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19 November 2001

Text: Joint IMF-World Bank Committee on Post-Sept. 11 Actions

(Urges closer World Bank, IMF, UN ties to aid poor) (3010)
The joint International Monetary Fund (IMF) and World Bank Development
Committee has called for more collaboration between the Bank, IMF,
regional development banks and United Nations to address the specific
challenges posed to poor countries as a result of the worsening global
economy following the terrorist actions of September 11.
In a communique issued at the end of its meeting November 18 in
Ottawa,
Canada, the committee also stressed the need for developing countries
to focus on governance issues, particularly public expenditure
management, and to enhance efforts to address money laundering and
terrorist financing.
The committee reiterated support for the Bank and Fund's poverty
reduction strategies approach -- noting that 38 countries had
completed interim poverty reduction programs (PRSPs) and eight full
PRSPs. The committee noted significant progress in reducing the stock
of debt owned by the highly indebted poor countries (HIPC), adding
that 24 countries may soon qualify for $36,000 million in debt service
relief and three countries are currently receiving full relief. It
said, however, that a worsening global outlook and declines in trade
should be taken into account when updating HIPC debt sustainability.
The committee said it welcomed the World Bank's background paper on
the
importance of quality education being available to all children and
said it will take up the issue of education for all by 2015 at its
next meeting in April 2002.
The committee outlined an agenda it expects to take up at its
Financing for Development Conference in March 2002. Included are:
-- Building development partnerships on a foundation of sound policies
and good governance.
-- Strengthening the conditions for investment and growth.
-- Promoting integration into the international trading system.
-- Enhancing official development assistance (ODA) flows.
-- Reducing the transition costs of aid.
Following is the text of the communiqué:
(begin text)
November 18, 2001
COMMUNIQUE
1. The 64th meeting of the Development Committee was held in Ottawa,
Canada, on November 18, 2001 under the chairmanship of Mr. Yashwant
Sinha, Minister of Finance of India. Ministers expressed their great
appreciation to the Canadian Government for facilitating the holding
of this meeting under unusual circumstances.
2. Impact of Recent Events in Low- and Middle-Income Countries:
Response of the World Bank Group. 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 pre-existing
global economic slowdown, which had already led to weaker exports and
commodity prices, and have other more specific impacts: e.g.,
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 [World Bank] Bank Group, the [International
Monetary Fund] IMF, the regional development banks and UN 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 industrialized countries to the
improvement of prospects for poverty reduction in developing
countries.
3. 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 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 MIGA's general capital increase.
4. 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 Fund, in accordance with their respective mandates and
comparative advantage, to pay more attention to governance-related
issues, including public expenditure management, diagnostic (e.g.,
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.
5. United Nations Financing for Development Conference. Ministers
expressed appreciation to United Nations 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 (FfD). 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 (MDGs) (endorsed by Heads of State and 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
impact on development. (The Committee's views on Conference issues are
attached.)
6. Poverty Reduction Strategies. Ministers welcomed the significant
progress made in implementing the PRSP approach, noting that 38
countries had completed interim PRSPs and eight 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 Fund's
efforts to work with countries to analyze the poverty and social
impact of programs and to help them to build their own capacity.
Ministers noted that the joint Bank/Fund staff review of the PRSP
approach was underway. 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.
7. HIPC. Ministers welcome the continued progress made in implementing
the HIPC Initiative, noting that twenty-four countries have now
reached their decision points under the enhanced HIPC framework,
qualifying for debt service relief amounting to some $36 billion;
three 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 Fund to work with remaining eligible countries to bring
them to their decision and completion points, as quickly as
circumstances permit.
8. Ministers reiterated their commitment to the enhanced HIPC
Initiative as a means for achieving a lasting exit from unsustainable
debt for eligible countries. 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, they noted that
the enhanced HIPIC initiative framework provides for the consideration
of additional assistance at the completion point if there has been a
fundamental change in a country's economic circumstances due to
exceptional exogenous shocks. The Committee recognized the need to
take into account worsening global growth prospects and declines in
terms of trade, when updating HIPC initiative debt sustainability
analysis at completion point. Ministers noted that the relevant
operational procedures for exercising such an option were recently
approved by the Bank and Fund 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.
