IFIs Latin American Monitor
The meeting of social organizations with Paul Wolfowitz, World Bank President, Rodrigo de Rato, IMF Managing Director and Trevor Manuel, Finance Minister and Development Committee Chair (World Bank) was only an update on the relationship of the World Bank with civil society representatives. September 26, 2005.
The World Bank and International Monetary Fund (IMF) have agreed that the debts owed by 18 of world's poorest countries to them and to the African Development Bank will be cancelled "outright" and "upfront", bringing an end to the suspense surrounding the issue for nearly three months.
The Group of Eight (G8) most industrialised countries had proposed complete debt cancellation without conditions for these countries. The deal was left to be approved by the Bank and IMF during their annual meetings, which concluded Sunday. Both institutions have agreed to cancel the debts.
The countries whose debt will be erased are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.
It is important to note that all these countries are among the Heavily Indebted Poor Countries (HIPC), a category established by the Bank and IMF in 1996. HIPC created a process of debt relief for extremely poor countries, which have to meet highly controversial conditions to qualify, such as large-scale privatisation of utilities like water and other state-owned enterprises, removal of subsidies on basic goods, and trade liberalisation, set by the two institutions.
As such, all the 18 countries in question have already fulfilled the IMF and World Bank conditions.
HIPC conditions have come under fire from civil society organisations, and even the Bank and IMF have admitted that these conditions have not succeeded in their aim "to reduce to sustainable levels the external debt burdens of the most heavily indebted poor countries" and "freeing up of resources for increased social sector expenditures". Some activists had been sceptical of the debt deal from the start, saying that the institutions may add extra conditions, making the deal meaningless. They had pressured the institutions to agree to full debt cancellation without conditions and to extend the deal to other poor countries.
Asked by IPS if there will be any more conditions for the eligible countries before they can be granted full debt relief, Rodrigo de Rato, the IMF's managing director, said that there will be no more conditions and that the debt cancellation will be given "outright" and "upfront".
He was speaking at a joint Bank and IMF Development Committee press conference today. Also in attendance were Paul Wolfowitz, president of the World Bank, and Minister Trevor Manuel, chairman of the Development Committee.
De Rato added that the results of the deal will be reviewed by the International Monetary and Financial Committee (IMFC).
The issue at the heart of the debt cancellation deliberations at the Bank and IMF since the G8 proposed it has been the financing of the International Development Association (IDA), the World Bank agency that gives around nine billion dollars a year in concessional loans to poor countries. Doubts have been raised by donor countries about the sustainability of the IDA if the debt is cancelled.
Today, the Development Committee announced that it had "agreed on the need for an interdependent package consisting especially of dollar for dollar compensation for IDA that is truly additional to existing commitments and that maintains the financial integrity and capacity of IDA to assist poor countries in the futureà"
"We are confident that the package, including financing, the main technical features of the proposal and burden sharing on a voluntary basis will provide these benefits," the committee said.
Seventy percent of the funding for the IDA comes from the G8 countries -- Russia, Britain, France, Germany, the United States, Japan, Italy and Canada. Wolfowitz stressed Sunday that in order for the deal to succeed, the donor countries must fulfill their promises.
The Bank and IMF also "emphasised the importance of maintaining sound economic performance and good governance by eligible countries".
Wolfowitz assured reporters that the details of the deal will be finalised in the next three weeks.
"We are still far from a final deal in practice, despite the principle of 100 percent cancellation endorsed today," he said. "Once donor countries will concede additional financing to pay for the deal, then in particular in the case of the World Bank, it should be clarified how this will impact aid disbursement to these 18 and to other countries which are not in the initiative."
The debt amount to be erased for the 18 eligible countries is about 40 billion dollars.
Neil Watkins, national coordinator of the Jubilee USA Network, an anti-debt group, told IPS, "complete debt cancellation for these countries is a welcome step. However, this cancellation amounts to only 10 percent of the money that is needed to achieve the Millennium Development Goals (MDGs)."
The MDGs include a 50 percent reduction in poverty and hunger; universal primary education; reduction of child mortality by two-thirds; cutbacks in maternal mortality by three-quarters; promotion of gender equality; reversal of the spread of HIV/AIDS, malaria and other diseases; and a North-South global partnership for development.
A summit meeting of 189 world leaders in September 2000 pledged to meet all of these goals by the year 2015. But their implementation has depended primarily on increased development aid by Western donors.
"This means that these 18 countries should only be the beginning," Watkins said. "The World Bank and IMF should extend debt cancellation to all poor countries if they are serious about poverty alleviation."
"Also, civil society must stay vigilant because the details of the deal will be worked out over the upcoming weeks at the IMF and World Bank boards. What we have right now is only a broad agreement; the finer details are what will matter."
Another important issue discussed at the IMF and World Bank meetings was climate change, which the Development Committee statement describes as "one of the greatest threats to the world today".
But critics charge that the World Bank has only exacerbated the problem.
"By being one of the leading global financiers of fossil fuel projects and ignoring the results of its own extractive industries review, the World Bank is one of the most guilty in fueling the world's unsustainable addiction to oil and other CO2-producing industries," Ann Petermann of the Global Justice Ecology Project told IPS.
"This statement does nothing to acknowledge the damage that the World Bank has done or even to take steps to address the issue, one of which would be implementing the recommendations of the extractive industries review."
World Bank/IMF Annual Meetings - September 2005 At the 2005 Annual Meetings, the Boards of Governors will decide on major international monetary issues. Civil society organizations are preparing seminars and workshops surrounding the Annual Meetings with special focus on conditionalities, debt, development financing and the Millennium Development Goals.
