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December 21, 2010
Department of Finance Consultation on Official Development Assistance, 2010
Consultation documents:
Note: A consultation is not a poll. Please do not send multiple or duplicate submissions.
Who may respond:
The consultation period will end on February 18, 2011. 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.
Department of Finance Consultation on Official Development Assistance, 2010
The Department of Finance today launches an online consultation on Official Development Assistance disbursements, giving Canadian stakeholders an opportunity to comment on whether the disbursements meet criteria stated under the Official Development Assistance Accountability Act.
The Official Development Assistance Accountability Act 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.
The Department of Finance currently makes different kinds of international assistance payments:
World Bank
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. IDA allocates its resources primarily through a performance-based allocation mechanism, which includes measures of a country’s social inclusion (e.g. social protection, gender equality, etc.) and governance. The higher countries rate on these indicators, the more IDA resources they can receive.
Additionally, IDA bases its approach on country-driven Poverty Reduction Strategies, which involve broad-based participation by civil society and the private sector. These strategies are focused on results and they are partnership-oriented in that they encourage the coordinated involvement of bilateral, multilateral and non-governmental organizations. They also recognize that tackling poverty requires a comprehensive approach, including improvements in people’s access to opportunities, security and voice for decision making.
The Department of Finance provides $384 million per year to IDA. This financing supports IDA’s efforts 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 the IDA is available at www.worldbank.org/ida.
International Bank for Reconstruction and Development
The International Bank for Reconstruction and Development (IBRD) is the World Bank’s principal financing tool for middle-income and creditworthy developing countries. It promotes sustainable development through loans, guarantees, risk management products and analytical and advisory services. In April 2010, the Development Committee of the World Bank, a body that includes the Government of Canada, endorsed an US$86-billion capital increase. If ratified, Canada’s share of this increase would be US$1.6 billion, of which US$98 million would be paid-in, with the remainder provided by way of financial guarantee. Ratification is anticipated in early 2011, with Canada’s payments commencing in fiscal year 2011–12.
This recapitalization will support higher lending levels from the IBRD, supporting core programs and priorities such as education, health care, social protection, agriculture and rural development, tackling climate change, promotion of gender equality, and infrastructure improvements.
Canada’s equity investment in the IBRD also assists the world’s poorest countries through significant transfers of net income to the IDA. In 2009–10, this transfer of net income amounted to US$383 million.
More information on the IBRD is available at www.worldbank.org/ibrd.
International Monetary Fund (IMF)
Contributions to the Poverty Reduction and Growth Trust
To make its financial support more flexible and tailored to the diversity of poor countries, the IMF has established the Poverty Reduction and Growth Trust (PRGT) as its concessional lending framework. The PRGT’s assistance and conditionality is guided by a country’s Poverty Reduction Strategy, which is, as noted above, country-specific and involves broad-based participation by civil society and the private sector.
In Budget 2010, Canada delivered $800 million in loan resources and $40 million in subsidy resources to the PRGT to support its activities in low-income countries, which is consistent with the commitments made at the G-20 London Summit.
More information on the PRGT and Canada’s commitment is available at:
http://www.budget.gc.ca/2010/pdf/budget-planbudgetaire-eng.pdf (p. 144)
http://www.imf.org/external/np/exr/facts/concesslending.htm
http://www.imf.org/external/np/exr/facts/prsp.htm
http://www.imf.org/external/np/exr/facts/poor.htm
Debt Relief
Canada remains a leader in the area of debt relief. Debt relief allows recipient countries to channel additional resources, which otherwise would have been used to make debt payments, into investments that are consistent with a country’s Poverty Reduction Strategy. Canada provides debt relief through its participation in international debt relief initiatives, such as the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI), and through its participation at the Paris Club.
HIPC and MDRI debt cancellations are only provided once an eligible poor country has completed the HIPC process. The time needed by countries to do so varies according to the implementation timing of their Poverty Reduction Strategy, the macroeconomic stability they can sustain under PRGT-supported programs and whether they carry out required key structural and social reforms. The IMF and World Bank Executive Boards are jointly responsible for reviewing that progress and are responsible for determining when a country has completed all of the tasks necessary to receive HIPC and MDRI debt relief.
More information on the HIPC and MDRI process is available at:
http://go.worldbank.org/76G2TJJO30
http://go.worldbank.org/ZZBSXIICM0
Bilateral Debt Relief
Canada provides 100 per cent debt forgiveness to eligible Heavily Indebted Poor Countries, which has led to over $1 billion forgiven in bilateral debt owed to it by the world’s poorest, most indebted countries. Provision of debt relief varies substantially from year to year depending on countries’ eligibility and the amount of debt Canada holds from these countries. For example, in fiscal year 2009–10, Canada provided $57.1 million in Official Development Assistance-eligible debt relief to Haiti ($2.4 million), the Republic of Congo-Brazzaville ($7.8 million) and the Ivory Coast ($46.8 million).
