1 IFAD9 Consultation inter- sessional paper 24-25 October 2011 Ninth Replenishment of IFAD’s Resources
Jan 13, 2016
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IFAD9 Consultation inter-sessional paper
24-25 October 2011
Ninth Replenishment of IFAD’s Resources
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Key messages from the 2nd Consultation
• Non-repeatability of the ratio of Members’ contributions to PoLG under IFAD8
• Strong view that the PoLG should not be reduced
• Further clarification and information required in a number of areas
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Further clarification
• Options for strengthening internal resources
• Fuller analysis of ACA/CFS
• Longer-term perspective on IFAD’s financial capacity
• External audit of the assumptions and projections used in IFAD’s financial model
• Additional resources needed as a result of DSF
• Request for alternate scenarios
• Additional medium-term funding possibilities
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Options for strengthening internal resources
• Loan prepaymentCould enhance internal contribution by US$15 million
Can only be done on a voluntary case by case basis, hence eliminated from calculations
• Alignment of lending termsHardening some highly concessional terms
Dropping intermediate terms
Could generate resources in the range of US$40-55 million
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Fuller analysis of ACA/CFS
• Benefits of ACA
• Limitations in its use
• Why CFS is better
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Benefits of ACA
• Future reflows virtually certain
• IFAD carries high levels of liquidity
• Can safely commit, based on future cash receipts
• Allows enhancement of resources while limiting Member contributions
• But …
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Limitations of ACA
• Increasing ACA is a one-time drawdown of resources
• ACA oversimplifies
• Does not give any insight into repeatability
• Does not represent maximum prudent use of resources
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What is CFS and why is it better?
• Other IFIs use cash flow modelling to determine prudent disbursements
• CFS is one form of cash modelling
• Assumes repeatability is desirable
• Assures repeatability by explicitly considering future IFAD replenishments
• Assumes maximising PoLG by optimizing cash flow for any given IFAD replenishment
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Implementation plan for a CFS approach
• Creation of a Financial Planning and Risk Analysis unit within the Financial Operations Department
• Unit to be directly supervised by the CFO
• Will include ALM, BUD and Financial Management Office
• ALM will therefore be independent from TRE and will focus on Risk budgeting Financial forecasting Developing quarterly financial projections for management
to report to the EB
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Longer-term perspective on IFAD’s financial capacity
• Assumed US$1.6 billion IFAD9 Member contributions
• Assumed US$3.2 billion PoLG
• From IFAD10 onward, contributions and PoLG grow with inflation
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IFAD long-term cash flow
IFAD cash flows under an IFAD9 with a US$ 3.2 billion PoLG, assuming US$1.62 billion in Member contributions(Millions of United States dollars)
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Snapshots of IFAD9 and beyond
IFAD sources of funds and requirements(Millions of United States dollars)
IFAD9 (2013-2015)
IFAD10 (2016-2018)
IFAD11 (2019-2021)
IFAD12 (2022-2024)
Source of FundsInvestment Income 188 140 104 86 Loan Reflows 886 1 085 1 339 1 656 Cancellations/Reduction 193 243 297 309 Use of future reflows 921 832 708 565 Total IFAD 2 188 2 299 2 448 2 617
Members Contributions 1 615 1 739 1 873 2 017 Total Funds 3 803 4 038 4 321 4 634
PoLG 3 200 3 446 3 711 3 997 Admin and HIPC 603 592 610 637 Total PoLG, Admin and HIPC 3 803 4 038 4 321 4 634
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External Audit of IFAD’s financial modelling
• PWC engaged to perform an external audit of the assumptions and projections used in IFAD’s financial modelling
Assumptions reasonableData agrees to published financial informationModel arithmetically and logically validProjections reasonable
• Clean audit assurance on all counts
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Additional resources needed as a result of DSF
Replenishment Forgone principal due and compensated by Member States (Millions of United States dollars)
IFAD 9 (2013-2015) 0
IFAD 10 (2016-2018) 3.4
IFAD 11 (2019-2021) 39.7
IFAD 12 (2022-2024) 99.2
Resources required to compensate IFAD for the loan principal repayments forgone as a result of DSF
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Additional medium-term funding possibilities
• Management will build on lessons learned
• Potential new sources
• New and existing partners
• Validated proposals will be brought before the relevant governing body
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Thank you!