Archived - Canada at the IMF and World Bank 2007 : 2

- Table of Contents - Previous - Next -

An Introduction to the World Bank

The World Bank Group is made up of five complementary but distinct entities: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a unique but complementary role in promoting global poverty reduction.

The overarching mission of the World Bank is to reduce global poverty, focusing on the achievement of the Millennium Development Goals (MDGs). These MDGs set concrete targets for the elimination of poverty and sustained development and provide the Bank and other donors with common targets and yardsticks for measuring results. The Bank concentrates on fostering a climate conducive for investment, job creation and sustainable growth. It also seeks to empower the less fortunate, through the provision of health services, education and other social services, to enable them to participate in development.

The Millennium Development Goals End extreme poverty and hunger. Make sure all children receive a primary education. Promote equal rights for women and give them power to help themselves. Improve the health of pregnant women and mothers. Reduce child death rates. Tackle HIV/AIDS, malaria and other diseases. Protect the environment and natural resources. Develop an international partnership for development.

Together, the IBRD and IDA are often referred to as "the World Bank." They focus on lending and contributing to development projects that help to reduce poverty. Funding from the IBRD and IDA go to sectors such as education, health, infrastructure, environment and agriculture. The IFC and MIGA support private sector investment in developing countries.

World Bank Group Agencies^[12]

IBRD—International Bank for Reconstruction and Development

IBRD at a Glance Established: 1945 Members: 185 Mission: Broad poverty reduction Clients: Middle-income and creditworthy low-income countries Tools: Loans, guarantees, analytical and advisory services Size: US$12.8 billion in new commitments, 2007

Established in 1944, the IBRD is the original institution of the World Bank Group and its main lending agency, providing loans to middle-income and creditworthy low-income countries with per capita incomes of less than US$17 per day.

The IBRD raises most of its funds in the world's financial markets by selling AAA-rated World Bank bonds. It lends these funds to its client countries at a rate of interest that is much lower than the rate they could secure on their own. The IBRD is able to borrow at attractive rates because it is backed by capital commitments from its member countries.

The IBRD does not seek to maximize profit; rather, it aims to earn enough to ensure its financial strength and to sustain its development activities. In 2007, the IBRD raised US$11 billion on world capital markets and committed US$12.8 billion to 112 projects in developing countries.

Latin America and the Caribbean receive the largest portion of IBRD funding (34 per cent in 2007), followed by Europe and Central Asia. IBRD lending for infrastructure has been on the rise in recent years, accounting for approximately 55 per cent of total lending in 2007. Lending for government and economic management, health and education also remained a focus.

IDA—International Development Association

IDA at a Glance Established: 1960 Members: 166 Mission: Broad poverty reduction Clients: Poorest countries Tools: Interest-free loans, grants, analytical and advisory services Size: US$11.9 billion in new commitments, 2007

In the 1950s, it became clear that the poorest developing countries could not afford to borrow needed capital on the terms offered by the IBRD. In response, IDA was set up to lend to very poor countries at zero interest. IDA lending now accounts for approximately one-third of World Bank Group financing and is focused on countries with annual per capita income of less than US$3 per day. IDA offers 35- and 40-year interest-free loans and grants and represents the largest source of development financing for these countries.

New IDA commitments are financed through donor contributions, annual transfers from IBRD and IFC net income, and IDA's own internal resources (i.e. principal repayment on past loans). Donor contributions make up the largest component of IDA's finances, and a replenishment is held every three years to mobilize new donor pledges for the coming period.

2007 was a record year for IDA commitments, with US$11.9 billion committed to 189 projects. This volume of IDA commitments was 25 per cent higher in dollar terms than in 2006. The largest share of IDA resources were committed to Africa, which received a record $5.8 billion, or 48 per cent of total IDA commitments. South Asia also received a large share of total funding, with US$4 billion in new commitments. Nigeria (US$1.6 billion) and Pakistan (US$0.9 billion) were the largest single recipients of IDA funding. Sectorally, infrastructure, health, education and agriculture were major focuses for IDA financing.

Supporting Developing Countries' Priorities Development programs are most successful when the country has a true sense of ownership and is deeply involved in their design and execution. Over the last decade, the World Bank has made progress in focusing its lending on borrower countries' development priorities. IDA borrowers begin by setting out their vision for their country's development in a Poverty Reduction Strategy Paper (PRSP). These documents describe the policies and programs they would put in place to promote growth and reduce poverty, as well as associated external financing needs, and are prepared through a participatory process involving civil society and development partners. As of August 2007, 54 low-income countries had prepared PRSPs. Using the PRSP as its starting point, the World Bank works with the country and other stakeholders to prepare a Country Assistance Strategy (CAS). The CAS identifies the key areas where the Bank Group's assistance can have the biggest impact on poverty reduction and sets out a selective program of Bank Group support, including the level and composition of financial, advisory and/or technical support. Canada is very supportive of the efforts the Bank has made to advance the country-led development model and we encourage it to continue helping client countries build the institutional capacity to properly define and implement national strategies and to promote truly participatory processes for the development of the PRSP, involving all interested stakeholders.

IFC—International Finance Corporation

IFC at a Glance Established: 1956 Members: 179 Mission: Promote private sector investment Clients: Businesses in developing countries where there is limited access to capital Tools: Commercial-rate loans, equity investments, resource mobilization, advisory services Size: US$8.2 billion in new commitments, 2007

The IFC works with the private sector in developing countries to reduce poverty and encourage sustainable economic growth. It provides financing for private sector projects, assists in mobilizing financing in international financial markets, and provides advice and technical assistance to businesses and governments. The IFC is now the largest multilateral source of loan and equity financing for private sector projects in the developing world. The IFC's mandate stipulates that it provide financing only where sufficient private capital cannot be obtained from other sources on reasonable terms.

The IFC collaborates and coordinates with the IBRD, IDA, MIGA and other organizations, though it is legally and financially autonomous, with its own share capital, management and staff.

In 2007, the IFC's portfolio grew 17 per cent to US$25.4 billion from US$21.6 billion the previous year. New commitments in Sub-Saharan Africa nearly doubled to US$1.4 billion. New commitments in South Asia increased 112 per cent to US$1 billion, and growth in the Middle East and North Africa was up 82 per cent, to US$1.2 billion.

New commitments for frontier markets (i.e. IDA-eligible countries and other high-risk markets) hit an all-time high, with growth of US$2 billion during the fiscal year, and represented approximately 31 per cent of total new commitments. Growth was especially strong in Sub-Saharan Africa, with new commitments in reaching US$538 million, notably in Nigeria (US$147 million), Uganda (US$156 million) and the Democratic Republic of Congo (US$75 million).

MIGA—Multilateral Investment Guarantee Agency

MIGA at a Glance Established: 1988 Members: 171 Mission: Promote foreign direct investment in developing countries Clients: Investors and lenders Tools: Political risk insurance, advisory and legal services Size: US$1.9 billion in risk guarantees, 2007

MIGA encourages foreign investment in developing countries by providing guarantees to foreign investors against loss caused by non-commercial risks. MIGA also provides technical support to help developing countries promote investment opportunities and uses its legal services to reduce possible barriers to investment.

