KUWAIT CITY, 1 June 2006 — Saudi Arabia has agreed to contribute $1 billion to the Poverty Alleviation Fund managed by the Jeddah-based Islamic Development Bank and first proposed by Custodian of the Two Holy Mosques King Abdullah at the Extraordinary Islamic Summit in Makkah Al-Mukarramah in December 2005.
Kuwaiti Finance Minister Badr Al-Humaidhi, speaking after the closing ceremony of the 31st Annual Meeting of the Board of Governors of the IDB here yesterday morning, confirmed that the Board of Governors agreed the go-ahead for the establishment of the fund, which will concentrate on poverty alleviation projects in the least developed member countries of the IDB and helping them to achieve the Millennium Development Goals.
“A figure of $5 billion was mentioned at the meeting, but this is not the final size of the fund. Saudi Arabia has pledged to contribute $1 billion. Many of the countries, which would benefit from the fund have also contributed including Chad ($2 million), Senegal ($2 million), Burkina Faso ($2.2 million), Ivory Coast ($3 million); Mali ($4 million), and Togo ($4 million). The establishment of this fund is a further manifestation of cooperation between Muslim countries.”
Al-Humaidhi dismissed suggestions that the fact that other wealthier Muslim countries, especially those oil-exporting ones, did not follow Saudi Arabia in pledging contributions, meant that they were not supporting the fund. “It is not strange at all for these countries not to have pledged anything today. Every country has its own procedures to determine its contribution. This does not mean other countries do not wish to contribute to this initiative,” he maintained.
IDB President Ahmad Mohammad Ali also confirmed that the Kingdom has agreed to sponsor a number of orphans in Indonesia as a result of the Tsunami disaster of last year and the recent earthquake, which claimed almost 6,000 lives. The IDB yesterday agreed to give $1 million in emergency aid and has pledged more funds to Indonesia in humanitarian relief and reconstruction.
Given the regularity with which natural disasters are occurring in IDB member countries such as Indonesia, Pakistan, Turkey, Iran and elsewhere, Ali was asked whether it would not be more feasible for the multilateral development bank to establish a permanent Disaster Emergency Fund for reconstruction to cater for such events. “The IDB is not an emergency funding organization. It is a development bank. That task should be taken up by the emergency organizations such as the Red Crescent and others. The IDB of course offers nominal assistance of relief in these disaster situations, and it offers specific funding for rehabilitation and reconstruction,” he explained to Arab News.
Ali revealed that the bank has already set up a $30 million Waqf for the financing and promotion of education, especially vocational education, in India. He also stressed that the Board of Governors had agreed to increase the authorized capital of the bank from ID15 billion to ID30 billion. The IDB had already increased its subscribed capital from ID8.1 billion to ID15 billion. However, of this only 30 percent was drawn. As such it hopes to raise another $1.2 billion from the remaining 70 percent of callable capital over the next five years.
IDB sources confirmed to Arab News that it was highly unlikely that the bank would go to the international money markets to mobilize any additional resources. The bank is flush with liquidity and with this additional injection from the callable capital, there was no need to tap further resources. The bank’s institutional rating has been reaffirmed at AAA by Standard & Poor’s the international rating agency. The bank also has a zero risk weighting for MDB’s from the Bank of International Settlement (BIS) in Basel.
Ali revealed that 42 countries had signed the agreement for the establishment of the International Islamic Trade Finance Corporation (ITFC), which will be based in Jeddah, and which will open its first branch in Dubai. The ITFC has an authorized capital of $3 billion of which $500 million is subscribed. Of this $450 million has already been paid-up, with the IDB itself contributing $300 million from existing resources. Much of this has been reallocated from the current balance sheet and assets from the activities of the IDB Unit Investment Fund; the Islamic Banks’ Portfolio; and the IDB’s import finance and export finance operations.
He also confirmed that the boards of the Al-Aqsa and Intifada Funds set up to help Palestinian reconstruction have allocated $100 million in new funds. The IDB has a the mandate to manage and disburse this funding. However this funding includes $70 million already pledged at the Arab Foreign Ministers’ meeting held in Rabat recently. The additional $30 million will come from contributions from other Arab economic development funds.
A previous meeting of the ministers’ has allocated $1 billion to Palestinian reconstruction and aid. Of this some $700 million had been disbursed for Palestinian projects. Ali stressed that these funds are ring-fenced for projects to help ordinary Palestinians only and not to pay salaries for employees of the Palestinian Authority. The Arab League had set up a separate fund for this purpose.