borrowing and rec- debt to be classified as extraordinary items only if they ognized as an adjustment of the borrowing cost over meet the criteria for such classification in Accounting the remaining life of the borrowing. In instances where Principles Board Opinion No. 30, "Reporting the the underlying borrowing was prepaid, the change in Results of Operations - Reporting the Effects of Dis- the associated derivative's market value was recognized posal of a Segment of a Business, and Extraordinary, immediately as an adjustment to the cost of the under- Unusual and Infrequently Occurring Events and Trans- lying borrowing instrument. However, upon adoption actions" (APB No. 30). These provisions are effective of FAS 133, these derivatives are carried at fair value. January 1, 2003. Adoption of this standard will not Valuation of Financial Instruments: Derivative finan- have a significant impact on IBRD's financial state- cial instruments and investment securities are recorded ments. in IBRD's financial statements at fair value. Disclosures related to the fair value of these, and other financial 54 THE WORLD BANK ANNUAL REPORT 2002 NOTE A-CAPITAL STOCK, RESTRICTED CUR- 2002, this transaction is not reflected in the balance RENCIES, MAINTENANCE OF VALUE, AND sheet at that date. MEMBERSHIP Capital Stock: At June 30, 2002 and June 30, 2001, NOTE INVESTMENTS IBRD's capital comprised 1,581,724 authorized shares, of which 1,570,895 shares had been subscribed. Each As part of its overall portfolio management strategy, share has a par value of 0.1 million 1974 SDRs, valued IBRD invests in government and agency obligations, at the rate of $1.20635 per 1974 SDR. Of the sub- time deposits, asset-backed securities, repurchase agree- scribed capital, $11,476 million ($11,476 million- ments, securities loans, resale agreements and related June 30, 2001) has been paid in, and the remaining financial derivatives including futures, forward con- $178,029 million ($178,029 million-June 30, 2001) is tracts, currency swaps, cross-currency interest rate subject to call only when required to meet the obliga- swaps, interest rate swaps, options and short sales. tions of IBRD created by borrowing or guaranteeing For government and agency obligations, IBRD may only loans. invest in obligations issued or unconditionally guaran- Currencies Subject to Restrictions: A portion of capital teed by governments of countries with a minimum subscriptions paid in to IBRD has been paid in the local credit rating of AA; however, if such obligations are currencies of the members. These amounts, referred to denominated in the home currency of the issuer, no rat- as restricted currencies, are usable by IBRD in its lend- ing is required. IBRD may only invest in obligations ing operations, only with the consent of the respective issued by an agency or instrumentality of a government members, and for administrative expenses. of a country, a multilateral organization or any other official entity with a minimum credit rating of AA. For Maintenance of Value: Of the. total Amount of $1 ,asset-backed securities, IBRD may only invest in securi- million ($912 million-June 30, 2001) included In ties with a AAA credit rating. Amounts to Maintain Value of Currency Holdings, which has been deducted from equity, $195 million With respect to futures and options, IBRD generally ($198 million-June 30, 2001) represents MOV closes out most open positions prior to maturity. receivables for countries that have amounts in arrears Therefore, cash receipts or payments are mostly limited for two years or more. IBRD still considers these MOV to the change in market value of the futures and receivables in arrears as obligations due from the mem- options contracts. Futures contracts generally entail bers concerned. The remaining $446 million ($714 mil- daily settlement of the net cash margin. lion-June 30, 2001) represents net MOV amounts F reatn to retice curnce ou on loa tha For options, IBRD only invests in exchange-traded become paya underithe samentes as ot Mo V options. The initial price of an option contract is equal obiations only after sh acenes arer tOV to the premium paid by the purchaser and is signifi- IBRDl cantly less than the contract or notional amount. IBRD IBRD* does not write uncovered option contracts as part of its Membership: On July 23, 2002, East Timor became a investment portfolio strategy. member of IBRD. On that date, East Timor subscribed A for 517 shares with a par value of $62.4 million, s of June 30, 2002, IBRD had received $1,833 mlion which $1.9 million was paid in and $60.5 million was ($319 million-June 30, 2001) of securities under subject to call. As this occurred subsequent to June 30, resale agreements IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 55 Liquid Portfolio: A summary of IBRD's position in trading and other liquid portfolio instruments at June 30, 2002 and June 30, 2001 is as follows: In mtlltons of US dollars equivalent Other AU Euro Japanese yen US dollars currencies currencies 2002 2001 2002 2001 20021 2001 2002 2001 2002 2001 Trading: I Government and agency obligations Carrying value 5,835 5,359 j 1,223 2,221 1,901 1,118 I 21 8,959, 8,719 Average balance during fiscal year 5,397 4,355 1,641: 2,935 1,544 1,200 5 19 8,587 8,509 Net gains [losses) for the I fiscal year (10) 8 (29) 5 9' 9 (30) 22 Average yield (%) 4.22 4 75 0 21 0 24 3 63 4 83 5 09 3 55 3 59 Average maturity (years) 2 79 2 94 2.87 3 27 2 86 3 80 0 29 2 82 3 13 Time deposits Carrying value 1,669 848 664 188 6,662 9,014 1,2011 980 10,196 11,030 Average balance during I I "I fiscalyear 979 1,705 440 311 9,3051 8,495 578 1,064 11,293: 11,575 Average yield (%) 3 40 4 62 0.02 0 08 1.90 4 14 3.57, 4 99 2.22 418 Average matunty (years) 0.09 0 09 0 13 0 02 0 09 0 08 0 050 0 04 0.09 0 07 Asset-backed securities Carryingvalue - - 5,100 4,413- 5,10 4,413 Average balance dunng fiscal year _4,88 4,494 - 4,886 4,494 Net gains (losses) for the j 4 4 - , 4 fiscal year I - - '- 22 -- 1: 22 Average yield (%) - - - 2.51 4 92 -i 2.51' 4 92 Average matunty (years) - -l - 11.88 8 37i - 11 88 8 37 Options, futures and i forwards Carrying value - -j 6 - II 6 Average balance during j 2 - l 2 fiscal year I 2 Net gains (losses) for the fiscal year i -- 14 ( ) - 14 ( Total Trading Investments' j Carrying value 7,504 6,207 1,887 2,409 13,664 14,551 1,201 1,001 24,256 24,168 Average balance during fiscal year I 6,367 6,060 2,081| 3,246 15,736 14,191 583 1,083 24,767 24,580 Net gains (losses) for the I fiscalyeara (10) 8 (291 5 ) 24 31 . . (15) 44 Repurchase agreements & j securities loans: Carrying value t - - , (207) - - (207) Average balance dunng fiscal year - (147) (108) - (147) (108) Average cost (%) -l _ 413 - 4 13 Average matunty (years) -o i -0 i ° -l ! -I _ 001 Resale agreements: i Carrying value _ - _ _ 1,820 322 - _ 1,820 322 Average balance dunng fiscal year U _l _ 1,062 506 - 1,062 506 Average yield (%) - _ - 1.93 4 34 , 1.93 4.34 Average matunty (years) , - _ -| 001| 001 - 0.01 0 01 56 THE WORLD BANK ANNUAL REPORT 2002 In millions of US dollars equwvalent Other All Euro Japanese yen US dollars currencies currencies 2002 2001 1 2002 1 2001 2002 2001 2002 2001 2002 2001 Short sales:b I I Carrymg value - - - (102) (63) (102) (63) Average balance dunng fiscalyear -$ - -i (8) (214) - -i (8) (214) Currency swaps receivablec: i Carrymg value ,- - 2,4971 1,3541 - 2,4971 1,354 Average balance dunng fiscal year -- - 1,346 2,248 1 4 1,346 2,262 Average yield(%) I - - 1 86 4 36 - 1.86 4 36 Average matunty (years) j -, - l 010 0 08 1 - 010 0 08 Currency swaps payablec: Carrying value (1,260) (683) (518)' (40) - (886) (600) (2,664) (1,323) Average balance dunng ! fiscal year (700) (1,465) (Z74) (90) () (14) (334) (665) i (1,308) (2,234) Average cost (%) 3. 4 60 0.02 0 06 - 3 76 5 18 1 286 4 72 Average matunty (years) 01 0 11 0 15 0 07 1 , - 0.06 0.06 0 10 0 08 Cross-currency interest rate 1 F | | swaps receivable ! Carrying value - - 528 8921 6,907' 8,797 7,435 9,689 Average balance dunng ' , j fiscal year - 577! 537 i 7,684 7,729 - - 8,261 8,266 Net gains (losses) for the fiscal yeara 211 (7)1 (6), 20 15 13 Average yield () - - 060q 0 07 2.04 4 30 | -W 1 94 3 91 Average matunty (years) ___ - 6 49, 0.31 3 06 2 23 - 330 2 05 Cross-currency interest rate swaps payable' c - i j _ j j Carrying value (5,842) (5,365) (1,752) (3,116) (952) - (18) (8,106) (9,451) Average balance durnng fiscal year (5,402) (4,359) (2,222) (3,443) (609) (536) () (19) (8,233) (8,357) Net gains (losses) for the fiscal yeara 10 (14) ' (1) (3) (2) () () 16 (17) 1 9,~~~ 506I1 1 17 Average cost (%) 4 22 4 72. 0 30 0 14 1 1.99 3 88 5 06 3.23 3 11 Average matunty (years) 2 80 2 95 3.96 1 49 1 6 49 0 31 - 0 29 3 28 2 19 Net Interest rate swaps c Carrying value , -' _ -I (49) (17) -j (49) (17) Average balance dunng | fiscal year I - _ -i (12) (7) - (12) (7) Net gains (losses) for the ! fiscal yeara , __' -| (25) 1 I (25) 1 Average cost (%) -I - 1 0 05 0 05 Average matunty (years) _ ' - . - o91i 090 [ _ 0 90 a Included in Net gains (losses) on the Trading portfolio in the income statement b Included in Amounts Payable for Investment Secunties Purchased on the balance sheet c Included in Currency and Interest Rate Swaps-Investments on the balance sheet * Less than $0 5 million, 0 005 percent, or 0 05 years May differfrom the sum of individualfigures due to roundtng. IBRD FINANCIAL STATEMENTS. JUNE 30, 2002 57 NOTE C-LOANS, COFINANCING AND GUARANTEES IBRD's loan portfolio includes multicurrency loans, single was to reduce Net Income by $102 million, ($139 rmil- currency pool loans, single currency loans and fixed spread lion-June 30, 2001, $59 million-June 30, 2000). In loans. Single currency loans include fixed-rate and vari- addition, IBRD continued to waive a portion of the com- able-spread loans, as well as certain loans with non-standard mitment charge on all eligible undisbursed balances on terms. At June 30, 2002 only variable spread loans, fixed loans to all borrowers. For the fiscal year ended June 30, spread loans, and special structural and sector adjustment 2002, the effect of this waiver was to reduce net income by loans were available for new commitments. $156 million ($169 million-June 30, 2001, $207 mil- lion-June 30, 2000). Waivers of Loan Interest and Commitment Charges A summary of IBRD's outstanding loans by currency and For fiscal year 2002, IBRD continued to offer waivers of a product at June 30, 2002 and June 30, 2001 follows: portion of interest owed by all eligible borrowers. For the fiscal year ended June 30, 2002, the effect of this waiver In millions of US. dollars equivalent 2002 Euro Japanese yen US. dollars Others Loans Outstanding Fixed Adjust. Fixed Adjust. Fixed Adjust. Fixed Adjust. Fixed Adjust. Total Multicurrency loansa b Amount $ 120 $8,586 $ 82 $9,022 $ 197 $ 8,785 $102 $1,683 $ 501 $ 28,076 $ 28,577 Weighted average rate (%)' 8.17 5.03 7.84 5.03 7.77 5.03 7.66 5.03 7.85 5.03 5.08 Single currency pools Amount $ - $2,835 $ - $ 40 $ 1 $22,710 $ - $ - $ 1 $ 25,585 $ 25,586 Weighted average rate (%) - 6.65 - 1.72 11.60 8.32 - - 11.60 8.12 8.12 Average Maturity (years) - 3.72 - 2.86 0.47 3.86 - - 0.47 3.84 3.84 Single currency loansd Amount $ 623 $2,045 $ - $ 139 $15,250 $42,350 $ - $ 2 $15,873 $ 44,536 $ 60,409 Weighted average rate (%)C 5.47 3.82 - 0.28 6.64 2.86 - 1.71 6.59 2.90 3.87 Average Maturity (years) 4.33 6.40 - 6.48 4.26 5.70 - 3.97 4.26 5.73 5.35 Fixed-spread loans Amount $1,903 $ 990 $ - $ 1 $ 565 $ 3,558 $ - $ - $ 2,468 $ 4,549 $ 7,017 Weighted average rate (%)C 5.72 4.10 - 0.59 6.64 2.63 - - 5.93 2.95 4.00 Average maturity (years) 14.74 14.44 - 13.34 9.56 8.34 - - 13.55 9.67 11.04 Total Loans Amount $2,646 $14,456 $ 82 $9,202 $16,013 $77,403 $102 $1,685 $18,843 $102,746 $121,589 Weighted average rate (%)C 5.77 5.12 7.84 4.95 6.65 4.70 7.66 5.03 6.54 4.79 5.06 Total loans $121,589 Less accumulated provision for loan losses and deferred loan income 5,514 Net loans outstanding $116,075 Note: Forfootnotes seefollowingpage. 58 THE WORLD BANK ANNUAL REPORT 2002 In millions of US. dollars equivalent 2001 Euro Japanese yen US. dollars Others Loans Outstanding Fixed Adjust. Fixed Adjust. Fixed Adjust. Fixed Adjust. Fixed Adjust. Total Multicurrency loansa b Amount $ 261 $ 8,417 $206 $ 9,865 $ 351 $10,447 $160 $1,534 $ 978 $ 30,263 $ 31,241 Weighted average rate (%)c 8.15 5.04 8.09 5.04 8.39 5.13 7.84 5.04 8.17 5.07 5.17 Single currency pools Amount $ 3 $ 2,997 $ - $ 47 $ 26 $27,448 $ - $ - $ 29 S 30,492 $ 30,521 Weighted average rate (%)C 10.93 7.26 - 3.94 11.37 8.76 - - 11.33 8.61 8.61 Average Maturity (years) 0.47 4.02 - 3.25 0.45 4.26 - - 0.45 4.24 4.23 Single currency loansd Amount $ 522 $ 1,468 $ - $ 137 $14,467 $37,308 $ - $ 2 $14,989 $ 38,915 $ 53,904 Weighted average rate (%)c 5.48 4.79 - 0.31 6.74 5.55 - 3.38 6.69 5.50 5.83 Average Maturity (years) 4.87 6.68 - 7.09 4.82 6.02 - 4.47 4.82 6.05 5.70 Fixed-spread loans Amount $ 265 $ 64 $ - $ - $ 215 $ 2,656 $ - $ - $ 480 $ 2,720 $ 3,200 Weighted average rate (%)c 6.29 5.04 - - 6.92 4.61 - - 6.57 4.62 4.91 Average maturity (years) 9.67 9.54 - - 9.95 8.98 - - 9.79 8.99 9.11 Total Loans Amount $1,051 $12,946 $206 $10,049 $15,059 $77,859 $160 $1,536 $16,476 $1(02,390 $118,866 Weighted average rate (%)c 6.36 5.52 8.09 4.97 6,79 6.59 7.84 5.04 6.79 6.27 6.35 Total loans $118,866 Less accumulated provision for loan losses and deferred loan income 4,459 Net loans outstanding $114,407 a. Includes loans issued prior to 1980, and loans to IFC, in addition to multicurrency pool loans. Forfiscal year 2001, this also includes co-financing loans. b. Average Maturity - Multicurrency loans. IBRD maintains a targeted currency composition in its multicurrency loans. The present target ratio is one U.S. dollarfor every 125 Japanese yen and one euro. These three major currencies comprise at least 90% of the multicurrency loans' US. dol- lar equivalent value, with the remainder in other currencies. The composition of the multicurrency loans is affected by the selection of currenciesfor disbursements on those loans and by the currencies selectedfor the billing of the principal repayments. Along with the selection of disbursement ctur- rencies, IBRD manages the selection of repayment currencies to maintain the alignment of the multicurrency loans' composition with the target ratio. The selection of currencies for repayment billing by IBRD precludes the determination of average maturity information for multicurrency loans by individual currency. Accordingly, IBRD only discloses the maturity periodsfor its multicurrency loans on a combined U.S. dollars equiva- lent basis. c. Excludes effects of any waivers of loan interest. d. Includes fixed-rate, variable-spread and non-standard loans. IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 59 The maturity structure of IBRD's loans at June 30, 2002 and June 30, 2001 is as follows: In millions 2002 July 1, 2002 through July 1, 2003 through July 1, 2007 through ProductIRate Type June 30, 2003 June 30, 2007 June 30, 2012 Thereafter Total Multicurrency loans Fixed $ 311 $ 177 $ 13 $ - $ 501 Adjustable 3,897 13,574 9,153 1,452 28,076 Single currency pools Fixed I - - - I Adjustable 4,168 13,528 7,075 814 25,585 Single currency loansa Fixed 1,433 8,517 5,784 139 15,873 Adjustable 3,662 18,118 15,823 6,933 44,536 Fixed-spread loans Fixed - 193 742 1,533 2,468 Adjustable - 297 2,836 1,416 4,549 All Loans Fixed 1,745 8,887 6,539 1,672 18,843 Adjustable 11,727 45,517 34,887 10,615 102,746 Total loans outstanding $13,472 $54,404 $41,426 $12.287 $121.589 In millions 2001 July 1, 2001 through July 1, 2002 through July 1, 2006 through Product/Rate Type June 30, 2002 June 30, 2006 June 30, 2011 Thereafter Total Multicurrency loans Fixed $ 690 $ 256 $ 32 $ - $ 978 Adjustable 4,306 13,531 10,315 2,111 30,263 Single currency pools Fixed 28 1 - - 29 Adjustable 4,511 14,844 9,592 1,545 30,492 Single currency loansa Fixed 788 7,469 6,374 358 14,989 Adjustable 1,664 16,226 14,478 6,547 38,915 Fixed-spread loans Fixed - 43 232 205 480 Adjustable - 49 1,913 758 2,720 All Loans Fixed 1,506 7,769 6,638 563 16,476 Adjustable 10,481 44,650 36,298 10,961 102,390 Total loans outstanding $11,987 $52,419 $42.936 $11.524 $ 118,8 66 a. Includes fixed-rate, variable-spread and non-standard loans. Cofinancing and Guarantees loans. IBRD's partial guarantees of bond issues are included IBRD has taken direct participations in, or provided partial in the guarantees amount mentioned below. IBRD's direct guarantees of, loans syndicated by other financial institu- participations in syndicated loans are included in the tions for projects or programs also financed by IBRD reported loan balances. At June 30, 2002, IBRD did not through regular loans. IBRD also has provided partial guar- have any direct participation in syndicated loans. antees of securities issued by an entity eligible for IBRD 60 THE WORLD BANK ANNUAL REPORT 2002 Guarantees are regarded as outstanding when the bor- than three months. At June 30, 2002, the aggregate rower incurs the underlying financial obligation and are principal amounts outstanding on all loans to any bor- called when a guaranteed party demands payment rower, other than those referred to in the following under the guarantee. Outstanding guarantees of loan paragraph, with any loans overdue by more than three principal and interest of $1,584 million at June 30, months, was $2 million. 2002 ($1,605 million - June 30, 2001) were not At June 30, 2002, the loans made to or guaranteed by included in reported loan balances. These amounts certain member countries with an aggregate principal represent the maximum potential risk if the payments balance outstanding of $2,755 million ($2,832 mil- guaranteed for these entities are not made. At June 30, lion-June 30, 2001), of which principal of $336 mil- 2002, $473 million of these guarantees were subject to lion ($1,331-June 30, 2001) was overdue, call ($484 million - June 30, 2001). As of June 30, h n ($1,331 million-June 30, 2001) was overdue, 2002, no guarantees provided by IBRD have been were in nonaccrual status. At such date, overdue inter- call, d est and other charges in respect of these loans totaled $313 million ($1,087 million-June 30, 2001). If these Overdue Amounts loans had not been in nonaccrual status, income from At June 30, 2002, in addition to those loans referred to loans for the fiscal year ended June 30, 2002, would in the following paragraph, total principal, interest and have been higher by $34 million ($80 million-June charges of less than $1 million was overdue by more 30, 2001, $52 million-June 30, 2000). A summary of countries with loans or guarantees in nonaccrual status follows: In millions 2002 Principal Principal and Nonaccnual Borrower outstanding charges overdue since With overdues Congo, Democratic Republic of $ 81 $132 November 1993 Iraq 40 76 December 1990 Liberia 134 318 June 1987 Syrian Arab Republic 14 6a February 1987 Zimbabwe 416 117 October2000 Total 685 649 Without overdues Yugoslavia, Federal Republic of 2,070 - September 1992 Total $2,755 $649 a. Represents interest and charges overdue. During fiscal year 1998, the Syrian Arab Republic will increase by $6 million, representing income that (Syria) and IBRD entered into an agreement covering, would have been accrued in previous fiscal years had among other things, the application of payments by these loans not been in nonaccrual status. This is in Syria of its overdue principal, interest, and charges. accordance with IBRD's policy of recognizing income Under this agreement, Syria paid the overdue principal on a cash basis when a country is in nonaccrual status. to IBRD in one payment of $263 million on September This event was considered in determining the adequacy 2, 1997 and has been making monthly payments to of the provision for loan losses at June 30, 2002. IBRD since then. In June 1996, the accumulated arrears on loans to the On July 1, 2002, Syria made its final payment under former SFRY assumed by Bosnia and Herzegovina were this agreement, clearing all of its overdue interest and cleared through three new consolidation loans charges with IBRD, and all IBRD loans to, or guaran- extended by IBRD. These new loans consolidated all teed by Syria, were restored to accrual status. As a outstanding principal and overdue interest on the loans result, income for the fiscal year ended June 30, 2003 assumed by Bosnia and Herzegovina. This resulted in IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 61 an increase in loans outstanding of $168 million and the tional financial institution. On the same day, IDA deferral of the recognition of the related interest disbursed a development credit to the Democratic income. The net exposure to Bosnia and Herzegovina Republic of Congo in support of economic reform and did not change as a result of this event. poverty reduction programs. Part of the proceeds of this credit was used to repay the bridge financing. The In December 2001, Bosnia and Herzegovina corn- development credit was funded by IDA resources other menced making principal repayments on these consoli- th datio las. In adiin duin fica yea 202 IBR than transfers from IBRD. As a result of this event, dation loans. In addition, during fiscal year 2002, IBRD income for the fiscal year ended June 30, 2003 will be began amortizing the related deferred loan income over increa by $51 misll y represen02n i e th reann lie of ths loans increased by $51 million, representing income that would have been accrued in previous fiscal years had As of June 30, 2002, all IBRD loans outstanding to Bos- these loans not been in nonaccrual status. This is in nia and Herzegovina were restored to accrual status fol- accordance with IBRD's policy of recognizing income lowing management's determination that a suitable on a cash basis when a country is in nonaccrual status. period of payment performance had passed subsequent This event was considered in determining the adequacy to the time of arrears clearance. During the fiscal year of the provision for loan losses at June 30, 2002. ended June 30, 2002, income increased by $8 million, The average recorded investment in nonaccruing loans representing income that would have been accrued in during the fiscal year ended June 30, 2002, was $2,897 previous fiscal years had these loans not been in nonac- million ($2,424 million-June 30, 2001, $2,057 mil- crual status. lion-June 30, 2000). On January 8, 2002, the accumulated arrears on loans During the fiscal year ended June 30, 2001, no loans to FRY were cleared through six new consolidation ' loans extended by IBRD. These new loans consoli- dated all overdue interest and charges with FRY's then Accumulated Provision for Loan Losses outstanding loans. This resulted in an increase in loans IBRD has always eventually collected all contractual outstanding of $799 million and the deferral of the rec- Incipal and erentuans. Howeved all suf- ognition of the related interest income. The net expo- principal and interest on its loans. However, IBRD suf- sure to FRY has not changed as a result of this event. fers losses resulting from the difference between the All of these consolidation loans are fixed-spread single discounted present value of expected payments for currency loans, denominated in euro, and carry the cur- interest and charges according to the related loan's con- rent interest rate terms for this product, which, at the tractual terms and the actual cash flows. Certain bor- time of consolidation, was LIBOR plus a 55 basis point rowers have found it difficult to make timely payments spread. They have a final maturity of thirty years, for protracted periods, resulting in their loans being which includes a three-year grace period. The previous placed in nonaccrual status. Several borrowers have loans had final maturities ranging from January 1, 1992 emerged from nonaccrual status after a period of time to March 15, 2005 and a combined weighted-average by bringing up-to-date all principal payments and all interest rate of 5.5%. overdue service payments, including interest and other During the fiscal year ended June 30, 2002, C6te d'lvo- charges. To recognize the probable losses inherent in its ire and th Republic of Cong a l o ir o- .loan portfolio, IBRD maintains an accumulated provi- ire and the Republic of songo clearef al oA teerr over- . r l Oo due service payments to IBRD, and all IBRD loans to, sLon for loan losses. Of the Accumulated Provision for or guaranteed by, these two countries were restored to ($3 959 mil lion at June 305 2002 accrual status. These arrears clearances of $25 mllion ($3,959 million-June 30, 2001), $655 million is for Ct d'lvoire ^ r and $34 mill.on for the Re of attributable to the nonaccruing loan portfolio ($1,090 for C6te dIlvoire and $34 million for the Republic of million-June 30, 2001). Congo were accomplished using bridge financing pro- vided by an international financial institution. On the Changes to the Accumulated Provision for Loan Losses same day that arrears were cleared, IDA disbursed for the fiscal years ended June 30, 2002, June 30, 2001 development credits to the respective country in sup- and June 30, 2000 are summarized below: port of economic reform and poverty reduction pro- grams. Some or all of the proceeds of these In miluions development credits were used to repay the bridge 2002 2001 2000 financing. The development credits were funded by IDA resources other than transfers from IBRD. As a Balance, beginning of result of these events, income for the fiscal year ended the fiscal year $3,959 $3,400 $3,560 June 30, 2002 increased by $40 million, representing Provision for loan losses (15) 676 (166) income that would have been accrued in previous fiscal Translation adjustment 134 (117) 6 years had these loans not been in nonaccrual status. On July 3, 2002, the Democratic Republic of Congo Balance, end of the fiscal cleared all of its overdue service payments to IBRD, and year $4,078 $3,959 $3,400 all IBRD loans to, or guaranteed by, the Democratic Republic of Congo were restored to accrual status. This arrears clearance of $131 million was accom- In fiscal year 2002, provisioning requirements were plished using bridge financing provided by an interna- reduced by $15 million, as arrears clearances from bor- 62 THE WORLD BANK ANNUAL REPORT 2002 rowers in the nonaccrual portfolio offset a further dete- to September 1988 and have in place an IDA-sup- rioration of the credit quality of the accrual portfolio. ported structural adjustment program. Such supple- In contrast, loans to two borrowers were placed into mentary IDA development credits are allocated to nonaccrual status in fiscal year 2001. countries that meet specified conditions, in proportion to each country's interest payments due that year on its IBRD has endorsed a multilateral initiativeforaddress- pre-September 1988 IBRD loans. To be eligible for ing theadebt problem or ocontries Identi such IDA supplemental development credits, a mem- ned as heavily indebted poor countries (HIPCs), to ber country must meet IDA's eligibility criteria for ensure that the reform efforts of these countries will lending, must be ineligible for IBRD lending and must not be put at risk by unsustainable external debt bur- not have had an IBRD loan approved within the last dens. Under this initiative, creditors are to provide debt twelve months. To receive a supplemental development relief for those countries that demonstrated good policy credit from the program, a member country cannot be performance over an extended period to bring their more than 60 days overdue on its debt-service pay- debt burdens to sustainable levels. IBRD has not ments to IBRD or IDA. At June 30, 2002, IDA had entered into any commitments to provide debt relief approved development credits of $1,706 million under this initiative. However, IDA is expected under ($1,679 million-June 30, 2001) under this program the HIPC debt initiative, to extend new credits to cer- from inception, of which $1,690 million ($1,651 mil- tain IDA-eligible countries no longer able to borrow on lion-June 30, 2001) had been disbursed to the eligible IBRD terms, but with outstanding IBRD debt. These counes. credits will be funded by IDA resources other than countries transfers from IBRD. In determining the adequacy of the Accumulated Provision for Loan Losses, IBRD has NOTE D-BORROWINGS taken the situation of these countries into account. Providing liquidity and minimizing the cost of funds are Fifth Dimension Program key objectives to IBRD's overall borrowing strategy. Under IDA's Fifth Dimension program established in IBRD uses swaps in its borrowing strategy to lower the September 1988, a portion of principal repayments to overall cost of its borrowings for those members who IDA are allocated on an annual basis to provide supple- benefit from IBRD loans. IBRD undertakes swap trans- mentary IDA development credits to IDA-eligible actions with a list of authorized counterparties. Credit countries that are no longer able to borrow on IBRD limits have been established for each counterparty. terms, but have outstanding IBRD loans approved prior IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 63 A summary of IBRD's borrowings portfolio at June 30, 2002 and June 30, 2001 follows: Medium- and Long-term Borrowings and Swaps at June 30, 2002 In millions of US. dollars equivalent Currency Interest rate Direct borrowings swap agreementsa swap agreements Net currency obligations Wgtd. Wgtd. Notional Wgtd. Wgtd. avg. Average Amount avg. Average amount avg. Average Amount avg. Average Currency/ cost maturity payable cost maturity payable cost maturity payable cost maturityj Rate type Amount (%) (years) (receivable) (%) (years) (receivable) (%) (years) (receivable) (%) (years) Euro Fixed $ 13,218 6.19 4.64 $ 1,145 6.07 2.63 $ 3,129 6.05 7.64 $ 17,492 6.16 5.05 (11,539) 6.21 4.19 (1,117) 6.26 3.37 (12,656) 6.21 4.12 Adjustable 4,777 5.52 7.92 9,620 3.55 4.23 1,105 3.31 2.32 15,502 4.14 5.23 (5,782) 5.10 7.61 (3,128) 3.83 7.64 (8,910) 4.65 7.62 Japanese yen Fixed 7,437 4.57 4.90 127 5.48 1.75 2,283 0.37 1.32 9,847 3.61 4.03 (5,979) 4.85 3.46 (1,757) 2.65 3.90 (7,736) 4.35 3.56 Adjustable 9,037 5.69 24.14 5,221 0.09 2.42 1,757 (0.07) 3.90 16,015 3.23 14.84 (9,265) 5.24 22.73 (2,283) (0.01) 1.32 (11,548) 4.20 18.50 U. S. dollars Fixed 52,039 5.66 4.21 10,009 8.95 2.01 18,506 5.92 7.37 80,554 6.13 4.66 (314) 6.49 0.66 (50,647) 5.31 3.84 (50,961) 5.32 3.82 Adjustable 1,146 3.51 3.23 39,013 1.86 11.20 52,288 1.93 3.35 92,447 1.92 6.66 (13,477) 1.93 3.59 (20,156) 2.17 6.68 (33,633) 2.07 5.44 Others Fixed 17,107 6.95 8.54 169 2.52 0.08 - - - 17,276 6.91 8.46 (16,201) 6.88 8.17 (154) 6.66 4.26 (16,355) 6.88 8.13 Adjustable 192 3.58 22.88 - - - 154 2.80 4.26 346 3.23 14.59 (345) 4.97 14.60 - - - (345) 4.97 14.60 Total Fixed 89,801 5.89 5.16 11,450 23,918 125,169 6.04 5.19 (34,033) (53,675) (87,708) 5.65 4.64 Adjustable 15,152 5.44 17.43 53,854 55,304 124,310 2.37 7.56 (28,869) (25,567) (54,436) 2.96 8.63 Principal at face value 104,953 5.83 6.93 2,402 (20) 107,335 3.67 Net unamor- tizedpremium 38 61 72 171 Effects of applying FAS 133 354 (347) (1,220) (1,213) Total $105,345 $2,116 $(1,168) $106,293 a. Currency swap agreements include cross-currency interest rate swaps. b. At June 30, 2002, the average repricing period of the net currency obligations for adjustable rate borrowings was three months. 