Annex FOUTCOMES OF THE 2006 ANNUAL MEETINGS OF THE WORLD BANK AND THE INTERNATIONAL MONETARY FUND (IMF)1. The Development Committee and IMFC Communiqués record the agreed outcomes of those meetings. This note highlights outcomes from the UK perspective.
The Development Committee 2. There were two items for discussion at this year's Development Committee: the Bank's Governance and Anticorruption strategy; and the Bank's engagement with Middle Income Countries.
Governance and Anticorruption 3. The UK helped secure broad agreement that more work needed to be undertaken on developing the Bank's Governance and Anticorruption strategy and that this should be taken forward under the oversight of the Bank's Executive Board. The Committee agreed that good governance is fundamental to eliminating poverty, that corruption is one product of bad governance, and that governance and corruption are not synonymous. It therefore welcomed the Bank's engagement in governance and anticorruption work and agreed that the principal objective should be to help develop capable and accountable states to deliver services to the poor, promote private sector led growth and tackle corruption effectively. The Committee recognised that the paper set out a framework for continued Bank engagement in this work and urged the Bank to consult widely in developing this strategy. In particular, the Committee agreed that: countries must own and lead their own fight against corruption; the Bank must work with governments rather than round them; the Bank must work with other donors, multilaterals, civil society and the private sector, taking into account the specific situation in each country; and that there must be clear division of responsibility among donors. A progress report will be prepared for the Spring Meetings next April.
4. The Committee also agreed that investigations by the Bank's Department of Institutional Integrity (INT) should be completed as quickly as possible, and that a review of INT should be conducted to make its operations more transparent.
Middle Income Countries (MICs) 5. The Development Committee strongly endorsed the statement of the Bank's corporate role and mission to eradicate poverty in its partnership with MICs. The Committee welcomed the Bank's proposals to deliver more flexible country partnership strategies reflecting diverse country circumstances; to reduce the cost of doing business with the Bank by streamlining internal Bank procedures; to simplify loan pricing and make its products more competitive; to develop new ways to help countries facing external shocks; to increase provision of fee based expert services, unbundled from lending; to continue to work towards scaling up Bank Group lending to sub-national entities; and to better exploit synergies between the different arms of the Bank Group.
6. The Committee emphasised the importance of increased use of country systems and encouraged the Bank to give greater emphasis to regional and global public goods in areas where it has a comparative advantage. There was also agreement that the Bank should cooperate more deeply with regional development banks and other development partners in their engagement with MICs.
7. Although not discussed by the Committee as separate agenda items, the UK also progressed its objectives on the following issues at the Annual Meetings: Climate Change8. The Committee welcomed the progress made in developing a Clean Energy Investment Framework, including the review of the adequacy of existing financial instruments, and there was agreement that the challenges posed by climate change require sound country energy policies and regulatory frameworks. There was broad support for the Bank's approach in addressing the three inter-related issues of :(i) energy for development and access to affordable energy for the poor; (ii) the transition to a low carbon economy; and (iii) adaptation to climate change. The Committee recognised lack of access to energy as an acute problem in many low income countries, especially in Sub Saharan Africa, supported the Action Plan for improved energy access and urged donors to provide additional funding and other assistance required.
9. The Bank was encouraged to work with the regional development banks, United Nations agencies, the Global Environment Facility (GEF), the private sector and other interested parties to maximize the use of existing instruments and, in close coordination with the GEF, to continue to explore financing options to support investment in clean energy for development.
Education10. The Committee welcomed the progress report on the Education for All-Fast Track Initiative (EFA-FTI), and the contribution it is making to increasing primary school completion rates. The Committee noted that the initiative offers a promising approach to donor harmonisation and scaling up at the sectoral level and recognised the need to expand the initiative to larger countries and fragile states. The Committee also called for predictable and long term funding for this initiative, including domestic funding.
11. The Chancellor of the Exchequer and the Secretary of State for International Development participated in a side event on education hosted by the World Bank President and co-chaired by the President of the African Development Bank. The event was well attended, with many African Ministers present, and generated strong backing for the long term education plans presented by 17 African countries led by Ghana and Nigeria. President Wolfowitz gave his warm support to the plans; the Dutch announced that they would be spending €640 million per year on education by 2007, and that they would increase their 2006 contribution to the FTI Catalytic Fund by €100m (to €150m) and maintain that higher level of support in subsequent years; and the Secretary of State announced £150m for Mozambique's education plan over 10 years. In summing up the meeting, President Wolfowitz set out that the next step should be a donor conference in early 2007 to take forward discussion of financing, implementation and delivery issues.
