With the world facing an unprecedented food crisis, the smallest of the three Rome-based agencies of the United Nations — the International Fund for Agricultural Development — has a new president. Álvaro Lario, its chief financial officer and a Spaniard, was elected as the agency’s seventh president on July 7, starting Oct. 1 for a four-year term. He takes over as the agency is being pressured to do more while also facing a cash crunch.
Lario succeeds Gilbert Houngbo, a former Togolese prime minister who is leaving to head the International Labor Organization, in Geneva. Houngbo has led the Rome organization since 2017.
In his acceptance speech to the Governing Council on July 7, Lario vowed to double the agency’s impact on Sustainable Development Goal 1 (eradicating poverty) and SDG 2 (aiming for zero hunger) by 2030. The election was held one day after the release of the 2022 edition of The State of Food Security and Nutrition in the World, a report by the Food and Agriculture Organization (FAO) detailing a grim estimate that as many as 828 million people were affected by hunger in 2021 — 150 million more than in 2019, in the pre-pandemic era.
Ifad, as it’s known, is a financial institution and granting agency specializing in helping the world’s poorest rural farmers. Active in 94 countries with 40 country offices, it often partners with other agencies, including the two other Rome-based UN entities, the FAO and the World Food Program, to expand its reach.
Ifad was founded in 1977 in response to the famines of the early 1970s and received its original financing from OPEC countries that were pressured to recycle petrodollars from the first oil shock into development uses, according to Uma Lele, the author of “Food for All,” a historical review of food and agricultural development agencies. The current top pledging countries include the United States, France, Germany, Canada, Sweden, China and the Netherlands.
Highly regarded for its expertise in working with farming communities, in 2021 the Center for Global Development, a Washington research institute, ranked Ifad as the top global agency for “development cooperation.” The Group of 7 leaders, meeting in June in the Bavarian Alps, emphasized in a statement the important role Ifad plays in increasing food production to deal with global hunger.
Lario takes over as the fund’s 177-member countries want it to do more by not only assisting small-holder farmers but also by building climate-resilient food systems in those communities — improving crop yields, strengthening supply chains and giving a hand up especially to women farmers and youth.
The fund’s finance structure is changing as it strives to find more resources to meet the growing demand for its expertise. Under Houngbo, Ifad became the first UN fund and agency other than the World Bank to achieve public credit ratings. In 2020, S&P Global and Fitch both awarded Ifad AA+ ratings, allowing it to borrow in public capital markets to enhance its work with low- and middle-income countries. Obtaining credit ratings are also central to the fund as it forms partnerships with national development banks.
In June, the agency issued its first sustainable development bond with Folksam, a Swedish insurance and pension fund. The $100 million bond will be used for loans to developing countries “to help small-scale farmers adapt to climate change, access supply chains and markets, and produce more diverse foods,” according to Ifad.
Financed through three-year replenishment pledges from member countries, the most recent one, known as Ifad 12, saw a record $3.8 billion in commitments for 2022-2024. More than half the funding will flow to rural development in sub-Saharan Africa and one quarter to what the agency calls “fragile and conflict-affected states.”
Yet Ifad is losing money. The sunny financial ratings and strong replenishment pledges obscure liquidity constraints that have forced cuts to its core programs of grants and loans and pinched the operating budget.
According to a former senior official who spoke to PassBlue and asked to remain anonymous, financial pressures stem largely from a 2007 Governing Council decision to adopt the International Monetary Fund’s Debt Sustainability Framework along with other multilateral financial institutions. It allows the most-indebted countries to convert Ifad loans to grants. Since 2007, the agency has converted $2.6 billion to grants, losing $397 million in loan-related fees. With an eroding revenue stream, the fund suffered a staggering 2021 net loss of $503 million on income of $117.5 million. During Houngbo’s tenure, Ifad has had to cap disbursements to protect its liquidity.
At Lario’s hybrid press conference as president-elect on July 7, PassBlue asked what steps he needed to take to address the losses. He said that they were due to the nature of the agency’s concessional funding structure to the “most poor countries.”
“Our business model is to lose money,” he added. “Every three years there is a replenishment. If we were not to have a loss, that would mean we are not doing our business.”
In a show of support, Petter Nilsson, Sweden’s deputy permanent representative to Ifad and one of its largest funders, told PassBlue that the agency was not judged on its bottom line. “Loss-making is misleading,” he said. “Yes, it is loss-making. [However] it is the development results we are buying. We don’t call it losses.”
Besides the cash crunch, Lario must also rebuild staff trust in the agency’s senior management team. Under Houngbo, it accelerated a strategy of decentralization, moving personnel from Rome into offices located in the countries that borrow money from Ifad. This policy has led to high staff turnover, and for those that remain in Rome, morale is low. In a first-ever presentation to the executive board in April, the Ifad Staff Association flagged concern for the mental and physical health of employees due to overwork. Staff said that “any additional promises to deliver cannot realistically be met with the existing resources.”
The association also raised concerns regarding the appeals tribunal. Two years ago, Houngbo withdrew Ifad from the International Labor Organization’s administrative tribunal, citing a standard of proof that was too high for Ifad to terminate employees for misconduct. Employee appeals were then moved to the UN Administrative Tribunal. At the April meeting, the executive board supported the staff association and tasked Ifad’s human resources department to “deliver improvements.”
Meanwhile, the UN is holding a series of meetings this month at New York City headquarters to tackle the lack of progress toward achieving the Sustainable Development Goals. Dire setbacks are being attributed to conflicts, climate change and the Covid-19 pandemic. Small-scale farmers, who produce 80 percent of the world’s food, are particularly vulnerable. Food production was already down and hunger rising before Russia further invaded Ukraine in February, according to the World Bank.
The war is expected to push millions of more people globally into acute food insecurity, with nothing to eat. A range of supporters of Ifad say that its work with rural farmers is more important and urgent than ever. Indeed, expectations are high for Lario to turn his commitments into positive results.
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Susanne Courtney is a freelance journalist and writer based in Canada. A former fellow in global journalism at the Munk School of Global Affairs and Public Policy in Toronto, her writing focuses primarily on international affairs, international development and development finance. Recently, she wrote the 2021 State of the Sector Report on Canada’s Impact Investing in Emerging and Frontier Markets.