64 THE WORLD BANK ANNUAL REPORT 2002 Medium- and Long-term Borrowings and Swaps at June 30, 2001 In millions of US. dollars equivalent Currency Interest rate Direct borrowings swap agreementsa swap agreements Net currency obligations Wgtd. Wgtd. Notional Wgtd. Wgtd. avg. Average Amount avg. Average amount avg. Average Amount avg. Average Currencyl cost maturity payable cost maturity payable cost maturity payable cost maturityb Rate type Amount (96) (years) (receivable) (%) (years) (receivable) (%) (years) (receivable) (%) (years) Euro Fixed $12,932 6.63 4.77 $ 1,464 6.23 2.50 $ 3,329 6.26 3.02 $ 17,725 6.53 4.25 (11,451) 6.77 4.29 (1,447) 5.92 3.19 (12,898) 6.67 4.17 Adjustable 4,681 4.94 8.14 7,961 4.54 2.58 1,421 4.61 2.48 14,063 4.68 4.42 (5,621) 4.79 7.77 (3,311) 4.72 3.03 (8,932) 4.76 6.02 Japanese yen Fixed 9,331 4.79 4.54 81 5.88 2.23 3,518 0.50 1.10 12,930 3.63 3.59 (6,334) 4.93 3.85 (2,607) 2.75 3.51 (8,941) 4.29 3.75 Adjustable 4,177 5.68 18.50 4,563 (0.08) 0.93 2,607 0.12 3.51 11,347 2.09 7.99 (4,610) 4.32 15.45 (3,518) 0.07 1.10 (8,128) 2.48 9.24 U. S. dollars Fixed 47,381 6.15 4.70 11,531 9.05 2.68 18,050 6.02 7.50 76,962 6.56 5.05 (435) 6.30 1.15 (42,669) 5.80 4.42 (43,104) 5.80 4.39 Adjustable 1,380 4.57 3.17 39,840 4.52 8.39 42,133 4.63 3.95 83,353 4.57 6.06 (12,754) 4.41 2.00 (17,516) 4.75 7.34 (30,270) 4.61 5.1( Others Fixed 19,624 7.23 8.12 463 5.10 0.53 363 7.08 0.30 20,450 7.18 7.81 (19,416) 7.14 7.57 (154) 6.66 5.26 (19,570) 7.13 7.55 Adjustable 245 4.32 17.55 363 2.05 0.23 154 4.47 5.26 762 3.27 6.81 (397) 5.83 12.83 (363) 3.33 0.30 (760) 4.64 6.85 Total Fixed 89,268 6.32 5.44 13,539 25,260 128,067 6.36 5.23 (37,636) (46,877) (84,513) 6.08 5.02 Adjustable 10,483 5.17 11.83 52,727 46,315 109,525 4.32 6.05 (23,382) (24,708) (48,090) 4.28 6.00 Principal at face value 99,751 6.20 6.11 5,248 (10) 104,989 5.41 Net unamor- tized premium (discount) 43 59 113 215 Effects of applying FAS 133 45 (544) (125) (624) Total $99,839 $ 4,763 $ (22) $104,580 a. Currency swap agreements include cross-currency interest rate swaps. b. At June 30, 2001, the average repricing period of the net currency obligations for adjustable rate borrowings was three months. IBRD FINANCIAI STATEMENTS: JUNE 30, 2002 65 Short-term Borrowings and Swaps at June 30, 2002 and June 30, 2001 In millions of US. dollars equivalent 2002 2001 Interest Interest Currency rate Wgtd. Currency rate Wgtd. swapa swap Net avg. swapa swap Net avg. Currency/ Principal payable payable currency cost Principal payable payable currency cost Rate type outstanding (receivable) (receivable) obligationsb (%) outstanding (receivable) (receivable) obligatons! (%o) U. S. dollars Fixed $3,964 $- $- $3,964 1.82 $5,923 $ - $ - $5,923 3.93 - - - - - (100) (100) 3.91 Adjustable 896 60 - 956 1.83 827 173 100 1,100 3.78 Others Fixed 66 - - 66 10.13 189 - - 189 17.36 (66) - (66) 10.13 (189) - (189) 17.36 Total Fixed 4,030 - - 4,030 1.96 6,112 - - 6,112 4.35 (66) - (66) 10.13 (189) (100) (289) 12.71 Adjustable 896 60 - 956 1.83 827 173 100 1,100 3.78 Principal at face value 4,926 (6) - 4,920 1.82 6,939 (16) - 6,923 3.91 Net unamortized premium (discount) (8) - - (8) (21) 1 - (20) Effects of applying FAS 133 - - (1) ( (1) Total $4,918 $ (6) $- $4,912 1.82 $6,918 $ (16) $ () $6,902 3.91 a. Currency swap agreements include cross-currency interest rate swaps. b. At June 30, 2002, the average repricing period of the net currency obligations for short-term borrowings was less than one month (one month-June 30, 2001.) Less than $0.5 million 66 THE WORLD BANK ANNUAL REPORT 2002 The maturity structure of IBRD's Medium-and Long-term borrowings outstanding at June 30, 2002 and June 30, 2001 is as follows: In millions In milions Period 2002 Period 2001 July 1, 2002 through June 30, 2003 $17,498 July 1, 2001 through June 30, 2002 $17,560 July I, 2003 through June 30, 2004 11,773 July 1, 2002 through June 30, 2003 16,763 July 1, 2004 through June 30, 2005 17,937 July 1, 2003 through June 30, 2004 11,191 July 1, 2005 through June 30, 2006 11,206 July 1, 2004 through June 30, 2005 9,019 July 1, 2006 through June 30, 2007 6,917 July 1, 2005 through June 30, 2006 9,547 July 1, 2007 through June 30, 2012 16,566 July 1, 2006 through June 30, 2011 17,691 Thereafter 23,056 Thereafter 17,980 Total $104,953 Total $99,751 Line of credit: IBRD maintains a $400 million line of NOTE E-OTHER ASSET/LIABILITY SWAPS credit with an independent financial institution. This facility is used to cover any overnight overdrafts that may As part of asset/liability management, IBRD has entered occur due to failed trades. At June 30, 2002 and June 30, into a number of currency swaps to better align its cur- 2001, no amounts were outstanding under this line Of rency composition of Equity with that of loans. A sum- creit no amounts were outstanding under this ne of mary of IBRD's other asset/liability swaps at June 30, credit. 2002 and June 30, 2001 is presented below: In millions of US. dolars equivalent June 30, 2002 June 30, 2001 Other Asset/Liability Swap Agreements Other Asset/Liability Swap Agreements Amount Weighted Average Amount Weighted Average Receivable Average Maturity Receivable Average Maturity (payable) Cost (9) (years) (payable) Cost (%) (years) U.S. dollars $727 2.30 4.72 $728 4.85 5.72 Euro $(312) 3.53 4.71 $(271) 4.71 5.71 Japanese yen (446) (0.03) 4.73 (430) 0.04 5.73 $(758) 1.43 4.72 $(701) 1.85 5.72 NOTE F-CREDIT RISK Country Credit Risk: This risk includes potential losses IBRD's own cost of borrowing and partial interest charge arising from protracted arrears on payments from borrow- waivers conditioned on timely payment that give borrow- ers. IBRD manages country credit risk through individual ers self-interest in IBRD's continued strong intermediation country exposure limits according to creditworthiness. capacity. Collectibility risk is covered by the Accumulated These exposure limits are tied to performance on macro- Provision for Loan Losses. IBRD also uses a simulation economic and structural policies. In addition, IBRD estab- model to assess the adequacy of its equity including lishes absolute limits on the share of outstanding loans to reserves in case a major borrower, or group of borrowers, any individual borrower. The country credit risk is further stops servicing its loans for an extended period of time. managed by financial incentives such as pricing loans using IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 67 Commercial Credit Risk: For the purpose of risk man- In addition, IBRD has entered into master derivatives agement, IBRD is party to a variety of financial instru- agreements which contain legally enforceable close-out ments, certain of which involve elements of credit risk. netting provisions. These agreements may further Credit risk exposure represents the maximum potential reduce the gross credit risk exposure related to the accounting loss due to possible nonperformance by swaps shown below. Credit risk with financial assets obligors and counterparties under the terms of the con- subject to a master derivatives arrangement is elimi- tracts. For all securities, IBRD limits trading to a list of nated only to the extent that financial liabilities to the authorized dealers and counterparties. Credit risk is same counterparty are settled after the assets are real- controlled through application of eligibility criteria and ized. Because the exposure is affected by each transac- volume limits for transactions with individual counter- tion subject to the arrangement, the extent of the parties and through the use of mark-to-market collat- reduction in exposure may change substantially within eral arrangements for swap transactions. IBRD may a short period of time following the balance sheet date. require collateral in the form of cash or other approved liquid securities from individual counterparties in order The contract value/notional amounts and credit risk to mitigate its credit exposure. As of June 30, 2002, exposure, as applcable, of these financial instruments IBRD had received collateral of $764 million in con- at June 30 2002 and June 30, 2001 (prior to taking nection with swap agreements. None of this collateral nto account any master derivatives or collateral has been included in the assets of IBRD. arrangements that have been entered into) are given below: In millions of US dollars equivalent 2002 2001 INVESTMENTS - TRADING PORTFOLIO Options, futures and forwards * Long position $6,300 $ 5,500 * Short position 976 3,400 * Credit exposure due to potential nonperformance by counterparties I Currency swaps * Credit exposure due to potential nonperformance by counterparties - 33 Cross-currency interest rate swaps * Credit exposure due to potential nonperformance by counterparties 51 438 Interest rate swaps * Notional principal 10,705 12,058 * Credit exposure due to potential nonperformance by counterparties 8 16 BORROWING PORTFOLIO Currency swaps * Credit exposure due to potential nonperformance by counterparties 2,092 2,845 Interest rate swaps * Notional principal 79,242 71,685 * Credit exposure due to potential nonperformance by counterparties 3,084 1,169 OTHER ASSET/LIABILITY Currency swaps * Credit exposure due to potential nonperformance by counterparties 36 * Less than $0.5 million. 68 THE WORLD BANK ANNUAL REPORT 2002 NOTE G-RETAINED EARNINGS, ALLOCATIONS AND TRANSFERS Retained Earnings: Retained Earnings comprises the ended June 30, 2001 to the General Reserve and $155 following elements at June 30, 2002 and June 30, million to the Pension Reserve, representing the differ- 2001: ence between actual funding of the Staff Retirement Plan and its accounting income for the fiscal year 2001. In addition, the Executive Directors allocated $345 In millions million of fiscal year 2001 net income to a separate cat- 2002 2001 egory of retained earnings-"Cumulative FAS 133 2002 2001 ~Adjustments." Special reserve $ 293 $ 293 On December 4, 2001, the Board of Governors General reserve 17,841 17,223 approved the following transfers out of fiscal year 2001 Pension reserve 870 715 unallocated net income: $302 million to IDA and $69 million to the Heavily Indebted Poor Countries (HIPC) Surplus 100 131 Debt Initiative Trust Fund. In addition, the Board of Cumulative FAS 133 Governors approved the transfer of $31 million to the Adjustments 345 - HIPC Debt Initiative Trust Fund out of Surplus. Of the Unallocated net income 2,778 1,489 $302 million that was approved for transfer to IDA, $300 million is to be drawn down in fiscal year 2005 Total $22,227 $19,851 and the remaining $2 million was transferred in December 2001 as a reimbursement of IDA's share of the balance of the fiscal year 2000 cost of implement- On August 2, 2001, the Executive Directors allocated ing the Strategic Compact of IBRD and IDA. $618 million of the net income earned in the fiscal year The aggregate transfers and amounts payable for these Board of Governors-approved transfers at June 30, 2002 and June 30, 2001 are included in the following table: In millions of US dollars equivalent Fiscal Year 2002 Amount Payable Transfers from at June 30 Aggregate Transfers Unallocated Transfers to through June 30, 2001 Net Income Surplus 2002 2001 International Development Associationa $6,755 $302 $- $1,243 $ 896 Debt Reduction Facility for IDA-only Countries 300 - - 81 84 Trust Fund for Gaza and West Bank 380 - - 13 13 Heavily Indebted Poor Countries Debt Initiative Trust Fund 1,300 69 31 100 100 Capacity building in Africa 60 - - - - Trust Fund for Kosovo 60 - - - - Trust Fund for East Timor 10 - - - - Trust Fund for Federal Republic of Yugoslavia 30 - - - - $ _437 $ _093 a. Prior to fiscal year 2002, all amounts were approved in an equivalent amount of SDRs. NOTE H-ADMINISTRATIVE EXPENSES, CON- years ending June 30, 2002, June 30, 2001, and June TRIBUTIONS TO SPECIAL PROGRAMS, AND 30, 2000, the amount of fee revenue associated with OTHER INCOME administrative services is as follows: Administrative Expenses for the fiscal year ended June In mi.ions 30, 2002 are net of the share of administrative expenses charged to IDA of $654 million ($551 million-June 2002 2001 2000 30, 2001, $549 million-June 30, 2000). Service fee revenue $155 $146 $118 Contributions to special programs represent grants for , , , l , , , , . ctivi Included in these amounts agricultural research, and other developmental activi- are the following: ties. Fees charged to IFC 26 19 16 IBRD recovers certain of its administrative expenses by Fees charged to MIGA 3 1 1 billing third parties for services rendered. These amounts are included in Other Income. For the fiscal IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 69 At June 30, 2002 and June 30, 2001, the following pay- pension and other postretirement benefits are included ables (receivables) by IBRD to (from) its affiliated orga- in Miscellaneous Assets and Accounts Payable and Mis- nizations with regard to administrative services and cellaneous Liabilities: In millions 2002 2001 Pension and Pension and Other Other Administrative Postretirement Administrative Postretirement Services Benefits Total Sevices Benefits Total IDA $(245) $ 726 $481 $(229) $637 $408 IFC (16) 286 270 (26) 250 224 MIGA (3) 16 13 (3) 14 11 $(264) $1,028 $764 $(258) $901 $643 NOTE I-MANAGEMENT OF EXTERNAL FUNDS Trust Funds global and regional programs and research and training IBRD, alone or jointly with IDA, administers on behalf programs. These funds are held in trust with IBRD and/ of donors, including members, their agencies and oth.r or IDA, and are held in a separate investment portfolio of donors, including members, their agencies and other which is not commingled with IBRD's funds, nor are entities, funds restricted for specific uses which include they included in the assets of IBRD' The trust fund the cofinancing of IBRD lending projects, debt reduc- assets by executing agent at June 30, 2002 and June 30 tion operations, technical assistance for borrowers are summared below: including feasibility studies and project preparation, 2001 are summarized below: 2002 2001 Total fiduciary Number of Total fiduciary Number of assets trustfund assets trust fund (In millions) accounts (In millions) accounts IBRD executed $1,665 1,754 $ 864 1,577 Recipient executed 2,049 1,273 1,977 1,349 Total $3,714 3,027 $2,841 2,926 The responsibilities of IBRD under these arrangements During fiscal year 2002, IBRD began offering asset vary and range from services normally provided under management and technical advisory services to Central its own lending projects to full project implementation Banks of member countries, under the Reserves Advi- including procurement of goods and services. During sory and Management Program. Under this program, the fiscal year ended June 30, 2002, IBRD received $11 IBRD is responsible for managing investment portfolios million ($14 million-June 30, 2001 and $17 million- on behalf of these institutions, as well as providing June 30, 2000) as fees for administering trust funds. training and technical assistance, and in return receives These fees have been recorded as Other Income. a quarterly fee based on the percentage of assets under Investmtent Management Services management. The fee income from all of these investment manage- During fiscal year 2000, IBRD began offering invest- ment activities is included in service fee revenues ment management services to a non-affiliated institu- tion. Under this arrangement, IBRD is responsible for described in Note H managing investment account assets on behalf of this At June 30, 2002, the assets managed under these institution, and in return receives a quarterly fee based agreements had a value of $5,319 million ($4,172 mil- on the average value of the portfolio. lion-June 30, 2001). These funds are not included in the assets of IBRD. 70 THE WORLD BANK ANNUAL REPORT 2002 NOTE J-PENSION AND OTHER POSTRETIRE- All costs associated with these plans are allocated MENT BENEFITS between IBRD, IFC, and MIGA based upon their IBRD has a defined benefit Staff Retirement Plan employees' respective participation in the plans. In (SRP), a Retired Staff Benefits Plan (RSBP) and a Post- addition, aFC and MIGA reimburse IBRD for their Employment Benefits Plan (PEBP) that cover substan- share of any contributions made to these plans by tially all of its staff members as well as the staff of IFC IBRD. and MIGA. The following table summarizes the benefit costs asso- The SRP provides regular pension benefits and includes ciated with the SRP, RSBP, and PEBP for IBRD and a cash balance plan. The RSBP provides certain health IDA for the fiscal years ended June 30, 2002, June 30, and life insurance benefits to eligible retirees. The 2001, and June 30, 2000: PEBP provides pension benefits administered outside the SRP. In millions SRP RSBP PEBP 2002 2001 2000 2002 2001 2000 2002 2001 2000 Benefit Cost Service cost $202 $ 228 $ 230 $28 $ 23 $ 24 $13 $ 8 $ 9 Interest cost 412 448 391 54 52 42 6 6 9 Expected return on plan assets (761) (829) (773) (72) (79) (67) - - - Amortization of prior service cost 7 7 7 - - - - - - Amortization of unrecog- nized net (gain) loss (26) (113) (121) 5 - - (2) (1) - Amortization of Transition Asset (11) (11) (11) - - - - - - Net periodic pension (income) cost $(177) $(270) $(277) $15 $ (4) $ (1) $17 $13 $18 The portion of the SRP income related to IBRD that June 30, 2001; $10 million-June 30, 2000). The bal- has been included in income for the fiscal year ended ance has been included as a receivable from IDA. June 30, 2002 is $93 million ($155 million-June 30, For the fiscal year ended June 30, 2002, net income 2001; $166 million-June 30, 2000). The balance has been included as a payable to IDA. The portion of the from these plans of $31 million was allocated to IFC cost for the RSBP and PEBP related to IBRD that has ($47 million-June 30, 2001, $45 million-June 30, been included in administrative expenses for the fiscal 2000) and $2 million was allocated to MIGA ($2 mil- year ended June 30, 2002 is $17 million ($7 million- lion-June 30, 2001, $2 million-June 30, 2000). IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 71 The following table summarizes the benefit obligations, plan assets, and funded status associated with the SRP, RSBP, and PEBP for the fiscal years ended June 30, 2002, June 30, 2001, and June 30, 2000: In millions SRP RSBP PEBP 2002 2001 2000 2002 2001 2000 2002 2001 2000 Benefit Obligation Beginning of year $ 7,277 $ 6,951 $ 6,483 $867 $731 $662 $103 $ 89 $ 142 Service cost 244 271 271 32 26 27 15 10 10 Interest cost 499 536 461 60 57 47 7 7 10 Employee contributions 65 64 64 8 6 5 * ' * Amendments 19 - - (38) - - - - - Benefits paid (304) (312) (244) (30) (20) (17) (5) (5) (4) Actuarial (gain) loss 463 (233) (84) 30 67 7 13 2 (69) End of year 8,263 7,277 6,951 929 867 731 133 103 89 Fair value of plan assets Beginning of year 10,364 11,562 10,226 894 975 846 - - - Employee contributions 65 64 64 8 6 5 Actual return on assets (712) (950) 1,516 (70) (70) 141 Employer contributions - - - 16 3 - Benefits paid (304) (312) (244) (30) (20) (17) Endofyear 9,413 10,364 11,562 818 894 975 Funded status Plan assets in excess of pro- jectedbenefitobligation 1,150 3,087 4,611 (111) 27 244 (133) (103) (89) Unrecognized net (gain) loss from past experience dif- ferent from that assumed and from changes in assumptions 714 (1,415) (3,258) 344 170 (53) (11) (26) (30) Unrecognized prior service cost 44 33 41 (38) - - - - - Remaining unrecognized net transition asset (13) (26) (39) - - - _ _ _ Prepaid (accrued) pension cost $1,895 $ 1,679 $ 1,355 $195 $197 $191 $(144) $(129) $(1 19) * Less than $0.5 million. The $1,895 million prepaid SRP cost at June 30, 2002 Assumptions ($1,679 million-June 30, 2001) is included in Miscel- The actuarial assumptions used are based on financial laneous Assets on the balance sheet. Of this amount market interest rates, past experience, and manage- $938 million was attributable to IDA, IFC, and MIGA ment's best estimate of future benefit changes and eco- ($815 million-June 30, 2001) and is included in nomic conditions. Changes in these assumptions will Accounts Payable and Miscellaneous Liabilities on the impact future benefit costs and obligations. Actuarial balance sheet. gains and losses occur when actual results are different The $195 million prepaid RSBP cost at June 30, 2002 from expected results. Amortization of these unrecog- ($197 million-June 30, 2001), is included in Miscella- nized gains and losses will be included in income if, at neous Assets on the balance sheet. Of this amount $85 the beginning of the fiscal year, they exceed 10 percent million was attributable to IDA, IFC, and MIGA ($86 of the greater of the projected benefit obligation or the million-June 30, 2001) and is included in Accounts market-related value of plan assets. If required, the Payable and Miscellaneous Liabilities on the balance unrecognized gains and losses are amortized over the sheet. expected average remaining service lives of the employee group. Where there are no active employees, the unrecognized net gain or loss is amortized over the remaining life expectancy of the inactive participants. 72 THE WORLD BANK ANNUAL REPORT 2002 The weighted-average assumptions used in determining expense and benefit obligations for the fiscal years ended June 30, 2002, June 30, 2001, and June 30, 2000 are as follows: In percent SRP RSBP PEBP 2002 2001 2000 2002 2001 2000 2002 2001 2000 Discount rate 6.75 7.00 7.75 6.75 7.00 7.75 6.75 7.00 7.75 Expected return on plan assets 7.75 9.00 9.00 7.75 9.00 9.00 Rate of compensation increase a 475- 5.00- 5.75- 11.25 11.50 12.25 Health care growth rates - at end of fiscal year 6.75 7.00 7.25 - to year 2011 and thereafter 4.75 5.00 5.75 a. The effect of projected compensation levels was calculated based on a scale that provides for a decreasing rate of salary increase depending on age, beginning with 11.25% (11.50%-June 30, 2001; 12.25%-June 30, 2000) at age 20 and decreasing to 4.75% (5.00%-June 30, 2001; 5.75%-June 30, 2000) at age 64. The medical cost trend rate can significantly affect the effects of a one-percentage-point change in the reported postretirement benefit income or costs and assumed healthcare cost trend rate: benefit obligations. The following table shows the In millions One percentage point increase One percentage point decrease Effect on total service and interest cost $21 $(17) Effect on postretirement benefit obligation 179 (143) NOTE K-SEGMENT REPORTING For fiscal year 2002, loans to each of two countries gen- Based on an evaluation of IBRD's operations, manage- erated in excess of 10 percent of loan incomne. Loan . . . ...... . . ' ~~~income from these two countries was $877 million and ment has determined that IBRD has only one report- $752 million. able segment since IBRD does not manage its $752 million operations by allocating resources based on a determi- nation of the contribution to net income from individ- ual borrowers. In addition, given the nature of IBRD, Comprehensive income consists of net income and the risk and return profiles are sufficiently similar other gains and losses affecting equity that, under gen- among borrowers that IBRD does not differentiate erally accepted accounting principles, are excluded between the nature of the products or services pro- from net income. For IBRD, comprehensive income vided, the preparation process, or the method for pro- comprises the effects of the implementation of FAS viding the services among individual countries. 133, currency translation adjustments, and net income. These items are presented in the Statement of Compre- hensive Income. IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 73 The following tables present the changes in Accumulated Other Comprehensive Loss for the fiscal years ended June 30, 2002, June 30, 2001, and June 30, 2000: In millions 2002 Total Cumulative Accumulated Cumulative Effect of Change Other Translation in Accounting Comprehensive Adjustment Principle Reclassificationa Loss Balance, beginning of the fiscal year $(1,176) $500 $(169) $(845) Changes from period activity 224 - (128) 96 Balance, end of the fiscal year $ (952) $500 . $297) $(749) In millions 2001 Total Cumulative Accumulated Cumulative Effect of Change Other Translation in Accounting Comprehensive Adjustment Principle Reclassificationa Loss Balance, beginning of the fiscal year $ (641) $ - $ - $(641) Changes from period activity (535) 500 (169) (204) Balance, end of the fiscal year $(1,176) $500 .$(L69 $(845) In mullions 2000 Total Cumulative Accumulated Cumulative Effect of Change Other Translation in Accounting Comprehensive Adjustment Principle Reclassificationa Loss Balance, beginning of the fiscal year $(637) $- $- $(637) Changes from period activity (4) (4) Balance, end of the fiscal year $(641) $- $- $(641) a. Reclassification of FAS 133 transition adjustment to net income. 74 THE WORLD BANK ANNUAL REPORT 2002 NOTE M-EFFECTS OF APPLYING FAS 133 On July 1, 2000, IBRD adopted FAS 133. These stan- sive income was based upon the cash flow hedging rela- dards require that derivative instruments, as defined by tionships that existed under generally accepted FAS 133, be recorded on the balance sheet at fair value. accounting principles before the initial application of Upon adoption of FAS 133, IBRD's net income was FAS 133. increased by $219 million, and an additional $500 mil- The following table reflects the components of the lion was reported in other comprehensive income. The effects of applying FAS 133 for the fiscal years ended allocation between net income and other comprehen- June 30, 2002 and June 30, 2001. In millions of US dollars equivalent 2002 2001 Net unrealized gains on derivative instruments, as defined by FAS 133 $783 $ 46 Reclassification and amortization of transition adjustment Reclassification from Other Comprehensive Income-Cash Flow Hedges 128 169 Amortization of mark-to-market on borrowings associated with fair value hedges (57) (89) Effects of applying FAS 133 $854 $126 Cumulative effect of change in accounting principle $ - $219 The cumulative effect of the change in accounting prin- Since IBRD has not defined any qualifying hedging ciple includes the difference between the carrying value relationships under this standard, the amount recorded and the fair value of the embedded derivatives and in other comprehensive income is being reclassified derivative instruments, as defined by FAS 133, in the into earnings in the same period or periods in which the borrowings portfolio on July 1, 2000, offset by any hedged forecasted transactions affect earnings. gains or losses on those borrowings for which a fair value exposure was being hedged prior to adoption. IBRD FINANCIAL STATEMENIS: JUNE 30, 2002 75 NOTE N-ESTIMATED AND FAIR VALUE DISCLOSURES The Condensed Balance Sheets below present IBRD's estimates of fair value of its assets and liabilities along with their respective carrying amounts as of June 30, 2002 and 2001. In millions of US. dollars June 30, 2002 Reversal of Carrying Carrving FAS 133 Value Before Value Effects FAS 133 Fair Value Due from Banks $ 1,083 $ 1,083 $ 1,083 Investments 26,076 26,076 26,076 Loans Outstanding 121,589 121,589 126,454 Less Accumulated Provision for Loan Losses and Deferred Loan Income (5,514) (5,514) (5,514) Net Loans Outstanding 116,075 116,075 120,940 Swaps Receivable Investments 9,932 9,932 9,932 Borrowings 66,052 $(2,821) 63,231 66,052 Other Asset/Liability 727 (1) 726 727 Other Assets 7,800 7,800 7,327 Total Assets $227,745 $(2,822) $224,923 $232,137 Borrowings $110,263 $ (354) $109,909 $114,502 Swaps Payable Investments 10,819 10,819 10,819 Borrowings 66,994 (1,254) 65,740 66,994 Other Asset/Liability 758 1 759 758 Other Liabilities 6,598 6,598 6,598 Total Liabilities 195,432 (1,607) 193,825 199,671 Paid in Capital Stock 11,476 11,476 11,476 Retained Earnings and Other Equity 20,837 (1,215) 19,622 20,990 Total Liabilities and Equity $227,745 $(2,822) $224,923 $232,137 Off-Balance-Sheet Financial Instruments: Financial Guarantees $ 1,422 Except for loans, which are on an estimated value (current value) basis. 