Norway and the multilateral finance institutions

01/09/2009 // Norway is a member of the World Bank, three regional development banks (the African, the Asian and the Inter-American), and two independent development funds (the Nordic Development Fund and the International Fund for Agricultural Development). The multilateral finance institutions are important channels for resource flows to the poorest countries.

The banks, particularly the World Bank, have also become increasingly important as “knowledge banks”, and are providing extensive advisory and analytical services. It is therefore important for Norway to take an active part in the policy development processes in the banks and to work towards the changes it considers necessary. Norway’s core contribution to the multilateral finance institutions totals approximately NOK 1.5 billion

Coherent approach to development cooperation

Norway’s foreign and international development policy forms the basis for its priorities vis-à-vis the multilateral finance institutions. In this area, Norway uses the UN’s Millennium Development Goals as a guide. One of Norway’s priorities is to advocate a more coherent approach to development cooperation, based on partner country ownership and donor coordination. Poverty reduction will only be successful if the developing countries themselves take responsibility for their own development. They must therefore be given a say when decisions are taken in the multilateral finance institutions, and Norway has worked actively to secure additional board representation for Africa.

Norway plays an active role in the governing bodies of the finance institutions, and cooperates very closely with the other Nordic countries. Norwegian representatives at all levels have frequent contact with the management and staff of the institutions, especially concerning their policy and implementation of programmes and projects.

Capital stock and general contributions

Norway makes two kinds of general contributions to the multilateral finance institutions. Firstly, it contributes an appropriate share of the capital stock. The capital stock of each institution consists of a proportion that is actually paid in and a considerably larger guaranteed portion. This enables the institution to take up loans in the international capital markets on very favourable terms. The money is then lent out on approximately the same terms to finance development projects and programmes in those developing countries that are in a position to service loans on favourable market terms. The repayment period may be up to 20 years.

Secondly, Norway makes general contributions to development funds that are administered by the development banks and to independent funds. The development funds provide grants and offer loans to the poorest countries on even more favourable terms than the best terms offered by the banks in their ordinary lending operations. Loans from these funds are interest-free (although payment of modest administration fees may be required), and they have a grace period of 10 years, and a repayment period of up to 40 years.

Funds for high-priority measures

Norway also provides extra-budgetary funds or co-financing for specific measures that it considers particularly important.  These funds total some NOK 0.5 billion in addition to the core contribution of approximately NOK 1.5 billion.. They help the institutions to implement policies and strategies as well as provide catalytic funding for new research and development. In this way co-financing supports and supplements the work in the governing bodies. Co-financing is also important in strengthening the partnership and the dialogue between Norway and the management and staff in these institutions. The extra-budgetary funds are now concentrated in larger thematic funds, including multidonor funds. In this way co-financing also contributes to the ongoing efforts to strengthen donor coordination.

Source: Norwegian Ministry of Foreign Affairs   |   Share on your network   |   print