Select Committee on International Development Minutes of Evidence

Memorandum submitted by the Department for International Development


  The Annual Meetings of the World Bank and International Monetary Fund (IMF) were held on 28-29 September in Washington. The Chancellor of the Exchequer chaired the International Monetary and Financial Committee (IMFC) and the Governor of the Bank of England represented the UK. At the Development Committee the Secretary of State for International Development (the UK Governor of the World Bank) represented the UK.

  The first part of this submission (Section A) sets out the UK's objectives in advance of the Meetings. These objectives were circulated to all MPs and to relevant NGOs in mid-September. Two meetings were held with NGOs to discuss the objectives in advance of the Meetings: the first chaired by the Secretary of State in DFID on 19 September, and the second chaired by the Chancellor at the Commonwealth Institute on 25 September. The Secretary of State and Jim Wolfensohn, President of the World Bank, were also present at the latter meeting.

  The second part of this submission (Section B) reports on, and set outs achievements at, the Annual Meetings. A similar note has also been sent to MPs and NGOs. Also attached are: the Joint UK Ministerial statement to the Development Committee (Section C); the IMFC Communique agreed at the Meetings (Section D); and the Development Committee Communique agreed at the Meetings (Section E).



  The proposed agenda for the IMFC focuses on two broad topics: the Global Economy and Financial Markets, including outlook, risks and policy responses; and the IMF and the International Financial System in the Process of Reform, which will include strengthening surveillance, crisis prevention and crisis resolution, the Fund's role in low income countries and combating money laundering and the financing of terrorism. In addition, the IMFC will also consider progress reports on the Twelfth General Review of IMF Quotas, Streamlining Conditionality and Enhancing ownership, and the Independent Evaluation Office.


Strengthening the global economy

  The UK will be seeking to ensure that, given the heightened risks and vulnerabilities arising from the current situation in the global economy, the IMFC remains vigilant and takes positive action to identify and minimise potential vulnerabilities, including further strengthening the framework of internationally recognised codes and standards, particularly in the area of corporate governance.

  We will again emphasise the central importance of strengthening crisis prevention, including enhancing the transparency, authority and independence of the IMF's surveillance; and in providing additional financing to support country programmes where appropriate. We will also stress the importance of the involvement of the private sector in the prevention and resolution of financial crises, including consideration of the IMF's policy regarding access to Fund resources, and taking forward work on the complementary contractual and statutory approaches to sovereign debt restructuring.

The role of the IMF in low-income countries

  The UK will reiterate our firm commitment to, and the key role of, the IMF in achieving the Millennium Development Goals, and building on progress to implement the Monterrey Consensus and the Johannesburg plan of implementation. We will continue to press for further progress on the PRSP and PRGF approach to poverty reduction; on public expenditure management; and on poverty and social impact analysis. We shall continue to emphasise the need for the Enhanced HIPC Initiative to provide genuine debt sustainability for all eligible countries, in both the IMFC and the Development Committee, through ensuring the full financing of the Initiative.

  We will also underscore the importance of open trade for a durable economic recovery. We welcome the Doha-Johannesburg commitment to free market access for the exports of least developed countries and will continue to stress the need to address agricultural subsidies in advanced economies.

Anti-Money Laundering and Combating the Financing of Terrorism

  The UK welcomes the progress made by the IMF and World Bank. The IMFC will review progress against the action plan set out in the its November communique and we will emphasise the need for the international community to continue working together, in particular to ensure the provision of sufficient technical assistance.

Other issues

  We welcome the progress that the IMF has made in its review of conditionality and will continue to emphasise the importance of streamlining and increased collaboration with the World Bank. We will also welcome the first report from the Independent Evaluation Office on prolonged use of Fund resources, and look forward to future reports.


  This year's Development Committee has two key themes: Implementing the Monterrey Consensus (sub-divided into "Better Measuring, Monitoring and Managing for Results" and "Development Effectiveness and Scaling Up"); and Progress under the Heavily Indebted Poor Countries (HIPC) Debt Relief Initiative.

  In addition, progress reports will be received on: Poverty Reduction Strategy Papers; Multilateral Development Banks' Harmonization of Operational Policies, Procedures and Practices; and Anti Money Laundering Action Plan and Fighting Terrorist Financing for comment in Ministerial statements.