76 THE WORLD BANK ANNUAL REPORT 2002 In millions of US. dollars June 30, 2001 Reversal of Canying Carying FAS 133 Value Before Value Effects FAS 133 Fair Value* Due from Banks $ 685 $ 685 $ 685 Investments 24,490 24,490 24,490 Loans Outstanding 118,866 $118,866 123,062 Less Accumulated Provision for Loan Losses and Deferred Loan Income (4,459) (4,459) (4,459) Net Loans Outstanding 114,407 114,407 118,603 Swaps Receivable Investments 11,043 11,043 11,043 Borrowings 63,326 $(2,032) 61,294 63,326 Other Asset/Liability 728 (2) 726 728 Other Assets 8,162 8,162 7,673 Total Assets $222,841 $(2,034) $220,807 $226,548 Borrowings $106,757 $ (45) $106,712 $110,290 Swaps Payable Investments 10,791 10,791 10,791 Borrowings 68,051 (1,362) 66,689 68,051 Other Asset/Liability 701 - 701 701 Other Liabilities 6,971 6,971 6,971 Total Liabilities 193,271 (1,407) 191,864 196,804 Paid in Capital Stock 11,476 11,476 11,476 Retained Earnings and Other Equity 18,094 (627) 17,467 18,268 Total Liabilities and Equity $222,841 $(2,034) $220,807 $226,548 Off-Balance-Sheet Financial Instruments: Financial Guarantees $ 1,376 Except for loans which are on an estimated value (current value) basis. Valuation Methods and Assumptions Net Loans Outstanding Due from Banks All of IBRD's loans are made to or guaranteed by coun- tries that are members of IBRD, except for those loans The carrying amount of unrestricted and restricted cur- made to IFC. IBRD does not currently sell its loans nor rencies is considered a reasonable estimate of the fair . does thr coprblyem e its . value of these positions. ~does it believe there IS a comparable market for Its loans. The current value of loans outstanding incorpo- Investments rates management's best estimate of the probable IBRD's investment securities and related financial expected cash flows of these instruments to IBRD. instruments held in the trading portfolio are carried and The current value of all loans is based on a discounted reported at fair value. Fair value is based on market cash flow method. The estimated cash flows from prin- quotations. Instruments for which market quotations cipal repayments and interest are discounted using the are not readily available have been valued using market- market yield curves applicable to IBRD funding plus based methodologies and market information. (See IBRD's relevant basis point lending spread adjusted for Summary of Significant Accounting and Related Poli- waivers. cies). IBRD FINANCIAL STATEMENTS: JUNE 30, 2002 77 The current value of net loans outstanding also includes quoted market price is available, the fair value is esti- IBRD's assessment of the appropriate credit risk, con- mated based on the cost at which IBRD could currently sidering its history of collections from borrowers. This undertake borrowings with similar terms and remaining is reflected in the Accumulated Provision for Loan maturities, using the secondary market yield curve. Losses Other Assets and Other Liabilities Swaps Receivable and Swaps Payable These amounts are generally short-term in nature. Certain derivatives, as defined by FAS 133, are Therefore, the carrying value is a reasonable estimate of recorded in the balance sheet at estimated fair value. fair value. The difference between the carrying value The fair value of swaps is based on market prices, where and fair value of other assets is due to the carrying value such prices are available. Where no quoted market of debt issuance costs being included in other assets price is available, the fair value is estimated using a dis- while the fair value of these costs is included as part of counted cash flow method representing the estimated the fair value of borrowings. cost of replacing these contracts on that date. (See Summary of Significant Accounting and Related Poli- Guarantees cies). The fair value of guarantees is determined by discount- ing the guaranteed amount from the first respective call Borrowings date. The fair value of borrowings is based on quoted market prices where such prices are available. 'Where no 78 THE WORLD BANK ANNUAL REPORT 2002 TABLE OF CONTENTS June 30, 2002 SPECIAL PURPOSE FINANCIAL STATEMENTS OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION Management's Assertion Regarding Effectiveness of Internal Controls Over External Financial Reporting 81 Report of Independent Accountants on Management's Assertion Regarding Effectiveness of Internal Controls Over External Financial Reporting 82 Report of Independent Accountants on Special Purpose Financial Statements 83 Statement of Sources and Applications of Development Resources 84 Statement of Income 86 Statement of Comprehensive Income 87 Statement of Changes in Retained Earnings 8 7 Statement of Cash Flows 88 Summary Statement of Development Credits 89 Statement of Voting Power, and Subscriptions and Contributions 93 Notes to Special Purpose Financial Statements 97 Supplementary Information on the Heavily Indebted Poor Countries Debt Initiative 109 IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 79 80 THE WORLD BANK ANNUAL REPORT 2002 MANAGEMENT'S ASSERTION REGARDING EFFECTIVENESS OF INTERNAL CONTROLS OVER EXTERNAL FINANCIAL REPORTING The World Bank 1818 H Street N.W. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS Management's Assertion Regarding Effectiveness of Internal Controls Over External Financial Reporting July 31, 2002 The International Development Association (IDA) maintains a system of internal control over external financial reporting, which is designed to provide reasonable assurance to management and the board of directors regarding the preparation of reliable published financial statements. The system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified. Even an effective internal control system, no matter how well designed, has inherent limitations - including the possibility of the circumvention or overriding of controls - and therefore can provide only reasonable assurance with respect to external financial statement preparation. Further, because of changes in conditions, internal control system effectiveness may vary over time. IDA assessed its internal control system as of June 30, 2002 in relation to criteria for effective internal control over external financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, IDA believes that, as of June 30, 2002, its system of internal control over external financial reporting met those criteria. James D. Wolfensohn President 7/J7effrey A. Goldsltein (gary L. Prin Managing Director Senior Vice President and Chief Financial Officer Fayezu H. Choudhury Charles A. McDono h Vice President and Controller Director, Accounting D artment IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 81 REPORT OF INDEPENDENT ACCOUNTANTS ON MANAGEMENT' S ASSERTION REGARDING EFFECTIVENESS OF INTERNAL CONTROLS OVER EXTERNAL FINANCIAL REPORTING DeloitteToucheTohmatsu (international Firm) Suite 500 555 12th Street, N.W. Washington. D,C 20004-1207 Tel: (202) 879-S600 Fax: (202) 879-5309 www.us.deloitt.com ' D eloitte Touche Tohmatsu (International Firm) President and Board of Governors Intemational Development Association We have examined management's assertion, included in the accompanying "Management's Assertion Regarding Effectiveness of Intemal Control Over Extemal Financial Reporting", that, as of June 30, 2002, the International Development Association met the criteria for effective intemal control over extemal financial reporting described in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management is responsible for maintaining effective internal control over extemal financial reporting. Our responsibility is to express an opinion on management's assertion based on our examination. Our examination was made in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of internal control over extemal financial reporting, testing, and evaluating the design and operating effectiveness of internal control over extemal financial reporting, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Because of inherent limitations in any intemal control, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of internal control over extemal financial reporting to future periods are subject to the risk that internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies may deteriorate. In our opinion, management's assertion that, as of June 30, 2002, the Intemational Development Association met the criteria for effective internal control over external financial reporting described in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission is fairly stated, in all material respects. This report is intended solely for the information and use of the Board of Govemors, management and members of the International Development Association and should not be used for any other purpose. }O4f4 T (t4TOd4T 44v 6 4 r) July 31, 2002 82 THE WORLD BANK ANNUAL REPORT 2002 REPORT OF INDEPENDENT ACCOUNTANTS ON SPECIAL PURPOSE FINANCIAL STATEMENTS DeloitteToucheTohmatsu (International Firm) Suite 500 5s5 12th Street, N.W. Washington, DC 20004-1207 Tel: (202) 879-5600 Fax: (202) 879-5309 www.us.deloitte.com D eloitte Touche Tohmatsu (International Firm) President and Board of Govemors Intemational Development Association We have audited the accompanying special purpose staterents of sources and applications of development resources of the International Development Association as of June 30, 2002 and 2001, including the summary statement of development credits and statemnent of voting power, and subscriptions and contributions as of June 30, 2002, and the related special purpose statements of income, comprehensive income, changes in retained eamings, and cash flows for each of the three fiscal years in the period ended June 30, 2002. These special purpose financial statements are the responsibility of the Intemational Development Association's management. Our responsibility is to express an opinion on these special purpose financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and Intemational Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The accompanying special purpose financial statements were prepared to reflect the sources and applications of development resources, operations, and cash flows of the Intemational Development Association to comply with Article VI, Section 11 (a) of the Articles of Agreement of the Intemational Development Association, as discussed in Note A to the special purpose financial statements, and are not intended to be a presentation in confonnity with accounting principles generally accepted in the United States of Armerica or Intemational Accounting Standards. In our opinion, such special purpose financial statements referred to above present fairly, in all material respects, the sources and applications of development resources of the Intemational Development Association as of June 30, 2002 and 2001, and the results of its operations and its cash flows for each of the three fiscal years in the period ended June 30, 2002 in conformity with the accounting principles described in Note A to the special purpose financial statements. Our audits were conducted for the purpose of fomiing an opinion on the basic financial statements taken as a whole. The Supplementary Information on the Heavily Indebted Poor Countries Debt Initiative listed in the table of contents is presented for the purpose of additional analysis. This additional information is the responsibility of IDA's management. Such information has been subjected to the auditing procedures applied in our audits of the basic financial statements. As discussed in Note A to the special purpose financial statements, on May 25, 2001, the Interim Trust Fund was terminated and all of its assets and liabilities were transferred to the Intemational Development Association. Accordingly, the infomiation in the special purpose financial statements and related notes reflect the combined results of the Intemational Development Association and the Interim Trust Fund as if the transfer had been in effect for all periods presented. This report is intended solely for the information and use of the Board of Govemors, management, and members of the Intemational Development Association. However, under the Intemational Development Association's Articles of Agreemnent, this report is a matter of public record and its distribution is not limited. % 14 - ('44 ) August 8, 2002 IDA SPECIAL PURPOSE FINANCIAL STATENENTS: JUNE 30, 2002 83 STATEMENT OF SOURCES AND APPLICATIONS OF DEVELOPMENT RESOURCES June 30, 2002 and June 30, 2001 Expressed in millions of US. dollars 2002 2001 Applications of Development Resources Net resources available for development activities Due from banks Unrestricted currencies $ 434 $ 49 Currencies subject to restriction 21 19 455 68 Investments-Notes B and F Investments-Trading (including securities transferred under repurchase or security lending agreements of $1,919 million-June 30, 2002; $4,573 million-June 30, 2001-Note A) 12,055 12,187 Net payable on investment securities transactions (447) (445) 11,608 11,742 Nonnegotiable, noninterest-bearing demand obligations on account of member subscriptions and contributions 8,971 9,238 Receivable from the International Bank for Reconstruction and Development-Note D 1,243 896 Receivable from the HIPC Debt Initiative Trust Fund-Note I 559 647 Payable for HIPC grants-Note 1 (26) (70) Payable for development grants-Note J (148) Other resources, net 731 620 Total net resources available for development activities 23,393 23,141 Resources used for development credits (see Summary Statement of Development Credits, Notes E, F and I) Total development credits 118,882 107,014 Less undisbursed balance 22,510 20,442 Development credits outstanding 96,372 86,572 Less accumulated allowance for HIPC Debt Initiative 10,270 8,579 Total resources used for development credits outstanding 86,102 77,993 Total applications of development resources $109,495 $101,134 84 THE WORLD BANK ANNUAL REPORT 2002 2002 2001 Sources of Development Resources Member subscriptions and contributions (see Statement of Voting Power, and Subscriptions and Contributions, and Note C) Unrestricted $108,588 $107,923 Restricted 288 288 Subscriptions and contributions committed 108,876 108,211 Less subscriptions and contributions receivable and unamortized discounts on contributions-Note C 122 3,278 Subscriptions and contributions paid in 108,754 104,933 Deferred amounts receivable to maintain value of currency holdings (235) (236) 108,519 104,697 Transfers from the International Bank for Reconstruction and Development-Note D 7,042 6,693 Accumulated other comprehensive loss-Note K (514) (4,968) Retained deficit (see Statement of Changes in Retained Earnings) (5,552) (5,288) Total sources of development resources $109,495 $101,134 The Notes to Special Purpose Financial Statements are an integral part of these Statements. IDA SPECIAL PURPOSE FINANCIAI. STATEMENTS: JUNE 30, 2002 85 STATEMENT OF INCOME For the fiscal years ended June 30, 2002, June 30, 2001 and June 30, 2000 Expressed in millions of US. dollars 2002 2001 2000 a Income Income from development credits-Note E $ 641 $ 614 $ 619 Income from investments, net-Note B 773 684 408 Total income 1,414 1,298 1,027 Expenses Administrative expenses-Notes G and H 568 431 440 Amortization of discount on subscription advances - 1 3 Development grants-Note J 154 - _ Total expenses 722 432 443 Operating Income 692 866 584 Effect of exchange rate changes on accumulated income excluding HIPC Debt Initiative 819 (847) (289) Income before HIPC Debt Initiative 1,511 19 295 Enhanced HIPC Framework-(Expenses) Income-Notes E and I Allowance for principal component of debt relief (1,883) (686) (8,009) Contribution from the HIPC Debt Initiative Trust Fund 108 177 601 HIPC debt service grants - (101) _ Total net expenses for Enhanced HIPC (1,775) (610) (7,408) Original HIPC Framework-Expenses-Note E Allowance for write-down on sale of development credits - (24) (455) Loss after HIPC Debt Initiative $ (264) $(615) $(7.568) a. Restated to include Interim Trust Fund activity for the fiscal year ended June 30, 2000, see Note A. The Notes to Special Purpose Financial Statements are an integral part of these Statements. 86 THE WORLD BANK ANNUAL REPORT 2002 STATEMENT OF COMPREHENSIVE INCOME For the fiscal years ended June 30, 2002, June 30, 2001 and June 30, 2000 Expressed in millions of US. dollars 2002 2001 2000 a Loss after HIPC Debt Initiative $ (264) $ (615) $(7,568) Other comprehensive income-Note K Currency translation adjustment on development credits 4,454 (4,230) (532) Total other comprehensive income (loss) 4,454 (4,230) (532) Comprehensive income (loss) $4,190 _$L4.8451 $(8,100) a. Restated to include Interim Trust Fund activity forfiscal year ended June 30, 2000, see Note A. STATEMENT OF CHANGES IN RETAINED EARNINGS For the fiscal years ended June 30, 2002 and June 30, 2001 Expressed in millions of US. dollars 2002 2001 Balance at Activity Balance at Balance at Activity Balance at beginning of during the end of the beginning of during the end of the the fiscal year fiscal year fiscal year the fiscal year fiscal year fiscal year Accumulated income excluding HIPC DebtInitiative $3,531 $1,511 $ 5,042 $3,512 $ 19 $ 3,531 Allowance for Enhanced HIPC (8,695) (1,883) (10,578) (8,009) (686) (8,695) Contribution for Enhanced HIPC from HIPC Debt Initiative Trust Fund 778 108 886 601 177 778 HIPC debt service grants (101) - (101) - (101) (101) Original HIPC (801) - (801) (777) (24) (801) Total retained deficit $(5,288) $ (2641 $(5,552) $(4,6731 $(615) $(5288) The Notes to Special Purpose Financial Statements are an integral part of these Statements. IDA SPECIAL PURPOSE FINANCIAL STAT EMENTS: JUNE 30, 2002 87 STATEMENT OF CASH FLOWS For the fiscal years ended June 30, 2002, June 30, 2001 and June 30, 2000 Expressed in millions of US. dollars 2002 2001 2000 a Cash Flows from Development Activities Development credits Disbursements $(6,601) $(5,492) $(5,177) Principal repayments 1,063 997 920 Credits sold to the HIPC Debt Initiative Trust Fund - 133 354 Reimbursements received from the HIPC Debt Initiative Trust Fund for principal repayments forgiven 192 105 11 Net cash used in development credit activities (5,346) (4,257) (3,892) Grant activities Development grant disbursements (11) - - HIPC debt service grant disbursements (45) (31) - Reimbursements received from the HIPC Debt Initiative Trust Fund for HIPC debt service grants disbursed 4 15 - Net cash used in grant activities (52) (16) - Net cash used in development activities (5,398) (4,273) (3,892) Member Subscriptions and Contributions 4,088 5,232 5,320 Transfers from the International Bank for Reconstruction and Developmtent 2 19 50 Cash flows from operating activities Operating income 692 866 584 Adjustments to reconcile operating income to net cash provided by operating activities Amortization of discount on subscription advances - 1 3 Net changes in other development resources 54 (113) (142) Net cash provided by operating activities 746 754 445 Effect of exchange rate changes on unrestricted cash and liquid investments 813 (838) (257) Net increase in unrestricted cash and liquid investments 251 894 1,666 Unrestricted cash and liquid investments at beginning of the fiscal year 11,791 10,897 9,231 Unrestricted cash and liquid investments at end of the fiscal year $12,042 $ 11,791 $10 897 Composed of: Due from banks-Unrestricted currencies $ 434 $ 49 $ 73 Investments 11,608 11,742 10,824 $12,042 $11,791 $10,897 Supplemental Disclosure Increase (decrease) in ending balances of development credits outstanding, resulting from exchange rate fluctuations $ 4,454 $(4,230) $ (532) Principal repayments forgiven under Enhanced HIPC (192) (105) (11) Write-down on sale of development credits-Original HIPC - (97) (382) a. Restated to include Interim Trust Fund activity for the fiscal year ended June 30, 2000, see Note A. The Notes to Special Purpose Financial Statements are an integral part of these Statements. 88 THE WORLD BANK ANNUAL REPORT 2002 SUMMARY STATEMENT OF DEVELOPMENT CREDITS June 30, 2002 Expressed in millions of U.S. dollars Percentage of Total Undisbursed Development development development development credits credits Borrower or guarantor credits credits outstanding outstanding Afghanistan $ 75 $ - $ 75 0.08%yo Albania 629 221 408 0.42 Angola 272 22 250 0.26 Armenia 652 173 479 0.50 Azerbaijan 498 204 294 0.31 Bangladesh 8,285 1,405 6,880 7.14 Benin 734 97 637 0.66 Bhutan 60 25 35 0.04 Bolivia 1,603 379 1,224 1.27 Bosnia and Herzegovina 795 290 505 0.52 Botswana 8 - 8 (.01 Burkina Faso 945 261 684 0.71 Burundi 704 91 613 0.64 Cambodia 452 178 274 0.28 Cameroon 980 186 794 0.83 Cape Verde 172 50 122 0.13 Central African Republic 422 30 392 0.41 Chad 750 155 595 0.62 Chile 6 - 6 (.01 China 9,629 411 9,218 9.56 Colombia 6 - 6 ().01 Comoros 115 26 89 (.09 Congo, Democratic Republic of 1,681 478 1,203 1.25 Congo, Republic of 250 54 196 0.20 Costa Rica I - I * C6te d'Ivoire 1,914 370 1,544 1.60 Djibouti 119 49 70 0.07 Dominica 18 3 15 0.02 Dominican Republic 13 - 13 (.01 Ecuador 19 - 19 0.02 Egypt, Arab Republic of 1,659 375 1,284 1.33 El Salvador 15 - 15 0.02 Equatorial Guinea 47 - 47 0.05 Eritrea 385 193 192 0.20 Ethiopia 3,439 1,000 2,439 2.53 Gambia, The 256 71 185 (.19 Georgia 622 182 440 0.46 Ghana 3,921 538 3,383 3.51 Grenada 18 6 12 0.01 Guinea 1,236 165 1,071 1.11 Guinea-Bissau 291 59 232 0.24 Guyana 206 15 191 0.20 Haiti 493 3 490 0.51 Honduras 1,186 208 978 1.02 IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 89 SUMMARY STATEMENT OF DEVELOPMENT CREDITS (continued) June 30, 2002 Expressed in millions of US. dollars Percentage of Total Undisbursed Development development development development credits credits Borrower or guarantor credits credits outstanding outstanding India $ 24,289 $ 3,887 $20,402 21.17% Indonesia 1,148 388 760 0.79 Jordan 53 - 53 0.06 Kenya 2,760 364 2,396 2.49 Korea, Republic of 59 - 59 0.06 Kyrgyz Republic 584 157 427 0.44 Lao People's Democratic Republic 606 151 455 0.47 Lesotho 259 54 205 0.21 Liberia 101 - 101 0.10 Macedonia, former Yugoslav Republic of 359 73 286 0.30 Madagascar 2,018 493 1,525 1.58 Malawi 1,862 134 1,728 1.79 Maldives 60 13 47 0.05 Mali 1,428 349 1,079 1.12 Mauritania 722 202 520 0.54 Mauritius 13 - 13 0.01 Moldova 200 75 125 0.13 Mongolia 293 126 167 0.17 Morocco 24 - 24 0.03 Mozambique 1,486 625 861 0.89 Myanmar 717 - 717 0.74 Nepal 1,285 100 1,185 1.23 Nicaragua 1,046 286 760 0.79 Niger 978 179 799 0.83 Nigeria 1,353 695 658 0.68 Pakistan 5,548 451 5,097 5.29 Papua New Guinea 88 - 88 0.09 Paraguay 26 - 26 0.03 Philippines 209 - 209 0.22 Rwanda 942 183 759 0.79 St. Kitts and Nevis I - I * St. Lucia 30 16 14 0.01 St. Vincent and the Grenadines 15 6 9 0.01 Samoa 60 9 51 0.05 Sao Tome and Principe 72 7 65 0.07 Senegal 2,097 618 1,479 1.53 Sierra Leone 498 62 436 0.45 Solomon Islands 44 4 40 0.04 Somalia 400 - 400 0.42 Sri Lanka 1,940 259 1,681 1.74 Sudan 1,178 - 1,178 1.22 Swaziland 4 - 4 * Syrian Arab Republic 27 - 27 0.03 Tajikistan 297 110 187 0.19 Tanzania 3,552 765 2,787 2.89 Thailand 84 - 84 0.09 Togo 684 63 621 0.64 90 THE WORLD BANK ANNUAL REPORT 2002 Percentage of Total Undisbursed Development development development development credits credits Borrower or guarantor credits credits outstanding outstanding Tonga $ 10 $ 6 $ 4 *% Tunisia 36 - 36 0.04 Turkey 92 - 92 0.10 Uganda 3,052 584 2,468 2.56 Uzbekistan 21 21 - - Vanuatu 16 3 13 0.01 Vietnam 3,697 2,141 1,556 1.61 Yemen, Republic of 1,744 415 1,329 1.38 Yugoslavia, Federal Republic of 182 108 74 0.08 Zambia 2,356 280 2,076 2.15 Zimbabwe 505 64 441 0.46 Subtotal members 2 $118,791 $22,499 $96,292 9992 West African Development Bank 3 56 7 49 0.05 Caribbean Development Bank 4 25 - 25 0.03 Subtotal regional development banks 81 7 74 0.08 African Trade Insurance Agency 5 5 4 1 * Other 6 5 - * Total-June 30, 20022 $118,882 $22,510 $96,372 100.00% Total-June 30, 2001 $107,014 $20,442 $86,572 * Indicates amounts less than $0.05 million or less than 0.005 per cent. NoTEs 1. Of the undisbursed balance at June 30, 2002, IDA has entered into irrevocable commitments to disburse $174 million ($209 million-June 30, 2001). 2. May differ from the sum of individual figures shown because of rounding. 3. These development credits are for the benefit of Benin, Burkina Faso, C6te d'Ivoire, Mali, Niger, Senegal, and Togo. 4. These development credits are for the benefit of Grenada and territories of the United Kingdom (Associated States and Dependencies) in the Caribbean region. 5. Represents development credit extended to the African Trade Insurance Agency (ATI) as implementing agency for the benefit of Burundi, Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia. 6. Represents development credits made at a time when the authorities on Taiwan represented China in IDA (prior to May 15, 1980). The Notes to Special Purpose Financial Statements are an integral part of these Statements. IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 91 SUMMARY STATEMENT OF DEVELOPMENT CREDITS (continued) June 30, 2002 Expressed in millions of US. dollars Maturity Structure of Development Credits Outstanding Period July 1, 2002 through June 30, 2003 $ 2,007 July 1, 2003 through June 30, 2004 1,741 July 1, 2004 through June 30, 2005 1,934 July 1, 2005 through June 30, 2006 2,129 July 1, 2006 through June 30, 2007 2,323 July 1, 2007 through June 30, 2012 14,895 July 1, 2012 through June 30, 2017 18,591 July 1, 2017 through June 30, 2022 20,351 July 1, 2022 through June 30, 2027 17,794 July 1, 2027 through June 30, 2032 10,710 July 1, 2032 through June 30, 2037 3,625 July 1, 2037 through June 30, 2042 272 Total $96,372 The Notes to Special Purpose Financial Statements are an integral part of these Statements. 92 THE WORLD BANK ANNUAL REPORT 2002 STATEMENT OF VOTING POWER, AND SUBSCRIPTIONS AND CONTRIBUTIONS June 30, 2002 Expressed in millions of US. dollars Subscriptions and Number of Percentage of contributions Member1 ]votes total votes committed Part I Members Australia 174,739 1.32% $ 1,824.6 Austria 90,656 0.68 905.9 Belgium 158,185 1.19 1,778.3 Canada 396,880 3.00 4,763.5 Denmark 136,921 1.03 1,475.6 Finland 82,106 0.62 698.0 France 579,342 4.37 7,562.4 Germany 940,076 7.10 12,467.5 Iceland 30,416 0.23 23.2 Ireland 39,324 0.30 142.7 Italy 398,415 3.01 4,462.9 Japan 1,461,212 11.03 24,137.7 Kuwait 78,681 0.59 707.4 Luxembourg 33,117 0.25 66.6 Netherlands 297,311 2.24 4,054.3 New Zealand 38,255 0.29 131.5 Norway 137,159 1.04 1,398.5 Portugal 33,497 0.25 59.1 Russian Federation 35,991 0.27 174.0 South Africa 36,796 0.28 91.7 Spain 85,714 0.65 667.9 Sweden 265,030 2.00 2,802.3 Switzerland 2 138,922 1.05 1,449.6 United Arab Emirates 1,367 0.01 5.6 United Kingdom 658,718 4.97 8,068.2 United States 1,913,640 14.44 25,841.8 Subtotal Part I Members 3 8,242,470 62.22 105,760.7 Part II Members Afghanistan 13,557 0.10 1.3 Albania 28,789 0.22 0.3 Algeria 27,720 0.21 5.1 Angola 48,362 0.37 7.9 Argentina 134,439 1.01 69.8 Armenia 2,717 0.02 0.5 Azerbaijan 644 0.9 Bangladesh 73,545 0.56 7.3 Barbados 29,714 0.22 0.6 Belize 1,788 0.01 0.2 Benin 10,176 0.08 0.6 Bhutan 16,929 0.13 0.1 Bolivia 36,363 0.27 1.4 Bosnia and Herzegovina 19,571 0.15 2.3 Botswana 26,854 0.20 1.6 Brazil 231,776 1.75 305.3 Burkina Faso 21,166 0.16 0.7 Burundi 25,706 0.19 1.0 IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 93 STATEMENT OF VOTING POWER, AND SUBSCRIPTIONS AND CONTRIBUTIONS (continued) June 30, 2002 Expressed in millions of US. dollars Subscriptions and Number of Percentage of contributions Member 1 votes total votes committed Cambodia 10,322 0.08% $ 1.3 Cameroon 22,684 0.17 1.4 Cape Verde 4,916 0.04 0.1 Central African Republic 13,620 0.10 0.7 Chad 10,990 0.08 0.6 Chile 31,782 0.24 4.5 China 247,345 1.87 40.8 Colombia 53,080 0.40 24.4 Comoros 13,141 0.10 0.1 Congo, Democratic Republic of 12,164 0.09 3.8 Congo, Republic of 8,385 0.06 0.6 Costa Rica 12,480 0.09 0.3 C6te d'lvoire 23,069 0.17 1.3 Croatia 36,430 0.28 5.5 Cyprus 33,817 0.26 1.1 Czech Republic 61,671 0.47 35.3 Djibouti 532 * 0.2 Dominica 16,749 0.13 0.1 Dominican Republic 27,780 0.21 0.6 Ecuador 32,886 0.25 0.9 Egypt, Arab Republic of 60,884 0.46 6.7 El Salvador 6,244 0.05 0.4 Equatorial Guinea 6,167 0.05 0.4 Eritrea 25,295 0.19 0.1 Ethiopia 23,053 0.17 0.7 Fiji 9,423 0.07 0.7 Gabon 2,093 0.02 0.6 Gambia, The 19,444 0.15 0.4 Georgia 25,723 0.19 0.9 Ghana 23,831 0.18 3.0 Greece 57,020 0.43 41.2 Grenada 20,627 0.16 0.1 Guatemala 30,750 0.23 0.5 Guinea 28,087 0.21 1.3 Guinea-Bissau 6,790 0.05 0.2 Guyana 20,860 0.16 1.0 Haiti 22,271 0.17 1.0 Honduras 24,270 0.18 0.4 Hungary 100,075 0.76 45.6 India 405,142 3.06 55.6 Indonesia 115,860 0.87 14.4 Iran, Islamic Republic of 15,455 0.12 5.7 Iraq 9,407 0.07 1.0 94 THE WORLD BANK ANNUAL REPORT 2002 Subscriptions and Number of Percentage of contributions Member votes total votes committed Israel 43,136 0.33% $ 13.2 Jordan 24,865 0.19 0.4 Kazakhstan 806 0.01 1.9 Kenya 33,882 0.26 2.2 Kiribati 9,234 0.07 0.1 Korea, Republic of 70,267 0.53 309.8 Kyrgyz Republic 2,700 0.02 0.5 Lao People's Democratic Republic 16,967 0.13 0.6 Latvia 614 4 0.7 Lebanon 8,562 0.06 0.6 Lesotho 28,677 0.22 0.2 Liberia 22,467 0.17 1.0 Libya 7,771 0.06 1.3 Macedonia, former Yugoslav Republic of 18,707 0.14 1.0 Madagascar 11,600 0.09 1.2 Malawi 31,515 0.24 1.0 Malaysia 48,929 0.37 3.5 Maldives 27,547 0.21 0.1 Mali 24,808 0.19 1.2 Marshall Islands 4,902 0.04 * Mauritania 15,285 0.12 0.7 Mauritius 34,730 0.26 1.2 Mexico 102,666 0.77 137.8 Micronesia, Federated States of 18,424 0.14 * Moldova 612 * 0.7 Mongolia 24,389 0.18 0.3 Morocco . 