9. Education for All (EFA). Ministers consider education as 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 towards 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, inter alia, the policy and resource
requirements needed to ensure that EFA goals are reached by 2015
through the development of sustainable and high quality EFA programs
at the country level.
10. The Committee expressed its great appreciation to Mr. Yashwant
Sinha for his valuable leadership and guidance to the Committee as its
Chairman during the last fifteen months, and welcomed his successor,
Mr. Trevor Manuel, Finance Minister of South Africa. The Ministers
also expressed their warm thanks to Mr. Alexander Shakow upon his
retirement as the Committee's Executive Secretary, and welcomed his
successor, Mr. Thomas A. Bernes.
11. The Committee's next meeting is scheduled for April 22, 2002 in 
Washington, D.C.
Attachment (Financing for Development Conference)
Attachment to the Development Committee Communique
(64th Meeting - Ottawa, Canada, November 18, 2001)
FINANCING FOR DEVELOPMENT CONFERENCE (FfD)
1. Building Development Partnerships on a Foundation of Sound Policies
and Good Governance. Ministers reaffirmed the critical importance of
sound national policies and good governance as prerequisites for
poverty reduction and sustained growth. They noted that the Millennium
Development Goals (endorsed by Heads of State and Government in the UN
General Assembly on September 8, 2000) and other internationally
agreed development targets can help guide country-owned short- and
medium-term national priorities on which external partnerships of
support could be based. They noted that the Comprehensive Development
Framework principles and Poverty Reduction Strategy Papers provide a
vehicle for structuring partnerships with donors; they also provide a
framework for the interventions of donors and other partners -- such
as through country assistance strategies and UN Development Assistance
Frameworks -- to ensure that external support is well integrated into
national programs. An important contribution by the international
community would be the strengthened provision of technical assistance
to help developing countries -- particularly low-income countries and
those emerging from conflict -- improve their capacity for sound
economic management and efficient use of resources.
2. Strengthening the Conditions for Investment and Growth. Ministers
stressed that, in addition to a stable and conducive international
framework, a sound national policy environment, essential
nfrastructure and good governance are needed to allow the private
sector to invest efficiently and create employment. They recognized
that in many countries major reforms of the policy and regulatory
framework will be required to encourage domestic investment and job
creation. Such reforms can also help to promote foreign investment and
contribute to productivity growth and the additional resources needed
for sustainable development. Ministers underlined the need for
coherent and comprehensive support to private sector development. They
emphasized the important role that IFC [International Finance
corporation], MIGA [Multilateral Investment Guarantee Agency] and
other agencies working
directly with the private sector can play in this regard.
3. Promoting Integration into the International Trading System. Trade
is an important source of growth and poverty reduction, and developing
countries need to be able to take greater advantage of the
opportunities it offers. In this connection, the Committee warmly
welcomed the decision reached by the WTO [World Trade Organization]
last week in Doha to launch a new round of trade negotiations. They
endorsed the WTO Ministerial Declaration's aim to place the needs and
interests of developing countries at the heart of their Work
Programme. Ministers emphasized the importance of countries
integrating trade into their development strategies and improving
their investment regulations, standards and technical regulations,
removing obstacles to efficient transport of goods and materials, and
strengthening telecommunications and business services. Ministers
noted that greater access to markets would provide a major boost to
development. They also stressed the priority they attach to helping
developing countries strengthen their capacity to respond to market
opportunities and to implement trade-related agreements.
4. Importance of Enhancing ODA Flows. Ministers recognized that for
most low-income countries the availability of Official Development
Assistance (ODA) remains an essential supplement to domestic resource
mobilization and foreign investment if growth and poverty reduction
goals are to be achieved. Ministers agreed that special emphasis
should be placed on ensuring that adequate resources are directed to
countries implementing sound policies and exercising good governance.
