Frontier markets get a lot of aid and this can distort the investment landscape. It is because of this that there is a lot of focus right now on the World Bank which is working on the replenishment of the finances of its affiliate, the International Development Association.
The IDA provides the bulk of low-interest loans for frontier markets.
Negotiations for the IDA replenishment continue in Washington in September during the joint World Bank-International Monetary Fund annual meetings. The World Bank needs to raise at least US$25 billion from donors because of the additional costs of its debt relief programmes. If it fails, governments may shift their funds from the Bank to bilateral programmes and smaller multilateral organisations, such as the African Development Bank.
The key issues are the type of aid and the increasing competition from regional development banks (European Union programmes, sovereign lenders such as China and India and philanphropic funds).
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