57,674 0.44 4.9 Mozambique 12,217 0.09 1.7 Myanmar 44,697 0.34 2.9 Nepal 31,410 0.24 0.7 Nicaragua 29,845 0.23 0.4 Niger 19,302 0.15 0.7 Nigeria 12,657 0.10 4.3 Oman 26,927 0.20 1.3 Pakistan 116,830 0.88 13.5 Palau 504 * * Panama 7,550 0.06 * Papua New Guinea 15,750 0.12 1.1 Paraguay 14,119 0.11 0.4 Peru 20,428 0.15 2.2 Philippines 16,583 0.13 6.4 Poland 304,241 2.30 58.4 Rwanda 20,312 0.15 1.0 St. Kitts and Nevis 7,888 0.06 0.2 St. Lucia 24,503 0.19 0.2 St. Vincent and the Grenadines 2,214 0.02 0.1 Samoa 15,761 0.12 0.1 Sao Tome and Principe 6,414 0.05 0.1 Saudi Arabia 471,464 3.56 2,158.2 Senegal 35,224 0.27 2.3 Sierra Leone 14,367 0.11 1.0 Slovak Republic 38,740 0.29 12.6 Slovenia . 18,956 0.14 3.0 IDA SPECIAL PURPOSE FINANCIAI STATEMENTS: JUNE 30, 2002 95 STATEMENT OF VOTING POWER, AND SUBSCRIPTIONS AND CONTRIBUTIONS (continued) June 30, 2002 Expressed in millions of U.S. dollars Subscriptions and Number of Percentage of contributions Member votes total votes committed Solomon Islands 518 *% $ 0.1 Somalia 10,506 0.08 1.0 Sri Lanka 51,188 0.39 4.0 Sudan 22,484 0.17 1.3 Swaziland 12,773 0.10 0.4 Syrian Arab Republic 10,351 0.08 1.2 Tajikistan 20,568 0.16 0.5 Tanzania 35,867 0.27 2.2 Thailand 48,488 0.37 4.1 Togo 23,243 0.18 1.0 Tonga 14,144 0.11 0.1 Trinidad and Tobago 770 0.01 1.6 Tunisia 2,793 0.02 1.9 Turkey 89,997 0.68 113.8 Uganda 23,121 0.17 2.2 Uzbekistan 746 0.01 1.5 Vanuatu 13,821 0.10 0.2 Vietnam 15,454 0.12 1.9 Yemen, Republic of 37,025 0.28 2.1 Yugoslavia, Federal Republic of 25,109 0.19 6.8 Zambia 28,568 0.22 3.4 Zimbabwe 15,057 0.11 5.0 Subtotal Part 11 Members 3 5,005,660 37.78 3,627.0 Total-June 30, 2002 2,3 $13,248,130 100.00% $109,387.7 Total-June 30, 2001 2 $12,977,256 $108,724.1 * Indicates amounts less than $0.05 million or less than 0.005 percent. NoTEs 1. See Notes to Special Purpose Financial Statements-Note A for an explanation of the two categories of membership. 2. $512.3 million of Switzerland's subscription and contributions have not been included in the Statement of Sources and Applications of Development Resources at June 30, 2002 and June 30, 2001 since this represents the difference between the total cofinancing grants of $580.1 million provided by Switzerland directly to IDA borrowers as cofinancinggrants between the fourth and the ninth replenishments of IDA resources, and the July 1992 contribution by Switzerland of $67.8 million. 3. May differfrom the sum of individualfigures shown because of rounding. The Notes to Special Purpose Financial Statements are an integral part of these Statements. 96 THE WORLD BANK ANNUAL REPORT 2002 NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS NOTE A-ORGANIZATION, OPERATIONS AND Standards. These special purpose financial statements SIGNIFICANT ACCOUNTING AND RELATED have been prepared to comply with Article VI, Section POLICIES 11 (a) of the Articles of Agreement of IDA, and are pre- Purpose and Affiliated Organizations pared in accordance with the accounting policies out- lined below. On August 8, 2002, the Executive The International Development Association (IDA) is Directors approved these financial statements for issue. an international organization established on September 24, 1960. IDA's main goal is reducing poverty through The preparation of these special purpose financial state- promoting sustainable economic development in the ments requires management to make estimates and less developed areas of the world included in IDA's assumptions that affect the reported amounts of assets membership, by extending concessionary financing in and liabilities and disclosure of contingent assets and the form of grants, development credits and guarantees. liabilities at the date of the financial statements and the IDA has three affiliated organizations, the International reported amounts of revenue and expenses during the Bank for Reconstruction and Development (IBRD), the reporting period. Actual results could differ from these International Finance Corporation (IFC), and the Mul- estimates. Significant judgments have been used in the tilateral Investment Guarantee Agency (MIGA). Each computation of estimated fair values of development of these other organizations is legally and financially credits and allowances for the HIPC Debt Initiative. independent from IDA, with separate assets and liabili- Reclassifications ties, and IDA is not liable for their respective obliga- Certain reclassifications of the prior years' information tions. The principal purpose of IBRD is to promote Ce benlade to of the current yearmation sustainable economic development and reduce poverty have been made to conform to the current year's pre- in its member countries, primarily by providing loans, sentation. guarantees and related technical assistance for specific Basis of Accounting projects and for programs of economic reform in devel- IDA's special purpose financial statements are prepared oping member countries. IFC's purpose is to encourage on the accrual basis of accounting. That is, the effects of the growth of productive private enterprises in its transactions and other events are recognized when they member countries through loans and equity invest- occur (and not as cash or its equivalent is received or ments in such enterprises without a member's guaran- paid) and are recorded in the accounting records and tee. MICA was established to encourage the flow of invesentsIGAfr pdtive posesoamg member reported in the financial statements of the periods to investments for productive purposes among member which they relate. countries and, in particular, to developing member countries by providing guarantees against noncommer- Translation of Currencies cial risks for foreign investment in its developing mem- IDA's special purpose financial statements are ber countries. expressed in terms of U.S. dollars solely for the purpose Termination of the Interim Trust Fund of summarizing IDA's financial position and the results of its operations for the convenience of its members The Interim Trust Fund (ITF) was established by IDA's and other interested parties. Board of Governors on June 26, 1996 as part of the Eleventh Replenishment, and became effective on IDA is an international organization which conducts its November 14, 1996. The ITF was administered by IDA operations in Special Drawing Rights (SDRs) and U.S. to help fund operations approved during the period dollars. Applications of development resources and July 1, 1996 to June 30, 1997, as well as certain opera- sources of development resources are translated at mar- tions approved after July 1, 1997. ket exchange rates in effect at the end of the accounting period, except Member Subscriptions and Contribu- The Executive Directors terminated the ITF on May tions which are translated in the manner described 25, 2001. Upon termination, ITF credits became part below. Income and expenses are translated at either the of IDA's regular lending portfolio, and all of ITF's assets market exchange rates in effect on the dates of income and liabilities were transferred to IDA. IDA's activity and expense recognition, or at an average of the for the fiscal year ended June 30, 2000 has been exchange rates in effect during each month. Translation restated to include the results of the terminated Interim adjustments relating to the revaluation of development Trust Fund. credits denominated in SDRs are charged or credited to Summary of Significant Accounting and Related Accumulated Other Comprehensive Income. Other Policies translation adjustments are shown in the Statement of Due to the nature and organization of IDA, these finan- Income. cial statements have been prepared for the specific pur- Member Subscriptions and Contributions pose of reflecting the sources and applications of R member subscriptions and contributions and other ecogntion development resources. These financial statements are Member Subscriptions and Contributions committed not intended to be a presentation in accordance with for each IDA replenishment are recorded in full as Sub- accounting principles generally accepted in the United scriptions and Contributions Committed upon effec- States of America or with International Accounting tiveness of the relevant replenishment. Replenishments become effective when IDA has received Instruments IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 97 of Commitments from members for subscriptions and nonconvertible local currencies for the subscriptions of contributions of a specified portion of the full replen- Part II members are recorded either as currencies sub- ishment. Amounts not yet paid in, at the date of effec- ject to restriction under due from banks, or as restricted tiveness, are recorded as Subscriptions and notes included under nonnegotiable, noninterest-bear- Contributions Receivable and shown as a reduction of ing demand obligations on account of member sub- Subscriptions and Contributions Committed. These scriptions and contributions. Restricted notes at June receivables come due throughout the replenishment 30, 2002 were $33 million ($33 million-June 30, period (generally three years) in accordance with an 2001). agreed maturity schedule. The actual payment of Valuation receivables when they become due from certain mem- bers is conditional upon the respective member's bud- The subscriptions and contributions provided through getary appropriation processes. the Third Replenishment are expressed in terms of "U.S. dollars of the weight and fineness in effect on Jan- The Subscriptions and Contributions Receivable are uary 1, 1960" (1960 dollars). Following the abolition of settled through payment of cash or deposit of nonnego- gold as a common denominator of the monetary system tiable, noninterest-bearing demand notes. The notes and the repeal of the provision of the U.S. law defining are encashed by IDA as provided in the relevant replen- the par value of the U.S. dollar in terms of gold, the ishment resolution over the disbursement period of the pre-existing basis for translating 1960 dollars into cur- credits committed under the replenishment. rent dollars or any other currency disappeared. The In certain replenishments, donors have had the option Executive Directors of IDA decided, with effect from of paying all of their subscription and contribution that date and until such time as the relevant provisions amounts in cash before they become due, and thereby of the Articles of Agreement are amended, that the receiving discounts. In addition, some replenishment words "U.S. dollars of the weight and fimeness in effect arrangements have incorporated an accelerated encash- on January 1, 1960" in Article II, Section 2(b) of the ment schedule. In these cases, IDA and the donor agree Articles of Agreement of IDA are interpreted to mean that IDA will invest the cash and retain the income. the SDR introduced by the International Monetary The related subscription and contribution is recorded at Fund as the SDR was valued in terms of U.S. dollars the full undiscounted amount. The discount is recorded immediately before the introduction of the basket as unamortized discounts on contributions (a reduction method of valuing the SDR on July 1, 1974, such value of Subscriptions and Contributions Committed) and being equal to $1.20635 for one SDR (the 1974 SDR), amortized over the projected encashment period. and have also decided to apply the same standard of value to amounts expressed in 1960 dollars in the rele- Under the provisions governing replenishments, IDA vant resolutions of the Board of Governors. must encash the notes or similar obligations of contrib- uting members on an approximately pro rata basis. As The subscriptions and contributions provided through discussed in the previous paragraph, donors sometimes the Third Replenishment are expressed on the basis of contribute resources on an advanced or an accelerated the 1974 SDR. Prior to the decision of the Executive basis. IDA holds these resources until they become Directors, IDA had valued these subscriptions and con- available for disbursement on a pro rata basis. tributions on the basis of the SDR at the current mar- ket value of the SDR. Transfers to IDA from IBRD are recorded under Sources of Development Resources and are receivable The subscriptions and contributions provided under the upon approval by IBRD's Board of Governors. Fourth Replenishment and thereafter are expressed in members' currencies or SDRs and are payable in mem- For the purposes of its financial resources, the member- bers' currencies. Beginning July 1, 1986, subscriptions ship of IDA is divided into two categories: (1) Part I and contributions made available for disbursement in members, which make payments of subscriptions and cash to IDA are translated at market exchange rates in contributions provided to IDA in convertible currencies effect on the dates they were made available. Prior to which may be freely used or exchanged by IDA in its that date, subscriptions and contributions which had operations and (2) Part II members, which make pay- been disbursed or converted into other currencies were ments of ten percent of their initial subscriptions in translated at market exchange rates in effect on dates of freely convertible currencies, and the remaining 90 per- disbursement or conversion. Subscriptions and contri- cent of their initial subscriptions, and all additional sub- butions not yet available for disbursements are trans- scriptions and contributions in their own currencies or lated at market exchange rates in effect at the end of in freely convertible currencies. Certain Part II mem- the accounting period. bers provide a portion of their subscriptions and contri- butions in the same manner as mentioned in (1) above. Article IV, Section 2(a) and (b) of IDA's Articles of IDA's Articles of Agreement and subsequent replenish- Agreement provides for maintenance of value pay- ment agreements provide that the currency of any Part ments on account of the local currency portion of the II member paid in by it may not be used by IDA for initial subscription whenever the par value of the mem- projects financed by IDA and located outside the terri- ber's currency or its foreign exchange value has, in the tory of the member except by agreement between the opinion of IDA, depreciated or appreciated to a signifi- member and IDA. The cash paid and notes deposited in cant extent within the member's territories, so long as, 98 THE WORLD BANK ANNUAL REPORT 2002 and to the extent that, such currency shall not have sion for credit losses, other than allowances for the been initially disbursed or exchanged for the currency Heavily Indebted Poor Countries (HIPC) Debt Initia- of another member. The provisions of Article IV, Sec- tive, has been established. This is because it is not prac- tion 2(a) and (b) have by agreement been extended to ticable to determine a provision for credit losses in view cover additional subscriptions and contributions of IDA of the nature and maturity structure of the credit port- through the Third Replenishment, but are not applica- folio. Should probable losses occur, they would be ble to those of the Fourth and subsequent replenish- included in the Statement of Income. ments. The repayment obligations of IDA's development cred- The Executive Directors decided on June 30, 1987 that its funded from resources through the Fifth Replenish- settlements of maintenance of value, which would ment are expressed in the development credit result from the resolution of the valuation issue on the agreements in terms of 1960 dollars. In June 1987, the basis of the 1974 SDR, would be deferred until the Executive Directors decided to value those develop- Executive Directors decide to resume such settlements. ment credits at the rate of $1.20635 per 1960 dollar on These amounts are shown as Deferred Amounts a permanent basis. Development credits funded from Receivable to Maintain Value of Currency Holdings. resources provided under the Sixth Replenishment and thereafter are denominated in SDRs; the principal Development Credits amounts disbursed under such development credits are All development credits are made to or guaranteed by to be repaid in currency amounts currently equivalent member governments or to the government of a terri- to the SDRs disbursed. tory of a member (except for development credits which have been made to regional development institu- Development Grants tions for the benefit of members or territories of mem- On July 25, 2002, the Executive Directors approved bers of IDA). In order to qualify for lending on IDA the Thirteenth Replenishment report and subsequently terms, a country's per capita income must be below a submitted the report and draft resolution to the Board certain level and the country may have only limited or of Governors for their approval. Upon approval by the no creditworthiness for IBRD lending. Development Board of Govemors, IDA would be authorized to pro- credits carry a service charge of 0.75 percent and gener- vide 18 to 21 percent of financing under the Thirteenth ally have 35- or 40-year final maturities and a 10-year Replenishment as development grants. grace period for principal payments. Development The Twelfth Replenishment Resolution authorizes the credits are carried in the Special Purpose Financial use Twelfth Replenishment donor fund s the Statements at the ful fac amun of th oroes use of Twelfth Replenishment donor funds to finance outstanding obligations. IDA development grants in the context of the HIPC Debt Initiative, or assistance to post-conflict countries It is the practice of IDA to place in nonaccrual status all under a framework approved by the Executive Direc- development credits made to a member government or tors on July 31, 2001. The net income transfers from to the government of a territory of a member if princi- IBRD for fiscal years 1997, 1998 and 1999 also autho- pal or charges with respect to any such development rizes the use of such funds for IDA development grants. credit are overdue by more than six months, unless IDA's management determines that the overdue Heavily Indebted Poor Countries Debt Initiative amount will be collected in the immediate future. In The HIPC Debt Initiative was launched in 1996 as a addition, if loans by IBRD to a member govemment are joint effort by bilateral and multilateral creditors to placed in nonaccrual status, all development credits to ensure that reform efforts of HIPCs would not be put that member government will also be placed in nonac- at risk by unsustainable external debt burdens. As a crual status by IDA. On the date a member's develop- part of this process, the HIPC Debt Initiative Trust ment credits are placed in nonaccrual status, charges Fund was established on November 7, 1996 as a legally that had been accrued on development credits out- separate entity. It was administered by IDA and consti- standing to the member which remained unpaid are tuted by funds of donors including the IBRD, to help deducted from the income from development credits of beneficiaries reduce their overall debt, including IDA the current period. Charges on nonaccruing develop- debt. ment credits are included in income only to the extent Under the Original Framework of the Initiative, eligible that payments have actually been received by IDA If countries received relief on IBRD and IDA debt collectibility risk is considered to be particularly high at through three mechanisms: (i) partial financing of lend- the time of arrears clearance, the member's credits may ing operations with development grants; (ii) purchase not automatically emerge from nonaccrual status, even and cancellation of IDA credits by the IBRD/IDA com- though the member's eligibility for new credits may ponent of the HIPC Debt Initiative Trust Fund subject have been restored. A decision on the restoration of to availability of funds; and (iii) the provision of debt accrual status is made on a case-by-case basis. service on selected IDA credits, in certain cases, by the In fulfilling its mission, IDA makes concessional loans HIPC Debt Initiative Trust Fund. to the poorest countries. Therefore, there is significant Under the Enhanced Framework of the Initiative, credit risk in the portfolio of development credits. Man- which was approved by IDA's Executive Directors on agement continually monitors this credit risk. No provi- IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 99 January 27, 2000, implementation mechanisms also Futures and Forwards: Futures and forward contracts include: (i) partial forgiveness of IDA debt service as it are contracts for delivery of securities or money market comes due, to be reimbursed to IDA by the IBRD/IDA instruments in which the seller agrees to make delivery component of the HIPC Debt Initiative Trust Fund; at a specified future date of a specified instrument, at a and (ii) in the case of countries with a substantial specified price or yield. Futures contracts are traded on amount of outstanding IBRD debt, partial refinancing regulated United States and international exchanges. by IDA resources (excluding transfers from IBRD) of IDA generally closes out most open positions in futures outstanding IBRD debt. contracts prior to maturity. Therefore, cash receipts or payments are mostly limited to the change in market Development grants and any impairments of IDAs out- value of the futures contracts. Futures contracts gener- standing development credits In connection with the ally entail daily settlement of the net cash margin. HIPC Debt Initiative are recognized as charges to income. This recognition occurs when development Government and Agency Obligations: These obliga- grants and HIPC debt service grants are signed follow- tions include marketable bonds, notes and other obliga- ing approval, or when IDA determines that impair- tions issued by governments. Obligations issued or ments to development credits are probable and can be unconditionally guaranteed by governments of coun- reasonably estimated. Previously, development grants tries require a minimum credit rating of AA if denomi- and such impairments were not charged to income. nated in a currency other than the home currency of Instead, they were directly reported in the Statement of the issuer, otherwise no rating is required. Obligations Sources and Applications of Development Resources, issued by an agency or instrumentality of a government as a separate line item titled Heavily Indebted Poor of a country, a multilateral organization or any other Countries Debt Initiative. official entity require a minimum credit rating of AA. Cash and Cash Equivalents: IBRD considers unre- Options: Options are contracts that allow the holder of stricted cash as well as securities held in the investment the option the right, but not the obligation, to purchase portfolio, as an element of liquidity in the Statement of or sell a financial instrument at a specified price within Cash Flows, since they are readily convertible to known a specified period of time from or to the seller of the amounts of cash within ninety days. option. The purchaser of an option pays a premium at Investmnents the outset to the seller of the option, who then bears the risk of an unfavorable change in the price of the IDA carries its investment securities and related finan- financial instrument underlying the option. IDA invests cial instruments at fair value. Both realized and unreal- only in exchange-traded options. The initial price of an ized gains and losses are included in Income from option contract is equal to the premium paid by the Investments. purchaser and is significantly less than the contract or notional amount. Securities purchased under resale agreements and secu- rities sold under repurchase agreements are recorded at Repurchase and Resale Agreements and Securities historical cost. IDA receives securities purchased under Loans: Repurchase agreements are contracts under resale agreements, monitors the fair value of the securi- which a party sells securities and simultaneously agrees ties and, if necessary, requires additional collateral. to repurchase the same securities at a specified future date at a fixed price. The reverse of this transaction is NOTE B-INVESTMENTS called a resale agreement. A resale agreement involves As part of its portfolio management strategy, IDA the purchase of securities with a simultaneous agree- invests in the following financial instruments. ment to sell back the same securities at a stated price on a stated date. Securities loans are contracts under which Asset-backed Securities: Asset-backed securities are securities are lent for a specified period of time at a instruments whose cash flow is based on the cash flows fixed rice. of a pool of underlying assets managed separately. IDA may only invest in asset-backed securities with a AAA Short Sales: Short sales are sales of securities not held credit rating. in the seller's portfolio at the time of the sale. The seller must purchase the security at a later date and bears the Currency Swaps: Currency swaps are agreements risk that the market value of the security will move between two parties to exchange cash flows denomi- adversely between the time of the sale and the time the nated in different currencies at one or more certain security must be delivered. times in the future. The cash flows are based on a pre- determined formula reflecting rates of interest and an Time Deposits: Time deposits include certificates of exchange of principal. IDA is authorized to enter into deposit, bankers' acceptances, and other obligations currency swaps including covered forwards. issued or unconditionally guaranteed by banks and other financial institutions. 