They recognized that a substantial increase in current ODA levels
would be required if the opportunities emerging from policy
improvements in low-income countries are to be realized and the MDGs
to be met. In this context, a number of Ministers referred to the need
to reach the 0.7 percent ODA/GNP target. It would also require that,
among countries with sound policies and governance, ODA be allocated
with greater emphasis on countries with the greatest need (in part
based on the
difficulties they face in the achievement of their MDGs) and with
capacity to make the most effective and efficient use of the
resources. Ministers also emphasized the importance of appropriate
concessionality in ODA flows.
5. Harmonization - Reducing the Transaction Costs of Aid. Ministers
noted that major improvements in development effectiveness and
efficiency, as well as reduced administrative burdens and costs on
recipient governments, would be gained from eliminating rigidities in
aid delivery mechanisms. In this regard, they highlighted the critical
importance of harmonization of operational policies and procedures by
the Bank, other multilateral agencies and bilateral aid donors.
Ministers welcomed the World Bank's report on progress achieved to
date in this area and commended the action programs set forth in this
report. The Committee urged that the Bank and its partners continue
vigorously to pursue these programs, and that the FfD Conference be
encouraged to recognize the importance of, and provide broad-based
support for, further progress in such harmonization and its
implementation at the country level.
6. Debt and Other Instruments. Ministers underscored the need to
deploy a flexible mix of instruments so as to respond appropriately to
the needs of developing countries in a manner consistent with their
economic circumstances and public expenditure management capacities.
While urging that the HIPC Initiative continue to be implemented
expeditiously to achieve debt sustainability for the poorest
countries, they noted that debt relief is only one of many possible
actions and instruments to support country poverty reduction
strategies.
7. Global Public Goods. Ministers noted that FfD provides an
opportunity for enhancing a common approach to global public goods and
accelerating progress on the coordination of priority global public
goods areas, such as those addressing HIV/AIDS and other major
infectious diseases. They agreed on the importance of focusing on
specific priority activities, while consolidating initiatives to
achieve efficient use of resources. They stressed the need to ensure
that activities are anchored in national as well as global strategies.
In some cases this would require ensuring additionality in funding,
while in others flexibility and reinforcement of existing mechanisms
would be needed to help countries own and implement global public
goods-related national programs.
8. Making the Most of Existing Institutions. Ministers noted that FfD
offers an opportunity to establish a broad international consensus --
among governments, institutions, the private sector, and civil society
- for action on the basis of common objectives and for the
identification of specific gaps that may require enhanced
international action. This would provide a platform for individual
institutions to use their respective mandates, governance structures
and strengths to undertake high priority initiatives as well as to
promote more focused and coherent action among bilateral and
multilateral agencies. Ministers strongly believe in making the most
of existing institutions.
9. Integration into the Global System. Ministers agreed on the
importance of promoting the greater integration of developing
countries into the global financial system. They noted that progress
is being achieved through the efforts of, inter alia, the
international financial institutions, including in areas of crisis
prevention, standards and codes, legal and regulatory frameworks,
transparency, financial sector strengthening, combating terrorist
financing and other abuses, debt management, and private sector
participation in the resolution of financial crises. Ministers also
agreed that it is important to find pragmatic and innovative ways to
continue to enhance the effective participation of developing
countries in international dialogues and decision-making processes.
10. Staying Engaged. Ministers noted that the FfD Conference should be
seen as part of ongoing efforts to intensify concerted international
action for development and poverty reduction, to expand growth
opportunities for developing countries, and to improve the
effectiveness and responsiveness of development cooperation. They
urged that the follow-up to the Conference be seen in this context.
They believe that the dialogue among the ECOSOC and the Bretton Woods
Institutions offers unrealized potential, as does further progress
within the framework of the coordinating committee of the heads of
United Nations agencies (ACC). Greater cooperation among existing
institutions is needed, based on a clear understanding and respect for
their respective responsibilities and governance structures. For
example, a combined effort by the Bretton Woods institutions and the
United Nations, along with the OECD, to check periodically on progress
towards the MDGs, would provide an efficient and practical approach
for improved cooperation.
11. Ministers requested their Chairman to convey these conclusions to
the President of the United Nations General Assembly.
(end text)
(Distributed by the Office of International Information Programs, U.S.
Department of State.  Web site: http://usinfo.state.gov)



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