In 2007, the total amount of guarantees issued for projects in MIGA's developing member countries reached US$1.9 billion. This represents the third consecutive year of steady growth in guarantees issued by the agency.

Of the new guarantees issued, US$387 million went to projects in IDA-eligible countries and US$ 302 million went to projects in conflict-affected countries. Overall, Africa accounts for 18 per cent of MIGA's outstanding portfolio at US$964 million in gross exposure.

ICSID—International Centre for Settlement of Investment Disputes

ICSID at a Glance Established: 1966 Members: 144 Mission: Investment dispute resolution mechanism

ICSID provides a conciliation and arbitration mechanism for investment disputes between member countries and private investors. Canada is not currently a member of ICSID as it requires both federal and provincial implementing legislation. Both the federal government and all of the provinces have indicated a willingness to introduce legislation for Canadian membership, and in 2006 Canada signed a convention with the intention of ratification in the near future. ICSID membership would provide Canadian investors with an additional mechanism for the resolution of investment disputes pursued under international arbitration.

The World Bank Group's Internal Checks and Balances

The World Bank Group has in place several bodies to ensure that its activities are achieving results, are carried out with integrity, and are working for the benefit of the vulnerable and disadvantaged in developing countries.

The Independent Evaluation Group (IEG)

The IEG is an independent unit within the World Bank Group reporting directly to the Bank's Executive Board. The IEG assesses the development impact of IBRD, IDA, IFC and MIGA programs. The IEG's goals are to provide an objective assessment of their work, provide accountability in the achievement of the Bank's objectives and ensure that the Bank learns from its experiences. In 2007, the IEG conducted 27 evaluations of individual Bank projects, 4 country-level evaluations, 5 sector evaluations, and 9 corporate reviews. These reports are available online at: www.worldbank.org/ieg.

Quality Assurance Group (QAG)

QAG's primary objective is to promote increased internal accountability at the Bank by providing staff with credible, timely feedback on operational performance and identifying systemic issues affecting operational performance. It highlights the skills and resources needed to ensure high-quality work and uses lessons learned to support staff training. In 2007, QAG released an assessment of the supervision of Bank projects. An assessment of project design and preparation (i.e. "quality at entry") is expected in early 2008. These are available online at: http://web.
worldbank.org/WBSITE/EXTERNAL/PROJECTS/QAG/0,,content
MDK:20067126~menuPK:114865~pagePK:109617~piPK:
109636~theSitePK:109609,00.html.

Compliance Advisor Ombudsman (CAO)

The Office of the CAO is committed to enhancing the development impact and sustainability of IFC and MIGA projects by responding quickly and effectively to complaints from affected communities. It also supports the IFC and MIGA in improving the social and environmental outcomes of their work and fostering a high level of accountability. The CAO has received 64 complaints since 2000, including 8 in 2007. Ten of these cases were closed in 2007. CAO's Annual Report can be accessed at: www.cao-ombudsman.org/html-english/documents/CAO_AR0607_

Engforweb.pdf

The Inspection Panel

The primary purpose of the Inspection Panel is to address the concerns of people who may be affected by IBRD and IDA projects and to ensure that the Bank adheres to its operational policies and procedures during the design, preparation and implementation phases of projects. The Panel is appointed by and reports directly to the Executive Board. In 2007, the Panel completed two investigations and received six new requests for inspection. The Panel's Annual Report can be accessed at: http://site
resources.worldbank.org/EXTINSPECTIONPANEL/Resources/

InspP_2007_Annual_Report.pdf

Department of Institutional Integrity (INT)

INT investigates allegations of fraud and corruption in Bank Group operations as well as allegations of staff misconduct, and reports its findings directly to the President. INT also assists in preventative efforts to protect Bank Group funds and ensure they are used for intended purposes. In 2007, INT closed 149 cases of suspected misconduct by external partners, which have so far led to the debarment of 3 firms from participation in Bank-related projects. INT also closed 152 cases of suspected misconduct by Bank staff, which led to the termination of 22 staff and disciplinary action for 22 others. INT's Annual Report can be accessed at: http://siteresources.worldbank.org/INTDOII/Resources/

fy07report-execsum.pdf

Volcker Panel Review of INT In 2007, an independent review panel, chaired by former Chairman of the Federal Reserve Bank, Paul Volcker, was formed to review the work of the Department of Institutional Integrity (INT) and to strengthen and clarify INT's role in relation to the Bank's broader Governance and Anti-Corruption strategy. The Panel's recommendations included the creation of an independent advisory board comprising international anti-corruption experts to protect INT's independence and strengthen its accountability, as well as the creation of a preventative services consulting unit to help Bank staff guard against fraud and corruption in Bank projects. The Panel also recommended raising the rank of the head of the department to Vice President. Canada supports the full implementation of the Volcker Panel recommendations. An empowered and effective INT is essential to safeguard against misconduct by external partners and Bank staff.

Canada and the World Bank

This section describes how Canada participates at the World Bank, highlighting the opportunities for Canada to influence Bank policy.

The World Bank is governed by 185 member countries. Each owns shares of World Bank stock and thus holds decision-making power. Every World Bank member state appoints a Governor to represent them on the Board of Governors, the highest authority governing the Bank. Canada's Governor is the Minister of Finance.

The Governors are responsible for core institutional decisions, such as admitting or suspending members, increasing or decreasing the Bank's authorized capital stock, determining the distribution of net income, and reviewing financial statements and budgets.

They delegate responsibility for the day-to-day running of the organization to 24 full-time Executive Directors, located at the Bank's headquarters in Washington, DC. Executive Directors are appointed for terms of two years. In September 2006, Mr. Samy Watson was elected to represent the constituency which includes Antigua and Barbuda, the Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Guyana, Ireland, Jamaica, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines. Governments within the constituency provide advice to the Executive Director on issues discussed at the Executive Board. The Executive Director considers this advice in forming his positions and applies his own judgement as an officer of the World Bank.

The Executive Board usually makes decisions by consensus. In the event of a formal vote, however, the relative voting power of individual Executive Directors is based on the shares held by the constituencies they represent.

Voting power at the Bank is mainly a function of the shareholdings held by a country, which in effect means that voting power reflects the relative economic strength of individual members. A small share of a member's voting power is also determined by basic votes, which are distributed equally among all members.

Table 6
Voting Shares of the 12 Largest Members at the World Bank (IBRD)

Country	% of Total Voting Shares
United States	16.38
Japan	7.86
Germany	4.49
United Kingdom	4.30
France	4.30
China1	2.78
Canada	2.78
Italy	2.78
India	2.78
Russia	2.78
Saudi Arabia	2.78
Netherlands	2.21
1 China has slightly more votes than Canada, Italy, India, Russia and Saudi Arabia.

Canada is the seventh largest shareholder at the Bank, having contributed a total of US$5.5 billion in capital subscriptions to the IBRD, IFC and MIGA and US$7.8 billion in donor contributions to IDA. Our voting power ranges from 2.51 per cent to 3.39 per cent within the Bank's different institutions.