100 THE WORLD BANK ANNUAL REPORT 2002 A summary of IDA's investments, by instrument, at June 30, 2002 and June 30, 2001 is as follows: In millions of US. dollars equivalent 2002 2001 Average Net gains Average Net gains balance (losses) balance (losses) Carrying during the for the Carrying during the for the value fiscal year fiscal year value fiscal year fiscal year Government and agency obligations $ 9,598 $ 8,996 $149 $ 8,604 $ 7,304 $ 9 Time deposits 1,812 5,098 - 6,573 7,659 Asset-backed securities 1,906 1,839 48 1,283 218 (3) Currency swaps (9) (*) - 10 (*) Forwards, futures and options * * * (*) 3 8 Resale agreements 765 888 - 358 438 Repurchase agreements and securities loans (2,017) (3,933) - (4,641) (3,323) _ Total $12,055 $12,888 $197 $12,187 $12,299 $14 Short sales a $ (120) $ (114) $ - $ (9) $ (92) $_ a. Included in Net (payable) receivable on investment securities transactions in the Statement of Sources and Applications of Development Resources. * Less than $0.5 million. A summary of the currency composition of investments resale agreements. Of these instruments held by IDA, at June 30, 2002 and June 30, 2001 is as follows: $102 million ($42 million-June 30, 2001) has been transferred under repurchase or security lending agree- In millions of US. dollars equivalent ments. None of these securities has been included in the assets of IDA. 2002 2001 The credit risk exposure and contract value, as applica- Euro $ 4,609 $ 3,760 ble, of these financial instruments at June 30, 2002 and Japanese yen 789 783 June 30, 2001 (prior to taking into account any master Pounds sterling 2,110 2,053 derivatives agreements or collateral arrangements that U.S. dollars 4,547 5,591 have been made) are given below: Total $12,055 $12,187 In millions of US. dollars equivalent For the purpose of risk management, IDA is party to a 2002 2001 variety of financial instruments, certain of which involve elements of credit risk in excess of the amount Forwards, futures and options reflected in the Statement of Sources and Applications * Long position $721 $105 of Development Resources. Credit risk exposure repre- * Credit exposure due to sents the maximum potential accounting loss due to potential nonperformance * * possible nonperformance by obligors and counterpar- Currency swaps ties under the terms of the contracts. Additionally, the * Credit exposure due to nature of the instruments involve contract value and potential nonperformance notional principal amounts that are not reflected in the by counterparties - 10 basic financial statements. For both on- and off-balance sheet securities, IDA limits trading to a list of autho- *Less than $0.5 million. rized dealers and counterparties. Credit limits have been established for each counterparty by type of IDA maintains a $100 million line of credit with an instrument and maturity category. independent financial institution. This facility is used to cover any overnight overdrafts that may occur due to As of June 30, 2002, IDA received $776 million ($356 failed trades. At June 30, 2002 and June 3(1, 2001, no million-June 30, 2001) of securities purchased under amounts were outstanding under this line of credit. IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 101 NOTE C-MEMBER SUBSCRIPTIONS AND membership status for Greece changed from Part II to CONTRIBUTIONS Part 1. Subscriptions and Contributions Receivable: At June NOTE D-'IRANSFERS AND RECEIVABLES FROM 30, 2002, receivables from subscriptions and contribu- IBRD tions were $122 million ($3,278 million-June 30, 2001) of which $79 million ($80 million-June 30, IBRD's Board of Governors has approved aggregate 2001) was due and $43 million ($3,198 million- transfers to IDA totaling $7,057 million through June June 30, 2001) was not yet due. 30, 2002 ($6,755 million-June 30, 2001). The aggre- gate transfers reported in the Statement of Sources and Subscriptions and contributions due at June 30, 2002 Applcations of Development Resources may differ were as follows: from the amount of aggregate transfers approved due to exchange rate movements. In millions of US. dollars equivalent Of the aggregate transfers, $302 million was approved Amounts initially due from by IBRD's Board of Governors on December 4, 2001. Of this amount, $300 million will be drawn down in July 1, 2001 through June 30, 2002 $ 5 fiscal year 2005, at the end of the defined encashment June 30, 2001 and earlier 74 schedule for donor contributions to IDA's Twelfth Replenishment. The remaining $2 million was Total $79 transferred in December 2001 as a reimbursement of IDA's share of the balance of the fiscal year 2000 cost of implementing the Strategic Compact of IBRD and Subscriptions and contributions not yet due at June 30, 2002 will become due as follows: At June 30, 2002, $1,243 million was receivable from IBRD ($896 million-June 30, 2001). The following In millions of US. dollars equivalent table shows these receivables in U.S. dollar terms by year of drawdown. The amounts vary by reporting date Period due to exchange rate movements or transfers approved during the reporting period. July 1, 2002 through June 30, 2003 $24 July 1, 2003 through June 30, 2004 15 In millions of US. dollars equivalent Thereafter 4 June 30, 2002 June 30, 2001 Total $43 To be drawn down in: Fiscal Year 2003 $ 349 $332 Fiscal Year 2005 894 564 Thirteenth Replenishment On July 25, 2002, the Exec- Total $1,243 $896 utive Directors approved the Thirteenth Replenish- ment report and subsequently submitted the report and draft resolution to the Board of Governors for their NOTE E-DEVELOPMENT CREDITS approval. Upon approval by the Board of Governors, IDA would be authorized to provide concessional Accumulated Allowance for Heavily Indebted Poor financing of about SDR 18 billion, including a signifi- Countries Debt Initiative cant portion as grants, during the period July 1, 2002 to June 30, 2005. Of this amount, new donor contribu- Development credits outstanding are presented in the tions are expected to total about SDR 10 billion. The Statement of Sources and Applications of Develop- Thirteenth Replenishment will become effective when ment Resources before any allowance in connection IDA has received commitments for subscriptions and with either the Enhanced or Original HIPC Framework contributions of SDR 5,448 million. (see Note 1). Pending final approval of IDA's Thirteenth Replenish- The nominal value of the principal component of the ment, the Executive Directors approved on June 25, debt relief to be provided under the Enhanced HIPC 2002 the use of SDR 2.5 billion from internal resources Framework is included under accumulated allowance to enable IDA to continue its lending operations on an for HIPC Debt Initiative in the Statement of Sources interim basis during the first half of FY03. and Application of Development Resources. This amount is net of any debt relief delivered to date. Membership: On July 23, 2002, East Timor became a Part II member of IDA, and on July 15, 2002, IDA 102 THE WORLD BANK ANNUAL REPORT 2002 Upon approval by the Executive Directors of IDA in ment credits identified for sale, is recorded under accu- connection with the sales of IDA credits to the HIPC mulated allowance for HIPC Debt Initiative in the Debt Initiative Trust Fund, the estimated write-down, Statement of Sources and Application of Development representing the difference between the carrying value Resources. and the net present value (see Note F) of the develop- Changes to the accumulated allowance for HIPC Debt Initiative the fiscal years ended June 30, 2002 and June 30, 2001 are summarized below: In millions of US. dollars equivalent 2002 2001 Balance, beginning of the fiscal year $ 8,579 $8,071 Enhanced HIPC Framework Allowance for principal component of debt relief 1,883 686 Principal component of debt relief delivered (192) (105) 1,691 581 Original HIPC Framework Allowance for write-down on sale of development credits - 24 Write-down on sale of development credits - (97) - (73) Balance, end of the fiscal year a $10,270 $8,579 a. This balance is the sum of the principal component of the actual amount of debt relief remaining to be provided to those countries that have reached their decision points, and in certain cases their completion points, and the principal component of the best estimate available of the amount of debt relief that is expected to be provided to other eligible countries. Overdue Amounts lion ($340 million-June 30, 2001) was overdue, were in nonaccrual status. At such date, overdue charges in At June 30, 2002, no principal or charges payable to respect of these development credits totaled $251 mil- IDA on development credits were overdue by more lion ($207 million-June 30, 2001). If these develop- than three months other than those referred to in the ment credits had not been in nonaccrual status, income following paragraph. from development credits net of charges received from such members during the period, for the fiscal year At June 30, 2002, development credits made to or ended June 30, 2002 would have been higher by $43 guaranteed by certain member countries with an aggre- million ($34 million-June 30, 2001 and $29 million- gate principal balance outstanding of $5,759 million June 30, 2000). ($5,887 million-June 30, 2001), of which $443 mil- IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 103 A summary of borrowers with development credits or guarantees in nonaccrual status follows: In millions of US. dollars equivalent June 30, 2002 Principal and Principal Charges Nonaccrual Borrower Outstanding Overdue Since With overdues Afghanistan $ 75 $ 27 June 1992 Central African Republic 392 6 June 2002 Congo, Democratic Republic of 1,203 206 November 1993 Haiti 490 14 September 2001 Liberia 101 29 April 1988 Myanmar 717 85 September 1998 Solomon Islands 40 1 February 2002 Somalia 400 89 July 1991 Sudan 1,178 217 January 1994 Togo 621 11 May 2002 Zimbabwe 441 9 October 2000 Total 5,658 694 Without overdues Syrian Arab Republic 27 - April 1988 Yugoslavia, Federal Republic of 74 - September 1992 Total $5,759 $694 As of June 30, 2002, all IDA credits and IBRD loans June 30, 2002 increased by $8 million, representing outstanding to Bosnia and Herzegovina were restored income that would have been accrued in previous fiscal to accrual status following management's determina- years had these development credits not been in nonac- tion that a suitable period of payment performance had crual status. passed subsequent to the time of arrears clearance. During the fiscal year ended June 30, 2002, income No development credits came out of nonaccrual status from development credits increased by $1 million, rep- during the year ended June 30, 2001. resenting income that would have been accrued in pre- During fiscal year 2002, all development credits made vious fiscal years had these development credits not to, or guaranteed by Central Africa Republic, Haiti, been in nonaccrual status. Solomon Islands and Togo, were placed in nonaccrual During the fiscal year ended June 30, 2002, C6te d'lvo- status. ire and the Republic of Congo cleared all of their over- In accordance with the understanding reached with due service payments to IDA and IBRD, and all IDA IBRD and IDA in fiscal year 1999, Sudan made regular development credits to, or guaranteed by, these two monthly payments of $1 million to clear its arrears countries were restored to accrual status. These arrears beginning in July 1999. These payments have been clearances were accomplished using bridge financing applied to IDA arrears, since Sudan has paid off all of provided by an international financial institution. On its arrears to IBRD. the same day that arrears were cleared, IDA extended development credits to the respective country in sup- On July 3, 2002, the Democratic Republic of Congo port of economic reform and poverty reduction pro- cleared all of its overdue service payments to IDA and grams. Some or all of the proceeds of these IBRD, and all IDA development credits and IBRD loans development credits were used to repay the bridge to, or guaranteed by, the Democratic Republic of financing. The development credits were funded by Congo were restored to accrual status. This arrears IDA resources other than transfers from IBRD. As a clearance was accomplished using bridge financing result of these events, income for the fiscal year ended provided by an international financial institution, and 104 THE WORLD BANK ANNUAL REPORT 2002 supported by certain member countries. On the same Guarantees day, IDA disbursed a development credit to the Guarantees are regarded as outstanding when the Democratic Republic of Congo in support of an underlying financial obligation of the borrower is economic and poverty reduction program. A part of incurred, and called when a guaranteed party demands the proceeds of this development credit was used to payment under the guarantee. Guarantees of principal repay the bridge financing. The development credit was of $86 million at June 30, 2002 ($28 million-June 30, funded by IDA resources other than transfers from 2001) were not included in the Total Resources Used IBRD. for Development Credits Outstanding. These amounts represent the maximum potential risk if the principal During fiscal year 1998, the Syrian Arab Republic and or interest payments guaranteed for these entities are IDA entered into an agreement covering, among other not made. At June 30, 2002 and June 30, 2001, no things, the application of payments by the Syrian Arab amounts were subject to call. Republic of its overdue principal and charges. On July 1, 2002, the Syrian Arab Republic made its final Segent Reporting payment under this agreement, clearing all of its Based on an evaluation of its operations, management overdue charges with IDA. All development credits to, has determined that IDA has only one reportable seg- or guaranteed by the Syrian Arab Republic were ment since IDA does not manage its operations by allo- restored to accrual status effective July 1, 2002. There cating its resources based on the contribution to net will be no income effect for the fiscal year ended June income from individual borrowers. In addition, the risk 30, 2003 as a result of these events. As this occurred and return profiles are sufficiently similar among its subsequent to June 30, 2002, the effects of this borrowers so that IDA does not differentiate in terms of transequnttionare Junotreflected the effinanctsal f state s the nature of products or services provided, the prepa- transaction are not reflected in the financial statements ration process, or the method of providing services to of IDA as of June 30, 2002. its borrowers. Fifth Dimension Program For the year ended June 30, 2002, development credits Under the Fifth Dimension program established in Sep- to two countries generated in excess of ten percent of tember 1988, a portion of principal repayments to IDA total income from these credits. Income from develop- is allocated on an annual basis to provide supplemen- ment credits for these two countries was $144 million tary IDA development credits to IDA-eligible countries and $66 million. that are no longer able to borrow on IBRD terms, but have outstanding IBRD loans approved prior to Sep- NOTE F-FAIR VALUE OF FINANCIAL tember 1988 and have in place an IDA-supported INSTRUMENTS structural adjustment program. Such supplementary IDA development credits are allocated to countries that Investmnents: IDA carries its investments at the fair meet specified conditions in proportion to each coun- value of the portfolio. These fair values are based on try's interest payments due that year on its pre-Septem- quoted market prices, where available. If quoted mar- ber 1988 IBRD loans. To be eligible for such IDA ket prices are not available, fair values are based on supplemental credits, a member country must meet quoted market prices of comparable instruments. The IDA's eligibility criteria for lending, must be ineligible fair value of short-term financial instruments approxi- for IBRD lending and must not have had an IBRD loan mates their carrying value. approved within the last twelve months. To receive a Development Credits: IDA's development credits have supplemental development credit from the program, a a significant grant element because of the concessional member country cannot be more than 60 days overdue nature of IDA's terms. Discounting the future cash on its debt-service payments to IBRD or IDA. flows from 's development credits using govern- A summary of cumulative IDA credits committed and ment reference rates represented by interest rates of disbursed under this program from inception, at June government securities having similar maturity to the 30, 2002 and June 30, 2001 is given below: portfolio of development credits, provides an estimate for the grant element. Under the Original HIPC Debt In millions of US. dollars equivalent Initiative, development credits identified for sale to the *n millions of Us. dollars equivalent HIPC Debt Initiative Trust Fund are written down to 2002 2001 their estimated net present value using currency spe- cific Commercial Interest Reference Rates (CIRRs) Commitments $1,706 $1,679 published monthly by the Organization for Economic Less undisbursed 16 28 Cooperation and Development (OECD). Using the six months average CIRR as a discount rate provides an Disbursed and alternative estimate for the grant element. Outstanding $1,690 $1,651 Since IDA's development credits are denominated either in U.S. dollars or SDRs, currency specific rates have been used to discount the corresponding future cash flows for each currency component of the devel- opment credits before being aggregated to provide the composite results. IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 105 The grant element calculations consider interest rates, However, under either alternative, the estimated fair maturity structures and grace periods for the credits. values of development credits outstanding are substan- They do not consider credit risk, portfolio seasoning, tially lower than the $96,372 million reflected on the multilateral and sovereign credit preferences and other Statement of Sources and Applications of Develop- risks or indicators that would be relevant in calculating ment Resources at June 30, 2002 ($86,572 million- fair value. Estimating the impact of these factors is not June 30, 2001), as shown in the following table. practicable. In millions of US. dollars equivalent June 30, 2002 June 30, 2001 Government Government reference rate- reference rate- based CIRR-based based CIRR-based fair value fair value fair value fair value Development credits outstanding $96,372 $96,372 $86,572 $86,572 Less grant equivalent 39,382 44,513 37,840 40,602 Estimated value of development credits outstanding $56,990 $51,859 $48,732 $45,970 Estimated grant element 41% 46% 44% 47% Discount Rates Used Discount Rates Used Government reference rates - US dollar 4.86% 5.45% - SDRa 4.63% 4.93% CIRRs: Average of six months to June - U.S. dollar 5.90% 6.11% - SDR 5.39% 5.40% a. Implies weighted average government reference rates of the component currencies contained in the SDR. Discounting the future cash flows from IDA's develop- element. The estimated grant element based on this ment credits using the standard 10 percent discount standard DAC rate for IDA's development credits is 66 rate of the Development Assistance Committee (DAC) percent as of June 30, 2002 (67 percent-June 30, of the OECD, provides another alternative for the grant 2001). NOTE G-ADMINISTRATIVE EXPENSES IDA's share of the administrative expenses incurred The following table shows the administrative expenses, jointly by IBRD and IDA is set out below. net of IDA's share of income from pension plan and other postretirement benefits plans: In millions of US. dollars 2002 2001 2000 IDA's allocated share of administrative expenses incurred jointly by IBRD and IDA $654 $551 $549 Less IDA's share of income from pension plan and other postretirement benefits plans 86 120 109 Total $568 $431 $440 106 THE WORLD BANK ANNUAL REPORT 2002 NOTE H-TRUST FUNDS ADMINISTRATION IDA, alone or jointly with IBRD, administers on behalf aration, global and regional programs and research and of donors, including members, their agencies and other training programs. These funds are placed in trust with entities, funds restricted for specific uses which include IDA and/or IBRD, and are held in a separate invest- the cofinancing of IDA lending projects, debt reduction ment portfolio which is not comingled with IDA and/or operations for IDA members, technical assistance for IBRD funds, nor are they included in the development borrowers including feasibility studies and project prep- resources of IDA. At June 30, 2002 and June 30, 2001, the allocation of trust fund assets by executing agent were as follows: 2002 2001 Totalfiduciary Number of Total fiduciary Number of assets trustfund assets trust fund (In millions) accounts (In millions) accounts IDA executed $1,464 1,270 $ 623 1,037 Recipient executed 2,051 904 2,067 987 Total $3,515 2,174 $2,690 2,024 The responsibilities of IDA under these arrangements allowance for HIPC Debt Initiative, and as a charge to vary and range from services normally provided under income. This estimate is subject to periodic revision. its own lending projects to full project implementation including procurement of goods and services. IDA Upon signature by IDA of the country specific legal receives fees for administering trust funds as a reduc- notification, immediately following the decision by the tion of the administrative expenses charged by IBRD. Executive Directors of IDA to provide debt relief to the During the fiscal year ended June 30, 2002, IDA country (the decision point), a receivable from the received $10 million ($11 million-June 30, 2001, $7 HIPC Debt Initiative Trust Fund is created (to the million-June 30, 2000) as fees for administering trust extent that funds are available) and income is recog- funds. nized. This receivable is limited to the nominal value equivalent of one-third of the net present value of the NOTE I-IMPACT FROM HEAVILY INDEBTED principal component of the total debt relief committed POOR COUNTRIES DEBT INITIATIVE to the specific country, and is the maximum debt relief that can be provided before the country reaches its Enhanced HIPC Framework completion point. A completion point is reached when the conditions specified in the legal notification are Assistance under the Enhanced HIPC Framework is met, and the country's other creditors have confirmed provided by IDA, by debt service relief (forgiving a por- their full participation in the debt relief initiative. tion of an eligible country's IDA debt service obliga- tions as they become due), and by means of HIPC debt A receivable from the HIPC Debt Initiative Trust Fund service grants as partial refinancing by IDA resources is created and income is recognized when the country (excluding transfers from IBRD) of outstanding IBRD reaches its completion point. This receivable represents debt. the remaining principal component of the total debt relief committed that was not recognized at the deci- Debt Service Relief sion point. On January 27, 2000, the Executive Directors of IDA The accumulated allowance for HIPC Debt Initiative is gave approval for IDA to provide debt relief under the reduced when debt relief is provided by IDA. A sum- enhanced HIPC framework by forgiving a portion of an mary of changes to the accumulated allowance for eligible country's IDA debt service obligations as they HIPC Debt Initiative is presented under Note E. become due. Amounts of IDA debt service forgiven are expected to be reimbursed by the IBRD/IDA compo- As disclosed in the Supplementary Information on the nent of the HIPC Debt Initiative Trust Fund on a pay- HIPC Debt Initiative table, debt service relief com- as-you-go basis. posed of $308 million in principal repayments and $83 million in charges has been provided to date by IDA. Upon approval of the Enhanced HIPC Framework by These amounts have been reimbursed by the HIPC the Executive Directors of IDA, the nominal value of Debt Initiative Trust Fund. the principal component of the estimated debt relief costs is recorded as a reduction of the disbursed and outstanding development credits under accumulated IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 107 HIPC Debt Service Grants amount, SDR 40 million ($51 million U.S. dollar equiv- alent) was for the Democratic Republic of Congo and As disclosed in the Supplementary Information on the SDR 80 mon ($0 million u.S. dlaeqiant HIP Deb Intatv tal,,HP etsriegat SDR 80 million ($103 million U.S. dollar equivalent) HIPC Debt Initiative table, HIPC debt service grants wsfr Afhnsa.Uo intr,ftegatare totaling $101 million to date have been approved. Of was for Afghnimstan. Upon signature of the grant agree- totaling $101 million to date have been approved. Of ment, the commitments were reflected under the Pay- this amount, $37 million is for Honduras and $64 mil- al f D G lion for Cameroon. To date, $75 million has been dis- aSue aor Development Rrants on the Statement of bursed, and the remaining $26 million is included ins Payable for HIPC Grants on the Statement of Sources and as a charge to income on the Statement of Income. and Applications of Development Resources. Of the As of June 30, 2002, there was an undisbursed amount $75 million disbursed, $19 million has been reimbursed of $148 million U.S. dollar equivalent. by the HIPC Debt Initiative Trust Fund. NOTE K-COMPREHENSIVE INCOME Receivable from the HIPC Debt Initiative Trust Fund Comprehensive income consists of net income and A summary of changes to the receivable from the HIPC other gains and losses affecting sources of development Debt Initiative Trust Fund is presented below: resources that, under generally accepted accounting principles, are excluded from net income. For IDA, In millions of US. dollars comprehensive income comprises currency translation 2002 2001 adjustments on development credits and income or loss after HIPC Debt Initiative. These items are presented Balance, beginning of the fiscal year $ 647 $ 590 in the Statement of Comprehensive Income. The fol- Contribution from the HIPC Debt lowing table presents the changes in Accumulated Initiative Trust Fund 108 177 Other Comprehensive Loss balances for the years Reimbursement received for principal ended June 30, 2002, 2001 and 2000: repayments forgiven (192) (105) Reimbursement received for HIPC debt In millions of US. dollars equivalent service grants disbursed (4) (15) Accumulated Other Balance, end of the fiscal year $ 559 $ 647 Comprehensive Income a 2002 2001 2000 b Balance, beginning of the Original HIPC Framework fiscal year $(4,968) $ (738) $(206) A summary of the debt relief provided to date and debt Ch f d ac relief to be provided under the Enhanced and Original g f p ,45 (,2) (532) HIPC Frameworks is reflected in the Supplementary Balance,endofthefiscalyear $ (514) $(4,9681 $(738) Information on the HIPC Debt Initiative. I ______ ______ NOTE J-DEVELOPMENT GRANTS a. The total accumulated other comprehensive income repre- sents the cumulative translation adjustment on development During fiscal year 2002, IDA's Executive Directors credits approved post-conflict grants totaling SDR 120 million b. Restated to include Interim Trust Fund activity for the fiscal ($154 million U.S. dollar equivalent). Of this total year ended June 30, 2000, see Note A. 108 THE WORLD BANK ANNUAL REPORT 2002 SUPPLEMENTARY INFORMATION ON THE HEAVILY INDEBTED POOR COUNTRIES DEBT INITIATIVE Summary of HIPC Debt Initiative The summary table below shows debt relief for countries that have reached their decision or completion points as of June 30, 2002, and estimated amounts to be provided to other eligible countries (with the exception of those countries for which cost estimates are not currently available), under both the Enhanced and Original Heavily Indebted Poor Countries (HIPC) Debt Initiative. In addition to the total debt relief of $12,855 million, IDA is expected to extend new credits estimated at $232 million to certain IDA-eligible countries no longer able to borrow on IBRD terms, but with outstanding IBRD debt. These credits will be funded by IDA resources other than transfers from IBRD. In millions of US. dollars equivalent HIPC IDA Trust Fund a Trota Countries that have reached their decision or completion pointsb Provided to date Enhanced HIPC Principal $ 308 $ - $ 308 Service charges 83 5 88 HIPC debt service grants 75 - 75 466 5 471 Original HIPC Sale of development credits 572 571 1,143 Development grants 229 - 229 Debt service - 105 105 801 676 1,477 Total debt relief provided to date 1,267 681 1,948 Remainder to be provided Enhanced HIPC Principal 8,397 - 8,397 Service charges 304 2 306 HIPC debt service grants 26 - 26 8,727 2 8,729 Original HIPC Debt service - 15 15 Total debt relief to be provided 8,727 17 8,744 Other eligible countries that have not reached their decision points Estimated amount to be provided Enhanced HIPC Principal 1,873 - 1,873 Service charges 290 - 290 Total estimated debt relief to other eligible countries 2,163 - 2,163 Total Debt Relief $12,157 $698 $12,855 Composed of: Enhanced HIPC $11,356 $ 7 $11,363 Original HIPC 801 691 1,492 $12,157 $698 $12,855 a. The debt relief shown relates only to the IBRD/IDA component of this trust fund, and includes amounts approved up to June 30, 2002 by the Executive Directors of IDA. b. As of June 30, 2002, the 26 countries that have reached their decision points are Benin, Bolivia, Burkina Faso, Cameroon, Chad, Ethiopia, The Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Sdo Tome and Principe, Senegal, Sierra Leone, Tanzania, Uganda, and Zambia IDA SPECIAL PURPOSE FINANCIAL STATEMENTS: JUNE 30, 2002 109 Reconciliation to IDA's Financial Statements Reconciliation of the principal component of Enhanced HIPC debt relief as reported in the Supplementary Information on the HIPC Debt Initiative to IDA's financial statements at June 30, 2002 is provided below. In millions of US. dollars equivalent June 30, 2002 "Principal" component under "Remainder to be provided" as shown below "Countries that have reached their decision or completion points" $ 8,397 "Principal" component under "Estimated amount to be provided" as shown below "Other eligible countries that have not reached their decision points" 1,873 Accumulated Allowance for HIPC Debt Initiative (IDA's Statement of Sources and Application of Development Resources) 10,270 "Principal" component under "Provided to date" as shown below "Countries that have reached their decision or completion points" 308 