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 Communiqué agreed at the Meetings
(Section D); and the Development Committee Communiqué 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.
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