Trade and Aid for Trade 12. The Committee noted that the de facto suspension of the Doha negotiations represents a setback in the effort to make more rapid progress towards achieving the MDGs. It.called upon all World Trade Organisation (WTO) members to avoid backsliding and provide trade ministers with the necessary flexibility to resume the negotiations by the end of the year. The Committee also called on the Bank and the Fund to continue their global advocacy role on trade and development, and to integrate trade into country programmes.
13. The Committee reiterated its commitment to expanding the funding and strengthening the mechanisms for Aid for Trade but recognised that Aid for Trade is not a substitute for trade liberalisation.
14. The UK co-hosted a roundtable on Aid for Trade, which succeeded in raising the profile of trade issues among the development community: over 100 people heard Pascal Lamy (Director General of the WTO) stress the importance of a successful outcome to the Doha negotiations and of Aid for Trade; Mauritius and Rwanda presented their trade reform strategies and the chairs of the WTO Task Forces on Aid for Trade, and the Integrated Framework gave updates on their work. The UK and Finland noted their readiness to increase Aid for Trade funding and the US said they would honour their commitments.
World Bank Conditionality 15. In other negotiations during the Meetings, the Bank agreed to produce by November a further, more detailed report on the implementation of its conditionality policy over the last year. At the 2005 Annual Meetings the Development Committee endorsed a review of Bank conditionality and the new 'good practice principles', which reaffirmed and strengthened the Bank's commitment to ensuring government ownership of programmes financed by the Bank and to avoid imposing policy choices, such as privatisation and trade liberalisation, on developing countries. The report will assess how the Bank has changed its practice on conditionality and identify areas where further efforts will be needed. It will inform the Secretary of State's decision on whether to release to IDA the £50m that remains contingent upon satisfactory Bank progress on conditionality (and on working more effectively with other donors).
Scaling Up Aid 16. We welcome the Committee's call for donors to deliver on their commitments to provide 0.7 percent of Gross National Income as official development assistance (ODA), and for the substantial increase in the volume of ODA to be delivered in a predictable manner. Ministers also called on the Bank to deliver on its commitments to scaling up and urged developing countries to prepare clear, costed programmes for using scaled up aid for poverty reduction.
17. The Committee noted the country-based 'results and resources meetings' approach to facilitate scaling up aid now being piloted in several African countries and welcomed the launch of the International Financing Facility for Immunisation and the International Drug Purchase Facility.
Debt 18. We welcome the Committee's call for donors to meet their commitments to make the Multilateral Debt Relief Initiative (MDRI) and the Heavily Indebted Poor Countries (HIPC) Initiative additional to other aid flows. Ministers emphasised the importance of the Joint Debt Sustainability Framework of the Fund and the Bank for low-income countries in helping ensure that new borrowing in post-MDRI countries does not undermine their long-term debt sustainability. They called on all multilateral development banks, bilateral donors, export credit agencies and commercial creditors to adhere to the framework.
The International Monetary and Financial Committee (IMFC) 19. The Chancellor chaired a successful IMFC meeting which focussed on addressing the risks to global growth currently and strengthening the governance and function of the IMF for the long term.
Governance of the IMF 20. The IMFC meeting took place immediately before finalisation of the governor's vote on a resolution to reform and strengthen the governance of the IMF. All members of the Fund recognised the importance of governance reform to safeguard and enhance the Fund's effectiveness and credibility. The approval of that resolution on 19 September by a majority of over 90% of the voting power of the membership saw the implementation of the first step in a reform process. When complete, this reform should ensure that the governance of the Fund more accurately reflects the changing weight of countries in the global economy and strengthens the voice and voting power of low income countries.
21. The discussions in the IMFC confirmed the intention of all members of the committee to aim for a successful conclusion to complete this programme of reform and meet both the objectives set for the reform by the Annual Meetings of the IMF in 2008.
World Economy22. The Committee discussed the global economy focusing on the increasing risks to global growth. Ministers identified particular policy challenges which the IMF should focus on in the coming months:
23. Ministers welcomed the Managing Director's multilateral consultation to support the agreed policy strategy for resolving global imbalances of increased fiscal consolidation in the US and Japan; accelerated structural reform in Europe and Japan; and increased domestic demand in emerging Asia, with greater exchange rate flexibility. They looked forward to possible future consultations on the issues of multilateral concern.
24. In addressing the challenge of high and volatile prices in world energy markets, Ministers continued to attach importance to require further action to tackle supply and demand imbalances, including the need for further new investment in production and refining capacity, closer dialogue between oil producers and consumers, improved quality and transparency of oil data and the consideration of new incentives to encourage energy conservation and alternative sources of energy.
Trade and Globalisation25. Ministers lent strong support to the Head of the WTO and reinforced the importance that they attach to a successful conclusion to the Doha Development Round; they called for leadership from major trading nations to work urgently toward an early resumption of the negotiations by the end of the year. Ministers recognised the need for all countries to contribute to a comprehensive package on agriculture, industrial products and service. Importantly, the IMFC reaffirmed its commitment to deliver on commitments for `Aid for Trade' assistance independent of progress on the Doha Round.
