3 Responding to the crisis
DFID's response
24. The World Bank has identified three priority
areas which it believes should be the focus of efforts to prevent
the global financial crisis eroding progress made in reducing
global poverty. First, "attention must be directed to protecting
the poor through targeted social spending, including expanded
safety nets" to support the poorest people through the crisis.
Secondly, investment in infrastructure must be maintained as this
"will be crucial to restoring growth following the crisis."
Finally it argues for a "concerted effort [
] to support
the private sector especially SMEs [small and medium sized enterprises],
which are essential to a resumption of growth and job creation
in developing countries."[49]
DFID has taken steps to address all three of these areas
in its response to the impact of the recession in developing countries.
We discuss each element below.
SOCIAL PROTECTION
25. The Institute of Development Studies defines
social protection as "a group of policy initiatives that
transfer income or assets to the poor. They protect vulnerable
people against livelihood risks, and seek to enhance the social
status and rights of the marginalised." These can take several
different forms; for example, direct cash transfers, or in kind
transfers (such as free school meals), and can be conditional
either on household income or another requirement such as a child's
school attendance. Social protection programmes may also concentrate
on the provision of social services or social funds.[50]
26. Social protection programmes have been shown
to have helped reduce poverty levels in previous economic crises.
The Government of Indonesia introduced a National Safety Net Programme
in 1997 after the Asian financial crisis caused poverty levels
to double in a year. As a result of this programme the poverty
rate reduced from 33% in 1998 to 12% in 2002. The evidence suggests
that it was unlikely that the country would have recovered as
quickly had it not been for this programme.[51]
27. Dr McCulloch of IDS argued that social protection
policies not only provided help for the poorest but would also
inject demand into the economy. This method of increasing demand
for goods and services was particularly effective as it "does
not leak out in the form of imports, because poor communities
in Kenya are not buying iPods; they are just buying locally-produced
food and locally-produced services".[52]
28. The Secretary of State told us that DFID planned
to increase its bilateral expenditure on social protection by
£100 million over the next two years, as part of its response
to the crisis.[53] Amongst
the partner countries which will benefit is Ethiopia which will
receive an additional £15 million for social protection.[54]
We were concerned that this additional expenditure on social safety
nets would mean that spending on other essential programmes would
be affected. When we put this to the Secretary of State he was
clear that the funding had been found from DFID's contingency
budget and unallocated resources from within bilateral programmes
and that no existing programmes had been cut or reduced to date.[55]
29. While we accept that the Department needs to
keep some funds in reserve to allow it to respond to unforeseen
circumstances we are surprised that such a substantial increase
in funding was possible from unallocated resources. Given the
need for DFID to use its resources as effectively as possible
we would expect DFID to have already identified spending priorities
for a large proportion of that money.
30. The reallocation of £100 million within
DFID's bilateral programmes to fund social protection programmes
is in addition to the £200 million that the Department has
pledged to the Rapid Social Response Fund, which will be hosted
by the World Bank as part of its Vulnerability Fund.[56]
Rachel Turner told us that in past crises:
The multilateral system, particularly the World
Bank, has not really focused on the poorest people. The system
knows how to protect a balance of payment and it sort of knows
how to protect a budget but really has not worked in the past
to protect poor people.[57]
She argued that the current reaction by multilateral
development banks was "very different to the past "
with the World Bank, the African Development Bank, the Asian Development
Bank and the Inter-American Development Bank expected to invest
a total of $12 billion in social protection, between
2009 and 2011.[58]
31. Witnesses were positive about DFID's decision
to fund social protection as part of its response to the crisis.