'Allowance for Enhanced HIPC" - Balance at the end of the fiscal year (IDA's Statement of Changes in Retained Earnings) $10,578 An analysis of the different components of contribution for Enhanced HIPC from the HIPC Debt Initiative Trust Fund is provided below. In millions of US. dollars equivalent June 30, 2002 "Principal" component of under "Provided to date" as shown below "Countries that have reached their decision or completion points" $ 308 Reimbursement of debt service grants by HIPC Debt Initiative Trust Fund to IDA 19 Receivable from HIPC Debt Initiative Trust Fund (IDA's Statement of Sources and Application of Development Resources) 559 Contribution for Enhanced HIPC from HIPC Debt Initiative Trust Fund (IDA's Statement of Changes in Retained Earnings) $886 Reconciliation of the HIPC debt service grants as reported in the Supplementary Information on the HIPC Debt Initiative to IDA's financial statements at June 30, 2002 is provided below. In millions of US. dollars equivalent June 30, 2002 "HIPC debt service grants" under "Provided to date" as shown below "Countries that have reached their decision or completion points" $ 75 "HIPC debt service grants" under "Remainder to be provided" as shown below to "Countries that have reached their decision or completion points" 26 "HIPC debt service grants" - Balance at the end of the fiscal year (IDA's Statement of Changes in Retained Earnings) $101 110 THE WORLD BANK ANNUAL REPORT 2002 IBRD/IDA Appendixes Appendix 1: World Bank Expenditures, by Program, Fiscal 1998-2002 113 Appendix 2: Country Eligibility for Borrowing from the World Bank 114 Note to Appendixes 3-7 116 Appendix 3A: IBRD and IDA Disbursements for Foreign and Local Expenditures 117 Appendix 3B: IBRD and IDA Disbursements for Foreign Expenditures, by Source of Supply 118 Appendix 3C: IBRD and IDA Payments to Supplying Eligible Borrowing Countries for Local and Foreign Procurement in Fiscal 2002 119 Appendix 4: IBRD and IDA Payments to Supplying Countries for Foreign Procurement 122 Appendix 5: IBRD and IDA Payments to Supplying Countries for Foreign Procurement, by Description of Goods, Fiscal 2002 125 Appendix 6: IBRD and IDA Disbursements for Foreign Expenditures, by Description of Goods (for Investment Lending), Fiscal 2000-02 128 Appendix 7: Estimates of IBRD and IDA Payments to Supplying Countries for Foreign Procurement under Adjustment Lending, Fiscal 2002 129 Appendix 8: IBRD and IDA Cumulative Lending since Fiscal 1990 by Sector and Theme and by Region, June 30, 2002 131 Appendix 9: IBRD and IDA Cumulative Lending by Country, June 30, 2002 133 Appendix 10: Projects Approved for IBRD and IDA Assistance in Fiscal 2002, by Region, July 1, 2001-June 30, 2002 137 Appendix I 1: Projects Approved for IBRD and IDA Assistance in Fiscal 2002, by Theme, July 1, 2001-June 30, 2002 139 Appendix 12: Cumulative IDA Subscriptions and Contributions through June 30, 2002 143 Appendix 13: Development Committee Communiques, Fiscal 2002 144 Note: Information formerly presented in IBRD/IDA appendixes covering Governors and Alternates of the World Bank, Executive Directors and Alternates of the World Bank and their Voting Power, Officers of the World Bank, Offices of the World Bank, and Country Eligibility fc,r Borrowing from the World Bank (also included above) is now included in The World Bank Annual Report: Volume 1, Year in Review. Appendix 1 :World Bank Expenditures, by Program, Fiscal 1998-2002 (amounts in millions of U.S. dollars) Actual Fiscal Fiscal Fiscal Fiscal Fiscal Program 1998 1999 2000 2001 2002' Regional 709.0 739.5 778.7 707.8 774.6 Networks 84.0 107.3 124.1 119.3 146.8 Other Operational Programs 10.5 12.7 18.5 23.3 25.0 Development Economics and World Bank Institute 95.3 101.8 92.4 98.3 102.0 Financial 74.9 83.3 85.7 94.2 96.3 Administrative 151.5 146.0 154.8 150.0 158.5 Corporate Management and Services 90.2 102.8 99.8 108.8 116.9 Overheads, Benefits, & Contingencies 40.5 29.1 18.6 28.6 (13.2) Administrative Budget 1,255.9 1,322.6 1,372.6 1,330.2 1,406.9 Less: Reimbursements & Fee Income (102.9) (115.1) (117.8) (144.7) (154.8) NetAdministrative Budget 1,152.9 1,207.4 1,254.8 1,185.5 1,252.1 Staff RetirementAccountb 17.9 5.7 8.2 13.8 20.7 Development Grant Facility 110.3 129.4 126.1 147.4 176.1 Corporate Secretariat 57.1 58.1 61.8 64.9 63.2 Operations Evaluation 16.0 16.8 18.5 19.2 19.8 Less: Reimbursements & Fee Income (1.0) (1.3) (1.5) (1.2) (0. 1) Total Administrative Budget 1,353.3 1,416.2 1,467.9 1,429.6 1,531.8 Note: Amounts may not add to totals due to rounding. a. Reflects Budget Reform. b. Includes Staff Retirement Plan (SRP), Supplemental SRP, and Retired Staff Benefit Plan Contributions. World Bank Expenditures, by Program, Fiscal 1998-2002 113 Appendix 2: Country Eligibility for Borrowing from the World Bank (as of July 1, 2002) Income group 2001 GNI Income group 2001 GNI and country per capitaa and country per capita' Countries eligible for IBRD funds only 6,. - i - . . Per capita income over $5,185 Dominican Republic 2,230 Slovenia 9,780 Marshall Islands 2,190 Korea, Republic of 9,400 Micronesia, Federated States of 2,150 Antigua and Barbuda 9,070 Fiji 2,130 Argentina 6,960 Tunisia 2,070 St. Kitts and Nevis 6,880 El Salvador 2,050 Palau 6,730 Peru 2,000 Uruguay 5,670 Thailand 1,970 Mexico 5,540 Namibia 1,960 Trinidad and Tobago 5,540 Colombia 1,910 Czech Republic 5,270 Iran, Islamic Republic of 1,750 Seychelles - Jordan 1,750 Russian Federation 1,750 Per capita income $2,976-$5,185 Romania 1,710 Hungary 4,800 Macedonia, former Yugoslav Republic of 1,690 Venezuela, Repuiblica Bolivariana de 4,760 Suriname 1,690 Croatia 4,550 Guatemala 1,670 Chile 4,350 Algeria 1,630 Poland 4,240 Bulgaria 1,560 Lebanon 4,010 Egypt, Arab Republic of 1,530 Costa Rica 3,930 Mauritius 3,830 Per capita income $746-$1,435 Estonia 3,810 Kazakhstan 1,360 Slovak Republic 3,720 Paraguay 1,300 Malaysia 3,640 Swaziland 1,300 Botswana 3,630 Ecuador 1,240 Panama 3,290 Belarus 1,200 Latvia 3,260 Morocco 1,180 Gabon 3,160 Philippines 1,050 Lithuania 3,080 Syrian Arab Republicb 1,000 Brazil 3,070 Turkmenistan 950 China 890 Per capita income $1,436-$2,975 Iraq' Belize 2,910 South Africa 2,900 Per capita income less than $746 Jamaica 2,700 Ukraine 710 Turkey 2,530 Equatorial Guinea 700 Countries eligible for a blend of IBRD and IDA fumndsJ Per capita income $2,976-$5,185 Per capita income less than $746 St. Luciae 3,970 Indonesia 680 Grenadae 3,720 Azerbaijan 650 Dominica' 3,060 Papua New Guinea 580 Uzbekistan 560 Per capita income $1,436-$2,975 Zimbabwec 480 St. Vincent and the Grenadines' 2,690 India 460 Pakistan 420 Per capita income $746-$1,435 Nigeria 290 Bosnia and Herzegovina 1,270 Bolivia 940 Yugoslavia, Federal Republic ofc 114 The World Bank Annual Report 2002 Income group 2001 GNI Income group 2001 GNI and country per capita' and country per capita' Countries eligible for IDA funds only 'fi - - Per capita income $1,436-$2,975 Mauritania 350 Maldivese 2,040 Kenya 340 Tonga' 1,530 Gambia, The 330 Samoae 1,520 Sudanc 330 Zambia 320 Per capita income $746-$1,435 Lao People's Democratic Republic 310 Cape Verdee 1,310 Ghana 290 Albania 1,230 Kyrgyz Republic 280 Vanuatu' 1,050 Sao Tome and Principe 280 Djibouti 890 Tanzania 280 Honduras 890 Uganda 280 Guyana 840 Central African Republicc 270 Kiribati 830 Cambodia 270 Sri Lanka 830 Togo' 270 Madagascar 260 Per capita income less than $746 Nepal 240 Congo, Republic of 700 Rwanda 220 Bhutan 640 Burkina Faso 210 C6te d'lvoire 630 Mali 210 Solomon Islandsc 580 Mozambique 210 Cameroon 570 Chad 200 Georgia 570 Eritrea 190 Armenia 560 Malawi 170 Lesotho 550 Niger 170 Angola 500 Guinea-Bissau 160 Haiti' 480 Tajikistan 160 Senegal 480 Sierra Leone 140 Yemen, Republic of 460 Burundi 100 Vietnam 410 Ethiopia 100 Guinea 400 Afghanistanc Mongolia 400 Congo, Democratic Republic ofc - Moldova 390 Liberiac Comoros 380 Myanmar' Bangladesh 370 Nicaragua Benin 360 Somalia' - Precise figures are not available. a. World Bank Atlas methodology; per capita GNI (gross national income, formerly GNP) figures are in 2001 U.S. dollars. b. Loans and credits in nonaccrual status as of June 30, 2002. c. Loans and credits in nonaccrual status as of July 1, 2002. d. Countries are eligible for IDA on the basis of (a) relative poverty and (b) lack of creditworthiness. The operational cutoff for IDA eligibility for fiscal 2003 is a 2001 GNI per capita of $875, using Atlas methodology. To receive IDA resources, countries also meet tests of performance. In excep- tional circumstances, IDA extends eligibility temporarily to countries that are above the operational cutoff and are undertaking major adjustment efforts but are not creditworthy for IBRD lending. An exception has been made for small island economies (see footnote e). e. An exception to the GNI per capita operational cutoff for IDA eligibility ($875 for fiscal 2003) has been made for some small island economies, which otherwise would have little or no access to Bank Group assistance because they lack creditworthiness. For such countries, IDA finding is considered case by case for the financing of projects and adjustment programs designed to strengthen creditworthiness. Country Eligibility for Borrowing from the World Bank 115 Note to Appendixes 3-7 Disbursements and Procurement The procurement rules and procedures to be Appendix 5 shows the proportion of foreign dis- followed in the execution of each project depend bursements from IBRD and IDA for specific cate- on individual circumstances. Four considerations gories of goods and services provided by selected generally guide the Bank's requirements: member countries in fiscal 2002. • Economy and efficiency in the execution Appendix 6 provides a summary listing of the of a projectamutpadtelgbeWrdBnboowg * Opportunity for all eligible bidders from amounts paid to eligible World Bank borrowing borrowing and nonborrowing member country suppliers and nonborrowing country sup- courowies to com tnboroving goods, pliers in each fiscal year from 2000 to 2002 under works, and e o icmee inancediby the Ba investment projects. Amounts disbursed are com- * Development of local contractors, manufac- pared with respect to significant categories of goods turers, and consulting services in borrowing procured from foreign suppliers. The extent to countries which eligible borrowing countries and nonborrow- coTrnsarien ing countries participated in supplying these major categories of goods in each of the past three fiscal Appendix 3A shows consolidated foreign and local years is also compared. disbursements for IBRD and IDA through the end of Under simplified procedures for structural and fiscal 1997 and for period fiscal 1998 through fiscal sectoral adjustment loans approved by the executive 2002. Advance disbursements consist of payments directors in fiscal 1996, disbursements are no longer made into special accounts of borrowers, from which directly linked to procurement under adjustment funds are paid to specific suppliers as expenditures loans disbursed using simplified procedures. Thus, are incurred. Because balances in these accounts can- while appendixes 3B to 6 report on disbursements not be attributed to any specific supplying country from IBRD and IDA, they do not include disburse- until expenditures have been reported to the Bank, ments under adjustment loans disbursed using sim- these are shown as a separate category. plified procedures. The information in Appendix 7 reflects simplified adjustment loan disbursements to Appendix 3B provides details on foreign disburse- each borrower as pro-rata shares of that borrower's ments by countries eligible to borrow from the eligible imports from supplying countries using im- World Bank and nonborrowing countries' for IBRD port data drawn from United Nations trade statistics. and IDA separately. In all these tables and appendixes, IBRD figures Appendix 3C shows disbursements made in fiscal exclude disbursements for loans to the IFC and "B" 2002 by IBRD and IDA for local procurement by loans. IDA figures include Special Facility for Sub- current borrowing countries and disbursements Saharan Africa and Interim Trust Fund credits. Dis- made for goods, works, and services procured from bursements for Project Preparation Facility advances them by other Bank borrowers. (foreign procure- are excluded for both IBRD and IDA. ment) for projects funded by the Bank. Appendix 4 shows the amounts disbursed from IBRD and IDA separately for foreign procurement of goods, works, and services from selected member countries in fiscal 2002 and cumulatively through fiscal 2002. 1. Appendix 2 lists countries eligible for borrowing from the World Bank. 116 The World Bank Annual Report 2002 Appendix 3A: IBRD and IDA Disbursements for Foreign and Local Expenditures (amounts in millions of U.S. dollars) IBRD and IDA Net advance Foreigna Local disbursementsb Total Amount % Amount % Amount % Amount Cumulative to June30, 1997 159,134 56 121,113 42 5,177 2 285,424 1998 14,292 57 10,112 41 449 2 24,853 1999 14,781 61 8,859 36 736 3 24,376 2000 8,742 47 9,013 49 753 4 18,508 2001 8,104 47 8,504 49 698 4 17,307 2002 9,432 53 7,958 44 474 3 17,864 Cumulative to June 30, 2002 214,485 55 165,559 43 8,287 2 388,332 Note: Foreign expenditures are expenditures in the currency of any country other than that of the borrower or guarantor, for goods or scrvices supplied from the territory of any country other than the territory of the borrower or guarantor. Local expenditures are expenditures in the currency of the borrower or guarantor or for goods or services supplied from the territory of the borrower or the guarantor. Amounts may not add to totals because of rounding. a. Amounts exclude debt-reduction disbursements of $3,906 million through fiscal 1997, $82 million in fiscal 1998, and $49 million in fiscal 2002. Amounts include disbursements under simplified procedures for structural and sectoral adjustment loans of $3,889 million through fiscal 1997, $9,540 million in fiscal 1998, $10,423 million in fiscal 1999, $5,329 million in fiscal 2000, $5,366 million in fiscal 2001, and $6,584 million in fiscal 2002. Amounts include HIPC Initiative grant disbursements of $74 million in fiscal 1998, $149 million in fiscal 1999, $31 million in fiscal 2001, $45 million in fiscal 2002, and $11 million in IDA postconflict grants in fiscal 2002. b. Net advance disbursements are advances made to special accounts net of amounts recovered (amounts for which the Bank has applied evidence of expenditures to recovery of the outstanding advance). IBRD and IDA Disbursements for Foreign and Local Expenditures 117 Appendix 3B: IBRD and IDA Disbursements for Foreign Expenditures, by Source of Supply (amounts in millions of U.S. dollars) IBRD IDA Countries not Countries Countries not Countries eligible to eligible to eligible to eligible to borrow borrow borrow borrow Total Total Period Amount % Amount % Amount Amount % Amount % Amount Cumulative to June30, 1997 96,507 86 16,106 14 112,613 33,279 78 9,356 22 42,635 1998 2,733 85 469 15 3,202 1,103 75 374 25 1,477 1999 2,228 89 275 11 2,503 1,164 68 542 32 1,706 2000 1,842 84 343 16 2,186 851 69 376 31 1,228 2001 1,434 87 213 13 1,647 694 66 364 34 1,058 2002 1,457 86 239 14 1,696 718 66 377 34 1,095 Cumulative to June 30, 2002 106,201 86 17,645 14 123,847 37,809 77 11,389 23 49,199 Note: Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements under simplified procedures for structural and sectoral adjustment loans and disbursements under HIPC Initiative and IDA postconflict grants. Countries eligible to borrow from IBRD and IDA are listed in appendix 2. For consistency of comparison, the Republic of Korea and the Federal Republic of Yugoslavia are included as countries eligible to borrow for all periods covered by this table. Korea, a former graduate, again became eligible to borrow in December 1997. The Federal Republic of Yugoslavia's eligibility was reestablished in May 2001. Amounts may not add to totals because of rounding. 118 The World Bank Annual Report 2002 Appendix 3C: IBRD and IDA Payments to Supplying Eligible Borrowing Countries for Local and Foreign Procurement in Fiscal 2002a (amounts in millions of U.S. dollars) Percentage Borrowing Local Foreign Total of total countries procurement procurement amount disbursementsh Albania 20 - 20 0.11 Algeria 65 + 65 0.36 Angola 14 - 14 0.08 Argentina 152 4 156 0.88 Armenia 25 + 25 0.14 Azerbaijan 13 1 _ __ 14 0.08 Bangladesh 243 1 244 1.37 Barbados - + + * Belarus 2 + 2 * Belize 5 - 5 * Benin 29 + 29 0.16 Bhutan 5 + 6 * Bolivia 48 + 48 0.27 Bosnia and Herzegovina 10 1 11 0.06 Botswana - + + * Brazil 436 10 445 2.50 Bulgaria 8 5 13 0.08 Burkina Faso 62 + 62 0.35 Burundi 9 - 9 0.05 Cambodia 20 + 20 0.11 Cameroon 10 + 11 0.06 Cape Verde 6 - 6 Central African Republic + + + Chad 17 - 17 0.10 Chile 32 2 33 0.19 China 1,551 200c 1,751 9.84 Colombia 176 3 180 1.01 oComoros 7 -7 Congo, Democratic Republic of - + + * Congo, Republic of 2 + I * Costa Rica 8 2 10 0.05 C6te d'lvoire 29 3 32 0.18 Croatia 21 5 26 0.15 C_u __ _ 2 2 2 Czech Republic - 5 5 * Djibouti 8 2 10 0.06 Dominica I + I * Dominican Republic 38 1 39 0.22 Ecuador 27 1 28 0.16 Egypt, Arab Republic of 35 9 45 0.25 El Salvador 38 2 40 0.23 Equatorial Guinea - - -* Eritrea 31 - 31 0.18 Estonia 4 1 5 * Ethiopia 54 + 54 0.30 Fiji - + + * Gabon 2 + 2 * Gambia, The 8 + 9 Georgia 26 + 26 0.15 Ghana 58 2 60 0.33 Grenada + - + * Guatemala 34 1 35 0.20 Guinea 19 + 19 0.11 Guinea-Bissau 3 - 3 * Guyana 6 - 6 * (continued next page) IBRD and IDA Payments to Supplying Eligible Borrowing Countries for Local and Foreign Procurement in Fiscal 2002 119 Appendix 3C (continued) Percentage Borrowing Local Foreign Total of total countries procurement procurement amount disbursementsb Haiti I - I * Honduras 21 + 21 0.12 Hungary 1 2 3 * India 1,314 36 1,349 7.58 Indonesia 365 6 371 2.08 Iran, Islamic Republic of 26 16 42 0.24 Iraq - - - * s_'j - __ _ Jamaica _ _76) +- 760743 ! Jordan 43 9 52 0.29 Kazakhstan 16 1 17 0.10 l Kenya 44 5 49 0.27 Korea, Republic of 24 99 123 0.69 Kyrgyz Republic 13 + 13 0.07 _Lao People's Democratic Republic of 13 _ 13 0.07 Latvia 14 + 14 0.08 Lebanon 40 1 40 0.23 Lesotho 10 - 10 0.06 Liberia - -* Lithuania 17 + 17 0.09 Macedonia, former Yugoslav Republic of 13 7 19 0.11 Madagascar 42 + 42 0.24 Malawi -37 - 37 0.21 l Malaysia 15 11 26 0.15 Maldives I 1 * Mali 26 + 26 0.15 Mauritania 24 + 24 0.13 Mauritius 1 5 6 l M Mexico 355 5 ___360 __ _ _ 2.02 Moldova 9 + 9 Mongolia 18 + 18 0.10 Morocco 50 1 51 0.29 Mozambique 45 + 45 0.25 Myanmar - + + * Nepal 23 + 23 0.13 Nicaragua 45 + 45 0.25 l Niger 19 l Nigeria 14 + 14 0.08 Pakistan 240 1 241 1.35 Panama 22 11 33 0.19 l Papua New Guinea 9 - 9 * Paraguay 13 + 14 0.08 Peru ___ ___ 39 1 40 0.22 _l Philippines 94 + 94 0.53 Poland 148 10 158 0.89 Romania 70 3 72 0.41 Russian Federation 143 25 168 0.94 Rwanda 9 - 9 0.05 Samoa I - I * Sao Tome and Principe _ I - I * ' enegal 41 8 49 0.28 Seychelles - - -* Sierra Leone 13 + 13 0.07 Slovak Republic - 1 1 * Slovenia 2 8 10 0.06 Solomon Islands + - + * LSomalia _ _ _ _ _ + 120 The World Bank Annual Report 2002 Percentage Borrowing Local Foreign Total of total countries procurement procurement amount disbursementsb South Africa 4 44 48 0 27 SriLanka 42 + 42 0 24 St Kitts and Nevis + + * St Lucia 1 + 1 * St Vincent and the Grenadines + + * Sudan * Swaziland + + _ * 1Syrian Arab Republic - * Tajikistan 4 + 4 * Tanzania 49 + I 49 0 28 Thailand 111 8 1 119 067 Togo 12 1 12 0.07 Tonga -+ + * Trinidad and Tobago 8 1 9 _ 0 05 Tunisia 78 1 79 0 44 Turkey 222 8 230 1 29 Turkmenistan + - + * Uganda 26 3 28 0 16 Ukraine 10 3 13 0.07 Uruguay 32 + 32 0 18 Uzbekistan 4 + 4 * Vanuatu _ - = Venezuela, Repuibhca Bolivariana de 51 3 ! 54 0 30 Vietnam 166 + 166 0.93 Yemen, Republic of 52 1 53 0.30 Yugoslavia, Federal Republic of - 1 I * Zambia 50 2 52 0.29 Zlimbabwe- 6 _ 6 -*- Total 7,958 619 8,576 48 00 - zero + less than $0 5 million * less than 0 05 percent Note Amounts may not add to totals because of rounding a Countries eligible to borrow from IBRD and IDA are listed in appendix 2 In addition, payments under disbursing loans to Barbados and Cyprus, which are no longer eligible borrowing countries, are included Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements under simplified procedures for structural and sectorial adjustment loans and disbursements under HIPC Initiative and IDA postconflict grants b Refers to the share of all IBRD and IDA payments for fiscal 2002, which totaled $17,864 million c Includes supplies from Hong Kong, China IBRD and IDA Payments to Supplying Eligible Borrowing Countries for Local andi Foreign Procurement in Fiscal 2002 121 Appendix 4: IBRD and IDA Payments to Supplying Countries for Foreign Procurement (amounts in millions of U.S. dollars) IBRD cumulative IDA cumulative to June 30, 2002 IBRD fiscal 2002 to June 30, 2002 IDA fiscal 2002 Supplying country Amount % Amount % Amount % Amount % Algeria 45 * - * 14 * + * Argentina 928 0.75 3 0.16 141 0.29 1 0.11 Armenia + * - * 2 * + * Australia 1,303 1.05 36 2.13 770 1.57 15 1.37 Austria 1,997 1.61 49 2.88 286 0.58 3 0.32 Azerbaijan 3 - 4 25 0.05 1 0.07 Bahrain 68 0.06 + * 132 0.27 - * Bangladesh 18 * + * 51 0.10 + * Barbados 16 * + * 5 * * Belarus 55 S + * 2 * - Belgium 1,631 1.32 11 0.65 1,110 2.26 12 1.05 Benin 7 * - * 27 0.05 + * Bhutan I * 1 2 - * Bolivia 31 + * 4 4 + * Bosnia and Herzegovina + - * 2 * 1 0.07 Botswana 6 * - * 8 * + * Brazil 1,984 1.60 6 0.38 361 0.73 3 0.28 Bulgaria 64 0.05 5 0.27 56 0.11 1 0.07 Burkina Faso I * - * 13 * + * Cambodia I - * + * + * Cameroon 5 * - * 28 0.06 + * Canada 2,926 2.36 48 2.82 902 1.83 16 1.43 Central African Republic 4 * + * 6 * * Chile 400 0.32 1 0.05 42 0.09 1 0.06 China 1,745 1.41 71 4.16 1,777 3.61 129 11.81 Colombia 257 0.21 1 0.06 31 0.06 2 0.22 Congo, Democratic Republic of 6 - * 41 0.08 + * Congo, Republic of 8 - * 8 + * Costa Rica 69 0.06 1 * 47 0.09 1 0.10 C6te d'lvoire 52 * 2 0.09 262 0.53 2 0.15 Croatia 24 3 0.18 18 2 0.15 Cyprus 114 0.09 2 0.14 38 0.08 + * Czech Republic 117 0.09 4 0.25 15 * + * Denmark 853 0.69 19 1.13 398 0.81 16 1.42 Djibouti + - * 30 0.06 2 0.22 Dominica 5 * + * 2 * + * Dominican Republic 6 * - * 11 * 1 0.07 Ecuador 199 0.16 + * 14 * 1 0.06 Egypt, Arab Republic of 66 0.05 1 0.09 66 0.13 8 0.72 El Salvador 21 1 0.06 11 * 1 0.05 Estonia 7 * 1 0.06 5 * + * Ethiopia 2 - * 7 * + * Fiji 1 * - * 4 * * Finland 637 0.51 13 0.76 163 0.33 4 0.40 France 8,831 7.13 117 6.87 5,174 10.52 95 8.64 Gabon 18 - * 11 * + Gambia, The 5 * + * I * + * Georgia 14 * + * 9 * + * Germany 14,189 11.46 324 19.08 3,906 7.94 62 5.66 Ghana 11 * + * 22 0.05 2 0.17 Greece 224 0.18 1 * 98 0.20 2 0.15 Guatemala 21 * 1 29 0.06 + * Guinea 5 * - * 42 0.08 + * Honduras 15 * - * 8 * + * 122 The World Bank Annual Report 2002 IBRD cumulative IDA cumulative to June 30, 2002 IBRD fiscal 2002 to June 30, 2002 IDA fiscal 2002 Supplying country Amount % Amount % Amount % Amount % Hungary 353 0.29 2 0.11 29 0.06 + 0.05 Iceland 12 * -* 4 * 2 0.14 India 476 0.38 2 0.13 1,098 2.23 33 3.05 Indonesia 184 0.15 4 0.23 140 0.29 2 0.17 Iran, Islamic Republic of 164 0.13 13 0.76 209 0.42 3 0.25 Ireland 214 0.17 4 0.22 150 0.31 4 0.35 Israel 287 0.23 5 0.31 141 0.29 2 0.23 Italy 7,677 6.20 107 6.33 2,312 4.70 56 5.08 Jamaica 17 * + 2 + * Japan 15,552 12.56 107 6.28 4,530 9.21 63 5.72 Jordan 50 * * 173 0.35 9 0.78 Kazakhstan 84 0.07 - * 36 0.07 1 0.05 Kenya 28 320 0.65 5 0.44 Korea, Republic of 1,884 1.52 32 1.91 1,146 2.33 67 6.07 Kuwait 270 0.22 - * 263 0.53 2 0.16 Kyrgyz Republic 11 * + * + * - Latvia 16 * + * I * + * Lebanon 101 0.08 + * 27 0.05 + * Lithuania 25 + * 2 - Luxembourg 76 0.06 1 0.06 45 0.09 8 0.70 Macedonia, former Yugoslav Republic of 7 * 4 0.25 13 2 0.22 Madagascar 8 * * 3 * + Malaysia 358 0.29 9 0.51 269 0.55 3 0.24 Mali + * * 14 * + * Mauritania 8 * _ 17 * + * Mauritius 5 * 5 0.27 26 0.05 1 0.08 Mexico 589 0.48 3 0.21 117 0.24 1 0.10 Moldova 3 * - I * + * Mongolia + * I* + * Morocco 179 0.14 - * 66 0.13 1 0.13 Mozambique 4 7 7 * 7 Myanmar 24 * - 16 + * Nepal 3 7 + Netherlands 2,319 1.87 27 1.56 1,409 2.86 23 2.12 New Zealand 197 0.16 1 0.05 137 0.28 5 0.44 Nicaragua 10 * + * 7 + * Niger 9 I 1 * 18 * - Nigeria 391 0.32 - * 409 0.83 + * Norway 569 0.46 16 0.92 185 0.38 5 0.48 Oman 38 * - 15 * + * Pakistan 130 0.11 + * 187 0.38 1 0.10 Panama 416 0.34 10 0.60 62 0.13 1 0.11 Paraguay 121 0.10 + * 16 * + Peru 130 0.10 1 * 22 0.05 + * Philippines 76 0.06 + * 86 0.17 + * Poland 335 0.27 9 0.53 56 0.11 1 0.09 Portugal 79 0.06 + * 414 0.84 6 0.57 Romania 336 0.27 3 0.15 76 0.16 + * Russian Federation 780 0.63 18 1.08 117 0.24 7 0.64 Saudi Arabia 594 0.48 2 0.14 308 0.63 41 3.77 Senegal 30 * 1 0.07 134 0.27 7 0.64 Sierra Leone 5 - * 4 * + * Singapore 1,238 1.00 9 0.51 771 1.57 14 1.26 Slovak Republic 20 * 2 * Slovenia 63 0.05 6 0.35 15 * 2 0.20 (continued next page) IBRD and IDA Payments to Supplying Countries for Foreign Procurement 123 Appendix 4 (continued) IBRD cumulative IDA cumulative to June 30, 2002 IBRD fiscal 2002 to June 30, 2002 IDA fiscal 2002 Supplying country Amount % Amount % Amount % Amount % Somalia I - * 2 * + * South Africa 471 0.38 1 * 1,190 2.42 43 3.92 Spain 1,562 1.26 26 1.51 400 0.81 32 2.92 SriLanka 27 * - * 19 * + St. Lucia 9 * + * 4 * * Swaziland 38 * + * 33 0.07 + * Sweden 1,797 1.45 21 1.22 510 1.04 6 0.59 Switzerland 4,766 3.85 62 3.66 1,266 2.57 20 1.80 SyrianArab Republic 38 * - * 18 * + * Tajikistan + * - * + * + * Tanzania 7 * - * 37 0.08 + * Thailand 159 0.13 4 0.25 406 0.82 4 0.35 Togo 31 * 31 0.06 1 0.05 Tonga + I I + Trinidad and Tobago 23 * + * 25 0.05 1 0.09 Tunisia 92 0.07 + * 45 0.09 1 0.05 Turkey 606 0.49 4 0.24 146 0.30 4 0.36 Uganda 3 * - * 14 * 3 0.23 Ukraine 175 0.14 3 0.17 56 0.11 - * United Arab Emirates 573 0.46 2 0.09 388 0.79 7 0.62 United Kingdom 9,193 7.42 124 7.31 6,192 12.58 85 7.76 United States 23,394 18.89 150 8.85 4,748 9.65 65 5.91 Uruguay 114 0.09 + * 6 * + * Uzbekistan 5 * - * 14 * + * Venezuela, Republica Bolivariana de 597 0.48 1 0.06 214 0.44 2 0.15 Vietnam 46 * - * 55 0.11 + * Yemen, Republic of + * - * 2 * 1 0.07 Yugoslavia, Federal Republic of 857 0.69 - * 176 0.36 1 0.08 Zambia 52 * - * 119 0.24 2 0.16 Zimbabwe 34 * - * 136 0.28 6 0.55 Others 3,611 2.92 176 10.40 1,075 2.19 49 4.49 Total 123,847 100.00 1,696 100.00 49,199 100.00 1,095 100.00 - zero. + less than $0.5 million. * less than 0.05 percent. Note: Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements under simplified procedures for structural and sectoral adjustment loans and disbursements under HIPC Initiative and IDA postconflict grants. Amounts may not add to totals because of rounding. 