26. The IMFC reinforced their commitment to a rules-based multilateral trading system and to resisting protectionism and ensuring that all benefit from globalisation. They held a successful meeting with business leaders on the dangers and risks of protectionism. There will be a follow up conference on globalisation, risk and protectionism that will include representation from business at the Spring Meetings in 2007.
Strengthening IMF Surveillance 27 At the Spring Meetings, the IMFC set out a new reform agenda for IMF surveillance to ensure that the Fund moves to focus more on the prevention of crises than on their resolution. Ministers welcomed the progress so far in developing and implementing the reform of the surveillance system and look forward to an updating of the 30-year-old rules which underpin surveillance and a new remit for surveillance to strengthen accountability and independence in the Fund.
Low Income Countries 28 The IMFC also agreed that the IMF should focus its work in low-income countries on sustainable growth backed by microeconomic policies that support the achievement of the important Millennium Development Goals. We welcomed the progress that has been made on debt relief and congratulated the managing director of the IMF and the President of the World Bank for moving this forward. And we emphasised the importance of the new debt sustainability framework to avoid the accumulation of future debts by these countries.
29. The International Development Committee has also expressed interest in addressing the following issues which were not formally discussed at the Annual Meetings and were not included in the UK Objectives: (i) the division of responsibility between the IMF and the World Bank; (ii) debt cancellation for "illegitimate and odious debt"; and (iii) the Bank's approach to infrastructure. Information on these issues is included in Annex G.
ANNEX G
Division of Responsibility between the IMF and the World Bank 1. An External Review Committee has been established to review various aspects of collaboration between the World Bank and IMF, including the division of responsibilities. The Committee is preparing its report in consultation with IFI stakeholders and is expected to publish at the end of 2006. We look forward to considering its findings. We will seek to ensure that the institutional responsibilities of the Bank and IMF continue to cover all the critical issues within their mandates that relate to reaching the MDGs.
Cancellation of 'Illegitimate and Odious' Debt
2. The UK recognises that some debts result from imprudent or indisciplined borrowing and lending. However, the concept of illegitimate or odious debt is not a helpful one - debts incurred under legal contract must be properly dealt with in accordance with applicable laws. Existing debt relief mechanisms such as the Heavily Indebted Poor Countries Initiative and the Paris Club allow countries' debt burdens to be considered on a case by case basis, with relief provided where appropriate. We consider that these existing mechanisms represent the most effective way to deal with sovereign debts. Governments who believe that their debts are illegitimate are already able to raise their concerns with creditors. There is no clear additional benefit to be gained from establishing new, parallel arbitration systems to duplicate this. We continue to work to strengthen the voice of developing countries at the World Bank and IMF to enable them to do this more effectively, and support their approaches to the Paris Club.
3. The World Bank will undertake a study of 'odious debt' later this year, and the UN is also conducting similar work. We expect the reports to be available by the end of 2006 and we will consider them when available.
4. The UK is also working to strengthen the OECD's Guidelines on Responsible Borrowing and Lending and on Productive Expenditure. This should ensure that all new borrowing is responsible and appropriate.
The World Bank's Approach to Infrastructure 5. The World Bank is by far the largest multilateral donor in infrastructure, representing 55% of multilateral investment between 2002 and 2004 (IDA 28%, IBRD 27%). Its infrastructure lending has grown in recent years from $5.4 billion in 2003 to $7.3 billion in 2005 in response to the Infrastructure Action Plan on scaling up infrastructure work issued in 2004. This has been accompanied by increased provision of analytical and advisory support in the sector.
6. The Bank is a key partner of DFID in terms of infrastructure sector joint working in a number of countries, such as in Vietnam on rural transport, and also regionally, for example through the Infrastructure Consortium for Africa. We collaborate closely in addressing obstacles to private sector investment for infrastructure in developing countries, with an emphasis on increasing service provision for the poor. In partnership with DFID, the Bank is actively piloting and promoting innovative financing mechanisms for service delivery, such as output-based aid, which aim to develop new approaches that provide sustainable financing and target subsidies towards the poor.
7. The Bank has recently restructured its senior management and is now in the process of rationalising its programmes with a view to improving strategic coherence, management efficiency and effectiveness. While we welcome improvements, there is a need to ensure that programmes retain their identities and comparative advantages and we will be monitoring the process closely. In the restructuring, the Infrastructure and Environmental and Sustainable Development Vice Presidencies were amalgamated. The Bank is planning to appoint a strong and credible Director of Environment who will continue to promote the environment agenda. We will continue to monitor the Bank's performance in this area. |