Eckhard Deutscher, Chair of the OECD Development Assistance Committee
(DAC), told us that it was necessary "now more than ever"
to focus on developing social safety nets in poor countries and
Maciej Popowski of the European Commission believed DFID's response
was "definitely in the right direction."[59]
32. Dr McCulloch suggested that DFID should use the
heightened international focus on social protection programmes
to increase the level of coverage offered by existing programmes
in Africa. He told us that he was "really struck by the fact
that social protection efforts throughout Africa are very piecemeal,
many of them DFID funded". Many programmes were "lacking
in comprehensive coverage in a continent which has particular
need at this time for more effective social protection."[60]
This view was echoed in a piece of IDS research which concluded
that the "crisis can represent a window of opportunity and
[
] it is important to seize these moments for progressive
social protection initiatives."[61]
However, Dr McCulloch expressed a note of caution: the large sums
for social protection from donors could "actually undermine
the ability to generate domestic political demand throughout the
developing world" for partner country governments to supply
these services, which could result in a loss of country ownership
and disenfranchise local people.[62]
33. We commend DFID's focus
on funding social protection programmes which have been shown
to play a vital role in protecting the poorest people in the poorest
countries from the worst effects of economic crises. However,
DFID must work closely with partner governments to ensure coverage
of these programmes is sufficient to reach those with the greatest
need.
INFRASTRUCTURE
34. Investing in infrastructure is a particularly
effective policy response to the recession because it serves a
dual purpose. Firstly, as the Chairman of the OECD DAC emphasised,
it makes an important contribution to economic growth and lays
the foundation for future growth after the recession has run its
course.[63] Secondly,
it lessens the immediate impact of the downturn by creating jobs.
As Mr Popowski of the European Commission explained: "If
we invest in infrastructure we are automatically creating ways
[
] of cushioning the impact of the crisis on the real economy
because we would spur job creation and promote growth.[64]
Dr McCulloch echoed this view and emphasised the role that such
investments could play in stimulating the local economy: "we
know from experience that infrastructure expenditure is a very
good way of getting money into people's pockets".[65]
35. Poor infrastructure has been identified as one
of the main barriers that restricts African countries' ability
to trade with the rest of the world. Poor road systems are particular
barriers to trade for landlocked countries which are dependent
on transport links in neighbouring countries as well as their
own. The Democratic Republic of Congo, which is almost 10 times
the size of the UK, has just 1,400 miles of paved road and no
well- maintained road which runs the length of the country.[66]
36. DFID recently announced £100 million of
support for regional infrastructure and trade. This funding will
be used to support the North-South Corridor initiative in Africa
which aims to remove the bottlenecks that currently exist along
main trading routes by speeding up border crossings, and improving
railways, roads and ports across east and southern Africa.[67]
The North-South Corridor is a $1.2 billion project which will
link the "copper belt" of Zambia and the Democratic
Republic of Congo to ports in Southern Africa and pass through
eight countries: Botswana, South Africa, Zimbabwe, Zambia, Malawi,
Mozambique, Tanzania and the Democratic Republic of Congo.[68]
Announcing this project, Gareth Thomas, Minister for International
Development and Trade, said that the investment could be worth
"tens of millions of pounds a year to the African economy
and generate strong investment opportunities."[69]
37. Donor investment in infrastructure
not only provides developing countries with a source of employment
but will also enable them to emerge from this recession with a
stronger economy. We welcome DFID's decision to provide significant
funds for infrastructure projects as part of its response to the
downturn. The scale of the North-South Corridor project in Africa
gives it huge potential to boost trade and economic development
in the continent. We request the Department, in its response to
this Report, to provide an update on progress with the project.
SUPPORT FOR BUSINESSES
38. A recent meeting of the World Trade Organisation
(WTO) announced that the shortfall in trade credit was now $100
billion and that the cost of trade credit for developing countries
had become prohibitively high.[70]
Urgent action to restore trade finance liquidity was therefore
identified as one of the priorities for the G20.[71]
The World Bank has responded to the difficulties faced by small
and medium-sized enterprises (SMEs) by setting up the Global Trade
Liquidity Programme (GTLP). The Secretary of State told us that
the motivation for the GTLP arose from the fact that the market
in trade finance, on which 90% of global trade relies, was seen
to be failing.[72] DFID
plans to increase its support for SMEs through a £300 million
contribution to the GTLP (to be made through CDC Group).[73]
39. This Programme is intended to help address the
trade finance shortage in developing countries by making additional
funds available through international banks specialising in trade
finance in these regions.
The GTLP is due to become operational in May.
