FOLLOW UP TO THE ANNUAL MEETINGS OF THE
INTERNATIONAL MONETARY FUND (IMF) AND WORLD BANK, 2003
The Chancellor of the Exchequer, Gordon Brown, and
former Secretary of State for International Development, Valerie
Amos, attended the Annual Meetings of the IMF/World Bank on 21-24
September in Dubai. The Chancellor chaired the International Monetary
and Financial Committee (IMFC) and the Governor of the Bank of
England represented the UK. At the Development Committee, the
former Secretary of State for International Development represented
the UK. The Chancellor and the former Secretary of State submitted
a joint statement to the Development Committee.
The International Monetary and Financial Committee
(IMFC)
The IMFC discussion focussed on the global economy
and financial markets, including the importance of trade for growth
and development; strengthening IMF surveillance and promoting
international financial stability; and accelerating poverty reduction
and strengthening sustainable economic growth in low-income countries.
The Committee also discussed the UK's proposal for an International
Finance Facility (IFF) to generate resources for the achievement
of the Millennium Development Goals.
Global Economy
In the discussion of the global economy the Committee
welcomed the prospects for a steady and strengthening global recovery,
but also stressed the need for more balanced growth and structural
reform to achieve this. We highlighted the priorities of fiscal
consolidation for the US, vigorous structural reform for Europe,
banking and corporate sector reform and ending deflation for Japan;
and ambitious structural and institutional reform in emerging
markets to reduce vulnerabilities. On the issue of trade we reaffirmed
our full commitment to a multilateral rules-based approach to
trade liberalisation and agreed that Horst Kohler and Jim Wolfensohn
would write on behalf of the Committee to all heads of state and
trade ministers on the critical importance to the development
agenda of resuming talks and completing the round. We also warmly
welcomed the Fund and Bank's proposals to provide assistance to
countries addressing the transitional impact of trade reforms.
Surveillance and Promoting Financial Stability
In the discussion on surveillance and promoting financial
stability, we welcomed the recent agreement to increase IMF transparency,
and we identified key areas for Fund surveillance to focus on
in the coming year. These include progress on structural reform,
sustainable fiscal frameworks, balance sheet vulnerabilities,
debt sustainability, and the reduction of global imbalances. The
Committee also voiced support for the objectives of the CCL to
reduce vulnerabilities and provide incentives for sound policy-making.
On crisis resolution, Ministers and Governors welcomed progress
in implementing Collective Action Clauses, supported continuing
work on the Code of Good Conduct, and looked forward to the ongoing
work on transparency and disclosure, aggregation and inter-creditor
equity.
Growth and Poverty Reduction in Low-Income Countries
In the discussion on low-income countries, the UK
stressed the need for continuing efforts to align the PRGF effectively
behind the PRSP approach, the need to review PRGF financing and
for Fund work on reducing vulnerability to shocks. The UK also
welcomes forthcoming work by the Independent Evaluation Office
which will consider the PRSP/PRGF approach. We committee also
emphasised that more progress is needed in the HIPC initiative,
and sought to gain support for additional bilateral debt relief
to be excluded from calculations over topping up at Completion
Point. We will continue to push for changes in the topping up
methodology as well as for full compliance from other creditors
in the initiative.
The Committee discussed the urgency of making faster
progress if the Millennium Development Goals are to be achieved.
Critical to this is the need to increase the level and effectiveness
of donor resources, and we sought to gain broad support for the
UK proposal for the International Finance Facility. In order to
make urgent progress on development financing, the IMFC called
on the IMF to work in cooperation with the World Bank on aid effectiveness,
absorptive capacity, and results-based measurement mechanisms,
and in examining the merits of various policy options and financing
mechanisms, such as an international finance facility. The IMFC
has asked for a report no later than the 2004 Annual Meetings,
and stressed the importance of closely involving emerging markets
and developing countries in work on development financing.
Quotas and Developing Country Representation
The Committee also discussed quotas and strengthening
developing country voice, welcoming the agreed capacity building
measures for the African constituencies, but calling for further
work on quotas and representation, which will be reviewed at the
next meeting. The Development Committee also had a full discussion
of issues relating to developing country voice - see below.