Table 7
Canada's Capital Subscriptions, Contributions and Voting Power as of June 30, 2007
(US$ millions, unless otherwise indicated)

	IBRD	IDA	IFC	MIGA
Capital subscription	5,403.8	–	81.3	56.5
Amount paid in	334.9	7,834.81	81.3	10.7
Amount callable	5,068.9	–	–	45.8
Subscription share  (%)	2.85	4.68	3.44	3.00
Voting power (%)	2.78	2.77	3.39	2.51
Note: Figures from the 2007 Annual Report for the World Bank, IFC and MIGA respectively for 2007.
1 IDA figure represents Canada's cumulative contributions.

Members of the Executive Director's Office at the World Bank

Executive Director	Samy Watson (Canada)
Alternate Executive Director	Ishmael Lightbourne (the Bahamas)
Senior Advisor	Terry Winsor (Canada)
Senior Advisor	François Pagé (Canada)
Senior Advisor	Brendan Ryan (Ireland)
Senior Advisor	Cal MacWilliam (Canada)
Advisor	Sharmila Prakash Khare (Canada)
Advisor	Carl Oliver (the Bahamas)
Executive Assistant	Monique Piette
Program Assistant	Monica Morris
Phone/fax	202-458-0082/202-477-4155
Address	MC-12-175, 1818 H Street N.W. Washington, DC 20433, USA

IDA Replenishments

Every three years IDA funds are replenished through donor contributions. The replenishment provides another opportunity for Canada to influence policy, as during this process IDA and its donors discuss policy directions for the upcoming period. Governors from each donor country appoint an IDA Deputy to represent them at these discussions, which conclude with a round of donor pledges for the replenishment of the association's finances. Canada's IDA Deputy is Mr. Peter Cameron, Director of the International Finance and Development Division of the Department of Finance.

The Benefits of World Bank Membership

Membership at the World Bank provides significant benefits to Canada, including:

• An important voice in the leading international institution for global poverty reduction and development.
• A vehicle to contribute to development in low-income and emerging countries beyond that which can be achieved through our bilateral programs.
• Participation in an institution that shares our priorities with respect to effectiveness and results; is a key partner for Canada in fragile states; and leads the international community's efforts on debt sustainability.
• An opportunity to partner with the Bank on its research and policy work, which enriches our own understanding of international development.
• Business opportunities for Canadian companies and individuals, through its transparent and fair procurement system.
• The opportunity for closer ties with the countries with which we share a constituency, including a better understanding of their global development priorities and the unique development context in the Caribbean.

Canada at the World Bank: What Happened in 2007

This section describes how Canada delivered on its priorities for 2007, as set out in the 2006 Report on Operations Under the Bretton Woods and Related Agreements Act. It also provides an overview of other major developments at the World Bank in 2007. For each major issue, it describes Canada's involvement and summarizes our views, as conveyed through advice to the Executive Director's Office as well as statements at the DC Meetings. The section ends with Canada's voting record at the World Bank for 2007 and information on our financial contributions over the year.

Canada's Priorities in 2007

The "Looking Ahead" section of the 2006 report described Canada's priorities at the World Bank for 2007. There were two priorities listed:

• To use the 2007 IDA replenishment as an opportunity to seek enhancements to World Bank support in three areas: fragile states, debt sustainability and results and effectiveness.
• Further action to end the "lend and forgive" cycle through debt sustainability, including arrears clearance for Liberia.

IDA holds a replenishment every three years to raise new donor financing for its operations. These discussions provide an opportunity for IDA, donors and borrower representatives to review IDA's policies and operations, and agree on changes or enhancements for the upcoming three-year period. Discussions regarding IDA's fifteenth replenishment (IDA15) began in March 2007 and concluded in December 2007.

Canada proposed that fragile states, debt sustainability, and results and effectiveness be chosen as themes for the IDA15 policy discussions. We were pleased that these priorities were shared and accepted by the other members. Participants also agreed to examine IDA's climate change adaptation and mitigation activities.

Altogether, Canada and the other IDA donors secured a number of important policy enhancements in these priority areas, as described below. The IDA15 agreement will be presented to Governors in 2008 for their final approval, and a full list of policy agreements will be released publicly by the summer of 2008. Papers produced for the discussions and meeting summaries are available on the World Bank's website.

Fragile States

Fragile states present a major development challenge, with 35 per cent of the world's poor concentrated in these countries—a share that is expected to grow in the future. Canada has made fragile states a focus for our own bilateral aid, with large programs in countries such as Afghanistan, Sudan and Haiti, and has been advocating for stronger multilateral support in this area as well.

In this regard, the Bank has significantly enhanced its engagement in fragile states over the last few years, including:

• New guidelines to help the Bank tailor its responses in fragile states and avoid a "one size fits all" approach.
• A new rapid response system.
• Staffing improvements in fragile states, including more field presence, better sharing of lessons learned, and specialized backup teams for emergencies.
• The creation of the Low-Income Countries Under Stress (LICUS) Trust Fund to provide a quick-response and flexible funding mechanism.
• A significant increase in IDA financing for fragile states provided in the form of non-repayable grants, rather than loans.

During the IDA15 discussions, IDA, donor countries and borrower representatives suggested further improvements. Canada pushed for an increase in the size and duration of IDA's special funding for post-conflict states and the timely completion of a framework for better coordination between the Bank and the United Nations. These suggestions were echoed by many of the other donors, as well as IDA staff, and both were agreed to, including a US$1.5-billion increase to special financing for post-conflict states.

Canada also supported IDA's proposal for US$1.4 billion in financing to clear the arrears of countries emerging from conflict. This arrears clearance will enable countries such as Côte d'Ivoire, Liberia and Sudan to benefit from IDA support once again.

Debt Sustainability

Canada has been very active in the development and financing of debt relief through the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative (MDRI), which free up resources for recipient countries to redirect to poverty reduction initiatives. Under these programs, Canada has cancelled roughly $1 billion in debts owed to us by developing countries since 2000 and committed to provide the IMF, World Bank and African Development Bank with $2.5 billion over the next 40 years to compensate them for the debts they have cancelled.

Given these efforts, it is critical that the international community prevent a return to the "lend-and-forgive" cycles of the past by helping recipient countries implement sustainable, long-term financial management. The World Bank has played a significant role on this issue through the development of:

• The Debt Sustainability Framework, with the IMF to better monitor and prevent the reaccumulation of unsustainable debt.
• The Debtor Reporting System to collect debt data to improve the transparency of lending and borrowing activities.
• A grant allocation system for IDA under which countries with higher debt risk ratings receive financing in the form of grants, rather than loans.
• A Non-Concessional Borrowing Policy (NCBP) to create proper incentives for IDA-eligible countries to borrow on concessional terms and ensure that debt sustainability is maintained.
• Tools and technical assistance to help borrowers strengthen their debt management.

During the IDA15 discussions, Canada encouraged the Bank to further strengthen its tools to assess and encourage debt sustainability. Canada and other donors urged the Bank to strengthen their work to build debt management capacity in recipient countries. IDA agreed to develop a medium-term debt management strategy tool to assess a country's capacity to maintain debt at sustainable levels and enhance advisory services for IDA clients. IDA also agreed to conduct regular debt sustainability assessments for all of its clients and publish its analyses on its website to help increase the transparency of borrowing decisions.

