Recent events: response of World Bank
Ministers reviewed the impact of the September 11 terrorist attacks and their aftermath on developing countries. They recognized that poverty in many developing countries was likely to worsen as these events have deepened the preexisting global economic slowdown, which had already led to weaker exports and commodity prices, and have other more specific impacts: for example, increased refugee movements within countries and across borders, reduced private investment flows due to increased risk aversion in financial markets, reduced tourism revenues, and increased trade transaction costs. Ministers called for further enhancing the collaboration among the Bank Group, the IMF, the regional development banks, and United Nations agencies in their actions to help member countries address these additional challenges and to strengthen social safety nets. Ministers underlined the importance of renewed growth in industrial countries to the improvement of prospects for poverty reduction in developing countries.
Ministers reviewed the response of the World Bank Group. They stressed the importance of the Group using its financial capacity and the flexibility in its available instruments to respond effectively and promptly to current circumstances and emerging needs. They emphasized that financial support should continue to be linked to strong country performance and reform programs in support of poverty reduction. Ministers agreed that, from a financial standpoint, the magnitude of likely incremental demands on the Bank Group currently appears manageable, but they urged that the Board and Management keep under close review the Bank Group’s capacity to respond in more challenging circumstances. Ministers agreed that the International Development Association (IDA) had a particularly critical role in helping the poorest countries manage the adverse impact of recent events on their economies and people and emphasized that timely agreement on a substantial IDA-13 replenishment was essential. They encouraged all member governments to complete their subscription to the Multilateral Investment Guarantee Agency’s general capital increase.
Ministers considered improved governance to be an important element in generating the conditions for investment, private sector–led growth, improved productivity, job creation, and trade and, as a result, for poverty reduction. Thus, they highlighted the need for the Bank and the IMF, in accordance with their respective mandates and comparative advantages, to pay more attention to governance-related issues, including public expenditure management, diagnostic (for example, through the Financial Sector Assessment Program) and capacity-building work to help countries identify and address abuses such as money laundering and terrorist financing. In light of this, they also stressed the importance of working to strengthen further country procurement and financial management systems. They also recognized the need to allocate increased resources to address capacity-building concerns in many countries to help them meet new internationally agreed commitments and standards.
UN Financing for Development Conference
Ministers expressed appreciation to UN Secretary-General Kofi Annan for the opportunity to discuss with him, at the joint IMFC-Development Committee dinner on November 17, issues related to the March 2002 International Conference on Financing for Development [see box, page 368]. They expressed strong interest in contributing to the conference’s success, which they saw as an important milestone in the effort to halve the incidence of poverty by 2015 and to reach the other Millennium Development Goals (endorsed by heads of state or government in the UN General Assembly on September 8, 2000) and other agreed targets. They urged governments to involve all relevant ministries in preparing for the conference to enhance coherence of policies with an impact on development.
Poverty reduction strategies
Ministers welcomed the significant progress made in implementing the poverty reduction strategy paper (PRSP) approach, noting that 38 countries had completed interim PRSPs and 8 countries their first full PRSPs. They appreciated the extent to which poverty reduction strategies build on existing national strategies and processes, with a focus on broadening participation and sharpening poverty diagnosis and monitoring, as well as on prioritizing and costing policies and programs for poverty reduction. Ministers welcomed the Bank and the IMF’s efforts to work with countries to analyze the poverty and the social impact of programs and to help them build their own capacity. Ministers noted that the joint Bank–IMF staff review of the PRSP approach was under way. They called for a broad-based inclusive process that would draw upon the experience of other stakeholders and development partners and looked forward to considering the report at their next meeting.
Ministers welcome the continued progress made in implementing the Heavily Indebted Poor Countries (HIPC) Initiative, noting that 24 countries have now reached their decision points under the enhanced HIPC framework, qualifying for debt-service relief amounting to some $36 billion; 3 countries have now reached their completion points and are receiving their full relief under the enhanced initiative. There has also been a significant reduction in debt stock and debt service in these countries, and the commitment of qualifying HIPCs to increased poverty reduction spending has been encouraging. Ministers urged the Bank and the IMF to work with remaining eligible countries to bring them to their decision and completion points as quickly as circumstances permit.
Ministers reiterated their commitment to the enhanced HIPC Initiative as a way for eligible countries to achieve a lasting exit from unsustainable debt. They stressed that long-term debt sustainability will depend upon the maintenance of sound economic policies, strengthened debt management, and the provision of appropriate financing. With regard to recent events, ministers reaffirmed that in exceptional circumstances, when exogenous factors cause fundamental changes in a country’s circumstances, the option exists within the HIPC framework, at the completion point, to consider additional debt relief. Ministers noted that the relevant operational procedures for exercising such an option were recently approved by the Bank and the IMF Boards. Ministers also reiterated the importance of fully financing the enhanced HIPC Initiative and urged bilateral donors to fulfill this commitment. They welcomed the agreement among donors to continue their regular consultations on the financial requirements of HIPC. They also urged those creditors that had yet to confirm their participation in the Initiative to do so as soon as possible.
Education for All
Ministers consider education one of the most powerful instruments for reducing poverty and laying the basis for sustained growth. They welcomed the World Bank’s background paper on this subject and noted the efforts of the Bank and its partners to help ensure that quality primary education is available to all children worldwide as a necessary first step toward strengthening overall education systems. Ministers looked forward to full consideration of this subject at their next meeting, based on an action plan that will address, among other things, the policy and resource requirements needed to ensure that Education for All goals are reached by 2015 through the development of sustainable and high-quality Education for All programs at the country level.
The Committee expressed its great appreciation to Yashwant Sinha for his valuable leadership and guidance to the Committee as its chair during the past 15 months, and welcomed his successor, Trevor Manuel, Finance Minister of South Africa. The ministers also expressed their warm thanks to Alexander Shakow upon his retirement as the Committee’s Executive Secretary and welcomed his successor, Thomas A. Bernes.
Photo credits: Denio Zara, Padraic Hughes, Pedro Márquez, and Michael Spilotro for the IMF, pages 357, 360, 363–366, 369, 371, 375, 377, and 379; Thomas Coex for AFP, page 372; Cartac, page 380; and QNA H.O. for AFP, pages 382 and 384.