Memorandum submitted by the Department
for International Development
INTRODUCTION
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).
SECTION A: UK OBJECTIVES AT THE ANNUAL MEETINGS
OF THE INTERNATIONAL MONETARY FUND (IMF) AND WORLD BANK, 2002
THE INTERNATIONAL
MONETARY AND
FINANCIAL COMMITTEE
(IMFC)
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.
UK OBJECTIVES FOR
IMFC
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.
THE DEVELOPMENT
COMMITTEE
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.
UK OBJECTIVES FOR
THE DEVELOPMENT
COMMITTEE
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.
Harmonisation
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.
SECTION B: FOLLOW UP TO THE ANNUAL MEETINGS
OF THE INTERNATIONAL MONETARY FUND (IMF) AND WORLD BANK, 2002
THE INTERNATIONAL
MONETARY AND
FINANCIAL COMMITTEE
(IMFC)
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.
THE DEVELOPMENT
COMMITTEE
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.
SECTION C: JOINT MINISTERIAL STATEMENT TO
THE DEVELOPMENT COMMITTEE BY THE RT HON CLARE SHORT MP, SECRETARY
OF STATE FOR INTERNATIONAL DEVELOPMENT, AND THE RT HON GORDON
BROWN MP, CHANCELLOR OF THE EXCHEQUER
WASHINGTON DC, 28
SEPTEMBER 2002
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.
HIPC
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.
IMPLEMENTING THE
MONTERREY CONSENSUS
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.
MEASURING, MONITORING
AND MANAGING
FOR RESULTS
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.
DEVELOPMENT EFFECTIVENESS
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.
EDUCATION 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.
HEALTH
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.
WATER
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.
POVERTY REDUCTION
STRATEGIES (PRS)
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
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.
ANTI-MONEY
LAUNDERING AND
COMBATING TERRORIST
FINANCING
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.
| 