124 The World Bank Annual Report 2002 Appendix 5: IBRD and IDA Payments to Supplying Countries for Foreign Procurement, by Description of Goods, Fiscal 2002 (amounts in millions of U.S. dollars) All Total Equipment Civil works Consultants other goods disbursements Supplying country Amount % Amount % Amount % Amount % Amount % Algeria - * - + - + Argentina 3 0.20 - * 1 0.24 - * 4 0.14 Armenia - * + - + Australia 16 1.15 + * 34 7.17 1 0.36 51 1.83 Austria 44 3.14 6 0.81 2 0.39 1 0.53 52 1.88 Azerbaijan 1 0.05 - * + I * 1 * Bahrain - - * + * * + * Bangladesh - + 0.05 + 0.09 - * I * Barbados + + * + * * + * Belarus - * - * + * * + * Belgium 10 0.74 4 0.53 4 0.80 5 1.99 23 0.81 Benin - * - * + * * + * Bhutan - * 1 0.07 - * I * 1 * Bolivia - * * + 0.05 - * + * Bosnia and Herzegovina - * 1 0.08 + 0.05 - * 1 * Botswana + * - * + * - * + * Brazil 7 0.47 1 0.17 2 0.32 + 0.15 10 0.34 Bulgaria 2 0.14 3 0.48 + * + * 5 0.19 Burkina Faso - * - * + - * + * Cambodia + * _ * * _ * + * Cameroon - - * + 0.08 - + * Canada 24 1.73 6 0.85 33 6.97 + 0.09 64 2.28 Central African Republic - * - * - + + * Chile + * 1 0.09 + 0.10 - 2 0.05 China 56 4.01 136 19.78 1 0.26 7 2.99 200 7.16 Colombia 2 0.13 - * 2 0.32 - 3 0.12 Congo, Democratic Republic of - * + * * + * Congo, Republic of - * - * + * * + * Costa Rica + * 1 0.08 1 0.13 - * 2 0.06 C6te d'lvoire I 0.10 1 0.20 + 0.07 - * 3 0.11 Croatia 5 0.34 + * + - * 5 0.17 Cyprus I - * 2 0.36 + 0.07 2 0.09 Czech Republic 5 0.32 + + * + * 5 0.17 Denmark 14 1.01 13 1.93 6 1.32 1 0.48 35 1.24 Djibouti 2 0.17 - * * - * 2 0.09 Dominica - + * + 4 * Dominican Republic - * - 1 0.17 - * I * Ecuador - - * 1 0.17 - * I * Egypt, Arab Republic of 5 0.33 2 0.29 3 0.57 + * 9 0.33 El Salvador I * - * 1 0.21 - * 2 0.06 Estonia + * - * 1 0.21 - * 1 * Ethiopia * - * + * * + * Fiji - Finland 13 0.92 2 0.27 2 0.48 + 0.08 17 0.61 France 133 9.60 33 4.74 40 8.33 5 2.23 21] 7.56 Gabon + * * - * - * 4- * Gambia, The - * - * + 0.05 - * + * Georgia + * * + 0.05 - * + * Germany 251 18.10 76 11.14 42 8.71 16 6.78 386 13.82 Ghana - * + * 2 0.40 - * 2 0.07 Greece 1 0.08 1 0.12 + + 0.14 2 0.08 Guatemala + * - * 1 0.15 - 1 Guinea + * _ * _ * _ * + * Honduras - * + * - * + Hungary 2 0.12 - * + 0.07 + 0.12 2 0.08 (continued next page) IBRD and IDA Payments to Supplying Countries for Foreign Procurement, by Description of Goods, Fiscal 2002 125 Appendix 5 (continued) All Total Equipment Civil works Consultants other goods disbursements Supplying country Amount % Amount % Amount % Amount % Amount % Iceland - - 2 0.31 - * 2 0.05 India 24 1.74 5 0.77 6 1.24 + 0.06 36 1.27 Indonesia 2 0.12 4 0.53 + + 0.12 6 0.21 Iran, Islamic Republic of 1 0.08 14 2.10 + - * 16 0.56 Ireland 4 0.31 + * 3 0.67 + * 8 0.27 Israel 5 0.33 + 0.06 2 0.43 1 0.30 8 0.28 Italy 45 3.22 110 16.05 5 1.05 3 1.37 163 5.84 Jamaica + * - * + * - * + * Japan 151 10.85 14 2.10 3 0.53 2 0.64 169 6.06 Jordan 8 0.61 - * + * - * 9 0.31 Kazakhstan + * - * + 0.09 - 1 * Kenya 3 0.22 1 0.13 1 0.13 + 0.07 5 0.17 Korea, Republic of 36 2.61 58 8.42 4 0.85 1 0.40 99 3.55 Kuwait + * 2 0.25 - * - * 2 0.06 Kyrgyz Republic + * - * - ' - * + * Latvia + * - * + + * Lebanon + * - * 1 0.12 - * I * Lithuania + * - * - + + Luxembourg 8 0.57 - * 1 0.14 - * 9 0.31 Macedonia, former Yugoslav Republic of - * 7 0.97 - * - * 7 0.24 Madagascar + * - * + 0.07 - + * Malaysia 1 0.08 10 1.41 + 0.05 + 0.11 11 0.40 Mali - + * + * - * + * Mauritania - * + * - * + * Mauritius I * - * + 0.09 5 1.90 5 0.19 Mexico 3 0.20 1 0.09 1 0.27 - * 5 0.16 Moldova - - + * - * + * Mongolia * - * + * - + Morocco 1 0.10 - * + * - * 1 0.05 Mozambique - - - - - Myanmar - * + * - * + * Nepal - - + * - * + * Netherlands 21 1.49 10 1.46 17 3.61 2 0.71 50 1.78 New Zealand 1 0.05 - * 5 1.01 - * 6 0.20 Nicaragua - - + + - + Niger _ - _ 1 0.13 - I I * Nigeria - + * + 0.05 - * + * Norway 14 1.02 4 0.56 3 0.61 - * 21 0.75 Oman + * _ * _ _ * + * Pakistan + * 1 0.15 + * + I I * Panama 1 0.08 10 1.42 1 0.11 - * 11 0.41 Paraguay - + * + * - ' + * Peru + * - * 1 0.16 I * I * Philippines - - + 0.10 - * + Poland 9 0.62 + 0.06 + 0.05 1 0.26 10 0.35 Portugal 2 0.11 2 0.36 2 0.47 - 6 0.22 Romania + * 1 0.14 + * 1 0.53 3 0.09 Russian Federation 14 0.98 11 1.62 + 0.09 + * 25 0.90 Saudi Arabia 40 2.89 4 0.51 - * + * 44 1.56 Senegal 1 0.09 6 0.93 1 0.12 8 0.29 Sierra Leone + * - * + - . + * Singapore 20 1.41 - * 3 0.59 - * 22 0.80 Slovak Republic - * I * 1 0.11 + 0.07 1 * Slovenia 4 0.28 4 0.61 + * + * 8 0.29 Somalia - - + * - * + * South Africa 14 1.04 24 3.43 6 1.16 + * 44 1.56 Spain 12 0.86 37 5.33 8 1.65 1 0.45 58 2.06 126 The World Bank Annual Report 2002 All Total Equipment Civil works Consultants other goods disbursements Supplying country Amount % Amount % Amount % Amount % Amount % Sri Lanka * - * + * - * + * St. Lucia - * _ * + _ * + * Swaziland - ' - * + 0.08 - * + * Sweden 20 1.43 1 0.18 6 1.20 + 0.16 27 0.97 Switzerland 60 4.33 3 0.39 6 1.15 13 5.67 82 2.93 Syrian Arab Republic + * - + * * + * Tajikistan * - + * + * Tanzania + * - + 0.05 - * + * Thailand 3 0.23 4 0.62 1 0.13 - * 8 0.29 Togo - * 1 0.08 - I - * I Tonga + * + + Trinidad and Tobago 1 0.06 + * + 0.08 - * 1 * Tunisia + * * 1 0.11 - 1 * Turkey 2 0.18 5 0.68 1 0.17 + 0.06 8 0.29 Uganda + * 2 0.27 + * + 0.11 3 0.09 Ukraine + * _ * _ * 3 1.11 3 0.11 United Arab Emirates 7 0.47 1 0.13 - * 1 0.34 8 0.30 United Kingdom 82 5.9 23 3.39 70 14.52 35 14.77 209 7.49 United States 116 8.36 7 0.97 83 17.35 9 3.76 215 7.70 Uruguay + * _ * + * * + * Uzbekistan + * - * _ * _ * + * Venezuela, Republica Bolivariana de - 1 0.11 2 0.40 - * 3 0.10 Vietnam + * * + * _ * + * Yemen, Republic of - * 1 0.11 + * * 1 * Yugoslavia, Federal Republic of 1 0.06 - * I * 1 * Zambia - * 2 0.26 - * - * 2 0.06 Zimbabwe 2 0.16 3 0.40 1 0.22 - * 6 0.22 Others 50 3.63 8 1.14 47 9.71 121 50.97 226 8.08 Total 1,389 100.00 686 100.00 479 100.00 237 100.00 2,791 100.00 - zero. + less than $0.5 million. * less than 0.05 percent. Note: Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements under simplified procedures for structural and sectoral adjustment loans and disbursements under HIPC Initiative and IDA postconflict grants. Amounts may not add to totals because of rounding. IBRD and IDA Payments to Supplying Countries for Foreign Procurement, by Description of Goods, Fiscal 2002 127 Appendix 6: IBRD and IDA Disbursements for Foreign Expenditures, by Description of Goods (for Investment Lending), Fiscal 2000-02a Fiscal 2000 Fiscal 2001 Fiscal 2002 Countries Countries Countries Countries Countries Countries not eligible eligible not eligible eligible not eligible eligible Item to borrow to borrow Total to borrow to borrow Total to borrow to borrow Total Millions of US. dollars Civil works 456 286 742 420 278 698 365 320 686 Consultants 541 91 632 484 69 553 429 50 479 Goods 1,504 336 1,840 1,003 207 1,210 1,163 226 1,389 All other 133 6 139 155 24 179 167 19 187 Total 2,634 719 3,353 2,062 578 2,640 2,124 616 2,741 Percentb Civil works 61 39 22 60 40 26 53 47 25 Consultants 86 14 19 88 12 21 90 10 17 Goods 82 18 55 83 17 46 84 16 51 All other 96 4 4 87 13 7 90 10 7 Total 79 21 100 78 22 100 78 22 100 Note: Countries eligible to borrow from IBRD and IDA are listed in appendix 2. For consistency of comparison, the Republic of Korea and the Federal Republic of Yugoslavia are included as countries eligible to borrow for all periods covered by this table. The Republic of Korea, a former graduate, again became eligible to borrow in December 1997. The Federal Republic of Yugoslavia's eligibility was re-established in May 2001. Amounts may not add to totals because of rounding. a. Amounts exclude disbursements for debt reduction and net advance disbursements. Amounts also exclude disbursements for structural and sectoral adjustment loans, hybrids (loans that support policy and institutional reforms in a specific sector by financing both a policy component disbursed against imports and an investment component), and disbursements under HIPC Initiative and IDA postconflict grants. b. Percentages are based on the dollar amounts shown under the total disbursements section. These percentages show both the breakdown between countries eligible to borrow from the IBRD or IDA, or both, and countries not eligible to borroxv, for individual goods categories and the share of each goods category compared with total disbursements. 128 The World Bank Annual Report 2002 Appendix 7: Estimates of IBRD and IDA Payments to Supplying Countries for Foreign Procurement under Adjustment Lending, Fiscal 2002a (amounts in millions of U.S. dollars) Supplying countries Amount Percent Supplying countries Amount Plercent Afghanistan 6.9 0.1 Germany 493.8 7.5 Albania 0.5 0.0 Ghana 19.8 0.3 Algeria 20.0 0.3 Gibraltar + 0.0 Angola 0.6 0.0 Greece 26.4 0.4 Argentina 204.1 3.1 Guatemala 6.8 0.1 Armenia 0.7 0.0 Guinea + 0.0 Aruba + 0.0 Guinea-Bissau + 0.0 Australia 46.2 0.7 Honduras + 0.0 Austria 39.8 0.6 Hungary 26.3 0.4 Azerbaijan 0.5 0.0 India 59.3 0.9 Bahamas, The 6.8 0.1 Indonesia 39.5 0.6 Bahrain 6.9 0.1 Iran, Islamic Bangladesh 13.2 0.2 Republic of 13.2 0.2 Belarus 33.0 0.5 Iraq + 0.0 Belgium 144.9 2.2 Ireland 13.2 0.2 Benin 7.0 0.1 Israel 19.7 0.3 Bermuda + 0.0 Italy 362.1 5.5 Bolivia 13.2 0.2 Jamaica + 0.0 Bosnia and Herzegovina 6.9 0.1 Japan 322.6 4.9 Brazil 263.4 4.0 Jordan + 0.0 British Virgin Islands 6.8 0.1 Kazakhstan 13.2 0.2 Bulgaria 6.9 0.1 Kenya 65.8 1.0 Burkina Faso 6.6 0.1 Korea, Republic of 118.5 1.8 Burundi + 0.0 Kuwait 6.7 0.1 Cambodia 0.5 0.0 Kyrgyz Republic + 0.0 Cameroon + 0.0 Latvia 6.6 0.1 Canada 65.9 1.0 Lebanon + 0.0 Chile 92.5 1.4 Liberia + 0.0 China 210.7 3.2 Lithuania + 0.0 Colombia 13.2 0.2 Macedonia, former Congo, Democratic Yugoslav Republic of + 0.0 Republic of 6.7 0.1 Madagascar + 0.0 Costa Rica 6.8 0.1 Malaysia 26.3 0.4 C6te d'lvoire + 0.0 Mali + 0.0 Croatia + 0.0 Mauritania + 0.0 Cyprus 13.2 0.2 Mauritius + 0.0 Czech Republic 20.0 0.3 Mexico 19.7 0.3 Denmark 32.9 0.5 Moldova + 0.0 Djibouti 12.2 0.2 Morocco 13.2 0.2 Dominican Republic 6.8 0.1 Mozambique 0.5 0.0 Ecuador 13.2 0.2 Netherlands 138.3 2.1 Egypt, Arab Republic of 26.3 0.4 New Zealand 6.7 0.1 El Salvador 6.7 0.1 Nicaragua + 0.0 Estonia 0.5 0.0 Niger + 0.0 Ethiopia + 0.0 Nigeria 13.2 0.2 Fiji 0.5 0.0 Norway 13.2 0.2 Finland 46.1 0.7 Oman 0.5 0.1 France 395.0 6.0 Pakistan 6.5 0.1 Gabon + 0.0 Panama 6.8 0.1 Gambia, The + 0.0 Paraguay 16.8 0.3 Georgia 6.7 0.1 Peru 19.8 0.3 (continued next page) Estimates of IBRD and IDA Payments to Supplying Countries for Foreign Procurement under Adjustment Lending, Fiscal 2002 129 Appendix 7 (continued) Supplying countries Amount Percent Supplying countries Amount Percent Philippines 6.6 0.1 Switzerland 85.6 1.3 Poland 13.2 0.2 Syrian Arab Republic 65.9 1.0 Portugal 13.2 0.2 Taiwan 65.8 1.0 Romania 6.8 0.1 Tajikistan + 0.0 Russian Federation 151.4 2.3 Tanzania 6.5 0.1 Rwanda 6.8 0.1 Thailand 13.3 0.2 Saudi Arabia 32.9 0.5 Togo 13.2 0.2 Senegal 6.7 0.1 Trinidad and Tobago 6.6 0.1 Seychelles 0.6 0.0 Tunisia 6.7 0.1 Sierra Leone 0.7 0.0 Turkey 32.9 0.5 Singapore 65.8 1.0 Turkmenistan + 0.0 Slovak Republic 6.5 0.1 Uganda 0.5 0.0 Slovenia 6.6 0.1 Ukraine 19.9 0.3 Solomon Islands 0.5 0.0 United Arab Emirates 40.0 0.6 Somalia 6.7 0.1 United Kingdom 256.9 3.9 South Africa 19.8 0.3 United States 1,665.8 25.3 Spain 92.2 1.4 Uruguay 33.0 0.5 Sri Lanka 6.5 0.1 Uzbekistan 6.5 0.1 St. Lucia 0.8 0.0 Venezuela 26.3 0.4 St. Vincent and Vietnam 6.7 0.1 the Grenadines 0.5 0.0 Yemen, Republic of 6.5 0.1 Sudan 6.6 0.1 Yugoslavia, Federal Suriname 0.5 0.0 Republic of 6.7 0.1 Swaziland 0.6 0.0 Zambia 0.5 0.0 Sweden 66.0 1.0 Total 6,584.0 100.0 + Amount below $0.5 million. Note: Amounts exclude disbursements under investment lending. See appendix 4 for payments to supplying countries for foreign procurement under investment lending, fiscal 2002. Amounts may not add to total because of rounding. a. Based on import data drawn from the latest information available on borrowers' trade statistics compiled by the U.N. trade system COMTRADE. 130 The World Bank Annual Report 2002 Appendix 8: IBRD and IDA Cumulative Lending since Fiscal 1990 by Sector and Theme and by Region, June 30, 2002 (amounts in millions of U.S. dollars) IBRD loans to borrowers, by regiona Europe Latin , Middle East Asia and America East and and Central and the North South Purpose Africa Pacific Asia Caribbean Africa Asia Total Economic Management 212.3 711.4 4,860.0 7,066.9 644.2 322.8 13,817.7 Public Sector Governance 447.9 3,739.3 4,686.1 8,771.0 1,014.3 530.5 19,189.1 Rule of Law 23.9 444.5 691.0 1,016.4 321.0 331.3 2,828.1 Financial and PSD 464.9 20,038.0 17,984.1 15,940.6 4,021.6 6,445.8 64,895.0 Trade and Integration 250.3 2,014.0 2,815.9 2,113.6 732.0 856.5 8,781.6 Social Protection and Risk Management 56.9 2,017.8 3,401.7 5,946.1 652.6 244.6 12,319.6 Social Development, Gender, and Inclusion 74.9 1,316.9 520.9 2,696.6 361.4 300.3 5,271.5 Human Development 230.1 2,875.2 1,914.8 6,538.2 1,228.3 229.4 13,016.1 Urban Development 449.2 6,151.9 2,688.1 5,245.0 1,361.1 2,527.1 18,422.5 Rural Development 351.3 6,015.7 3,241.7 5,831.6 1,743.6 1,454.4 18,638.3 Environmental and Natural Resource Management 499.9 9,763.4 3,487.5 5,076.0 1,608.4 2,293.0 22,728.1 Total Themes 3,061.6 55,088.1 46,291.7 66,242.2 13,688.4 15,535.8 199,907.8 Agriculture, Fishing, and Forestry 276.9 3,560.0 2,228.4 3,840.6 1,813.6 580.5 12,300.0 Law and Justice and Public Administration 464.8 4,920.0 10,196.4 18,615.5 1,680.6 1,156.1 37,033.4 Information and Communication 221.6 1,629.0 715.7 418.4 251.6 72.2 3,308.5 Education 143.8 3,344.0 1,261.9 6,049.6 957.6 98.1 11,855.0 Finance 104.1 7,646.4 5,757.5 10,188.9 1,979.8 1,358.3 27,035.1 Health and Other Social Services 160.6 1,970.4 3,309.7 7,090.7 932.8 230.4 13,694.5 Industry and Trade 356.4 5,342.4 8,625.0 2,778.7 2,416.0 1,255.4 20,773.8 Energy and Mining 597.2 11,349.8 8,341.3 3,560.8 1,094.4 6,583.3 31,526.8 Transportation 185.3 10,544.0 4,337.9 9,120.6 1,182.7 3,416.7 28,787.4 Water, Sanitation, and Flood Protection 550.8 4,782.0 1,517.9 4,578.4 1,379.4 784.8 13,593.3 Total Sectors 3,061.6 55,088.1 46,291.7 66,242.2 13,688.4 15,535.8 199,907.8 Note: Figures are cumulative since fiscal 1990, the first year for which reclassified sector and theme data are available (see table 2.2, page 30 in 7he World Bank Annual Report 2002: Volume 1, Year in Review). Amounts may not add to totals because of rounding. a. No account is taken of cancellations subsequent to original commitment. IBRD loans to IFC are excluded. (continued next page) IBRD and IDA Cumulative Lending since Fiscal 1990 by Sector and Theme and by Region, June 30, 2002 131 Appendix 8 (continued) IDA loans to borrowers, by region' Europe Latin Middle East Asia and America East and and Central and the North South Purpose Africa Pacific Asia Caribbean Africa Asia Total Economic Management 2,334.0 219.0 384.7 401.3 32.2 781.3 4,152.5 Public Sector Governance .5,329.2 397.2 526.5 494.2 149.8 1,665.5 8,562.4 Rule ofLaw 441.8 115.2 195.8 110.1 6.5 166.3 1,035.7 Financial and PSD 7,575.6 1,535.8 1,763.3 825.1 364.8 2,700.4 14,765.0 Trade and Integration 1,766.8 234.0 122.5 181.4 8.0 468.2 2,781.0 Social Protection and Risk Management 1,419.0 862.9 373.5 372.4 183.8 1,611.3 4,822.9 Social Development, Gender, and Inclusion 2,539.7 794.3 296.8 304.9 384.8 3,693.3 8,013.8 Human Development 4,034.1 1,464.0 241.9 306.0 315.9 4,579.4 10,941.3 Urban Development 3,364.2 1,284.6 395.8 280.1 175.8 1,276.6 6,777.0 Rural Development 3,915.1 3,650.6 458.3 586.5 423.3 4,119.2 13,153.0 Environmental and Natural Resource Management 2,136.6 1,941.4 269.6 240.4 240.0 2,540.6 7,368.6 Total Themes 34,856.1 12,499.1 5,028.7 4,102.4 2,285.0 23,602.0 82,373.4 Agriculture, Fishing, and Forestry 2,443.7 3,000.1 423.5 306.2 334.1 3,773.4 10,281.0 Law and Justice and Public Administration 8,808.5 1,233.8 1,279.7 1,176.5 295.0 3,049.3 15,842.7 Information and Communication 292.4 55.5 18.0 33.8 1.3 212.8 613.7 Education 3,309.9 1,172.9 141.3 430.1 366.1 3,513.5 8,933.8 Finance 2,226.8 840.1 600.1 240.9 217.4 1,016.7 5,142.0 Health and Other Social Services 4,025.2 1,338.9 436.5 543.4 442.7 5,192.5 11,979.2 Industry andTrade 3,577.2 983.2 883.1 277.7 194.1 1,584.6 7,499.9 Energy and Mining 3,058.6 1,282.6 576.3 152.1 66.6 1,539.6 6,675.9 Transportation 4,989.3 1,394.0 378.9 710.5 180.5 2,057.6 9,710.9 Water, Sanitation, and Flood Protection 2,124.6 1,198.1 291.1 231.3 187.2 1,661.9 5,694.2 Total Sectors 34,856.1 12,499.1 5,028.7 4,102.4 2,285.0 23,602.0 82,373.4 Note: Figures are cumulative since fiscal 1990, the first year for which reclassified sector and theme data are available (see table 2.2, page 30 in The World Bank Annual Report 2002: Volume 1, Year in Review). a. No account is taken of cancellations subsequent to original commitment. IBRD loans to IFC are excluded. 132 The World Bank Annual Report 2002 Appendix 9: IBRD and IDA Cumulative Lending by Country, June 30, 2002 (amounts in millions of U.S. dollars) IBRD loans IDA loans Total Country Number Amount Number Amount Number Amount Afghanistan 24 330.1 24 330.1 Africa 11 259.8 2 50.5 13 310.3 Albania 47 656.9 47 656.9 Algeria 70 5,728.4 70 5,728.4 Angola 11 310.8 11 310.8 Argentina 114 18,947.4 114 18,947.4 Armenia 1 12.0 27 683.9 28 695.9 Australia 7 417.7 7 417.7 Austria 9 106.4 9 106.4 Azerbaijan 18 531.1 18 531.1 Bahamas, The 5 42.8 5 42.8 Bangladesh 1 46.1 173 9,913.7 174 9,959.8 Barbados 12 118.4 12 118.4 Belarus 4 192.8 4 192.8 Belgium 4 76.0 4 76.0 Belize 9 86.2 9 86.2 Benin 53 784.5 53 784.5 Bhutan 9 64.3 9 64.3 Bolivia 14 299.3 65 1,752.2 79 2,051.5 Bosnia and Herzegovina 39 811.5 39 811.5 Botswana 19 280.7 6 15.8 25 296.5 Brazil 277 31,945.6 277 31,945.6 Bulgaria 26 1,533.1 26 1,533.1 Burkina Faso 1.9 56 1,185.5 56 1,187.4 Burundi 1 4.8 51 824.5 52 829.3 Cambodia 19 478.3 19 478.3 Cameroon 45 1,347.8 27 1,126.0 72 2,473.8 Cape Verde 17 178.4 17 178.4 Caribbean 4 83.0 2 43.0 6 126.0 Central African Republic 27 448.5 27 448.5 Chad 1 39.5 41 836.5 42 876.0 Chile 63 3,684.9 19.0 63 3,703.9 China 168 26,129.2 71 9,946.7 239 36,075.9 Colombia 165 10,499.1 19.5 165 10,518.6 Comoros 18 119.1 18 119.1 Congo, Democratic Republic of 7 330.0 61 1,651.5 68 1,981.5 Congo, Republic of 10 216.7 14 273.3 24 490.0 Costa Rica 40 938.5 5.5 40 944.0 C6te d'lvoire 62 2,887.9 25 2,042.5 87 4,930.4 Croatia 18 983.6 18 983.6 Cyprus 30 418.8 30 418.8 Czech Republic 3 776.0 3 776.0 Denmark 3 85.0 3 85.0 Djibouti 15 125.6 15 125.6 Dominica 2 4.0 3 16.3 5 20.3 Dominican Republic 31 896.7 3 22.0 34 918.7 Eastern Africa 1 45.0 1 45.0 Ecuador 72 2,723.2 5 36.9 77 2,760.1 Egypt, Arab Republic of 64 4,547.5 41 1,984.0 105 6,531.5 El Salvador 33 963.2 2 25.6 35 988.8 Equatorial Guinea 9 45.0 9 45.0 (continued next page) IBRD and IDA Cumulative Lending by Country, June 30, 2002 133 Appendix 9 (continued) IBRD loans IDA loans Total Country Number Amount Number Amount Number Amount Eritrea II 385.4 11 385.4 Estonia 8 150.7 8 150.7 Ethiopia 12 108.6 70 3,779.5 82 3,888.1 Fiji 12 152.9 12 152.9 Finland 18 316.8 18 316.8 France 1 250.0 1 250.0 Gabon 14 227.0 14 227.0 Gambia, The 28 259.2 28 259.2 Georgia 28 649.8 28 649.8 Ghana 9 207.0 101 4,016.4 110 4,223.4 Greece 17 490.8 17 490.8 Grenada 3 10.0 1 16.5 4 26.5 Guatemala 38 1,325.3 38 1,325.3 Guinea 3 75.2 56 1,293.2 59 1,368.4 Guinea-Bissau 23 285.9 23 285.9 Guyana 12 80.0 17 307.6 29 387.6 Haiti 1 2.6 36 626.5 37 629.1 Honduras 33 717.3 30 1,258.5 63 1,975.8 Hungary 40 4,333.6 40 4,333.6 Iceland 10 47.1 10 47.1 India 187 29,690.4 247 28,844.6 434 58,535.0 Indonesia 248 27,572.3 49 1,468.1 297 29,040.4 Iran, Islamic Republic of 41 2,290.1 41 2,290.1 Iraq 6 156.2 6 156.2 Ireland 8 152.5 8 152.5 Israel 11 284.5 11 284.5 Italy 8 399.6 8 399.6 Jamaica 66 1,531.0 66 1,531.0 Japan 31 862.9 31 862.9 Jordan 53 2,041.7 15 85.3 68 2,127.0 Kazakhstan 22 1,883.6 22 1,883.6 Kenya 45 1,200.7 80 3,237.5 125 4,438.2 Korea, Republic of 114 15,647.0 6 110.8 120 15,757.8 Kyrgyz Republic 25 621.4 25 621.4 Lao People's Democratic Republic 32 662.6 32 662.6 Latvia 18 395.8 18 395.8 Lebanon 20 1,048.6 20 1,048.6 Lesotho 2 155.0 29 331.8 31 486.8 Liberia 19 156.0 14 114.5 33 270.5 Lithuania 17 490.9 17 490.9 Luxembourg 1 12.0 1 12.0 Macedonia, former Yugoslav Republic of 11 276.0 15 378.7 26 654.7 Madagascar 5 32.9 81 2,164.5 86 2,197.4 Malawi 9 124.1 70 1,956.6 79 2,080.7 Malaysia 88 4,150.6 88 4,150.6 Maldives 7 64.9 7 64.9 Mali 1.9 65 1,565.3 65 1,567.2 Malta 1 7.5 1 7.5 Mauritania 3 146.0 49 736.7 52 882.7 Mauritius 33 459.7 4 20.2 37 479.9 Mexico 182 33,821.1 182 33,821.1 Moldova 9 302.8 9 201.5 18 504.3 Mongolia 17 300.4 17 300.4 Morocco 128 8,545.4 3 50.8 131 8,596.2 134 The World Bank Annual Report 2002 IBRD loans IDA loans Total Country Number Amount Number Amount Number Amount Mozambique 42 2,262.1 42 2,262.1 Myanmar 3 33.4 30 804.0 33 837.4 Nepal 72 1,634.5 72 1,634.5 Netherlands 8 244.0 8 244.0 New Zealand 6 126.8 6 126.8 Nicaragua 27 233.6 31 1,090.2 58 1,323.8 Niger 50 1,030.9 50 1,030.9 Nigeria 84 6,248.2 23 1,584.5 107 7,832.7 Norway 6 145.0 6 145.0 OECS countries 3 24.5 12.6 3 37.1 Oman 11 157.1 11 157.1 Pakistan 84 6,614.2 112 6,642.5 196 13,256.7 Panama 45 1,273.2 45 1,273.2 Papua New Guinea 35 786.6 9 113.2 44 899.8 Paraguay 37 816.9 6 45.5 43 862.4 Peru 87 5,298.2 87 5,298.2 Philippines 157 11,138.7 5 294.2 162 11,432.9 Poland 37 5,384.8 37 5,384.8 Portugal 32 1,338.8 32 1,338.8 Romania 66 5,498.4 66 5,498.4 Russian Federation 51 12,560.0 51 12,560.0 Rwanda 54 1,073.0 54 1,073.0 Samoa 10 66.0 10 66.0 Sao Tome and Principe 10 68.9 10 68.9 Senegal 19 164.9 81 2,162.9 100 2,327.8 Seychelles 2 10.7 2 10.7 Sierra Leone 4 18.7 26 537.2 30 555.9 Singapore 14 181.3 14 181.3 Slovak Republic 4 335.8 4 335.8 Slovenia 5 177.7 5 177.7 Solomon Islands 8 49.9 8 49.9 Somalia 39 492.1 39 492.1 South Africa 12 287.8 12 287.8 Spain 12 478.7 12 478.7 Sri Lanka 12 210.7 77 2,428.7 89 2,639.4 St. Kitts and Nevis 3 10.9 1.5 3 12.4 St. Lucia 7 19.2 24.4 7 43.6 St. Vincent and the Grenadines 3 5.4 1 11.6 4 16.9 Sudan 8 166.0 47 1,352.9 55 1,518.9 Swaziland 12 104.8 2 7.8 14 112.6 Syrian Arab Republic 17 613.2 3 47.3 20 660.5 Taiwan, China 14 329.4 4 15.3 18 344.7 Tajikistan 17 302.1 17 302.1 Tanzania 17 318.9 103 3,910.6 120 4,229.5 Thailand 118 7,979.1 6 125.1 124 8,104.2 Togo 1 20.0 41 733.5 42 753.5 Tonga 3 10.9 3 10.9 Trinidad andTobago 21 313.6 21 313.6 Tunisia 115 4,954.1 5 74.6 120 5,028.7 Turkey 135 20,117.9 10 178.5 145 20,296.4 Turkmenistan 3 89.5 3 89.5 Uganda 1 9.1 82 3,401.4 83 3,410.5 Ukraine 22 3,222.8 22 3,222.8 Uruguay 49 1,815.1 49 1,815.1 (continued next page) IBRD and IDA Cumulative Lending by Country, June 30, 2002 135 Appendix 9 (continued) IBRD loans IDA loans Total Country Number Amount Number Amount Number Amount Uzbekistan 12 519.1 20.0 12 539.1 Vanuatu 5 18.9 5 18.9 Venezuela, Republica Bolivariana de 40 3,328.4 40 3,328.4 Vietnam 36 3,862.5 36 3,862.5 WesternAfrica 1 6.1 4 61.9 5 68.0 Yemen, Republic of 125 1,995.9 125 1,995.9 Yugoslavia, Federal Republic of 4 171.8 4 171.8 Yugoslavia, former 89 6,090.7 89 6,090.7 Zambia 27 679.1 51 2,492.3 78 3,171.4 Zimbabwe 24 983.2 12 662.0 36 1,645.2 Total 4,624 371,471.9 3,446 135,073.5 8,070 506,545.3 Note: Joint IBRD/IDA operations are counted only once, as IBRD operations. When more than one loan is made for a single project, the operation is counted only once. Amounts may not add to totals because of rounding. 136 The World Bank Annual Report 2002 Appendix 10: Projects Approved for IBRD and IDA Assistance in Fiscal 2002, by Region, July 1, 2001-June 30, 2002 (amounts in millions of U.S. dollars) IBRD loans IDA loans Total Country Number Amount Number Amount Number Amount Africa Benin 2 41.0 2 41.0 Burkina Faso 4 121.6 4 121.6 Burundi 1 36.0 1 36.0 Cameroon 5.5 5.5 Cape Verde 2 24.0 2 24.0 Central African Republic 1 17.0 1 17.0 Chad 2 64.6 2 64.6 Comoros 1 6.0 1 6.0 Congo, Democratic Republic of 2 500.0 2 500.0 Congo, Republic of 4 89.7 4 89.7 C6te d'lvoire 1 212.0 1 212.0 Eritrea 2 65.0 2 65.0 Ethiopia 3 210,0 3 210.0 Gambia, The 2 31.0 2 31.0 Ghana 2 330.5 2 330.5 Guinea 2 145.0 2 145.0 Guinea-Bissau 1 26.0 1 26.0 Kenya 1 16.5 1 16,5 Madagascar 2 43.8 2 43.8 Mali 2 113.5 2 113.5 Mauritania 3 122.5 3 122.5 Mauritius 2 41.8 2 41.8 Mozambique 4 270.5 4 270.5 Niger 2 108.7 2 108.7 Nigeria 4 427.3 4 427.3 Rwanda 1 25.0 1 25.0 Senegal 2 44.7 2 44.7 Sierra Leone 2 65.0 2 65.0 Tanzania 5 402.0 5 402.0 Uganda 4 180.7 4 180.7 Zambia 6.7 6.7 Total 2 41.8 63 3,751.6 65 3,793.5 East Asia and Pacific Cambodia 3 48.2 3 48.2 China 5 562.9 5 562.9 Indonesia 3 232.2 70.5 3 302.7 Lao People's Democratic Republic 3 44.8 3 44.8 Mongolia 3 28.7 3 28.7 Papua New Guinea 2 57.4 2 57.4 Philippines 2 130.0 2 130.0 Tonga 1 5.9 1 5.9 Vietnam 5 593.0 5 593.0 Total 12 982.4 15 791.2 27 1,773.6 Europe and Central Asia Albania 5 87.5 5 87.5 Armenia 4 39.2 4 39.2 Azerbaijan 2 69.5 2 69.5 Bosnia and Herzegovina 4 102.0 4 102.0 Croatia 1 202.0 1 202.0 Georgia 2.7 2.7 Kyrgyz Republic 1 15.0 1 15.0 Latvia 1 2.0 1 2.0 Lithuania 2 42.5 2 42.5 Macedonia, former Yugoslav 3 35.0 3 35.0 Republic of Moldova 2 45.5 2 45.5 Poland 1 100.0 1 100.0 Romania 2 60.0 2 60.0 Russian Federation 2 351.0 2 351.0 (continued next page) Projects Approved for IBRD and IDA Assistance in Fiscal 2002, by Region, July 1, 2001-June 30, 2002 137 Appendix 10 (continued) IBRD loans IDA loans Total Country Number Amount Number Amount Number Amount Slovak Republic 2 200.8 2 200.8 Tajikistan 3 40.8 3 40.8 Turkey 4 3,550.0 4 3,550.0 Ukraine 3 330.2 3 330.2 Uzbekistan 2 56.1 20.0 2 76.1 Yugoslavia, Federal Republic of 4 171.8 4 171.8 Total 20 4,894.7 28 628.9 48 5,523.6 Latin America and the Caribbean Argentina 3 735.0 3 735.0 Bolivia 1 83.0 1 83.0 Brazil 11 1,566.2 11 1,566.2 Chile 2 99.0 2 99.0 Colombia 5 482.0 5 482.0 Costa Rica 1 17.0 1 17.0 Dominica I 1.0 2.2 1 3.2 Ecuador 3 66.9 3 66.9 El Salvador 1 142.6 1 142.6 Grenada I 1.1 2.7 1 3.8 Guatemala 3 184.8 3 184.8 Honduras 2 40.4 2 40.4 Jamaica 3 130.0 3 130.0 Mexico 4 660.0 4 660.0 Nicaragua 1 32.6 1 32.6 Panama 1 10.5 1 10.5 Paraguay 1 9.0 1 9.0 St. Kitts and Nevis 2 9.4 2 9.4 St. Lucia 3 9.2 11.7 3 20.9 St. Vincent and the Grenadines 2 4.0 5.2 2 9.1 Uruguay 2 60.5 2 60.5 Total 49 4,188.1 4 177.8 53 4,365.8 Middle East and North Africa Algeria 3 30.7 3 30.7 Djibouti 2 25.0 2 25.0 Egypt, Arab Republic of 1 50.0 1 50.0 Jordan 1 5.0 1 5.0 Lebanon 2 108.5 2 108.5 Morocco 1 5.0 1 5.0 Tunisia 1 252.5 1 252.5 Yemen, Republic of 3 77.7 3 77.7 Total 9 451.8 5 102.7 14 554.5 South Asia Afghanistan 4 100.0 4 100.0 Bangladesh 4 321.4 4 321.4 India 4 893.0 6 1,296.5 10 2,189.5 Nepal 1 22.6 1 22.6 Pakistan 2 800.0 2 800.0 Sri Lanka 1 75.0 1 75.0 Total 4 893.0 18 2,615.4 22 3,508.4 Bank-wide Total 96 11,451.8 133 8,067.6 229 19,519.4 Note: Supplements are included in the amount but are not counted as separate lending operations. Joint IBRD/IDA operations are counted only once, as IBRD operations. Amounts may not add to totals because of rounding. 138 The World Bank Annual Report 2002 Appendix 11: Projects Approved for IBRD and IDA Assistance in Fiscal 2002, by Theme, July 1, 2001-June 30, 2002 (amounts in millions of U.S. dollars) Theme/Country IBRD IDA Total Economic management Comoros 6.0 6.0 Gambia, The 15.0 15.0 Macedonia, former Yugoslav Republic of 15.0 15.0 Pakistan 500.0 500.0 Total 536.0 536.0 Public sector governance Afghanistan 10.0 10.0 Argentina 730.0 730.0 Azerbaijan 69.5 69.5 Bangladesh 4.5 4.5 Burkina Faso 45.0 45.0 Cambodia 23.9 23.9 Cape Verde 15.0 15.0 Chad 40.0 40.0 Chile 23.2 23.2 Colombia 400.0 400.0 Congo, Democratic Republic of 500.0 500.0 Congo, Republic of 44.7 44.7 Djibouti 10.0 10.0 Ecuador 13.9 13.9 Ethiopia 120.0 120.0 Guatemala 29.8 29.8 Guinea 50.0 50.0 India 175.0 175.0 350.0 Jamaica 75.0 75.0 Kenya 15.0 15.0 Macedonia, former Yugoslav Republic of 15.0 15.0 Mali 70.0 70.0 Mauritius 40.0 40.0 Mexico 355.0 355.0 Moldova 30.0 30.0 Niger 70.0 70.0 Philippines 100.0 100.0 Russian Federation 351.0 351.0 Tanzania 0.6 0.6 Ukraine 250.0 250.0 Yugoslavia, Federal Republic of 70.0 70.0 Zambia 6.7 6.7 Total 2,542.9 1,384.9 3,927.8 Rule of law Colombia 5.0 5.0 Mongolia 5.0 5.0 Total 5.0 5.0 10.0 Financial and private sector development Albania 44.9 44.9 Algeria 30.7 - 30.7 Armenia 5.0 5.0 Bangladesh 5.0 5.0 Bolivia 77.0 77.0 Bosnia and Herzegovina 84.0 84.0 Brazil 938.1 938.1 (continued next page) Projects Approved for IBRD and IDA Assistance in Fiscal 2002, by Theme, July 1, 2001-June 30, 2002 139 Appendix 11 (continued) Theme/Country IBRD IDA Total Cameroon 5.5 5.5 China 365.0 365.0 C6te d'lvoire 12.0 12.0 Dominica 1.0 2.2 3.2 Ecuador 23.0 23.0 Ethiopia 5.0 5.0 Ghana 330.5 330.5 Grenada 1.1 2.7 3.8 Guatemala 155.0 155.0 Guinea-Bissau 26.0 26.0 India 60.0 60.0 Indonesia 200.0 200.0 Kenya 1.5 1.5 Lao People's Democratic Republic 25.5 25.5 Latvia 2.0 2.0 Madagascar 23.8 23.8 Mauritius 1.8 1.8 Mexico 5.0 5.0 Moldova 5.0 5.0 Mongolia 5.0 5.0 Mozambique 14.9 14.9 Nepal 22.6 22.6 Nigeria 100.0 100.0 Pakistan 300.0 300.0 Papua New Guinea 40.0 40.0 Philippines 30.0 30.0 Poland 100.0 100.0 Sierra Leone 50.0 50.0 Slovak Republic 177.3 177.3 St. Kitts and Nevis 4.4 4.4 St. Lucia 1.9 4.4 6.3 St. Vincent and the Grenadines 1.0 2.2 3.2 Tajikistan 10.0 10.0 Tanzania 183.0 183.0 Tunisia 252.5 252.5 Turkey 2,450.0 2,450.0 Uganda 62.0 62.0 Ukraine 30.0 30.0 Vietnam 225.0 225.0 Yugoslavia, Federal Republic of 85.0 85.0 Total 4,809.8 1,779.7 6,589.5 Trade and integration Armenia 1.0 1.0 Gambia, The 16.0 16.0 Panama 10.5 10.5 Yugoslavia, Federal Republic of 6.8 6.8 Total 10.5 23.8 34.3 Social protection and risk management Albania 20.0 20.0 Congo, Republic of 5.0 5.0 Croatia 202.0 202.0 Ecuador 25.2 25.2 Eritrea 60.0 60.0 India 442.8 442.8 Jamaica 40.0 40.0 Lao People's Democratic Republic 19.3 19.3 Morocco 5.0 5.0 Paraguay 9.0 9.0 Slovak Republic 23.5 23.5 St. Vincent and the Grenadines 3.0 2.9 5.9 140 The World Bank Annual Report 2002 Theme/Country IBRD IDA Total Tajikistan 13.8 13.8 Tonga 5.9 5.9 Ukraine 50.2 50.2 Total 358.0 569.7 927.6 Social development, gender, and inclusion Afghanistan 75.0 75.0 Argentina 5.0 5.0 Colombia 5.0 5.0 Eritrea 5.0 5.0 Macedonia, former Yugoslav Republic of 5.0 5.0 Romania 20.0 20.0 Rwanda 25.0 25.0 30.0 110.0 140.0 Human development Afghanistan 15.0 15.0 Bangladesh 120.9 120.9 Benin 23.0 23.0 Brazil 228.0 228.0 Burkina Faso 54.6 54.6 Burundi 36.0 36.0 Cape Verde 9.0 9.0 Central African Republic 17.0 17.0 Chad 24.6 24.6 Chile 75.8 75.8 China 104.0 104.0 Costa Rica 17.0 17.0 Djibouti 15.0 15.0 Egypt, Arab Republic of 50.0 50.0 El Salvador 142.6 142.6 Georgia 2.7 2.7 Guinea 70.0 70.0 Honduras 27.1 27.1 Indonesia 2.7 2.7 Jamaica 15.0 15.0 Lithuania 25.4 25.4 Madagascar 20.0 20.0 Mauritania 52.5 52.5 Mexico 300.0 300.0 Mozambique 60.0 60.0 Nigeria 217.3 217.3 Senegal 44.7 44.7 Sierra Leone 15.0 15.0 St. Kitts and Nevis 5.0 5.0 St. Lucia 6.0 6.0 12.0 Tanzania 150.0 150.0 Turkey 500.0 500.0 Uganda 5.0 5.0 Uruguay 42.0 42.0 Vietnam 58.0 58.0 Yemen, Republic of 32.5 32.5 Yugoslavia, Federal Republic of 10.0 10.0 Total 1,513.4 1,085.9 2,599.3 Urban development Brazil 294.0 294.0 Burkina Faso 22.0 22.0 Colombia 40.0 40.0 Congo, Republic of 40.0 40.0 (continued next page) Projects Approved for IBRD and IDA Assistance in Fiscal 2002, by Theme, July 1, 2001-June 30, 2002 141 Appendix 11 (continued) Theme/Country IBRD IDA Total India 718.0 79.0 797.0 Indonesia 29.5 70.5 100.0 Lebanon 65.0 65.0 Lithuania 17.1 17.1 Mauritania 70.0 70.0 Mozambique 33.6 33.6 Nigeria 110.0 110.0 Tajikistan 17.0 17.0 Uzbekistan 20.0 20.0 40.0 Yemen, Republic of 45.2 45.2 Total 1,183.6 507.3 1,690.9 Rural development Albania 22.6 22.6 Armenia 24.9 24.9 Bangladesh 191.0 191.0 Benin 18.0 18.0 Brazil 43.3 43.3 Colombia 32.0 32.0 C6te d'lvoire 200.0 200.0 Ecuador 4.8 4.8 Ethiopia 85.0 85.0 India 388.1 388.1 Jordan 5.0 5.0 Kyrgyz Republic 15.0 15.0 Mali 43.5 43.5 Moldova 10.5 10.5 Mongolia 18.7 18.7 Mozambique 162.0 162.0 Niger 38.7 38.7 Romania 40.0 40.0 Sri Lanka 75.0 75.0 Tanzania 26.0 26.0 Turkey 600.0 600.0 Uganda 113.6 113.6 Uruguay 18.5 18.5 Uzbekistan 36.1 36.1 Vietnam 310.0 310.0 Total 779.7 1,742.6 2,522.3 Environment and natural resources management Armenia 8.3 8.3 Bolivia 6.0 6.0 Bosnia and Herzegovina 18.0 18.0 Brazil 62.8 62.8 Cambodia 24.3 24.3 China 93.9 93.9 Guinea 25.0 25.0 Honduras 13.3 13.3 India 151.6 151.6 Lebanon 43.5 43.5 Nicaragua 32.6 32.6 Papua New Guinea 17.4 17.4 St. Lucia 1.3 1.3 2.6 Tanzania 42.4 42.4 Total 218.9 322.8 541.7 Bank-wide Total 11,451.8 8,067.6 19,519.4 Note: Supplements are included in the amount but are not counted as separate lending operations. Joint IBRDAIDA operations are counted only once, as IBRD operations. Amounts may not add to totals because of rounding. 