Canada also suggested that the Bank expand the scope of the NCBP to consider not just the rate of accumulation of non-concessional debt, but also the rate of accumulation of concessional debt (i.e. low or no interest loans provided by donors and organizations like IDA), when assessing IDA clients' debt situations. While this was not agreed to by all participants for the IDA15 period, IDA did agree to provide regular updates on its experience with the NCBP, and Canada will continue to monitor its effectiveness and advocate for the Bank to recognize the role of concessional loans in debt sustainability.

Results and Effectiveness

Given the enormous needs of developing countries, donors and recipients should ensure that each dollar available for international assistance goes as far as it can in terms of development results. To this end, Canada made a commitment in its 2007 budget to improve the effectiveness of its own aid program and we have been pushing our multilateral partners to strengthen their focus on results and effectiveness as well.

The World Bank has been a leader in this area, with considerable progress in the last few years on two fronts:

• Results Measurement

• Country-Level Effectiveness

During the IDA15 discussions, Canada and many other donors urged IDA to strengthen its work on statistical capacity building to ensure that results are being properly measured and that the data is being used to shape policies and programs. It was agreed that IDA would incorporate a more comprehensive discussion of weaknesses in statistical capacity in each CAS, follow up with financing and technical advice, where appropriate, and improve staff incentives to focus on results. Canada also encouraged IDA to strengthen its Results Measurement System by including gender-disaggregated data in order to report on and properly target progress on gender equality. IDA agreed to work towards this goal.

To further improve effectiveness at the country level, Canada and many other donors urged IDA to do more to draw non-traditional partners, including new multilateral funds, emerging donor countries and private sector donors, into its harmonization and alignment efforts. This was agreed, along with further progress in decentralization, internationally recruited staff, the use of recipient country systems for program delivery and more predictable disbursements.

Climate Change

There is strong consensus that climate change presents an urgent challenge to the entire international community, but it is of particular concern to developing countries as they will suffer most from the impact of variable climate. IDA15 participants therefore agreed that it was important to discuss IDA's role in helping client countries with climate change adaptation and mitigation efforts.

Canada welcomed these discussions, as climate change is a development issue which IDA is well placed to address. We noted the need to harness the strength of the private sector, given the enormous financial and technological needs, and urged IDA to ensure that its activities are properly coordinated with other partners in this area, including the Global Environment Facility (GEF).

It was agreed that IDA would mainstream climate change adaptation into CASs, pilot tools for better climate risk management, scale up financial support for these projects, tap into carbon finance^[13] to fund increased use of clean energy technologies, and improve coordination with the GEF and other donors in this area.

IDA15 Financial Contributions

The replenishment provided IDA with a record US$41.6 billion in contributions for the three years beginning July 1, 2008. Of this amount, US$25.1 billion will come from donors, a 42-per-cent increase over donor contributions in IDA14 (see Chart 5).

Canada has committed C$1.3 billion (SDR 798 billion) over the next three years, funded from our International Assistance Envelope (IAE), Canada's source for aid spending.^[14] This represents a considerable increase in our IDA support, up almost 50 per cent in SDRs from our IDA14 contribution (C$1.04 billion; SDR 534 billion). However, with the appreciation of our currency, our Canadian dollar payments to IDA will rise by 25 per cent.

Altogether, we will provide 4 per cent of total donor financing for IDA15, up from 3.75 per cent under the last replenishment. Our IDA contribution will account for 9.2 per cent of Canada's aid budget for 2008, up from 7.4 per cent in 2007.

Our strong financial support for IDA15 reflects a strong alignment between the institution's operations and Canada's aid priorities:

• Canada's 2007 budget committed "to make our existing aid resources work more effectively." IDA is widely held to be one of the most effective aid institutions.

• Canada's 2007 budget also announced that Canada will be focusing its traditional bilateral aid in fewer countries to improve effectiveness. Enhanced support through our IDA15 contribution allows Canada to maintain an important multilateral presence in countries where we will no longer be active bilaterally.
• As over 50 per cent of IDA's resources are expected to go to Africa, our strong IDA15 pledge supports Canada's commitment to double our aid to Africa by 2008–09 from 2003–04 levels.
• Significant focus on fragile states, debt sustainability and results.
• IDA seeks to build country systems (e.g. regulatory and transportation systems, good governance), creating enabling local environments in which our bilateral efforts can achieve better results.

Ending the "Lend-and-Forgive Cycle"

As indicated in the 2006 report, a second broad priority for Canada in 2007 was to help end the "lend-and-forgive" cycles of the past by promoting debt sustainability. To this end, progress was achieved on several fronts. First, a number of important enhancements were agreed to in the IDA15 discussions, as discussed in the subsection "Debt Sustainability" under "Canada at the World Bank: What Happened in 2007."

In addition, Canada actively worked with other G7 countries to push the World Bank and IMF to strengthen their joint Debt Sustainability Framework (DSF). Assessments of sustainable debt levels under the DSF have now been expanded to look not just at a country's overall debt stock, but also its rate of debt accumulation.

Finally, Canada and other G8 countries achieved important progress on arrears clearance, a key step in achieving debt sustainability. A number of heavily indebted poor countries (HIPCs) have large arrears owing to the World Bank, IMF and African Development Bank (ADB), as long periods of severe conflict have impeded their capacity to repay past loans. Until their arrears are cleared, these countries cannot benefit from debt relief under the HIPC Initiative or MDRI, or receive concessional financing from the World Bank, IMF or ADB to help them emerge from conflict. Clearance of these arrears requires substantial financial resources and coordination efforts by the international community. Liberia's arrears were addressed in 2007, representing the first case of large-scale arrears clearance.

After many years of civil war, Liberia has made tremendous strides in establishing political and economic stability. However, a legacy of high debt has prevented much-needed social investments. A major obstacle to receiving significant debt relief under the HIPC Initiative and MDRI was the US$1.5 billion in arrears that Liberia owed to the IMF, World Bank and ADB.

Securing adequate financing to clear Liberia's arrears took concerted effort by the G8, with Canada playing a leading role. Canada contributed C$44 million and actively encouraged others to do their part. In January 2008, adequate funding was secured from donors and an agreement was reached on a strategy to clear Liberia's arrears to all three institutions, making the country eligible for a total of US$3 billion in debt relief under the HIPC Initiative and MDRI.

Liberia's arrears clearance operation is a great demonstration of donor cooperation and will help pave the way for other countries facing significant arrears due to protracted conflicts. Canada's leadership in this operation underscores our commitment to helping well-performing developing countries receive the support they need to reach their long-term development goals.

Other Developments in 2007

Paul Wolfowitz's Resignation

In May 2007, the Executive Directors began investigating allegations of possible misconduct by Paul Wolfowitz, then President of the World Bank. At that time, Canada's Governor urged the Bank to undertake a fair and transparent process to assess Mr. Wolfowitz's actions. To this end, a panel of Executive Directors was set up to investigate the allegations in a fair and transparent manner.

On May 14, the panel found that Mr. Wolfowitz had violated Bank rules in arranging an assignment for his partner. Mr. Wolfowitz offered his resignation to the Executive Board on May 17. After a discussion with Mr. Wolfowitz, the Executive Directors accepted his resignation, stating that, while a number of mistakes were made, they accepted that those involved acted ethically and in good faith.

