The World Bank Group Board  has approved the creation of The Africa Catalytic Growth Fund (ACGF) to provide targeted financial support to accelerate shared economic growth and to assist in the achievement of Millennium Development Goals that have proved difficult to attain.

The fund grows out of the World Bank Group’s Africa Action Plan to Support African Countries, approved last September, which sets out a framework for supporting development results on the Continent, with an overriding emphasis on accelerating economic growth and assuring that poor people, women and rural populations have the means to participate in any economic expansion. The new multi-donor trust fund would complement existing International Development Association (IDA) development programs by providing rapid financing for country programs to be selected according to specific criteria to address specific constraints holding back their potential for shared growth.

The ACGF also stems from the commitment by international donors to increase development assistance to Africa. International donors are being encouraged to contribute as much as $1 billion to the ACGF, which will be managed by the World Bank. The United Kingdom already has pledged British pounds 200 million to the fund for the 2006-2008 period. The fund, which is considered a pilot financing vehicle, will be subject to an independent evaluation after three years of operation.

The funds will be used to support development opportunities falling into three categories: The High-performing countries that would benefit from targeted programs to remove obstacles to sustained growth at levels necessary to reduce poverty significantly;

The Transforming countries that are judged to be moving from a period of low performance or instability to one marked by sustained improvements in policies; Initiatives to facilitate regional integration by funding programs to strengthen regional “public goods” that could improve the climate for investment and growth in a cluster of countries.

"By using this fund to augment existing development programs, we can help selected countries overcome key binding constraints and break into higher growth," said Gobind Nankani, World Bank Vice President, Africa Region. "These programs can generate positive spillover effects for neighboring countries as well as a powerful demonstration effect for all Africa by creating more convincing models for sustained transformation."

All funds from the ACGF would be allocated as grants. Recipients can be governments or institutions such as regional economic communities. Projects financed by the ACGF can be scaled-up versions of existing IDA operations or new, stand-alone operations.

The experience of Mozambique demonstrates the value of significant development investment applied at the time of a turnaround or economic takeoff. Emerging from civil war and economic mismanagement in 1994, Mozambique received significant development assistance that helped it raise school enrollment levels, lower infant mortality and rehabilitate roads. The changes contributed to a drop in the rate of poverty to 54% in 2003 from 69% in 1997.

Specific criteria govern investment in each of the three categories. High-performing countries would need to show sustained growth rates, have a sound policy framework along with a national strategy for economic growth. Finally, there must be evidence of specific constraints holding the country back from potentially higher levels of growth.

To qualify as a transforming country, a government must have in place a sustained reform program, and show that there is a defined opportunity to achieve a sharp increase in growth. For regional projects, countries involved must have sound policy frameworks in place, along with credible strategies for growth. They must also make the case that growth would accelerate if specific obstacles at the regional level could be alleviated. In the regional category, the ACGF would also require that there be a regional institution to manage the program.