  The Chancellor and the Secretary of State will submit a joint written statement to the Development Committee highlighting UK views for the discussion.


Implementing the Monterrey Consensus

  We will be pressing both sides of the partnership to deliver the Monterrey Consensus—developing countries to put in place sound policies and good governance, developed countries to deliver increased and more effective development assistance. The UK will press other donors to commit to at least match the EU pledge to increase development assistance to an average of 0.39 per cent by 2006 and increasingly to focus their aid towards the poorest countries. We will also seek agreement on the need for coherent national policies towards developing countries. We will pressing the World Bank and IMF to deliver on their commitment to identify innovative and pragmatic ways in which they can promote the greater participation and voice of developing countries in their decision-making, and to present a paper for discussion at the Spring Meetings, 2003.

Better Measuring, Monitoring and Managing for Results

  We will seek agreement on the importance of a coherent international information system, which delivers consistent and comparable data and reduces the data demands on developing countries.

  We will continue to press for greater Bank resources to build both capacity and demand for statistical analysis in-country to measure results and so to drive better policy formation. We will also seek to ensure that the Bank has strategies for dealing with getting "good results" in difficult situations for poor performers and for countries under stress.

  We will seek endorsement of a focus on monitoring results at a country level, which recognises the multiple influences on what those resources can achieve, rather than on the attribution of success to each agency or to individual projects. Development partnerships, private sector investment and the country's policies all play a role in achieving results.

Development Effectiveness

  The lessons of development effectiveness, including aid untying and harmonisation, are well known; the UK will now be pressing strongly for better implementation of these measures. We will be urging donors and agencies to focus on the poorest countries, finance recurrent costs and provide long-term commitments, which will allow developing countries to plan and budget their resources more easily. Fast Track programmes, while providing a welcome effort to mobilise increased domestic and international support, must remain adaptable to each country's individual needs and must not distort on-going country programmes. We will call for any scaling-up of activities to contain long-term financing and support commitments.

Case Studies

  Education—We will urge greater analytical support, followed by financial resources, for the five countries in the Education Fast Trust that together have 50 per cent of the world's out of school children.

  Health—We will urge greater collaboration between the Bank and the World Health Organisation to identify key constraints and innovative solutions to deliver the Millennium Development Goals.

  Water and Sanitation—We welcome the World Summit on Sustainable Development's agreement to a target to halve the proportion of people without access to basic sanitation by 2015. In scaling up action, we will insist on due attention being given to the impacts on the poorest members of society.

Heavily Indebted Poor Countries Initiative

  We will continue to emphasise the need for full financing of the Enhanced HIPC Initiative to provide genuine debt sustainability for all eligible countries. We will press for concrete pledges from donors to fill the c. $1bn financing gap in the HIPC Trust Fund from the G7 and non-Paris Club creditors. We remain convinced that the rules on topping-up HIPC debt relief at Completion Point need revision. We will also press the Bank and the Fund for more advice for HIPC countries on more realistic debt sustainability analysis to ensure that countries exit the Initiative with a sustainable debt level.


  We will press for greater donor flexibility to harmonise aid behind poverty reduction strategy priorities, and to harmonise procedures around government systems to increase national ownership and domestic accountability. We will press the Bank and Fund to lead harmonisation efforts to reduce the burden on developing countries and other donors to set out their harmonisation plans at the forthcoming High Level Forum.

Poverty Reduction Strategy Papers

  We welcome progress made by developing countries to make more effective and accountable use of public and donor funds. We will urge donors to align their programmes behind PRSPs and with country cycles and will call for an IMF and World Bank report on their collaboration in this regard by the time of our next meeting. We will also urge the Bank and Fund to meet their commitment to analyse the poverty and social impact of major reforms with developing countries.



  At the Sixth Meeting of the IMFC, Ministers held a thorough discussion of the world economic outlook, including the risks and vulnerabilities to the global recovery. They agreed that the global recovery was proceeding, although at a slower pace than expected earlier this year. The Chancellor impressed on the meeting the need to remain vigilant about the risks to growth further ahead and to stand ready to act decisively to sustain and strengthen the economic recovery around the world. This included action in the US and other advanced economies to strengthen corporate governance, accounting and auditing in order to underpin confidence; in Europe, continued reforms, particularly in labour and product markets; and in Japan action to restructure the banking and corporate sectors. The Committee also discussed the current economic situation in emerging markets, recognizing that growth in Asia had picked up strongly, but that several economies in Latin America continued to face difficult conditions. The Committee emphasized the importance of the global economic recovery to developing countries and the need for sustained international efforts to fight poverty.