Under its first phase businesses will be assisted in
Angola, Ghana, Kenya, Malawi, Mauritius, Mozambique,
Nigeria, Seychelles and Zambia. DFID says that the initial sum
committed could help fund between £2 billion and £3
billion of trade over the next two years, by helping small and
medium firms to import and export products. The GTLP will be based
on a commitment of $1 billion from IFC, a member of the World
Bank Group. The IFC is seeking a further $3-4 billion from donors.
It is expected to support at least $30 billion of trade over three
years.[74]
The Secretary of State told us that getting
the GTLP up and running quickly "will make a significant
difference to what would otherwise be very, very serious consequences
as a result of the loss of trade finance in developing countries."[75]
40. We fully support DFID's
decision to fund the Global Trade Liquidity Programme. Ensuring
the availability of trade finance is an important part of supporting
small and medium-sized businesses in poor countries and thereby
sustaining economic development. It is vital that the aim for
the Programme to be operational in May is achieved. We request
that DFID, in its response to this Report, provides us with an
update on the amount of funding which has been disbursed, and
to which countries.
Outcomes of the G20 London Summit
41. The G20 meeting held in London on 2 April set
out to provide a strong multilateral response to the downturn,
including the challenges that it posed for the developing world.
The main outcome of the meeting was a $1.1 trillion programme
aimed at restoring credit, growth and jobs to the world economy.
This included:
- A trebling of resources available
to the International Monetary Fund (IMF) to $750 billion, an increase
of $500 billion, as well as commitments to support a new special
drawing rights allocation (SDR) of $250 billion; [76]
- Support for a minimum increase of $100 billion
of additional lending by the Multilateral Development Banks (MDBs);
- A promise to ensure $250 billion of support for
trade finance;
- An agreement to use the sale of part of the IMF
gold reserve to fund concessional financing for the poorest countries.[77]
42. Although these announcements are welcome, significant
uncertainty remains about how they will be delivered. Of the $500
billion of external resources pledged for the IMF "only a
$40 billion loan from China, still not confirmed by the Chinese
government, was an unknown before the summit." $200 billion
consists of two $100 billion agreements already made by Japan
and the EU. [78]
The UK has provided $15 billion to the IMF as part of the EU contribution.[79]
Another $114.5 billion has since been offered by a combination
of Canada, Norway and the USA. This still leaves $145.5 billion
to be found.[80]
43. The funding commitments
made at the G20 London Summit are very welcome. However, uncertainty
and lack of clarity remain on the detail of how the pledges will
be delivered. We recommend that the UK Government maintain pressure
on G20 partners to honour their commitments and on the international
financial institutions to ensure that the benefits of these commitments
are felt by poor countries at the earliest opportunity.
FUNDING FOR THE IMF
44. The main purpose of the IMF is to assist countries
in addressing balance of payments deficitsit does not provide
countries with aid. We were told by the President of the World
Bank that, while the work of the IMF is important, providing additional
funding to the IMF was no substitute for supporting infrastructure
and social protection spending. Poor countries urgently needed
this to help them through the economic downturn. Kevin Watkins,
director of UNESCO's Education for All Global Monitoring Group,
echoed this view: "While the IMF has a key role to play in
the financial crisis [
] poverty reduction is not the IMF's
core businessand it doesn't do it well."[81]
DFID officials agreed that "the role of the IMF for middle-income
countries is where these really big numbers are", suggesting
that IMF support for developing countries will be more limited.
[82]
45. Other commentators have been critical about the
prospect of the IMF playing an increased role in developing countries.
In previous crises, including the Asian financial crisis, the
IMF "imposed stringent conditions on many countries that
came to it for help, forcing them to target unrealistically low
inflation rates and implement [
] pro-cyclical policiesspending
cuts and interest rate rises that can exacerbate a downturn."