The Financing for Development process, led by the United Nations, reached a global 'consensus' in the Monterrey Conference (2002). But without political will that opportunity remains in jeopardy.
Although there is a wide array of perspectives on poverty at world level, no agreement has been reached about its character. In spite of having a common basis, there are multiple definitions and concepts on this issue.
The G8 Summit 2005
The Group of Eight (G8) Summit 2005 held in Gleneagles, Scotland from 6 to 8 July was aimed to focus on poverty in Africa and climate change but the leaders commitments fell far short of the expectations.
The World Bank's main self-proclaimed objective is to eradicate poverty. Yet, evidence suggests that its programmes often harm the poor and the environment.
International Monetary Fund - IMF
The IMF is one of the most powerful international organizations. Its policies change the lives of millions of people in developing countries.
Economic, social and cultural rights - ESCR
ESC rights are valid, enforceable, justiciable and claimable under both local and international law. Civil society is campaigning for their full implementation.
Millennium Development Goals - MDGs
A comprehensive list of resources from the United Nations and civil society organizations.
Climate change is widely considered to be one of the gravest threats to the sustainability of the planet's environment, the well-being of its people and the strength of its economies.
The most important decitions at the 2005 annual meeting were: 1) the WB/IMF agreement to the G8’s proposal to cancel 100% of the debts owed to the institution by 18 of the world’s poorest countries; 2) acceptance of the findings of its review of conditionality and commitment to monitor its implementation each year. 25 September 2005.
Ministers and Governors discussed the issue of financial markets and economic policies of pension system reform. The Minister of the Economy and Finance of Italy was elected Chairman of the Group of Ten for the coming year.
The International Monetary and Financial Committee held its twelfth meeting in Washington, D.C. on September 24, 2005 under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom.
Ministers of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development held their seventy-fourth meeting in Washington, D.C., on September 23, 2005. The meeting discussed the following issues: global economic prospects, the Millennium Development Goals, debt relief, medium-term strategic roles of the Bretton Woods Institutions, policy support for low-income countries, trade, voice and representation of developing countries, financing for development and date and place of next meeting.
The ability of poor countries to fight poverty and reach the MDGs should be the basis of calculations to determine the necessary level of debt cancellation. This means tha the G8 debt initiative should be extended to include all other poor countries that need to have their debts cancelled to meet the MDGs.
"Monitoring and pressure will need to continue until the two deals are signed and the debt has been legally and irrevocably cancelled" says InterAction, an alliance of more than 160 US-based international development and humanitarian NGOs. Provides analysis of the IMF statements and how they should be interpretated.
Christian Aid is relieved the International Monetary Fund (IMF) and the World Bank have ratified the decision taken by the G8 leaders in Gleneagles to cancel the unfair debts of 18 of the world’s poorest countries. However, it warns that five billion of the world’s poor are still mired in debt.
“For the first time ever, leaders have cancelled 100 percent of the World Bank and IMF debt for 18 poor countries. They must now apply this new standard to all the countries that need debt cancellation to fight poverty.” 25 September 2005.
"The debt cancellation deal proposed by the G8 in July has now been endorsed by all shareholders of the World Bank and IMF. Now we must ensure it is rapidly implemented - and build on the momentum to secure more desperately-needed debt relief, without harmful conditions." 25 September 2005.
Although the deal is by no means the comprehensive 100 per cent cancellation that its promoters claim, the forward steps are welcome. They clearly result in large part from the campaigning and advocacy work by many groups in recent years. Eurodad analyses progress achieved on debt at the World Bank and IMF annual meetings. 26 September 2005.
The World Bank’s Governing Body expressed support for the G8’s proposal to cancel 100% of the debts owed to the institution by 18 of the world’s poorest countries. Here is what ActionAid International had to say. 25 September 2005.
Civil society groups called for urgent action from the international financial institutions on the ongoing debt crisis in impoverished nations, emphasizing the need for immediate implementation and expansion of the Group of 8 (G-8) debt agreement. Statement by 50 Years is Enough Network, TransAfrica Forum, Jubilee USA Network, Institute for Policy Studies and Africa Action. 23 September 2005.
In a statement issued today to the 2005 Annual Meetings of the IMF and World Bank, Global Unions called on industrialised countries to go further than the G8 Summit commitments in increasing debt relief and development assistance. They also called on these institutions to eliminate economic policy conditionality attached to debt relief and aid. 26 September 2006.
Debt campaigners from the World Development Movement (WDM) said World Bank president Paul Wolfowitz's announcement that the Bank has agreed the G8 debt deal for 18 countries was a step in the right direction, but fell far short of ending the debt crisis.
The first official meeting of Mr. Wolfowitz with Civil Society Organizations took place on Thursday, September 22, within the framework of the Annual Meetings. Ahead of the meeting, the different organizations taking part carried out several workshops aimed at preparing a common strategy, although the results were not conclusive. September 26, 2005.
The IMF predicted a promising outlook for the region, although it also warned about the risks arising from the volatility in oil prices and a possible cycle of international market imbalances. The region is better prepared now than it was some years ago to face these challenges, although institutional reforms that would provide the framework to attract more and better investments are still pending. September 23, 2005.
In a speech, in which he points out both the good and bad moves of the Bank in its economic development policies, Wolfowitz analysed the factors that should be taken into account to successfully contribute to poverty eradication. September 25, 2005.