  The IMFC also considered the IMF's policy for crisis prevention and resolution, its role in low-income countries and the combating of money laundering and the financing of terrorism:

Crisis prevention and resolution

  Strengthening crisis prevention and enhancing Fund surveillance are central tasks facing the Fund, and the committee welcomed the recent review of surveillance and the progress made. However, more progress is needed in improving the framework for assessing debt sustainability, ensuring that there is sufficient objectivity in surveillance in programme countries and promoting codes and standards of best practice. The UK continues to press for greater independence in Fund surveillance from the Fund's lending operations, and for a broader take up by Fund members of codes and standards. At the meetings the UK announced its intention to undergo assessment against the codes and standards covering accounting and auditing, corporate governance and insolvency and creditor rights.

  On crisis resolution, the UK was pleased to see agreement on the need to continue to work on a two-track approach to improve the process of sovereign debt restructuring (contractual and statutory). The Committee encouraged the official community, the private sector and sovereign debt issuers to continue to work together to develop collective action clauses and to promote their early inclusion in international sovereign bond issues. On the statutory approach, ie the international bankruptcy procedure, the Committee called on the IMF to work up a concrete proposal to be considered at the Spring Meetings.

The IMF's role in low income countries

  In the discussion on low-income countries, ministers agreed on the need to build on the progress of Doha, Monterrey and Johannesburg, and the continuing vital contribution of the Fund and the Bank towards the achievement of the Millennium Development Goals, including through support for the Poverty Reduction Strategy Paper (PRSP) approach, financial assistance under the Poverty Reduction Growth Facility (PRGF) and debt relief through the Enhanced HIPC initiative. The UK emphasised the need to make PRSPs work more effectively, for the IMF to discuss macroeconomic choices, to make Poverty and Social Impact Analysis (PSIA) more systematic, and for the IMF and World Bank to improve and streamline their support for Public and Financial Management and Accountability. Prior to the meetings, the UK pressed for a commitment to the full financing of the HIPC initiative, pointing out that the shortfall in the HIPC trust fund was up to one billion dollars. We called on donor governments to make firm pledges and contributions as a matter of urgency. By the end of the meetings, around 15 countries had pledged support. We were also pleased to see agreement to build on the outcome of Doha, on the need for progress to enlarge market access for developing countries and to phase out distorting trade subsidies.

Combating money laundering and the financing of terrorism

  The UK was pleased to see the progress by member countries, the IMF and the World Bank against the action plan agreed in Ottawa last year on combating money laundering and the financing of terrorism—including adding of the Financial Action Task Force recommendations to the list of standards and codes and the proposed 12-month pilot programme of assessments.

Other issues

  On other issues, the Committee welcomed the adoption of new guidelines on conditionality. The UK is pleased to see these revisions, and the emphasis placed on streamlining conditionality. It will now be a matter of applying these principles evenly across Fund programmes. We continue to press the World Bank to undertake a similar review. Ministers discussed the first report of the Independent Evaluation Office on "Prolonged Use of Fund Resources". The Independent Evaluation Office is an important step forward in improving the accountability of the IMF. Its first report carries important lessons for the Fund, not least on the need for independence of Fund surveillance from its lending operations. We will expect Fund management to respond appropriately.

  The Committee noted the ongoing discussions under the Twelfth General Review of Quotas. It also recommended an early implementation of the Fourth Amendment for a special one-time allocation of SDRs.

  In concluding the meeting, the Chancellor referred to the important contribution made by IMFC deputies in their meeting on 9 September at the Treasury in London. This meeting, chaired by Ed Balls, the Chief Economic Adviser, helped prepare for the ministerial meeting in Washington.

  The IMFC communique is attached at Section D.


  This year's Development Committee had two key themes: Implementing the Monterrey Consensus (sub-divided into "Better Measuring, Monitoring and Managing for Results" and "Development Effectiveness and Scaling Up"); and Progress under the Heavily Indebted Poor Countries (HIPC) Debt Relief Initiative. The Chancellor and the Secretary of State submitted a joint written statement to the Development Committee highlighting UK views, which is attached.