Robert Zoellick's Nomination

Canada has long called for the Bank to introduce an open, transparent and merit-based process for the selection of its President. To this end, in May 2007, the Executive Board put out a call for any Executive Director to make a nomination and set a firm timetable and profile of key selection criteria, which was publicly released. The sole nominee was Robert B. Zoellick, a former US Trade Representative and Deputy Secretary of State. The Executive Board held an informal meeting with Mr. Zoellick to discuss key issues of interest to the Bank before making its decision.

Mr. Zoellick was confirmed as the World Bank's 11th President in July 2007. He brings a strong record of experience to the job, and Canada was supportive of his nomination. Looking ahead, Canada will work with others on the Executive Board to put in place a process to allow for the selection of the best-qualified candidate, regardless of nationality.

A New Strategic Direction

To support his vision for the Bank as a catalyst for "inclusive and sustainable globalization," Mr. Zoellick outlined six strategic themes for the Bank's future direction.

1) Meeting the needs of the poorest, particularly in Africa.

2) Fragile and post-conflict states.

3) Middle-income countries.

4) Regional and global public goods (GPGs).

5) The Arab and broader Islamic world.

6) The development learning agenda.

President Zoellick discussed these themes with the Bank's Governors during the Annual Meetings in October 2007 and has set up working groups to look at specific actions within each of the six areas. Canada welcomes these efforts to better define the Bank's long-term strategy, and we urged the Bank to work towards the following goals:

• Appropriate focus. For the Bank to maximize its effectiveness, it needs a strategy that helps it focus on its strengths within each of the six broad areas, rather than spreading itself too thinly. This would involve moving away from activities where the Bank is seeing low results, or where other organizations are better placed to lead efforts.
• Engaging the private sector on GPGs. A long-term, sustainable approach on GPGs will require greater engagement with the private sector. In particular, innovative financing initiatives, like the Advance Market Commitment and the Caribbean Catastrophe Risk Insurance Facility, can work to mobilize private sector investment. We see innovative initiatives such as these as crucial in pushing the GPG agenda forward.
• Synergies within the World Bank Group. It is important that the Bank improve coordination across its different agencies to better leverage all of its tools to maximize development impact.

Governance and Anti-Corruption

Corruption is an obstacle to economic and social development as it undermines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends. The harmful effects of corruption are especially severe on the poor, who are hardest hit by economic decline, are most reliant on the provision of public services, and are least capable of paying the extra costs associated with bribery, fraud, and the misappropriation of economic privileges.

In April 2006, Governors asked the Bank to elaborate a broad governance strategy to help member countries strengthen governance and deepen their fight against corruption. Following extensive consultations with representatives of governments, donors, civil society, parliaments, the private sector, academia and other stakeholders, the Bank produced a Governance and Anti-Corruption (GAC) strategy, which it presented to Governors at the World Bank-IMF Spring Meetings in 2007.

Canada supported the original call for a renewal of the Bank's approach to government accountability and corruption, as these are priority issues for the Government of Canada, both domestically and abroad. We encouraged the Bank to put in place transparent operational guidelines for the handling of situations where corruption and weak governance are a concern. Through our interventions at the Executive Board, in discussions with Bank senior management and through involvement in jointly funded activities such as Trust Funds and other initiatives, Canada is actively working to hold the Bank and its partners to a high standard.

As the Bank implements the GAC strategy, we would like to see an emphasis on results. In particular, the Bank and countries concerned should work in partnership to measure and monitor results at the country level and set GAC markers to gauge progress.

The Governance and Anti-Corruption Strategy

The GAC Strategy Aims to Improve Governance and Fight Corruption at the Project, Country and Global Level

Project level	More clearly integrate good governance into the preparation of Bank projects. Intensify supervision, detection and enforcement, especially for activities where the risks of corruption are high.
Country level	Intensify capacity building work, including public financial management, procurement and civil service reform. Expand work on initiatives to strengthen transparency, participation and oversight in partnership with governments, the private sector and civil society.
Global level	Strengthen bilateral and multilateral partnerships to promote coordinated donor action, especially in high risk environments. Intensify engagement with the private sector in tackling corruption.

The StAR—Helping Developing Countries Recover Looted Funds An integral part of the GAC strategy is the Stolen Asset Recovery (StAR) initiative, launched by the World Bank and the United Nations (UN) Office on Drugs and Crime in September 2007 to step up international efforts to recover developing countries' stolen assets and stem the flow of looted funds. Stolen assets are often hidden in the financial centres of developed countries, and bribes to developing country officials often originate from firms operating in both developing and developed countries. The StAR initiative's objective is to create the global partnerships needed to address this problem. A core part of the StAR Action Plan is advocacy to persuade developing and developed countries to ratify the UN Convention Against Corruption (UNCAC), the first global anti-corruption agreement that provides a regime by which proceeds of corruption can be returned to their rightful owners. It will also provide legal and technical advice to countries attempting to recover stolen assets, and services to monitor recovered assets to ensure that they are used transparently and effectively. Canada is committed to fight corruption as a worldwide problem that undermines democracy, human rights and the rule of law. We played an active role in developing the UNCAC and made a commitment, under the April 2006 Federal Accountability Action Plan, to ratify the Convention as soon as possible. In May 2007, Parliament passed legislation to make Canadian law consistent with the provisions of the Convention and in October 2007 Canada ratified the UNCAC.

Health

In April 2007, the World Bank released a new strategy entitled, Healthy Development: The World Bank Strategy for Health, Nutrition, and Population (HNP) Results, as an update to its 1997 HNP strategy. The development of a new strategy was prompted by recent changes in the global context for health financing, including:

• Increased global attention to HNP in developing countries, with total financing jumping from US$6 billion in 2000 to US$14 billion in 2006.
• An explosion of new multilateral, bilateral and private initiatives that has challenged the World Bank's traditional role as the predominant HNP financier, and created a system with several large financiers.
• Many of the new organizations focus on one priority disease.
• Renewed recognition of the importance of strengthening health systems as a whole for sustainable outcomes and to support the success of priority disease interventions.

The new HNP strategy was also designed to address challenges within the Bank's HNP program. In particular, it ranked lowest in terms of implementation quality among all sectors in the Bank for the last five years and suffered from a very weak focus on measurement of results, making progress difficult to track.

The updated strategy is intended to improve the Bank's contribution to HNP by renewing its focus on results and concentrating on its areas of comparative advantage, in particular strengthening overall health systems and ensuring adequate human and financial resources remain available for core health programs.

We believe that a number of new global HNP initiatives play a key role in mobilizing donor financing and providing targeted interventions, and we have provided several projects with significant contributions.^[15] However, we also recognize that the rapid proliferation of these initiatives and lack of coordination places a real burden on developing countries and creates challenges at the country level. We are pleased that the new HNP strategy will include a focus on assisting countries in effectively integrating global programs into national health care systems and will strengthen the Bank's focus on effective coordination with other donors and organizations on the ground. As a bilateral donor, Canada is also actively engaging in donor coordination efforts at the country level.