Work of the Independent Evaluation Office
The Committee considered the recent reports of the
Independent Evaluation Office on capital account crises and fiscal
adjustment, and called on the Fund to take forward work in the
light of the reports' recommendations. Key findings and recommendations
of the capital account crisis report include the need to strengthen
financial sector surveillance, improve transparency and for a
comprehensive review of programme design in capital account crises.
The fiscal adjustment evaluation called for clear justification
from IMF staff for the pace and magnitude of fiscal adjustment
and its link to growth projections.
The UK welcomed both these reports, and looks forward
to the forthcoming studies, including on the PRSP/PRGF (with the
Operations Evaluation Department of the World Bank), the case
study on Argentina and an evaluation on IMF technical assistance.
The UK was instrumental in the establishment of the IEO, and we
are pleased with the high quality of its analysis. It now makes
a significant contribution to improving the scrutiny and accountability
of Fund activities.
The Development Committee
There were three key items for discussion at this
year's Development Committee: Supporting Sound Policies with Adequate
and Appropriate Financing; Enhancing Voice and Participation of
Developing and Transition Countries; and a Progress Report on
Trade. The communiqué also addressed a number of other
issues, including the HIPC Initiative, the PRSP approach, global
monitoring of policies and actions to meet the MDGs and the World
Bank's infrastructure action plan.
Supporting Sound Policies with Adequate and Appropriate
Financing
There was general consensus on the urgent need to
scale up efforts if the Millennium Development Goals (MDGs) are
to be met and agreement that this will require enhanced efforts
on the parts of both developed and developing countries and the
international institutions. We welcome in particular the call
from the Development Committee for developing countries to sustain
their efforts to strengthen policies and governance and for developed
countries to support these efforts with more and better aid, debt
relief and improved market access.
The need for the World Bank to continue to monitor
financing shortfalls at the country level was a key theme at the
Development Committee. We are pleased that the UK's proposal
for an International Finance Facility to bridge these financing
gaps was endorsed by many, including in particular developing
countries, and that the communiqué called on the Bank to
work closely with the IMF on development financing, including
options for mobilising the substantial additional resources needed
to meet the MDGs, with developing and emerging market countries
being closely involved. We welcome the Bank and Fund's agreement
to present their findings to the Development Committee at the
Spring Meetings 2004. We also emphasised the importance of paying
attention to the balance between need and performance in making
financing allocations, and will continue to press the Bank on
this issue in the context of the International Development Association
(IDA) 14 replenishment negotiations and the IDA 13 Mid-Term Review.
The Development Committee recognised the need for
all donors to intensify harmonisation efforts at all levels to
enhance aid effectiveness, as highlighted at the Rome High Level
Forum on Harmonisation in February 2003. The UK's message that
aid provision needs to be better aligned with country poverty
reduction strategies was also roundly endorsed. We pressed for
- and achieved - a reference in the Development Committee communiqué
to aid commitments being predictable, long-term and provided,
where appropriate, to finance recurrent costs.
Enhancing Voice and Participation of Developing
and Transition Countries
We were pleased that there was general consensus
at the Development Committee that developing country voice is
an agenda that will require continued action over time on a range
of issues. We welcome in particular the call to the Boards of
Executive Directors at the World Bank and IMF for a progress report
on all aspects of the voice issue at the 2004 Annual Meeting.
We are also pleased that a roadmap outlining current procedures
and next steps for will be considered at the Spring Meetings 2004.
The Development Committee endorsed the progress made
by Directors on enhancing capacity in Executive Directors' offices
and in capitals. We are pleased with the Governors' call for further
work to be undertaken by Bank and Fund staff on capacity-building.
The UK pledged $500,000 for an Analytical Trust Fund for use
by Executive Directors representing sub-Saharan African developing
countries in undertaking independent research and analysis on
policy issues. We will continue to press for further commitments
from other donors and hope that the fund will be up and running
by the end of the year.
The Development Committee urged the World Bank and
IMF to step up their efforts to promote greater openness and transparency,
decentralisation and staff diversity within the institutions.