Implementing the Monterrey Consensus

  There was general consensus around the need to convert ideas arising from the Financing for Development Conference in Monterrey—as well as the Doha Trade Meeting and the World Summit on Sustainable Development in Johannesburg—into concrete action. We welcome in particular the acknowledgement of the key role that trade can play in development and the call on developed countries to do more to open their markets and eliminate trade-distorting subsidies. We also pressed the World Bank and IMF agreed to deliver on their commitment to broaden and strengthen the participation of developing countries in their decision-making, and so we were pleased that they agreed to present a paper on this for discussion at the Spring Meetings, 2003.

Better Measuring, Monitoring and Managing for Results

  The Development Committee endorsed the proposed approach to measuring, monitoring and managing for results, but we will continue to urge the need to focus on a country-based approach, which avoids top-down performance targets or results frameworks. We pressed for—and achieved—a reference to the need to work closely with the United Nations in measuring progress towards the Millennium Development Goals in the DC communique.

  We were pleased that the Development Committee urged the Bank to work closely with other development partners and donors to align support around national development strategies, rather than duplicating work and so overburdening countries. The Development Committee explicitly recognised that aid will be more effective where is it well co-ordinated and aligned with country-owned strategies. We will be monitoring the Bank and Fund, as well as other donors, in country to ensure that this behaviour is being translated into action and so reducing the transaction costs for developing countries.

  Several Governors mentioned the need to build capacity in statistical analysis and monitoring and evaluation. The Development Committee agreed and asked the Bank to report on increased and co-ordinated donor support in this area at the next Development Committee meeting in Spring 2003. Through the year, we will also seek to ensure that the Bank develops strategies for getting "good results" in difficult situations for poor performers and for countries under stress.

Development Effectiveness

  The UK's message of implementation of agreed strategies, rather than big, new conferences was shared by many and roundly endorsed. The focus was on better implementation of these agreed strategies. A large number of Governors spoke in favour of long-term commitments and finance for recurrent costs in development programmes, though mention of this did not appear in the communique.

  We welcome the focus on country-owned Poverty Reduction Strategy Papers and the call for the Bank and Fund to increase their co-operation in a number of key areas, including: analysis of the sources of growth, conditionality, support to public expenditure management, investment environment and poverty and social impact analysis. We would have liked a progress report on how they will collaborate in these areas and progress to date, but we will continue to monitor progress anyway during the year.

  The Development Committee recognised the need for all donors to intensify harmonisation efforts at all levels to enhance aid effectiveness before and beyond the forthcoming High Level Forum in Rome in February 2003.

Heavily Indebted Poor Countries Initiative

  The full financing of the Enhanced HIPC Initiative was a key theme at the Development Committee. The UK pledged US$95 million plus the UK share of any European Development Fund contribution. We welcomed pledges from the US (US$230 million), Germany (Euro100 million) and Sweden (US$21 million) and the commitment of most others to retain their previous share of Trust Fund contributions at a further meeting in October.

  In addition to the financing needs, the Development Committee considered other aspects of the HIPC Initiative. The Committee called on all non-participating creditors to join the Initiative and asked the Bank and Fund to review the difficult issues of non-participating creditor litigation against HIPC countries and of HIPC to HIPC debt relief.

  We remain convinced that the rules on topping-up HIPC debt relief at Completion Point need revision, but were not able to persuade others (notably the US and Japan) of the case for revision. At present, Debt Sustainability Analysis is calculated at Completion Point to include any additional, voluntary, "beyond HIPC" relief that has been provided by countries such as the UK. We believe that this additional relief should be truly additional. In response, we, with other like-minded countries, will write to the Bank and Fund informing them of our decision to delay additional "beyond HIPC" relief until after the Debt Sustainability Analysis at Completion Point has been undertaken.

  The final communique of the Development Committee is attached at Section E.



  At an unprecedented series of international summits over the past two years, the international community has tackled the challenges of poverty elimination head on. The Millennium Assembly, the trade round at Doha, the Financing for Development conference in Monterrey and, most recently, the World Summit on Sustainable Development have set out a strong basis for action.

