Select Committee on International Development Minutes of Evidence


Memorandum submitted by Mr Stephen Pickford, UK Executive Director, IMF/IBRD

THE FLOATING COMPLETION POINT (QUESTIONS 196 AND 197)

  The joint Bank/Fund paper entitled "Modifications to the Heavily Indebted Poor Countries (HIPC) Initiative" (dated 23 July 1999), sets out the purpose of, and rationale behind, the idea of a floating completion point.

What are the advantages of the "floating completion point"?

  The idea of a floating completion point comes from the World Bank's experience with Higher Impact Adjustment Lending (HIAL), introduced in the Africa region in 1995. The objective is to allow the process of debt relief to be speeded up, to increase a country's flexibility in sequencing its reform agenda, and to give the government greater ownership over the reform process. Evidence suggests that outcome-based, rather than time-specific, programmes achieve better policy outcomes in terms of fiscal adjustment, structural reforms, inflation, and debt sustainability[2]. It is intended that floating completion points will create the right incentive for countries to implement growth-enhancing, and poverty-reducing reforms quickly.

Who will set the reform targets and how will they be set? How will this process relate to the PRGF lending facility?

  The intention is that there will be a tripartite process involving the country, the Bank and Fund to determine the reform targets. In preparing its Poverty Reduction Strategy Paper (PRSP), a country will effectively set the framework within which the floating completion point will operate. The challenge will be to define, for each individual country, a small number of key reforms required for durable growth, debt sustainability and poverty reduction, and on which timing of the completion point will depend.

  Over time, PRSPs will also set the framework for all Bank and Fund support in the form of PRGF and IDA supported programmes. All such programmes will need to be consistent with delivering the objectives set out in the PRSP.

Can you provide examples of the types of targets that will be set—eg revenue-raising, poverty reduction, growth rates?

  The International Development Targets (IDTs) will provide the context for countries' Poverty Reduction Strategies. There is general agreement that these IDTs will be made operational within the strategies through setting relevant outcome indicators, for example, for literacy and child mortality rates. Such outcome indicators will be translated into related intermediate indicators which can be monitored in the short and medium term. In the case of literacy, relevant intermediate indicators might include primary enrollment and retention rates. Such an approach will augment the traditional method of relying solely on input indicators, for example social sector expenditure, though such indicators clearly still have a role to play.

Will it be possible for decision and completion point to be reached at the same time for "good" HIPCs (as was originally planned for Uganda)?

  As with all HIPC assessments, timing will be considered on a case by case basis. Staff will consider carefully when assessing each country whether sufficient progress towards implementing its Poverty Reduction Strategy has been achieved by the decision point to warrant bringing the completion point forward.

Mr Stephen Pickford


UK Executive Director, IMF/IBRD

September 1999


2   A study prepared in July 1999 by the World Bank's independent Operations Evalution Depatment reached this conclusion. Back


 
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