142 The World Bank Annual Report 2002 Appendix 12: Cumulative IDA Subscriptions and Contributions through June 30, 2002 Cumulative IDA subscriptions Cumulative IDA subscriptions and contributions and contributions Member (millions of U.S. dollars) (percent of total) United States 25,841.78 23.62 Japan 24,137.67 22.07 Germany 12,467.53 11.40 United Kingdom 8,068.19 7.38 France 7,562.38 6.91 Canada 4,763.45 4.35 Italy 4,462.91 4.08 Netherlands 4,054.32 3.71 Sweden 2,802.32 2.56 Saudi Arabia 2,158.21 1.97 Australia 1,824.58 1.67 Belgium 1,778.30 1.63 Denmark 1,475.61 1.35 Switzerland 1,449.61 1.33 Norway 1,398.50 1.28 Austria 905.86 0.83 Kuwait 707.35 0.65 Finland 698.02 0.64 Spain 667.87 0.61 Korea, Republic of 309.80 0.28 Brazil 305.33 0.28 Russian Federation 174.00 0.16 Ireland 142.74 0.13 Mexico 137.83 0.13 New Zealand 131.49 0.12 Turkey 113.79 0.10 South Africa 91.70 0.08 Argentina 69.80 0.06 Luxembourg 66.62 0.06 Poland 59.09 0.05 Portugal 58.38 0.05 Hungary 45.63 0.04 Greece 41.24 0.04 Czech Republic 35.34 0.03 Colombia 24.43 0.02 Iceland 23.22 0.02 Israel 13.19 0.01 Slovak Republic 12.57 0.01 Yugoslavia, Federal Republic of 6.80 0.01 United Arab Emirates 5.58 0.01 Croatia 5.54 0.01 Slovenia 3.00 0.00 Bosnia and Herzegovina 2.34 0.00 Botswana 1.61 0.00 Oman 1.33 0.00 Macedonia, former Yugoslav Republic of 1.03 0.00 Barbados 0.63 0.00 Total donors 109,108.51 99.74 Total nondonors 279.20 0.26 Grand Total 109,387.71 100.00 Note: Amounts may not add to totals because of rounding. Cumulative IDA SubscriDtions and Contributions throuah June 30. 2002 143 Appendix 13: Development Committee Communiqu6s, Fiscal 2002 1. The 64th meeting of the Development Commit- productivity, job creation, and trade, and, as a result, tee was held in Ottawa, Canada, on November 18, for poverty reduction Thus, they highlighted the 2001, under the chairmanship of Mr. Yashwant need 'for the Bank and the Fund, in accordance with Sinha, Minister of Finance of India Ministers ex- their respective mandates and comparative advan- pressed their great appreciation to the Canadian tage, to pay more attention to governance-related Government for facilitating the holding of this issues, including public expenditure management, meeting under unusual circumstances. diagnostic (e.g., through the Financial Sector Assess- ment Program) and capacity-building work to help 2 Impact of Recent Events in Low- and Middle- countries identify and address abuses such as money Income Countries Response of the World Bank Group. laundering and terrorist financing. In light of this, Ministers reviewed the impact of the September 11 they also stressed the importance of working to terrorist attacks and their aftermath on developing strengthen further country procurement and finan- countries They recognized that poverty in many cial management systems They also recognized the developing countries was likely to worsen as these need to allocate increased resources to address ca- events have deepened the pre-existing global eco- pacity building concerns in many countries to help nomic slowdown, which had already led to weaker them meet new internationally agreed commitments exports and commodity pnces, and have other more and standards. specific impacts- e g, increased refugee movements within countries and across borders, reduced private 5. United Nations Financing for Development investment flows due to increased risk aversion in Conference. Ministers expressed appreciation to financial markets, reduced tourism revenues; and United Nations Secretary-General Kofi Annan for increased trade transaction costs. Ministers called for the opportunity to discuss with him, at the joint further enhancing the collaboration among the Bank IMFC/Development Committee dinner on Group, the IMF, the regional development banks and November 17, issues related to the March 2002 UN agencies, in their actions to help member International Conference on Financing for Develop- countries address these additional challenges and ment (FfD) They expressed strong interest in con- to strengthen social safety nets Ministers under- tributing to the Conference's success, which they lined the importance of renewed growth in in- saw as an important milestone in the effort to halve dustrialized countries to the improvement of the incidence of poverty by 2015 and to reach the prospects for poverty reduction in developing other Millennium Development Goals (MDGs) countries. (endorsed by Heads of State and Government in the 3. Ministers reviewed the response of the World UN General Assembly on September 8, 2000), and Bank Group. They stressed the importance of the other agreed targets. They urged governments to Group using its financial capacity and the flexibility involve all relevant ministries in preparing for the in its available instruments to respond effectively Conference to enhance coherence of policies with and promptly to current circumstances and emerg- impact on development. (The Committee's views ing needs. They emphasized that financial support on Conference issues are attached.) should continue to be linked to strong country performance and reform programs in support of 6. Povery Reduction Strateges Minimsters welcomed poverty reduction Ministers agreed that, from a the signficant progress made i implementing the financial standpoint, the magnitude of likely incre- PRSP approach, noting that 38 countries had com- mental demands on the Bank Group currently pleted interim PRSPs and eight countries their first appears manageable, but they urged that the Board full PRSPs. They appreciated the extent to which and Management keep under close review the Bank poverty reduction strategies build on existing nation- Group's capacity to respond in more challenging al strategies and processes, with a focus on broaden- circumstances Ministers agreed that IDA had a ing participation and sharpening poverty diagnosis particularly critical role in helping the poorest and monitoring, as well as on prioritizing and costing countries manage the adverse impact of recent policies and programs for poverty reduction. Minis- events on their economies and people, and empha- ters welcomed the Bank and Fund's efforts to work sized that timely agreement on a substantial IDA13 with countries to analyze the poverty and social replenishment was essential. They encouraged all impact of programs and to help them to build their member governments to complete their subscription own capacity Ministers noted that the joint Bank/ to MIGA's general capital increase. Fund staff review of the PRSP approach was under- way. They called for a broad-based inclusive process 4 Ministers considered improved governance to be that would draw upon the experience of other stake- an important element in generating the conditions holders and development partners, and looked for- for investment, private-sector-led growth, improved ward to considering the report at their next meeting. 144 The World Bank Annual Report 2002 7. HIPC. Ministers welcome the continued progress 10. The Committee expressed its great appreciation made in implementing the HIPC Initiative, noting to Mr. Yashwant Sinha for his valuable leadership that twenty-four countries have now reached their and guidance to the Committee as its Chairman decision points under the enhanced HIPC frame- during the last fifteen months, and welcomed his work, qualifying for debt service relief amounting to successor, Mr. Trevor Manuel, Finance Minister of some $36 billion; three countries have now reached South Africa. The Ministers also expressed their their completion points and are receiving their full warm thanks to Mr. Alexander Shakow upon his relief under the enhanced Initiative. There has also retirement as the Committee's Executive Secretary, been a significant reduction in debt stock and debt and welcomed his successor, Mr. Thomas A. Bernes. service in these countries, and the commitment of qualifying HIPCs to increased poverty reduction 11. The Committee's next meeting is scheduled for spending has been encouraging. Ministers urged the April 22, 2002 in Washington, D.C. Bank and the Fund to work with remaining eligible Attachment (Financing for Development countries to bring them to their decision and com- Conferenci) pletion points, as quickly as circumstances permit. Conference) 8. Ministers reiterated their commitment to the Attachment to the Development Committee enhanced HIPC Initiative as a means for achieving Communique a lasting exit from unsustainable debt for eligible (64th Meeting-Ottawa, Canada, November 18 countries. They stressed that long term debt sustain- 2001) ability will depend upon the maintenance of sound economic policies, strengthened debt management and the provision of appropriate financing. With re- Financing for Development Conference (FfD) gard to recent events, they noted that the enhanced HIPC initiative framework provides for the consid- 1. Building Development Partnerships on a Foundation eration of additional assistance at the completion of Sound Policies and Good Governance. Ministers point if there has been a fundamental change in a reaffirmed the critical importance of sound national country's economic circumstances due to excep- policies and good governance as prerequisites for tional exogenous shocks. The Committee recognized poverty reduction and sustained growth. They noted the need to take into account worsening global that the Millennium Development Goals (endorsed growth prospects and declines in terms of trade, by Heads of State and Government in the UN Gen- when updating HIPC initiative debt sustainability eral Assembly on September 8, 2000) and other in- analysis at completion point. Ministers noted that ternationally agreed development targets can help the relevant operational procedures for exercising guide country-owned short- and medium-term na- such an option were recently approved by the Bank tional priorities on which external partnerships of and Fund Boards. Ministers also reiterated the support could be based. They noted that the Com- importance of fully financing the enhanced HIPC prehensive Development Framework principles and Initiative and urged bilateral donors to fulfill this Poverty Reduction Strategy Papers provide a vehicle commitment. They welcomed the agreement among for structuring partnerships with donors; they also donors to continue their regular consultations on the provide a framework for the interventions of donors financial requirements of HIPC. They also urged and other partners-such as through country assis- those creditors that had yet to confirm their partici- tance strategies and UN Development Assistance pation in the Initiative to do so as soon as possible. Frameworks-to ensure that external support is well integrated into national programs. An important 9. Education forAll (EFA). Ministers consider educa- contribution by the international community would tion as one of the most powerful instruments for re- be the strengthened provision of technical assistance ducing poverty and laying the basis for sustained to help developing countries-particularly low-in- growth. They welcomed the World Bank's back- come countries and those emerging from conflict- ground paper on this subject and noted the efforts improve their capacity for sound economic manage- of the Bank and its partners to help ensure that ment and efficient use of resources. quality primary education is available to all children worldwide as a necessary first step towards strength- 2. Strengthening the Conditions for Investment and ening overall education systems. Ministers looked Growth. Ministers stressed that, in addition to a sta- forward to full consideration of this subject at their ble and conducive international framework, a sound next meeting, based on an action plan that will national policy environment, essential infrastructure address, inter alia, the policy and resource require- and good governance are needed to allow the pri- ments needed to ensure that EFA goals are reached vate sector to invest efficiently and create employ- by 2015 through the development of sustainable ment. They recognized that in many countries major and high quality EFA programs at the country level. reforms of the policy and regulatory framework will (continued next page) Development committee Communiques, Fiscal 2002 145 Appendix 13 (continued) be required to encourage domestic investment and 5. Harmonization-Reducing the Transaction Costs of job creation. Such reforms can also help to promote Aid. Ministers noted that major improvements in foreign investment and contribute to productivity development effectiveness and efficiency, as well as growth and the additional resources needed for sus- reduced administrative burdens and costs on recipi- tainable development. Ministers underlined the need ent governments, would be gained from eliminating for coherent and comprehensive support to private rigidities in aid delivery mechanisms. In this regard, sector development. They emphasized the important they highlighted the critical importance of harmo- role that IFC, MIGA, and other agencies working nization of operational policies and procedures by directly with the private sector can play in this the Bank, other multilateral agencies and bilateral regard. aid donors. Ministers welcomed the World Bank's report on progress achieved to date in this area and 3. Promoting Integration into the International Trading commended the action programs set forth in this System. Trade is an important source of growth and report. The Committee urged that the Bank and its poverty reduction, and developing countries need to partners continue vigorously to pursue these pro- be able to take greater advantage of the opportuni- grams, and that the FfD Conference be encouraged ties it offers. In this connection, the Committee to recognize the importance of, and provide broad- warmly welcomed the decision reached by the WTO based support for, further progress in such harmo- last week in Doha to launch a new round of trade nization and its implementation at the country negotiations. They endorsed the WTO Ministerial level. Declaration's aim to place the needs and interests of developing countries at the heart of their Work Pro- 6. Debt and Other Instruments. Ministers under- gramme. Ministers emphasized the importance of scored the need to deploy a flexible mix of instru- countries integrating trade into their development ments so as to respond appropriately to the needs strategies and improving their investment regula- of developing countries in a manner consistent with tions, standards and technical regulations, removing their economic circumstances and public expendi- obstacles to efficient transport of goods and materi- ture management capacities. While urging that the als, and strengthening telecommunications and busi- HIPC Initiative continue to be implemented expe- ness services. Ministers noted that greater access to ditiously to achieve debt sustainability for the poor- markets would provide a major boost to develop- est countries, they noted that debt relief is only one ment. They also stressed the priority they attach to of many possible actions and instruments to support helping developing countries strengthen their capac- country poverty reduction strategies. ity to respond to market opportunities and to imple- 7. Global Public Goods. Ministers noted that FfD ment trade-related agreements. provides an opportunity for enhancing a common approach to global public goods and accelerating 4 Importance of Enhancing ODA Flo's. Ministers progress on the coordination of priority global pub- recognized that for most low-income countries the lic goods areas, such as those addressing HIV/AIDS availability of Official Development Assistance and other major infectious diseases. They agreed on (ODA) remains an essential supplement to domestic the importance of focusing on specific priority activ- resource mobilization and foreign investment if ities, while consolidating initiatives to achieve effi- growth and poverty reduction goals are to be cient use of resources. They stressed the need to achieved. Ministers agreed that special emphasis ensure that activities are anchored in national as should be placed on ensuring that adequate well as global strategies. In some cases this would resources are directed to countries implementing require ensuring additionality in funding, while in sound policies and exercising good governance. They others flexibility and reinforcement of existing recognized that a substantial increase in current mechanisms would be needed to help countries ODA levels would be required if the opportunities own and implement global public goods-related emerging from policy improvements in low-income national programs. countries are to be realized and the MDGs to be met. In this context, a number of Ministers referred 8. Making the Most of Existing Institutions. to the need to reach the 0.7 percent ODA/GNP Ministers noted that FfD offers an opportunity to target. It would also require that, among countries establish a broad international consensus-among with sound policies and governance, ODA be allo- governments, institutions, the private sector, and cated with greater emphasis on countries with the civil society-for action on the basis of common greatest need (in part based on the difficulties they objectives and for the identification of specific gaps face in the achievement of their MDGs) and with that may require enhanced international action. This capacity to make the most effective and efficient would provide a platform for individual institutions use of the resources. Ministers also emphasized the to use their respective mandates, governance importance of appropriate concessionality in ODA structures and strengths to undertake high priority flows. initiatives as well as to promote more focused and coherent action among bilateral and multilateral 146 The World Bank Annual Report 2002 agencies. Ministers strongly believe in making the to this result. We look forward to their continuing most of existing institutions. -collaboration and to strengthening this new partner- ship as we work towards a successful Worlcl Summit 9. Integration into the Global System. Ministers on Sustainable Development. agreed on the importance of promoting the greater integration of developing countries into the global 3. This new partnership for development recognizes financial system. They noted that progress is being that country-owned and driven development strate- achieved through the efforts of, inter alia, the inter- gies embodying sound policies and good governance national financial institutions, including in areas of have to be the starting point. Such strategies need to crisis prevention, standards and codes, legal and reg- be supported by increased and more effective devel- ulatory frameworks, transparency, financial sector opment assistance and by greater efforts to integrate strengthening, combating terrorist financing and developing countries into the global economy. We other abuses, debt management, and private sector are committed to the implementation of these participation in the resolution of financial crises. strategies and partnerships, such as NEPAD, as part Ministers also agreed that it is important to find of the scaling up of activities that is necessary for pragmatic and innovative ways to continue to implementing the Monterrey Consensus and to enhance the effective participation of developing meet the Millennium Development Goals, I we will countries in international dialogues and decision- regularly review progress at future meetings. We making processes. welcomed the pledges made at Monterrey by a number of donors to increase their official dlevel- 10. Staying Engaged. Ministers noted that the FfD opment assistance. Conference should be seen as part of ongoing efforts to intensify concerted international action for devel- 4. The CDF/PRSP approach is increasingly providing opment and poverty reduction, to expand growth a common foundation for implementing the new opportunities for developing countries, and to im- partnership at the country level. While recognizing prove the effectiveness and responsiveness of devel- that scope for improvement exists, we shared the opment cooperation. They urged that the follow-up positive assessment of implementation to date, par- to the Conference be seen in this context. They be- ticularly in enhancing ownership. We look forward lieve that the dialogue among the ECOSOC and the to continued progress in extending the participatory Bretton Woods Institutions offers unrealized poten- processes for the elaboration and monitoring of tial, as does further progress within the framework PRSPs, implementing pro-poor growth policies, of the coordinating committee of the heads of enhancing collaboration to strengthen public expen- United Nations agencies (ACC). Greater coopera- diture management and to improve poverty and tion among existing institutions is needed, based on social impact analysis; and, amongst multilateral and a clear understanding and respect for their respective bilateral development agencies, in better aligning responsibilities and govemance structures. For exam- their programs with country strategies. ple, a combined effort by the Bretton Woods institu- 5. We reaffirmed our stron suport for the current tions and the United Nations, along with the OECD, work ram o harong operati poliies and to check periodically on progress towards the wor program to harmonize operational policies and MDGs, would provide an efficient and practical procedures of bilateral and multilateral agencies so approac wfor improved cooperation. as to enhance aid effectiveness and efficiency. We approach for improved cooperation. committed to further action in streamlining such 11. Ministers requested their Chairman to convey procedures and requirements over the period leading these conclusions to the President of the United to the high-level forum scheduled for early 2003. Nations General Assembly. 6. Evidence demonstrates that effective assistance in support of good policies and institutions can bring Communique important development benefits. More attention should be given to the building of institutions and I. We met today to discuss future challenges for capacities as well as the timing and sequencing of development and an action plan for universal the reform process. We underlined the importance primary education. of an enhanced focus on results that can be used by countries in designing and implementing their 2. We welcomed the very important progress strategies, and by donors and development agencies achieved in the Monterrey Consensus laying out a in scaling up and allocating their support. We asked new partnership compact between developed and the World Bank to report to us at our next meeting developing countries, based on mutual responsibility and accountability, to achieve measurable improve- 1. From the U.N. Millennium Declaration, endorsed by Heads of State ments in sustainable growth and poverty reduction. and Government in the U.N. General Assembly on September 8, 2000. We recognized the efforts of the World Bank and the IMF, working together with the UN, in contributing (continued next page) Development Committee Communiques, Fiscal 2002 147 Appendix 13 (continued) on its efforts in this respect. We would also welcome about and to provide the necessary additional do- a report on efforts underway to engage more effec- mestic and external resources. The Bank and all tively with weak-performing low-income countries. other stakeholders should strengthen their efforts to achieve the MDG on gender equality in primary 7. Economic growth requires a strong and vibrant and secondary education by 2005. We will review private sector and an enabling climate that progress at our next meeting. encourages investment, entrepreneurship and job creation. However, it is not enough to strengthen the 9. We reviewed and welcomed the steady progress private sector in developing countries without fur- that has been made on the HIPC initiative. We re- ther progress in integrating them into the global main committed to its vigorous implementation and trading system. We thus strongly endorsed the call at full financing. Our objective remains an early and Monterrey for coherence between development as- enduring exit from unsustainable debt for HIPC sistance and trade policies. We urged an acceleration countries. We noted that within existing guidelines, of efforts to lower trade barriers (including trade dis- additional relief can be provided at the completion torting subsidies) and we called upon the Bank and point, on a case-by-case basis. Success will require others to provide more support in helping develop- a sustained commitment by HIPC countries to im- ing countries address policy, institutional, social and provements in policies and debt management and infrastructure impediments limiting their ability to by the donor community to continue to provide share in the benefits of trade. adequate and appropriate concessional financing. We will discuss the issue of debt sustainability and, 8. Education is one of the most powerful instru- consequently, financing and policy implications, at ments for reducing poverty. We strongly endorsed the next meeting. the action plan presented by the Bank as a basis for reaching international consensus to help make pri- 10. Finally, we reviewed a progress report on anti- mary education a reality for all children by 2015. We money laundering and combating terrorist financing. appreciated in particular that the action plan is con- Recognizing the serious risks posed by these activi- sistent with the new partnership for development ties, we welcomed the action plans agreed by the based on mutual responsibility and accountability. Bank and the Fund and the enhanced collaboration We called on the Bank to continue to work in part- with other institutions. We encouraged the Bank and nership with UNESCO and other relevant agencies. Fund to continue to integrate these issues into their We encourage all countries to place education at the diagnostic work in line with their respective man- heart of their poverty reduction strategies, reform dates, and urged that capacity building assistance be their education policies to achieve Universal Primary increased so that countries could better address Completion and monitor progress towards the 2015 these issues. education goals in line with an enhanced focus on results. We committed ourselves to work together 11. The Committee's next meeting is scheduled for in a much more coherent way to help bring this September in Washington. 148 The World Bank Annual Report 2002 Editor Cathy L. Gagnet, Office of the Publisher, External Affairs, World Bank Assistants to the Editor Nisha Chatani Rizvi, Consultant, Office of the Publisher, External Affairs, World Bank Caroline L. Banton, Office of the Publisher, External Affairs, World Bank Financial Reporting Philip A. Birkelbach, Central and Operational Accounting Division, World Bank Jinkyung Du, Central and Operational Accounting Division, World Bank Michael Ochieng, Central and Operational Accounting Division, World Bank Consultants Inder K. Sud, Washington Associates International Kenneth Watson, Rideau Strategy Consultants Production Cindy A. Fisher, Office of the Publisher, External Affairs, World Bank Monika D. Lynde, Office of the Publisher, External Affairs, World Bank Janet H. Sasser, Office of the Publisher, External Affairs, World Bank Project Assistant Cesar A. Gordillo Editorial Consultants EEI Communications Susan Graham Alison Pefia Cover Photo Richard Lord Design Patricia Hord.Graphik Design Typesetting Interactive Composition Corporation THE WORLD BANK 1818 H Street, NW Washington, DC 20433 USA Telephone: 202 473 1000 Facsimile: 202 477 6391 9 780821 318 Internet: www.worldbank.org E-mail: feedback@worldbank.org ISBN 0-8213-5158-3 THE WORLD BANK 0D 1 515 8 1818 H Street, NW I Washington, DC 20433 USA I I II I I Telephone: 202 473 1000 li Facsimile: 202 477 6391 9 781 Internet: www.worldbank.org E-mail: feedback@worldbank.org ISBN 0-8213-5158-3