  In Johannesburg earlier this month, Prime Minister Tony Blair spoke for many leaders when he said, "what is truly shocking is not the scale of the problems; the truly shocking thing is that we know the remedies. It is not rocket science, it is a matter of political will and leadership."

  As Governors of the World Bank and IMF, it falls to all of us to unlock that political will and show our leadership. This is our opportunity to show that we can meet the challenge of the Millennium Development Goals, act on our declarations and deliver on our promises. As Jim Wolfensohn has said, "Implement!"

  The Development Committee's agenda this year places a welcome focus on implementation: progress in implementation of the Heavily Indebted Poor Countries (HIPC) Initiative and implementation of the Monterrey Consensus.


  Taking HIPC first, this is an area where important progress has been made. Over US$62 billion in debt relief has been agreed for 26 countries, and the result is that priority social spending will rise by over US$2 billion a year in these countries. But the benefits of HIPC go beyond this, in consolidating the commitment to poverty reduction and good governance. The HIPC Initiative is an important example of what can be achieved with political will.

  However, these achievements are at risk if we do not act to ensure that HIPC delivers sustainability. This requires a number of further actions from the international community. First, we must ensure that the HIPC Initiative is fully funded. To help meet a financing gap of up to US$1 billion, the UK intends to contribute the same 12 per cent share of the bilateral total as it did in the first pledging round, plus our share of the EC contribution. We urge our colleagues—both in and beyond the Paris Club—to make similar pledges.

  Second, the debt sustainability analyses prepared by the Bank and Fund, as well as those prepared by HIPC countries themselves, must be realistic and robust to ensure that countries exit the Initiative with a sustainable debt level. Where, despite sound economic management, debt levels are unsustainable at Completion Point the rules on topping-up must be sufficiently flexible to redress the problem.

  Third, we must recognise that HIPC countries continue to be vulnerable to exogenous shocks, such as falls in commodity prices. The on-going sustainability problems affecting some HIPC countries demonstrate why we need to change the rules on topping up at Completion Point, to ensure that the voluntary additional relief provided by some bilateral creditors above and beyond the agreed relief in the HIPC framework is not included in the calculations. This would help define more clearly the burden sharing between all creditors, both bilateral and multilateral, in support of the HIPC Initiative. Moreover, it would provide an additional degree of comfort for HIPC countries confronting the twin problems of weaker global growth and lower commodity prices.

  Finally, we must address the problem of those creditors who are not delivering their share of relief, and do all we can to help countries secure the relief that they need. To this end, we urge the Bank and Fund to develop proposals on options for HIPC countries to obtain technical assistance to facilitate the resolution of disputes. One option would be for a window in the HIPC Trust Fund to pay for this, employing legal expertise as needed and drawing on the experience of legal departments in the Bank and Fund. We should also consider ways to enable the IDA commercial buyback facility to purchase more commercial debt. This will be an important consideration for some HIPCs yet to reach Decision Point.


  Financing for Development in Monterrey established a compact between developing and developed countries. Sound policies and good governance will be matched with increased and more effective development assistance. We welcome the great strides being made by many developing countries in designing and implementing their own poverty reduction strategies (PRS). In response, the UK's aid budget will be increased from £3.4 billion in 2002-03 to £4.6 billion in 2005-06. Within this, we are also aiming to increase the proportion of our bilateral programmes directed towards low-income countries from 78 per cent to 90 per cent by 2006. And we recently agreed our largest ever contribution to IDA during the thirteenth replenishment, committing up to £1 billion over three years. We would urge our partners to make similar commitments to increasing the volume and efficiency of their development budgets as promised at Monterrey.

  We recognise the scale of the global resources that will be needed to achieve the MDGs and will continue to explore innovative proposals to increase development financing. We would urge our partners to make similar commitments to increasing the volume and efficiency of their development budgets and to look at innovative ways of maximising these resources, including discussion of better financing mechanisms.

  But Monterrey also affirmed clearly that poverty reduction requires more than just development assistance. Our policies towards developing countries need to be coherent. For example, promoting agricultural projects will not lead to development while we maintain high tariff barriers against agricultural products from developing countries. Nor will capacity building projects for health professionals build long-term capacity for developing countries, while medical practices in our own countries actively recruit trained medical staff from these countries.