Clean Energy

Affordable and sustainable energy services are central to economic development and improved living standards, and it is expected that developing countries will account for much of the future increase in energy consumption. Recognizing that fossil fuels will continue to be the single greatest fuel source to meet growing demand, Canada and other G8 countries at the Gleneagles Summit in 2005 called on the World Bank to take a leadership role in creating a new framework to accelerate global investment and financing for clean energy and development.

In developing the Clean Energy Investment Framework (CEIF), Canada encouraged the Bank to strike an appropriate balance between the global need to take action on climate change and the need for the poorest countries to have access to affordable and sustainable energy to lift themselves out of poverty.

And, while we encouraged the Bank to scale up its support for clean energy sources to support the CEIF, we also realize that oil and coal will continue to be a major fuel source for the world's poorest people for the foreseeable future and that extractive industries will remain important for the economies of many developing countries. We therefore supported the Bank's plan to retain some level of participation in the oil and coal sector, as we believe that by staying engaged, it can have an influential role in ensuring that the best environmental and social practices are followed and that the goal of sustainable poverty reduction is achieved. Altogether, the Bank's participation in oil and coal is expected to remain relatively small (less than 5 per cent of total lending per year).

Finally, we urged the Bank to ensure that the CEIF highlights the critical role of the private sector in accelerating the transition to a low-carbon economy, as it is clear that we will not succeed unless this challenge is taken up in the marketplace. The CEIF should help the international community determine how it can best make use of its financial, technical and convening abilities to mobilize this much-needed private investment.

In this regard, Canada has been encouraging the Bank and others to look beyond their traditional focus on country-level interventions to consider what role it can play in catalyzing private sector participation in addressing climate change at the global level. In particular, the time may be ripe to consider an innovative financing initiative, similar to the Advance Market Commitment initiative, to accelerate global investment in the development of new clean energy technologies.

The CEIF was approved by the Bank's Governors in April 2007.

Three Areas of Action for the World Bank Under the CEIF

Access to energy	Policy and regulatory support to help client countries improve financing prospects and scale up investments. A particular focus on Africa, with a target of providing electricity access to 29 million more people by 2015.
Transition to a low-carbon economy	Strengthen program of analytical work and scale up low carbon investments. More financing for the incremental costs of clean energy projects through new mechanisms for carbon financing. Studies to help identify lower-carbon development paths that respect poverty alleviation and economic growth targets for India, China, Brazil, Mexico and South Africa.
Climate change adaptation	Scale up efforts and create new tools to assess countries' risks from climate change; build their capacity to manage risks; and invest in adaptive measures.

We are pleased to see that the Bank has already made substantial progress in implementing its Action Plan under the CEIF, for example:

• Total World Bank Group lending for energy projects is to exceed US$10 billion for the 2006–2008 period, up from US$7 billion in
  2003–2005.
• Support for energy in Sub-Saharan Africa rose to US$1.1 billion in 2007, compared to US$0.6 billion in 2006.
• Lending for low-carbon projects represented 40 per cent of energy lending in 2007, up from 20 per cent in 2004, while lending to oil, gas and coal fell from 29 per cent to 17 per cent.
• Two new facilities were created to scale up the use of carbon finance: the Carbon Partnership Facility and the Forest Carbon Partnership Facility.
• Consideration of climate change vulnerabilities was mainstreamed in 32 per cent of CASs in 2007, up from 15 per cent in the
  2000–2005 period.
• The Bank launched the first regional disaster insurance facility in the world, the Caribbean Catastrophe Risk Insurance Facility, which will help with climate risk management and adaptation.

Innovative Development Initiatives

Advance Market Commitment (AMC)

An Advance Market Commitment (AMC) is an innovative way to protect the lives of the world's poorest children by making vaccines available in developing countries more quickly. Although vaccines are an extremely cost-effective development tool, vaccine-makers invest relatively little to create vaccines for diseases prevalent in developing countries, given the perception that the countries will have limited capacity to pay for them. Under an AMC, donors put money aside with a promise to supplement the purchase price of vaccines once they are developed. This stimulates vaccine-makers to accelerate efforts, as they have more certainty about recouping the costs of developing these vaccines and bringing them to market. Donor funding is guaranteed as long as vaccines meet stringent, pre-agreed criteria regarding effectiveness, cost and availability; there is demand from developing countries for the vaccines; and the vaccine-maker agrees to continue supplying vaccines at fair prices that developing countries can afford after the pool of donor funding has been exhausted.

Canada has played a leadership role in moving the AMC model from a promising theoretical concept to a functioning program. Working closely with the World Bank, the Global Alliance for Vaccines and Immunization (GAVI) and a handful of other donors, Canada has very actively participated in the design, financing and implementation of the AMC. Canada was also the first to make a financial commitment to the initiative, with an announcement at the G8 Summit in St. Petersburg in 2006, a move that helped galvanize commitments from other donors over the months that followed.

In February 2007, Minister Flaherty, with his counterparts from Italy, the United Kingdom, Norway and Russia, together with the Bill & Melinda Gates Foundation, the World Bank and GAVI, officially launched the AMC at a special event in Rome. Altogether, donors committed US$1.5 billion for a pilot AMC for pneumococcal disease, a leading cause of childhood mortality in the developing world. Canada's total contribution will be US$200 million.

A key strength of the AMC mechanism is that donors only pay for success. Vaccines bought under the AMC scheme will have to meet strict criteria, set by an independent committee. No AMC money will be paid out until, and unless, the right vaccine is developed.

The pilot AMC aims to accelerate the introduction of a pneumococcal vaccine for the developing world by up to 13 years, from 2023 to 2010. It is estimated that this could save 5.8 million lives by 2030.

Caribbean Catastrophe Risk Insurance Facility (CCRIF)

Launched in 2007, the Caribbean Catastrophe Risk Insurance Facility (CCRIF) is the first regional disaster insurance facility in the world, providing participating Caribbean countries with rapid and guaranteed cash payments in the event of a "catastrophic" earthquake or hurricane.

The CCRIF is another innovative development tool in which Canada has taken a lead role. Canada has been involved in the CCRIF since its beginning stages, actively working with our Caribbean constituents to create a financing option that responds to their needs. The Executive Director representing Canada at the Bank played a key role in gaining full Caribbean participation in the Facility. We have also demonstrated our commitment to the CCRIF by contributing $20 million to the initiative, making Canada by far the Facility's largest donor, as well as actively encouraging other donors to contribute.

The CCRIF provides many benefits. The rapid and guaranteed cash payment provided when a natural disaster triggers the Facility's payment threshold ensures that funds are available to finance immediate post-disaster recovery and should give governments time to mobilize additional resources for longer-term reconstruction activities. Further, by pooling the individual risks of participating countries, the Facility lowers the cost of insurance coverage by approximately 40 per cent, thereby providing Caribbean countries with an insurance option that would be too costly to undertake individually. In addition, donor contributions to the facility serve to lower premium payments even further. IDA has also provided financing to help countries such as Dominica, Grenada and Haiti pay their premiums.

