Many member countries of the Jeddah-based Islamic Development Bank Group (IDB), the multilateral development bank (MDB) of the Muslim world, have urged the institution to adopt a much more aggressive resource mobilization strategy in order to deliver its strategic objectives which include promoting intra-Islamic trade, reducing poverty, promoting the private sector and the role of women in development, and promoting economic growth in member countries. The clarion call at the 37th Annual Meeting of the Board of Governors of the IDB held in Khartoum, Sudan recently surfaced as the least developed members, which form the majority of the group, have been severely affected by the impact of the global financial crisis and the eurozone sovereign debt crisis. "Under the current circumstances, it is even more imperative for the bank to strengthen its support to the economic and social development of the member countries," maintained the Governor from Turkey. While some members of the IDB are basking in fiscal euphoria due to high oil prices and revenues, others (the majority) are suffering due to burgeoning fiscal deficits and shortages. This coupled with a motley of structural factors, including high commodity prices, high cost of funding from the international markets, low GDP growth prospects, poor governance, corruption, and political instability, put extra pressure on multilateral institutions such as the IDB to step in and fill the funding gap. The impact of global price hikes in food, fuel and fertilizer coupled with a decline in trade growth and low level of investment, has led to balance of payment and price inflation problems in many of the IDB member countries. The IDB is under pressure from its Board of Executive Directors to devise a financing strategy for the next 3, 5 and 10 years. In the aftermath of the financial crisis, the IDB Board decided on a 30 percent increase per annum in the bank's financing for the next three years, a target which the bank's management considers very ambitious and high. In addition, the IDB is also under pressure to raise funds from the capital markets more frequently to leverage its AAA rating rather than rely too much on equity and callable capital from shareholders. Subsidies and welfare programs are beyond the fiscal capacity of all the least developed member countries. Bangladesh echoed the sentiments of most of the fellow member countries in stressing the need "for inexpensive trade financing and balance of payment support. Least developed countries deserve lower mark-up and a longer period of repayment." The issue of the terms and flexibility of IDB's trade financing is raised perennially by member countries especially those who rely heavily on exports or imports. The IDB Group's terms, especially those of its dedicated trade finance fund, the International Islamic Trade Finance Corporation (ITFC) are seen as less competitive, which IDB President Dr Ali acknowledges. A more efficient management process, a more proactive resource mobilization strategy and greater commitment to cooperation from its member countries, may infinitely improve the delivery of IDB's financing, operations and initiatives. As the governor for Malaysia pointed out, following the 2008 global economic crisis, the developing countries are now worse off. The gap between general revenue and expenditure for OIC countries as a percentage of their GDP expanded from a simple average of minus 1.4 percent in 2007 to minus 16.7 percent in 2011. Kuala Lumpur wants multilateral lending institutions such as the IDB to start thinking of ways and means to overcome the impact of systemic shocks on their respective member countries, not caused by deficient domestic policies but due to external shocks. "While the bank offers long-term development funding, we need to consider the need for a timely, targeted and temporary fiscal assistance or at least a multilateral sovereign-quality guarantee mechanism to ensure that our member countries are not disproportionately impacted by systemic global events," the governor from Malaysia said. In a recent interview, IDB President Dr. Ahmed Mohammed Ali confirmed that "for the viability of the institution, we have to do both. In addition to the sukuk program, we will raise some funds from callable capital, after that we also probably need to request for additional capital." The sukuk program has raised much of the interest. The IDB's current sukuk program of $3.5 billion is almost exhausted. To date the MDB has issued five sukuk totaling $3 billion, leaving a mere $500 million of issuances left. Dr. Ali confirmed that the bank will launch a new sukuk program "probably in the same region of $3.5 billion". The only difference is the urgency of the new program. "We want to be in the market every year. This is very important for the future for the bank to have the ability to raise resources regularly from the market. In the past we did not give enough attention to that. Perhaps this is because we did not need as much resources, so we did not go to the market regularly," Dr. Ali said. __