Concerns have been raised that similar conditions could be imposed
on developing countries seeking IMF assistance during the current
downturn. [83]
46. A recent report by the Global Campaign for Education
(GCE) argued that no real progress had been made in changing the
conditionality attached to IMF loans, and was particularly concerned
that this would impact upon developing countries' abilities to
fund basic social services, especially education.[84]
In the run up to the London summit, the IMF announced that changes
to its concessionary lending were on track and that conditionality
for low-income countries (LICs) had changed.[85]
However, the GCE asserts that the changes are only structural
and relate to how the money is delivered; they do not change the
economic conditions countries must meet to receive support.[86]
The World Bank has voiced similar concerns, arguing that
its sister organisation often puts too many conditions on countries
asking for help.[87]
Hugh Brendenkamp, IMF Deputy Director of Strategy, Policy and
Review, has denied that the IMF is preventing LICs investing in
basic social services: "The IMF has called for more aid to
prevent low income countries from having to cut expenditure at
we go into recession."[88]
47. The Secretary of State defended the G20's decision
to focus on the refinancing of the IMF, arguing that developing
countries would benefit. He said that the view that refinancing
the IMF would not help developing countries was a fallacy and
that "the poorest people in the world would have suffered
more if the financial crisis had led to the collapse of the banks".
He made "no apology for the actions that were taken in the
United Kingdom, in the United States and elsewhere in securing
stability of the global financial architecture."[89]
Mr Alexander believed that refinancing the Fund would allow it
to cope with the "very significant calls" on its reserves
which were expected in the coming months. This would mean that
the World Bank, whose main remit is poverty reduction, would not
have to use its resources for "crisis management" as
it had in previous balance of payment crises when there had "simply
not been adequate capital within the Fund to be able to deal with
it independently".[90]
48. Rachel Turner highlighted changes to the IMF's
relationship with developing countries that had come out of the
London Summit. One key change is the doubling of access limits
for low-income countries from 75% to 150% of their quota access
levels. This would apply to both the Exogenous Shocks
Facility and the IMF's Poverty Reduction and Growth Facility.
Previously IMF funds which could have been made available to low-income
countries had remained unused because of the "binding constraint"
of those countries having reached the ceiling of permitted funding
levels. [91]
While this change had not yet been agreed by the IMF board, DFID
was "fairly confident" that the proposals would get
through.[92]
49. We were told that discussions were also under
way to improve the concessionality of IMF financing. Currently
IMF loans are 30% below market rate compared to the 60% discount
offered by the World Bank's International Development Association.[93]
This increase in the concessionality of IMF lending is to be partially
financed by the sale of a proportion of the IMF's gold reserves.
However, DFID was unable to tell us how much income was expected
to be raised from this sale as this was a decision that the IMF
board was yet to take. "It is quite a complicated equation.
There is a set of options that have been worked up for the board
and decisions will be taken. We do not have the answer yet".[94]
50. We agree with the Secretary
of State that it was in everyone's interest for the IMF to be
recapitalised. But this, in itself, is not enough to support developing
countries through the downturn. The UK needs to continue to engage
with the IMF to ensure that this additional money is rapidly made
available to poor countries which need it. Increasing access limits
is an important first step. DFID must also ensure that the conditions
attached to IMF loans are reduced and that they are consistent
with the aim of reducing poverty and promoting growth in the world's
poorest countries. The sale of IMF gold reserves seems a sensible
way to increase the concessionality of the rate at which IMF loans
are made. We request that DFID, in response to this Report, provides
us with more details on progress with the sale.
FUNDING FOR THE MULTILATERAL DEVELOPMENT
BANKS
51. The headline figure of a $100 billion increase
in lending by the multilateral development banks (MDBs) sounds
impressive. The MDBs had planned to make loans worth $200 billion
over the next five years: this additional lending therefore represents
a substantial and welcome increase. However when we questioned
DFID about these increases we discovered that they were being
achieved without any additional commitment of resources by donor
governments. This is because "the additional £100 billion
is made up of the multilateral development banks doing more with
their existing balance sheets."[95]
An additional $60 billion of capacity has been found on the World
Bank balance sheet, with the balance coming from the regional
development banks.[96]
52. The Secretary of State assured us that the MDBs
were not over-stretching their resources and that nothing was
being done that would compromise the credit-worthiness of the
Banks.[97] This suggested
to us that the Banks must have been over-cautious in the past.