  In the same vein, there is a divergence between the lessons we have learned about the importance of country ownership of development strategies, while developing countries remain under-represented in the international financial institutions that decide the policies. The UK Government is committed to helping to build an open and accountable international system in which developing countries have an effective voice. The Monterrey Consensus encouraged the World Bank and IMF to consider the participation of developing countries in their decision-making, and to identify innovative and pragmatic ways to promote greater participation. We urge Bank and Fund staff to undertake this work and bring an issues paper to our next meeting in Spring 2003.

  The Monterrey Consensus also called for action from developing countries to commit to sound policies and good governance; tackling corruption, investing in people and establishing an investment climate to attract private capital. In Africa, we welcome progress made in taking forward NEPAD. One of the key aims of NEPAD is to change the nature of the relationship between Africa and development nations from the old style donor-recipient relationship to a partnership based on mutual obligations and responsibilities. The UK strongly supports NEPAD.

  The UK also urges other donor and developing countries to join in the new work to increase transparency in extractive industries. With international support, this initiative will help increase the accountability of developing countries to their citizens for the revenues they earn from natural resources.


  As the Bank develops its framework for managing for results, we will aim to ensure that recipient countries remain the focus of all efforts. It is only with streamlined conditionality that countries will have the space to focus on their results and performance frameworks, and only then can they develop clear lines of accountability to their citizens. We welcome progress in the Bank's decentralisation process but urge that sufficient authority to negotiate with national authorities and co-operate with other donors needs to be delegated.

  The internationally agreed development targets, the Millennium Development Goals (MDGs), set the focus for all our work. The 48 MDG indicators provide a yardstick against which to measure our global progress, although we feel that a smaller, core set would provide more focus. Currently, different international organisations are responsible for collecting and reporting different data sets with little co-ordination. This can result in inconsistent and incomparable data, which is confusing and misleading and an unnecessary burden on developing countries. It is most important, therefore, to reach agreement on a protocol of intermediate indicators (including definitions and a framework) to assist developing countries in establishing their own indicator systems that generate consistent and comparable data.

  To monitor progress in relation to the MDGs, we will all need to invest in the statistical capacity of developing countries. Greater statistical and analytical capacity has clear benefits both for donors wanting to measure outcomes and for developing countries to measure the effectiveness of their policies and increase accountability to their citizens.

  This focus on monitoring results at country level enhances the PRS approach. The UK is firmly committed to collaborating with others in support of nationally led poverty reduction strategies with a focus on the outcomes achieved, rather than trying to isolate and attribute the success of any one particular project to our inputs. We urge the Bank to put more effort into collaborating with other donors in this way.


  Our discussion at the Spring Meeting of the Development Committee highlighted the key lessons of development effectiveness studies. These include: support for the PRS approach and pro-poor budgets, untied aid, a focus on good policies and institutions in the poorest countries, full co-ordination and harmonisation with other agencies, and the need to disconnect aid allocations from improper political considerations. These lessons are now well understood, but implementation lags behind agreements on best practise. As we have said, our focus must now be on implementation of these lessons in all our programmes. The UK has unilaterally untied all development assistance and is increasingly providing flexible budget support to back up PRS plans. We agree with Bank staff in their conclusion that long-term commitments and support for recurrent costs are essential to allowing developing countries to plan and budget their resources effectively. For those countries that are struggling with lack of capacity, conflict or poor governance, we must also be flexible in our response, understanding the challenges and being prepared to adapt our approach. There is no set formula that works for all.


  The Education Fast Track Initiative has provided a focus on education and some valuable pressure to ensure that this important goal is reached. However, we remain concerned that the Initiative should not attempt to find a quick-fix solution, which will inevitably fail. We need to drive forward progress according to each country's needs and level of commitment to Universal Primary Education. We must include support for education reform in poverty reduction strategies to ensure that progress is comprehensive and sustainable.

  We believe particular attention should be given to the five countries that together account for over half of the world's children out of school: there is great scope for the Initiative to incorporate some difficult analytical work which will lead to an improvement in the policy environment for these countries and which must precede the delivery of extra resources.

  We are pleased that agreement was reached that commitments should be long term and predictable in order to finance recurrent costs for education and that donor approaches should be harmonised. This is very much the UK's approach. At the Spring Meetings we must review progress on both developing country plans and donor countries' promises of support to ensure that we move forward together. We call on the World Bank to report back on the progress, with particular emphasis on the five most challenging countries.