More information on bilateral debt relief is available at:
http://www.clubdeparis.org/
http://www.fin.gc.ca/treas/evaluations/ecidri-eiiadc-eng.asp.
Multilateral Debt Relief
The International Monetary Fund, the International Development Association and the African Development Fund have agreed under the Multilateral Debt Relief Initiative (MDRI) to cancel 100 per cent of eligible debts owed by Heavily Indebted Poor Countries. At the G-8 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 as not to undermine their ability to provide new financial support to all low-income countries.
Canada’s total commitment over the 50-year lifespan of the MDRI is $2.5 billion. In 2009–10, disbursement was $51.2 million. Canada also passed legislation contained in Section 18(1) of the 2009 Economic Recovery Act that solidified its MDRI commitment and allowed the multilateral institutions to better leverage this commitment in order to provide resources to low-income countries.
The Economic Recovery Act also provided the Government of Canada with the ability to respond quickly to the tragic earthquake that hit Haiti in January 2010. While Canada had already cancelled all bilateral debts owed to it by Haiti prior to the earthquake, following the tragedy, Canada led a G-20 consensus to forgive over US$825 million Haiti owed to international institutions. Canada was the first country to make all of the payments required to cancel Haiti’s debt, totalling US$32.6 million.
More information on the MDRI and Haiti debt relief is available at:
http://www.imf.org/external/pp/longres.aspx?id=4481 http://www2.parl.gc.ca/HousePublications/Publication.aspx?Docid=4115871&file=4 http://www.fin.gc.ca/treas/evaluations/ecidri-eiiadc-eng.asp
http://pm.gc.ca/eng/media.asp?id=3482
http://pm.gc.ca/eng/media.asp?id=3483
Other New Initiatives
In addition to its traditional support to multilateral development institutions and debt relief, the Department of Finance is supporting initiatives to leverage private sector investment for development through the World Bank Group’s International Finance Corporation (IFC). Investments in each of the programs described below support the Sustainable Economic Growth Pillar of Canada’s international assistance effort, and have a strong results focus. The IFC’s Development Outcome Tracking System (DOTS) is a standardized measurement system that allows the IFC to measure the development results of all projects throughout their life, including such variables as economic performance (contributing to poverty reduction) and environmental and social performance (taking into account the perspectives of the poor and human rights standards, including labour and working conditions, indigenous peoples and cultural heritage).
The Department of Finance is currently engaged in the following projects through the IFC:
- International Climate Change – Canada is supporting developing countries’ efforts to reduce their emissions and adapt to climate change. As part of this effort, the Department of Finance is delivering $291.5 million in concessional support for a broad portfolio of clean energy projects through the IFC. This contribution supports the Sustainable Economic Growth Pillar of Canada’s international assistance by enabling low-carbon energy development, a key component of sustainable economic growth. Of this, a grant financing component of $5.8 million will support the IFC's Advisory Services, aimed at building technical expertise in developing countries to support clean energy investments. This combination of concessional private sector financing and technical capacity-building is expected to catalyze significant clean energy investments in developing countries in the short term, while supporting their institutional capacity for environmentally sustainable development over the long term.
More information on Canada’s international climate change support can be found at http://www.climatechange.gc.ca/default.asp?lang=En&n=5F50D3E9-1
- Private Sector Window of the Global Agriculture and Food Security Program – Achieving food security is a growing challenge in the developing world and critical to alleviating poverty. As part of the international effort to address the global food security crisis, Canada announced that it would increase funding towards agriculture development by $600 million over three years. This funding provides resources to enhance agricultural productivity and to improve long-term food security for poor and vulnerable populations. Of Canada’s $600 million, it was agreed that $230 million would be directed to the Global Agriculture and Food Security Program—a new facility managed by the World Bank to boost sustainable agriculture and food security assistance to low-income countries. The Department of Finance is leading Canada’s $50-million contribution to the Private Sector Window of this facility, which is managed by the International Finance Corporation. The Private Sector Window seeks to fill a significant gap in financing available to small and medium-sized agri-businesses and farmers in developing countries. By supplying different types of innovative financing, the Private Sector Window seeks to increase the commercial potential of these groups and incorporate them into the local, national and global agricultural distribution chain.
- Small and Medium-Sized Enterprise (SME) Finance Challenge – Support of growth-oriented SMEs in developing countries is a significant contributor to poverty reduction through job creation. As host of the 2010 G-20 Leaders Summit in Toronto, Canada launched the SME Finance Challenge as an innovative and web-based competition in search of mechanisms for supporting small and medium-sized businesses. A panel of international experts examined hundreds of proposals submitted from around the world and identified the 14 best proposals. Canada will provide $20 million as part of a global effort to implement and scale up these 14 best proposals. Funding will be delivered through the SME Finance Innovation Fund, announced by the G-20, to be established with the IFC acting as trustee.
More information on the SME Finance Challenge, including information about the top-ranked proposals, is available online at www.changemakers.com/SME-Finance.
The consultation period will end on February 18, 2011. 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.