Mr Alexander agreed with this assessment:
[
] that is the position we have argued
for some time [
] I have been arguing that the very strength
of the balance sheet was not, in and of itself, going to make
as effective a contribution to tacking poverty [
] as if
it was using its balance sheet effectively.[98]
He believed that now was the time for the World Bank
in particular to step in and use the strength of its existing
reserves to provide the resources which developing countries need.[99]
53. We agree that the multilateral development
banks, and particularly the World Bank, should make the most effective
use of the funds they already have on their balance sheets to
maximise poverty reduction outcomes. At a time when other donors
are having to take hard decisions on spending, it is clearly welcome
that the Banks can increase their lending by $100 billion. DFID
has pressed for this and we are pleased that it has won the argument.
It should now maintain its engagement with the Banks to ensure
funds are disbursed rapidly to poor countries most affected by
the downturn.
REFORM OF THE INTERNATIONAL FINANCIAL
INSTITUTIONS
54. There was a high degree of consensus between
DFID and commentators before the summit on the need for the G20
negotiations to lead to further reform of the international financial
institutions (IFIs), particularly the World Bank and the IMF.[100]
They need reform both to improve the speed and level of funding,
and to provide developing countries with a greater say in the
institutions' internal decision-making processes. The Secretary
of State emphasised that the World Bank needed to "make more
funding available more quickly".[101]
This concern was echoed by Dr McCulloch who told us that a report
by the Brookings Institute had found that:
There is a very large sum of money that is stuck
in the disbursement pipeline. This is not money that needs to
go through the umpteen steps of the World Bank approval process
[
] this is money that has already been approved by the board
and which is still sitting in a bank account which has not actually
been disbursed.[102]
55. Dr Gottschalk, a research fellow at IDS, gave
us an example of the delays which occur in disbursal of funds.
The IMF's Exogenous Shocks Facility (ESF) was set up in 2005,
but did not deliver its first loans until December 2008 when funding
was made available to help Malawi cope with the effect of food
and fertiliser price rises and to assist the Kyrgyz Republic to
deal with commodity price shocks. Dr Gottschalk described these
loans as being "too few" and arriving "too late"
and argued that they were still being used to address past shocks
while a new crisis was happening.[103]
56. Some progress has already been made on this issue.
The World Bank has created a Fast Track Facility to speed access
to $2 billion of the $42 billion made available to the poorest
countries following the 15th replenishment of the International
Development Association.[104]
The Secretary of State told us back in January that the Bank had
already improved the speed with which it responded to need: "if
you look at the Bank's response to the global food crisis last
year, it acted with urgency uncharacteristic of the institution
in the past."[105]
57. We are glad that the World
Bank is becoming a more agile institution which can respond more
rapidly to the needs of developing countries. However, much progress
remains to be made by the international financial institutions
(IFIs) to ensure that the gap between approving funds and disbursing
them is as short as possible. DFID has played a leading role to
date in pushing for these changes and it is the largest contributor
to the World Bank's International Development Association. It
is entitled to continue to press the IFIs to improve their performance
in this regard.
58. The second area where there was general agreement
on the need for reform of the IFIs was on their governance, and
particularly the level of involvement of developing countries
in decision-making processes. At the last Autumn Meetings of
the Bank and the IMF in 2008, agreement was reached on the establishment
of a merit-based process for the selection of the President of
the World Bank and the Managing Director the IMF, which have previously
been US and European appointees respectively.[106]
The World Bank Governors also agreed to increase the voting share
of developing countries to 44% and to create an additional chair
to represent Sub-Saharan Africa on the board.[107]
59. Witnesses were unanimous in their belief that
these reforms, although welcome, were far from sufficient. Maciej
Popowski of the EC told us that an additional African seat on
the World Bank board would "not do the trick. It is a good
start but we need to go further than that."[108]
Eckhard Deutscher of the OECD DAC described the decision as "more
[of] a symbolic step."[109]
He argued for much more radical change and quoted Horst Koehler,
a former director of the IMF, who suggested that European countries
should consider being represented by one chair. "The Europeans,
without losing their voice and influence, should have a look at
how we can have a more efficient governance structure in both
institutions".[110]
60. Mr Deutscher emphasised that the real issue which
needed to be addressed was the allocation of shares within the
Bank and the Fund, which determine how much weight a country carried
in the voting process.[111]
The recent Manuel Report[112]