We welcome this, and believe that changes at the institutional
level could have a significant impact on the effectiveness of
developing country voice.
The Committee also discussed the potential for strengthening
the voice of borrowers in IDA. The Committee recognised that the
upcoming Mid-Term Review of IDA 13 and the IDA 14 replenishment
provide opportunities to enhance borrower participation in IDA
processes and called on developing countries to take up their
full IDA vote subscriptions. This would significantly increase
their aggregate voting share. We welcomed the Committee's call
for Staff to demonstrate further consideration of, and progress
on, these issues, and will support discussions of voice at the
IDA 13 Mid-Term Review in November.
The Committee recognised that it will take time and
effort to arrive at the necessary political consensus on structural
changes at Board level, but emphasised the importance of continuing
our efforts on these issues. We reiterated our belief that a 25th
seat for sub-Saharan Africa on the Boards of the IMF and World
Bank would be an important means of increasing the effectiveness
of developing country representation. We will continue to press
for an increase in the Basic Vote as part of any future revision
of the Articles of Agreement.
Progress Report on Trade
The Development Committee expressed regret at the
set back to multilateral trade organisations experienced at Cancun,
but urged all countries to capitalise on progress made to date
and to put the process back on track as soon as possible. We will
continue to press the World Bank and IMF to work more closely
with the World Trade Organisation (WTO), United Nations Development
Programme (UNDP), the United Nations Conference on Trade and Development
(UNCTAD) and donors. We welcome the consensus that a successful
conclusion to the Doha Development Agenda is crucial to growth,
poverty reduction and achieving the MDGs. We are pleased that
the Development Committee urged the Bank to design its lending
activities to support country-owned trade initiatives, and commend
the Bank and IMF's recent initiative to help countries benefit
from and adjust to trade liberalisation.
Debt relief and HIPC
The Development Committee reconfirmed its commitment
to the objectives, full financing and implementation of the Heavily
Indebted Poor Countries (HIPC) Initiative. It noted the ongoing
discussions on the methodology for calculating topping up at Completion
Point and the continued challenge for some HIPCs to reach Decision
Point. The Committee also urged all creditors to participate in
the Initiative and looked forward to a report by the Fund and
Bank on a forward-looking strategy for debt sustainability in
low-income countries for discussion at the 2004 Spring Meetings.
The UK emphasised that the key challenge in the longer-term is
ensuring debt sustainability while enabling countries to finance
their poverty reduction strategies - this will require continued
progress on the HIPC initiative, as well as new approaches to
future financing. The UK continues to support a range of measures
to ensure that the HIPC Initiative is as effective as possible,
including changing the topping up methodology at Completion Point
to exclude additional bilateral assistance that could provide
US $1 billion additional relief for HIPC countries, and a capacity-building
programme to improve countries' debt management. We are also pressing
for a donor-funded technical assistance facility to provide legal
advice to countries facing litigation.
Implementation Report of Policies, Actions and
Outcomes needed to achieve the Millennium Development Goals
We were pleased with the general consensus that progress
is needed in all areas in order for the Millennium Development
Goals and other related development outcomes to be achieved. The
Committee agreed that the presentation of a full implementation
report at the Spring Meetings will enable it to maintain a strategic
overview of progress on key issues and priorities in the policy
agenda and to reinforce accountabilities. We will continue to
press for assessments of aid quality - particularly progress on
PRSP alignment and donor harmonisation and coordination - to be
included in the monitoring of IFI policies, for example through
the work of the World Bank's Operations Evaluation Department
and the IMF's Independent Evaluation Office.
WORLD BANK GROUP INFRASTRUCTURE IMPLEMENTATION ACTION
PLAN
We were pleased that the Bank Group will scale up
investments in infrastructure within a comprehensive development
approach, but will continue to emphasise that this increased expenditure
must be achieved without returning to indiscriminate project lending.
We welcome the Committee's recognition that the right policy environment,
institutional and maintenance capacity are crucial for ensuring
sustainable infrastructure investments, and will continue to press
the Bank Group to ensure maintenance and management are given
equal emphasis as capacity building.
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