In the aftermath of Hurricane Dean in August 2007, the CCRIF came under criticism from some constituents as payment was not triggered. This stemmed largely from a misunderstanding over the purpose of the Facility and to the agreed trigger threshold levels—the CCRIF is designed as a response to truly catastrophic events, and Hurricane Dean fell below the threshold level. Following discussions between CCRIF administrators, the World Bank and CCRIF member countries, several modifications were made to better align the Facility with the expectations of Caribbean country members. Some of these changes include: lower premiums, higher maximum payouts, a minimum payout size, a lower trigger point and increased disaster risk management support. As a pilot project for a new and innovative disaster financing tool, the CCRIF will continue to evolve over time as experiences are incorporated, member country needs are refined and expectations clarified.

The CCRIF had its first payout in December 2007. Both Dominica and Saint Lucia received approximately US$500,000 following an earthquake that triggered payment.

Conditionality

In response to stakeholder concerns over the scope and complexity of policy conditionality that accompanies its lending, the Bank conducted a review in 2005, and implemented a new policy in 2006 to help better focus its conditionality. The policy introduced five good practice principles: country ownership, harmonization, criticality, transparency and predictability, and customization to country circumstances. An update on the implementation of the new policy was provided to the Executive Board in December 2007. This report found that Bank activities have been broadly consistent with the good practice principles.

Canada strongly supports these good practice principles, which facilitate the country-led formulation of economic and other reforms critical to the development process. We believe that conditionality can provide important incentives for meaningful reform, but that the conditions applied should be limited to only those essential for the success of the program or project. We note that during the IDA15 discussions, African leaders delivered the clear message that well-designed loan conditions can help improve their success in implementing priority reforms.

Canada's Voting Record in 2007

Canada and other shareholders typically raise concerns and questions about specific Bank operations before they get to the Executive Board. As a result, decisions at the Board are generally taken by consensus. Executive Directors may, however, abstain or vote against projects or policies in consultation with their constituencies. In 2007, the Executive Director representing Canada supported all policies and projects approved by the Board, with two exceptions, as detailed below.

Similarly, the Board of Governors is asked to vote on a number of resolutions throughout the year. Below are Canada's positions on the four resolutions taken in 2007.

Voting Record of the Executive Directors Representing Canada in 2007 (only oppositions or abstentions listed) In November 2007, Canada's Executive Director at the World Bank abstained on an IFC Investment in the Masinloc Coal-Fired Thermal Power Project in the Philippines, owing to concerns over a significant investment in a less-than-cleanest technology coal plant. While it was recognized that coal will continue to be an important energy source for the Philippines over the medium term, investments in such operations should be set within an overall strategy to move toward cleaner energy sources. In the absence of such a strategy for the Philippines, IFC investment in this project was seen as not advisable. In December 2007, Canada's Executive Director at the World Bank abstained on a proposal to extend the IFC's Performance-Based Grants Initiative (PBGI) pilot. The PBGI is designed to provide aid to the private sector for reaching specific performance based targets. In reviewing the proposal, it became clear that some of the funds were being used for technical assistance and did not differ from existing business lines at the IFC. This, combined with inadequate responses from IFC management to a series of questions raised by the Executive Director and his colleagues about the PBGI, led to an abstention by a number of Executive Directors. The Executive Director will review the use of performance-based aid to the private sector once a thorough evaluation of the PBGI pilot has been completed.

 

Voting Record of the Canadian Governor in 2007 Canada did not support a transfer from IBRD surplus funds to the Trust Fund for Gaza and West Bank in January 2007, owing to concern over the possibility of indirect benefit for the Hamas-led Palestinian Authority, and Canada's legal and foreign policy position. Canada supported the Republic of Montenegro's request for membership in MIGA in January 2007. Canada supported a transfer from IBRD surplus funds to the Low-Income Countries Under Stress Trust Fund in January 2007 to support the poorest, conflict-affected countries. Canada supported an increase in the salaries for the Executive Directors at the World Bank in August 2007 to reflect the increase in the cost of living in Washington, DC.

Canada's Financial Contributions in 2007

Canada is an important provider of donor funding for the World Bank. In 2007, we made the following contributions:

• IDA: In January 2007, Canada made its third and last payment of $318 million, as pledged under the IDA14 agreement.
• Multilateral Debt Relief Initiative (MDRI): In 2005, Canada committed to provide a total of $1.75 billion over 40 years to compensate IDA for the loans it agreed to cancel under the MDRI. In 2007, we made our second payment under this commitment, for a total of $46.3 million to date.
• Multi-Donor Trust Funds (MDTFs): Canada also makes use of World Bank-administered MDTFs, where the World Bank manages funds on behalf of multiple donors. MDTFs have been established in a number of post-conflict situations in order to mobilize resources and coordinate reconstruction efforts. In FY2006–07, Canada contributed a total of $292 million to these funds, and a further $198 million in FY2007–08.^[16] See Annex 10 for a table of these contributions.

Canada's Medium-Term Priorities at the
Bretton Woods Institutions

Canada remains committed to giving clear voice to its guiding principles and priority issues at the IMF and World Bank. Building on the 2006 report, this section articulates Canada's medium-term priorities for the Bretton Woods Institutions as well as the Department of Finance's strategy over the next three years to support those priorities.

The Government's priorities fall under three themes: 1) governance and accountability; 2) institutional effectiveness; and 3) sustainable poverty reduction and growth. To promote greater accountability and transparency regarding Canadian activities at the Bretton Woods Institutions, specific actions are listed that indicate where the Government of Canada plans to concentrate its resources and advocacy over the next one to three years. Subsequent reports will return to these priorities and actions to measure Canada's success in achieving its goals.

Canada's Medium-Term Priorities Fall Under Three Themes 1) Governance and Accountability—Playing a leadership role in pushing for innovations in the governance and accountability structures of the Bretton Woods Institutions. 2) Institutional Effectiveness—Encouraging both institutions to deliver on their core mandates as effectively as possible. 3) Sustainable Poverty Reduction and Growth—Supporting the IMF and World Bank's efforts to ensure that the growth and stability they help foster today will have a lasting effect over the long term.

1) Governance and Accountability

The Government of Canada is committed to promoting good governance and accountability both at home and in its relations and operations in the international community. One of Canada's main objectives at the Bretton Woods Institutions (BWIs) is to ensure that they are well governed and accountable to their memberships and other stakeholders. Canada considers it critical that their governance structures be representative of the membership and their operations reflect the priorities agreed by that membership. Further, the BWIs must be financially sustainable and transparent. These elements are central to the institutions maintaining their relevance and legitimacy in an evolving global context.

Priority 1.1: Governance Reforms

A key challenge for the BWIs will be to adopt a more representative governance structure in order to reflect a changing global economy. Both institutions also face budgetary challenges that must be met. Finally, transparent decision making and operations are essential for well-governed institutions, and Canada will press the IMF and World Bank to build on considerable recent progress in these areas.

Pushing for Concrete Progress on IMF Quota and Voice Reforms

In the near future, the most important priority for Canada at the IMF is coming to agreement on a package of quota and voice reforms that leaves the Fund a more legitimate and representative institution. As previously noted, Canada supports the creation of a simple and transparent quota formula, which will reward dynamic economies and realign quota shares. We also strongly support protecting the vote share of low-income countries through a significant increase in basic votes. With a view to meeting the fall 2008 deadline for concluding the exercise, Canada will engage at the Executive Board and with our G7 and G20 partners, looking for points of agreement and proposing realistic solutions to remaining challenges that are consistent with Canada's principles for governance reform.