on IMF reform reiterated the importance of accelerating the process
of reforming the quota system to increase the voice of developing
countries in decision-making.[113]
As Dr McCulloch highlighted, this will be a difficult issue to
resolve:
In order to increase representation for some
that means decreasing representation for others [
] I notice
he [Douglas Alexander] did not say in his speech that Britain
would be happy to take a lower voting share and yet those are
the issues which are going to need to be addressed.[114]
61. Dr McCulloch also stressed the importance of
decentralising World Bank staff to ensure that they spent more
time engaging with officials and civil society in the country
in which they operate. He said that, while some progress had been
made, much more could be done. He advocated changing the Bank's
internal incentive and reward mechanisms to encourage staff to
engage more effectively with developing countries.[115]
62. The World Bank recently announced the membership
of the Zedillo Commission,[116]
which will review its internal governance structure. Douglas Alexander
said that the reform package which this Commission produces must
address the issues of voting rights, decentralisation and the
relationship between the Bank's shareholders and managers.[117]
63. The G20 communiqué acknowledged the need
to reform the IFIs but the specific commitments made are simply
to implement reforms already agreed in October 2008 and to hold
future meetings on reforms in 2010 and 2011.[118]
Oxfam and ActionAid have argued that it was a mistake to make
such large increases in the resources of the IFIs, especially
the IMF, before governance reforms had been implemented.[119]
Mr Boutros-Ghali, who chairs the IMF's steering committee, has
warned that governments are already showing "reluctance"
to follow through on promises they made at the G20 to reform the
IMF.[120]
64. As we said in our 2008 report
on DFID and the World Bank, "adequate representation
of developing countries in World Bank decision-making is not only
a question of fairness, it is one of effectiveness: greater ownership
by developing countries will lead to more effective Bank programmes."
We emphasised the strong role which we believed the UK should
play in pressing for reform.[121]
The Secretary of State stressed that the UK remained committed
to this:
At the last meeting in October I argued, along
with colleagues, to see an additional African seat on the board.
I argued that we should have an open, merit based, transparent
selection process for the presidency of the Bank. I argued that
there needed to be more fundamental reform of what has come to
be called phase two of the reform of the Bank [
] I will
be this weekend in Washington [at the Spring Meetings of the IFIs]
urging that we seize the opportunity provided by the G20 summit
which asked that the reform process for the Bank, known as phase
two, looking at issues of voice and accountability, be accelerated
so that we would be in a position whereby shareholders would take
forward that work between now and the October meeting of the Bank,
ahead of decisions being reached next spring in 2010 [
]
I hope that gives you some assurance that we are not simply writing
a cheque for the IMF and walking away. We think there is both
a need for resources and for effective reform in the IFIs. We
need to be taking forward those processes simultaneously.[122]
65. If developing countries are going to be properly
represented in decisions on how the global community responds
to the current economic crisis, reform of the international financial
institutions (IFIs) needs to take place without further delay.
The UK Government clearly understands the need for reform and
we accept that it is not prepared simply to "write a cheque
and walk away". But the timescale set out at the London summit,
with no new reforms to be agreed, let alone implemented, until
next year at the earliest, fails to respond to the urgent need.
We reiterate our view that DFID, as one of the highest donors
to the World Bank, must continue to use its leverage at every
opportunity to press for swifter reform of the IFIs, particularly
in relation to the representation of developing countries on the
World Bank board.
Vulnerability Fund
66. Many hoped that the G20 summit would result in
additional funding pledges to meet the specific difficulties that
the recession poses for developing countries. There has been no
shortage of ideas for how this could be done. Ban Ki-moon, the
UN Secretary-General, called on the G20 to announce a $1,000 billion
stimulus package for developing countries threatened by the global
financial crisis.[123]
Another suggestion was that, rather than set an absolute amount
of money that should be raised to support developing countries,
a proportion of each national and international stimulus package
should be used to support developing countries. President Zoellick
has recommended that each developed country allocate 0.7% of its
stimulus package to the World Bank's Vulnerability Fund.[124]
(This figure was chosen because it is the same as the percentage
of GNI which donor countries have pledged to provide in official
development assistance by 2015.) According to the G20 communiqué,
the total global stimulus package was worth $5 trillion. Had 0.7%
of this amount been pledged to the Vulnerability Fund this would
have raised an additional $35 billion for developing countries.
