December 2008

- Consulting with Canadians : Active Consultations -

Archived - Department of Finance Consultations on International Aid

Archived information

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The Official Development Assistance Accountability Act (formerly Bill C-293) came into force on June 28, 2008. Its purpose is to ensure that Canadian Official Development Assistance is provided in a manner that:

  • Contributes to poverty reduction;
  • Takes into account the perspectives of the poor; and
  • Is consistent with international human rights standards.

This Web consultation has been introduced as a pilot project as a result of the Act. Any feedback on how the process can be improved will be considered for future consultations.

The Department of Finance currently makes four kinds of international assistance payments.

International Development Association

The International Development Association (IDA) is the World Bank’s principal financing tool for the world’s poorest countries, providing them with interest-free loans and grants. In December 2007, the Government of Canada announced that it would provide $1.3 billion to IDA over the next three years, under the institution’s fifteenth replenishment.

This financing will allow IDA to enhance its focus on effective delivery of aid, financing for large regional projects like infrastructure, and special assistance for fragile states such as Afghanistan and Haiti, while ensuring countries do not take on unsustainable levels of debt.

More information on IDA is available at www.worldbank.org/ida.

Bilateral Debt Relief

Canada has led the developed world in the area of poverty reduction by forgiving over $1 billion in debt owed to it by the world’s poorest, most indebted countries. Specifically, Canada forgives up to 90 per cent of the bilateral debt owed to it by eligible countries under the Heavily Indebted Poor Countries (HIPC) Initiative, whose aim is to reduce poor countries’ debts to sustainable levels. Canada delivers this debt relief through its participation in the Paris Club. Moreover, Canada goes beyond the requirements of the HIPC Initiative through the Canadian Debt Initiative, under which Canada forgives 100 per cent of the debts that eligible poor countries owe it.

This complete debt relief for HIPCs allows recipient countries to use funds that would have gone to debt payments for more productive investments that support long-term economic development in areas such as education, infrastructure and health care.

Canada’s provision of debt relief varies substantially from year to year, as international debt relief initiatives make debt cancellation conditional on debtor countries meeting International Monetary Fund (IMF) and World Bank mandated program targets. If a country’s performance does not meet the required target, debt relief is withheld until adequate reforms are made.

More information on bilateral debt relief is available at http://www.clubdeparis.org/, http://go.worldbank.org/85B908KVE0 and http://www.fin.gc.ca/toc/2005/cdre0105_-eng.asp.

Multilateral Debt Relief

Under the Multilateral Debt Relief Initiative (MDRI), the IMF, IDA and the African Development Fund (ADF) have agreed to cancel 100 per cent of the eligible debts owed by HIPCs to free up resources to help these countries achieve the Millennium Development Goals.

At the Group of Eight (G8) Summit in Gleneagles in 2005, Canada and other donor countries agreed to fully compensate these institutions for the debts they will cancel on behalf of poor countries, so that the MDRI would not undermine their ability to provide financial support to low-income countries. Canada’s total commitment over the 50-year lifespan of the MDRI is $2.5 billion.

More information on the MDRI is available at

pdf http://www.g7.utoronto.ca/summit/2005gleneagles/africa.pdf (paragraph 29), http://imf.org/external/np/exr/facts/mdri.htm and pdf http://www.fin.gc.ca/bretwood/pdf/bretwd07_e.pdf (page 47).

Arrears Clearance

Prior to receiving debt relief under the HIPC Initiative and the MDRI, countries must establish a sound track record of reform, but must be in good standing with the IMF, IDA and the ADF to do so (i.e. debts owed to these institutions must not be in arrears). There are currently low-income countries that may be eligible for the HIPC Initiative and the MDRI that are in arrears to these institutions. Given their precarious situations and their low-income status, these countries do not have the financial resources to fully clear their arrears to the institutions, which presents a barrier to the process of reform and to the benefits of debt relief.

Most recently, Canada contributed C$44 million to cancel Liberia’s arrears to the IMF, IDA and the ADF and actively encouraged other donors to do their part. In early 2008, adequate funding was secured, which helped Liberia gain access to US$3 billion in debt relief under the HIPC and MDRI initiatives.

The international community has recognized that efforts are needed to help these countries clear their arrears. The clearance of arrears is considered up-front debt relief and the G8, with Canada playing a strong role, has led the way in contributing resources to IDA, the IMF and the ADF to help these countries continue on the path to development. Canada’s participation in arrears clearance demonstrates our strong commitment to debt relief and ensuring that resources in low-income countries are directed towards areas of need.

More information on arrears clearance is available at

pdf http://www.fin.gc.ca/bretwood/pdf/bretwd07_e.pdf (pages 9, 47, and 51) and http://www.imf.org/external/np/sec/pr/2008/pr0855.htm.

Comments on whether these four types of payments meet the criteria for Canadian Official Development Assistance listed above are welcome.

The consultation period is December 5-31, 2008.

Canadian civil society organizations, governments, international agencies and other participants will need to provide the following information when e-mailing their comments:

  • Full name of the official; 
  • Name of the organization; 
  • Full mailing address, including postal code; 
  • Telephone number, including area code; and  
  • Reply e-mail address. 

Submissions should be e-mailed to: APD-consultation-ODA@fin.gc.ca.