Performance Based Allocation System: enhancements 11 July 2017 - - PowerPoint PPT Presentation

Lisandro Martin, Chief, Operational Programming and Effectiveness Unit (OPE), PMD

Performance Based Allocation System: enhancements

11 July 2017 – Executive Board Working Group on PBAS

Today’s presentation

2

Proposed scenarios Q&A

slide: 3 - 9 slide: 13

IFAD11 and beyond

slide: 10 - 12

A more balanced and stable formula…

Scenarios

49% 51% 49% 51% 54% 46% 55% 45% Needs Performance Needs Performance Needs Performance Needs Performance

Scenario 3

A

Scenario 3

B C

Scenario 3

D

Scenario 3

3

High dispersion of allocations 27% of countries with minimum allocations High dispersion of allocations 26% of countries with minimum allocations High dispersion of allocations 44% of countries with minimum allocations Focus on GNIpc and PAD: formula prone to volatility Lowest dispersion

• f allocations

10% of countries with minimum allocations Balanced elasticity across variables

MFS, 31% LICS, 41% LMICS, 44% UMICS, 15% MFS, 22% LICS, 32% LMICS, 49% UMICS, 19% 55% 45% 65% 35%

…that strengthens the focus on the poorest countries.

Scenarios

Needs Performance

4

Needs Performance

IFAD10

Scenario

Proposed scenario

Scenario

Total resources

The proposed scenario’s ability to capture the multidimensionality of poverty…

47% 19% 56% 22%

0% 10% 20% 30% 40% 50% 60%

+ 54% HDI Agri GDP

Scenarios

5

Share of allocation by indicator by two top quintiles (Total resources)

IFAD10

PROPOSED SCENARIO

Djibouti + 36% Gambia + 50% Grenada + 39% Liberia

Human Development Index Agricultural GDP

…is confirmed by diverse measures.

47% 37% 57% 44%

0% 10% 20% 30% 40% 50% 60%

Infant mortality School enrolment

6

Scenarios

Share of allocation by indicator by two top quintiles (Total resources)

+ 64% Infant mortality School enrolment Chad + 46% Cameroon + 53% Niger + 25% Guinea

IFAD10

PROPOSED SCENARIO

IFAD11 cross-cutting priorities are adequately captured

46% 40% 55% 25% 54% 46% 60% 30%

0% 10% 20% 30% 40% 50% 60% 70%

Gender Youth Nutrition Climate

7

Scenarios

Share of allocation to countries with lower performance by two top quintiles (Total resources)

IFAD10

PROPOSED SCENARIO

17 6 4 4 6 2 3 3 2 14 4 4 1 1 9 6 4 1 3 3 1 1 1

1 2 3 4 5 6 1 2 3 4 5 6

Performance Quintiles Needs Quintiles

15 9 4 2 15 6 6 1 9 1 3 1 2 7 6 3 2 3 2 2 1

1 2 3 4 5 6 1 2 3 4 5 6

Performance Quintiles

Needs Quintiles

Most resources are concentrated on countries that need the most and perform the best

Scenarios

8

Proposed IFAD11 IFAD10 Current

Balanced elasticity across variables

Scenarios

9

31% 33% 26%

• 10%

19% 33% 18% 47%

• 15%

18%

• 20%
• 10%

0% 10% 20% 30% 40% 50% 60%

PAR/PAD RSP CPIA IVI GNI POP

Comparison of elasticities – current and proposed formula

Scenario proposed IFAD10

Needs Performance

IFAD11 Business Model provides the strategic direction, with no uncertainties

10

IFAD11 and beyond

IFAD11

Business Model

IFAD11 country selectivity criteria preserve the formula’s macro-stability The proposed PBAS allows IFAD to maintain its commitment on shares

• f allocations of core resources (90% to LICS and LMICS, 10% to

UMICS). The size of the PoLG (3.3, 4, 4.5) does not influence the PBAS allocation shares by income level, lending term or any other breakdown. Therefore, the PBAS would remain valid for any PoLG level.

Different sources of funding require different resource allocation systems

11

IFAD11 and beyond

IFAD11

The PBAS is a mechanism for the fair distribution of resources to neediest and best performing countries Allocations are determined by the formula Recipient countries are allocated financing regardless of their creditworthiness

Beyond

Bond issuance is a tool for increasing IFAD’s funding base at cheap funding costs thorough high credit rating To obtain a high credit rating allocations of loan portfolio funded by bonds must be driven by risk management considerations:

Single borrower concentration Borrower credit rating

Way forward: preparing for IFAD11 and beyond

IFAD11 and beyond

IFAD10 IFAD11 IFAD12

2017 2018 2019 2020 2021 2022 2023 2024

Q4 2017 Q1-Q2 2018 Q2 2018 Q3 2018 – Q2 2020

• Feasibility study on market borrowing
• Internal rating assessment begins
• Production of PBAS Manual
• Revised RSP testing
• Development of PBAS IT system
• Definition of IFAD approach to

loan pricing

• IVI data collection and production
• RSP scores production
• PAD production
• IFAD11 PBAS allocations
• Review of PBAS
• Formal rating process

Q1 2019 – Q4 2020 Q1-Q4 2020 2022

• Inaugural bond issue

12

Thank you for your attention

Any questions?

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Armenia Bosnia and Herzogovina Egypt Iraq Kazakhstan Lebanon Montenegro Sudan Tajikistan Turkey Yemen Botswana Comoros Ethiopia Lesotho Malawi Mozambique Rwanda South Africa Swaziland Uganda Zimbabwe Bangladesh Cambodia Cook Islands India Iran D.P.R.K. Malaysia Marshall Islands Myanmar Nepal Pakistan Philippines Solomon Islands Thailand Tonga Vanuatu Argentina Bolivia Colombia Domincan Republic El Salvador Guatemala Honduras Nicaragua Peru Guyana Venezuela Benin Cameroon Central African Republic Congo DR Côte d’Ivoire Gabon Ghana Guinea Bissau Mali Niger Sao Tome Sierra Leone

Testing the new Rural Sector Performance Assessment

mock scoring of countries with the new questionnaire

WHAT WHY HOW

assess the potential impact of newly made scores on allocations use current RSP, CPIA, and other data sources to score countries

RESULTS

Reduced repetition between indicators The new RSP scores countries slightly lower, with an average reduction of 3%

Limited impact

• n allocations

14

RSP last RSP new

IFAD11 and beyond