However, the Secretary of State told us that this proposal did
not "find favour" at the London summit.[125]
67. The Vulnerability Fund is an umbrella fund that
channels resources through the Bank, the UN and other development
banks to help countries which do not have sufficient resources
to cope with the crisis. Assistance will be provided in the Bank's
three priority areas described above: social safety net programmes;
infrastructure projects; and the Global Trade Liquidity Programme.
68. We asked the Secretary of State whether DFID
regarded the commitments it has made to these funds as the UK's
response to the World Bank President's call for 0.7% of stimulus
packages to be devoted to the Vulnerability Fund. We did not get
a direct response to the this question. Mr Alexander told us that
he did not think that Mr Zoellick's suggestion was "the most
effective response the G20 could have taken".[126]
He argued that the proposal:
[
] could provide something of a get out
of jail free card for countries who were not meeting the bigger
obligations that they had in terms of prior commitments [
]
to overall spend as a proportion of their economy and they could
instead say, "We have quite a small stimulus package and
we are managing 0.7% of that."[127]
He also expressed concern that having two 0.7% figures
could dilute the clarity around the longstanding commitment made
by developed countries to allocate 0.7% of Gross National Income
(GNI) to poor countries by 2015.[128]
In the next chapter we shall review the progress that donors have
made towards reaching this target.
69. We welcome the creation of the World Bank's
Vulnerability Funddeveloping countries need large and dedicated
sums to support them through the downturn. We do, however, agree
with the Secretary of State that setting a target of dedicating
0.7% of stimulus packages to this new Fund could cause confusion
and undermine international resolve to achieve the long-standing
and much more ambitious commitment to allocate 0.7% of Gross National
Income to official development assistance by 2015. Nevertheless,
we believe that the premise which underlies the World Bank President's
proposal is valid: if rich countries can find substantial sums
to boost their own economies, they should recognise the pressing
need in poor countries and identify dedicated sums, additional
to existing pledges, to assist them. We invite the Secretary of
State, in response to this Report, to indicate how the UK is responding
to the World Bank President's proposal.
49 World Bank, Swimming against the tide, March
2009, p 1 Back
50
Davies, M. and McGregor J.A., "Social Protection Responses
to the Financial Crisis", IDS In Focus Policy Briefing
7.4, March 2009 Back
51
Davies, M. and McGregor J.A., "Social Protection Responses
to the Financial Crisis", IDS In Focus Policy Briefing
7.4, March 2009 Back
52
Q 107 [Dr McCulloch] Back
53
Q 247 Back
54
Ev 84 Back
55
Qq 247-248 Back
56
"Douglas Alexander pledges £200 million for rapid response
global safety net", DFID Press Release, 15 March 2009 Back
57
Q 248 [Ms Turner] Back
58
Q 248 [Ms Turner] Back
59
Q 185 and Q 213 Back
60
Q 89 Back
61
Davies, M. and McGregor J.A., "Social Protection Responses
to the Financial Crisis", IDS In Focus Policy Briefing
7.4, March 2009 Back
62
Q 90 Back
63
World Bank, Swimming against the tide, March 2009, p 1;
Q 185 Back
64
Q 213 Back
65
Q 104 [Dr McCulloch] Back
66
"UK's $1bn transport network across Africa", The
Guardian, 20 February 2009 Back
67
"New Dawn for Trade in Africa as UK Government Commits to
the North-South Corridor.", DFID Press Release, 6 April 2009 Back
68
http://www.northsouthcorridor.org Back
69
"Clearing a path for improved transport links in Africa to
boost trade", DFID Press Release, 19 February 2009 Back
70
"Trade finance gap hits $100 billion", Financial
Times, 19 March 2009 Back
71
Q 271 Back
72
Q 271 Back
73
"New financial boost for businesses in developing countries
from the UK government", DFID Press Release, 2 April 2009.
The CDC Group is a Government owned "fund of funds"
which invests in the private sector in developing countries to
promote growth. Back
74
"New financial boost for businesses in developing countries
from the UK government", DFID Press Release, 2 April 2009 Back
75
Q 287 Back
76
Special drawing rights is the IMF's unit of account, defined as
the value of a fixed amount of yen, dollars, pounds and euros.