  More needs to be done to improve the capacity of health systems to provide good quality, appropriate and affordable services. We call on the World Health Organisation and World Bank to work together to identify—country-by-country—the capacity gaps and financing efforts to build effective, poverty focused health systems as part of their poverty reduction strategies. An initial report should be presented at the Spring Meetings.


  Following Johannesburg, we must build further momentum towards achieving the MDGs in water and sanitation through the PRSP led processes; addressing the broader issues of management of water resources for livelihoods, economic growth and conflict avoidance; and increased delivery of water and sanitation services to the poor, including promoting an appropriate role for the private sector.

  We look forward to a successful Third World Water Forum in Kyoto that reviews progress and actions recently agreed at Johannesburg and in the paper on financing of water being prepared by Michel Camdessus. It must also set a framework for country-by-country assessment of finance gaps and necessary policy reforms.


  The PRS process has provided a fundamental shift in the way development agencies do business by putting the recipient countries in the driving seat. We know that this is essential for effective implementation of reforms and poverty reduction strategies. It is time for donors to act on their commitments to this process and align their programmes behind PRS plans and country cycles.


  Harmonisation has a clear development imperative by promoting national ownership and stronger domestic accountability. We welcome evidence of progress, for example, the Bank's decision to participate in pooled financing arrangements in Sector-Wide Approaches (SWAps). But the Bank itself needs to do more. It should lead by example to ensure its own work is harmonised with countries' own poverty strategies and with other donors' systems. The various initiatives towards harmonisation must complement rather than duplicate each other.

  Greater collaboration between the Bank and the Fund will be especially important in two key areas: Public Financial Management and Accountability (PFMA) and Poverty and Social Impact Analysis (PSIA). The effective and accountable management of expenditure is critical both for national accountability and to reassure donors that their contributions will affect poverty outcomes. We welcome the Bank and Fund's work on PFMA, but fear that multiple and overlapping approaches will overburden developing countries. The Bank, with the Fund, should substantially strengthen and harmonise their support to a range of low-income countries in order to assist them to develop ambitious action plans, within their poverty reduction strategies, to achieve substantially improved public financial management and accountability, including target dates to achieve international benchmarks. The Bank and Fund should consult with other stakeholders in the design of benchmarks in this exercise, eg with the Economic Commission for Africa in the context of NEPAD.

  PSIA is crucial to ensuring that major reforms to be undertaken will benefit stakeholders and achieve real poverty reduction. It is critically important that the Bank and Fund undertake these analyses in a way that not only builds national capacity for PSIA analysis, but also actively transfer ownership of the analytic agenda underpinning major reform policies to national stakeholders. We request separate reports on Bank/Fund collaboration (and any obstacles to further collaboration) on PFMA and PSIA by the time of our next meeting.

  The technical work on harmonisation being undertaken will be of no value unless it leads to improved aid delivery. We therefore give our full support to the vision of the High Level Forum in Rome early next year as being to encourage donors to apply emerging good practice. We also support the proposal that this be achieved by a Chairs' statement which includes agreed principles, a general endorsement of the technical work, and agreement that there should be agency specific voluntary commitment to implement these and a mechanism for monitoring and reporting the results.


  We welcome the achievements of the Bank and Fund, in collaboration with the Financial Action Task Force, in developing an agreed framework for reviewing countries' progress on combating money laundering and the financing of terrorism. There have been many difficult issues to address, but it has been a vital task. The agreed framework is a signal that all the agencies involved recognise the importance of tackling these issues. We must now ensure that implementation follows through in the same spirit of collaboration.

  We welcome too the initiative of the Bank and Fund in leading the way in establishing arrangements to coordinate technical assistance in this area. We endorse the use of Financial Action Task Force-style Regional Bodies as the main coordinating points in each region. The global level forum that the Bank/Fund has established will help to ensure that donors can quickly gain a strategic picture of needs region by region, and make their decisions accordingly.

  We now have an unprecedented international consensus that all our work should focus on achieving the MDGs and agreement on how we can best increase our effectiveness. We must now move to implement the agreed consensus and put in place more effective ways of measuring progress country by country, year by year, so that we can be held accountable for our joint efforts.

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