It represents a claim on other countries currency reserves that
can be exchanged voluntarily. Back
77
Official communiqué issued at the close of the G20 London
Summit, 2 April 2009, para 5 Back
78
"Mission: possible", The Economist, 11 April
2009 Back
79
"IMF poised to secure $500 billion boost to protect poor
countries", The Guardian, 25 April 2009 Back
80
"Mission: possible", The Economist, 11 April
2009 Back
81
"Hungry children do not make good learners", The
Guardian, 28 April 2009 Back
82
Q 266. The IMF is doing some work in low-income countries: when
we visited Kenya we heard that the IMF was in the process of approving
a loan to cover Kenya's budget deficit. Back
83
"Can the IMF now feed the world", The Observer, 26 April
2009 Back
84
Campaign for Global Education, "Education on the Brink: Will
the IMF's new lease on life ease or block progress towards education
goals?", April 2009 Back
85
"IMF Overhauls Lending Framework", IMF Press Release
09/85, 24 April 2009 Back
86
Campaign for Global Education, Education on the Brink: Will
the IMF's new lease on life ease or block progress towards education
goals?, April 2009, p 23-24 Back
87
"Britain to demand radical reform of the World Bank at G20",
The Observer, 22 February 2009 Back
88
"Hungry children do not make good learners", The
Guardian, 28 April 2009 Back
89
Q 272 Back
90
Q 262 [Mr Alexander] Back
91
The limit which determines the maximum amount of money a country
can borrow. Back
92
Q 262 [Ms Turner] Back
93
Q 262 [Ms Turner] IDA is the part of the World Bank which provides
loans and grants to developing countries. Back
94
Q 269 [Ms Turner] Back
95
Q 263 [Ms Turner] Back
96
Q 263 [Ms Turner] The regional development banks are the Asian
Development Bank, the African Development Bank, the Inter-American
Development Bank and the European Bank for Reconstruction and
Development. Back
97
Q 264 Back
98
Q 265 Back
99
Qq 264-5 Back
100
"Britain to demand radical reform of the World Bank at G20",
The Observer, 22 February 2009 and "Brown calls for
World Bank and IMF reform", The Daily Telegraph, 10
February 2009 Back
101
Douglas Alexander, "A Bank for the World", Parliamentary
Network of the World Bank (PNoWB) April Newsletter, April 2009 Back
102
Q 97 [Dr McCulloch] Back
103
Ev 121 Back
104
Ev 85 Back
105
Q 22 [Mr Alexander] Back
106
Douglas Alexander, "A Bank for the World", PNoWB
April Newsletter, April 2009; and Committee on IMF
Governance Reform, Final Report, 24 March 2009 Back
107
"World Bank Governors Approve Governance Reforms, Adding
Board Seat for Africa", World Bank Press Release 2009/220/EXC,
11 February 2009 Back
108
Q 222 Back
109
Q 193 Back
110
Q 192 Back
111
Q 193 Back
112
Produced by the Committee chaired by Trevor Manuel, South African
Minister of Finance. Back
113
Committee on IMF governance reform, Final Report, 24 March
2009, para 23 Back
114
Q 98 Back
115
Q 99 Back
116
To be chaired by Ernesto Zedillo, director of the Yale Center
for the Study of Globalisation Back
117
Douglas Alexander, "A Bank for the World", PNoWB
April Newsletter, April 2009 Back
118
G20 communiqué, 2 April 2009, para 20 Back
119
"Concern grows on powerful role for the fund", The
Guardian, 4 April 2009 Back
120
"Fund' reforms are at risk, warns Boutros-Ghali", The
Financial Times, 22 April 2009 Back
121
Sixth Report of Session 2007-08, DFID and the World Bank,
HC 67-I, Summary Back
122
Q 268 Back
123
"Ban sets target of $1,000bn for aid to poorer nations",
The Financial Times, 26 March 2009 Back
124
World Bank, Swimming against the tide, March 2009, p 14 Back
125
Q 270 Back
126
Q 271 Back
127
Q 271 Back
128
Q 276 Back
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