However, as previously mentioned, quota and voice reforms face significant challenges and there is considerable uncertainty about the outcome. Depending on the result of the negotiations, Canada will work at the Executive Board over the medium term to implement the agreed reforms, or be a driving force to find an alternative solution that reaches the membership's common goal of a more representative IMF. Canada's medium-term priorities for IMF governance reforms in next year's report will be developed based on our experiences in 2008.

Building Momentum for Reform at the World Bank

Like the IMF, the World Bank is facing pressure to ensure that developing country members have sufficient voice and participation in the institution. Voice reform has been a topic in a number of Development Committee Meetings since 2003.

World Bank staff are now working with shareholders to identify options that could comprise a reform package. The list of options covers not only changes in shareholding and voting power, but also possible reforms to institutional governance. These include reforming the size, term length and composition of the Executive Board and continued efforts to increase the representation of developing country nationals in senior management.

The Bank is taking a two-stage approach to formulating a reform package. The majority of institutional governance options will be addressed in the first phase while more complex options, such as adjustments in shareholding, will fall under the second phase. The first results of this exercise will be presented at the Spring Meetings in 2008.

Canada is very supportive of the Bank's voice reform exercise, as there is clearly a need to enhance the voice of developing countries within the institution. We are open to a reform package that includes at least a doubling of basic votes as a way of enhancing the voting power of the Bank's small and low-income members and would support proposals to introduce selective capital increases to ensure that all developing members benefit.

However, we also recognize that any adjustments to shareholdings must ensure that the Bank has sufficient financial backing to allow it to continue to borrow at the lowest possible interest rate and provide development financing at lowest cost. Thus, it is important that distribution of Bank shares should continue to be primarily based on each member's weight in the global economy.

We are also pleased that the reform exercise will look more broadly at improvements to the Bank's institutional governance, including enhancing the effectiveness of the Executive Board.

Action: Support discussions across the membership and play a bridging role on a new IMF quota formula, ad hoc quota increase and basic votes increase. Timeline: 2008 Action: Support the development of a reform package at the World Bank that enhances the voice of developing country members through an appropriate mix of reforms to voting, shareholding and other institutional processes, while preserving the Bank's ability to borrow at the lowest possible interest rates. Timeline: 2008–2010

Priority 1.2: Sound Finances

Another major challenge for the institutions will be to ensure that their financial situations are sound and sustainable for the future. This will require stakeholders to review the Fund and Bank's income and expenditure models.

Early Progress at the IMF in 2008

Canada supports the development of a package of measures that would eliminate the IMF's budget deficit and restore its finances to a sustainable footing. In particular, Canada is pushing for the inclusion of substantive expenditure and staff reductions as a complement to measures to increase IMF income. Our goal is budget reforms that result in a more cost-effective IMF that focuses its outputs on core institutional strengths and practises good financial governance. On the income side, we support a limited sale of IMF gold to provide greater investment income. We also support other Crockett report recommendations such broadening the scope of permitted IMF investments to increase the return on Fund resources.

The Managing Director has proposed the Spring Meetings in April 2008 as an ambitious target date to reach an agreement in principle on reforms to IMF finances. Canada will work to support this goal by continuing to actively contribute to the discussion of these proposals as they are elaborated at the Executive Board in the first part of 2008. We will also continue to show leadership at the IMF Executive Board in 2008 regarding efforts to cut the Board's operating budget on a magnitude similar to the overall cut in IMF spending.

Planning for the Future at the World Bank

At the World Bank, the challenge is not its current finances, but its sustainability in the future. While the IBRD realized income of US$1.7 billion in 2007, the outlook for the future is more uncertain, in particular due to the global low interest rate environment (which prompted significant reductions in the IBRD's loan pricing in the fall of 2007). At the same time, there has been growing demand for the IBRD to contribute from its income to other development purposes (e.g. transfers to IDA, support for the global public goods agenda). The Bank and its members should consider whether the IBRD's income model can be adjusted to ensure that its financial sustainability will not be in jeopardy in the future, and that it will be able to generate income to continue making important contributions to other initiatives.

Canada has also been at the forefront of the call for reforms to the Bank's administrative budget. For example, we have been encouraging the Bank to better link its budgeting process to the broad strategic directions and key outcomes it expects to pursue in the medium and long term. It is important that the Bank target resources to support its priorities and that it find savings from activities that have become less relevant. The Bank has begun to move towards this goal, but further efforts will be needed.

Action: Work with IMF members to agree on a new sustainable and equitable income model for the Fund. Continue to support expenditure and staff reductions at the IMF with a focus on core institutional strengths and good financial governance. Work actively with the goal of concluding this exercise in 2008. Timeline: 2008 Action: Advocate for a full review of the IBRD's long-term financial health, with a view to understanding the outlook for capital adequacy and prospects for net income, and whether any changes need to be made to the Bank's income model. Timeline: 2008 Action: Advocate for improvements in the Bank's budgeting process to help ensure that its budget serves as a tool to strategically align its resources with its current priorities, and to identify savings from activities that have become less relevant. Timeline: 2008–2010

Priority 1.3: Transparency

Governance and operational transparency are a basic tenet of effective institutions. Through the efforts of Canada and other countries, the IMF and World Bank have become increasingly transparent institutions. Both institutions have now adopted a policy of presumed disclosure for most documents, unless there are clear confidentiality concerns. Both also have independent review groups that provide candid, independent, public reviews of Fund and Bank performance in different areas of their core operations. IMF and World Bank Governors hold the institutions' management responsible to respond to these reviews and address any identified shortcomings.

A further review of Bank and Fund transparency was conducted by One World Trust, a non-governmental organization based in the United Kingdom. Their 2006 Global Accountability Index assessed the transparency capabilities of 34 international organizations, and ranked the World Bank and IMF third and fourth respectively, ahead of other well-known non-governmental organizations such as Oxfam, World Vision and Amnesty International.

At the IMF, Canada has consistently championed greater transparency since the early 1990s. The result is a disclosure policy that balances the need for confidentiality in IMF advice to members against the increasing recognition of the importance of transparency for the IMF's legitimacy and effectiveness. For country documents—which include economic reports or loan documents—this means that countries are in general expected to consent to publication. Currently, about 85 per cent of Article IV surveillance reports are published, as are the overwhelming majority of policy papers and summaries of Executive Board discussions.

Similarly, the World Bank has made considerable progress toward greater transparency over the past decade. Under its 2002 information disclosure policy, the Bank makes an enormous amount of operational information available to the public. The Executive Board approved further improvements to the policy in 2005 and, today, nearly all World Bank documents ranging from Country Assistance Strategies and sector studies to project-related reports are disseminated.

The Bank also makes the Executive Board's forward work program, the minutes of its meetings and the Chairman's summaries available on its website, although transcripts of Board discussions are not made public (see text box below). The policy documents discussed during the IDA replenishment discussions and the Chairman's summaries are also available online.

The Bank continues to review the provisions and implementation of its disclosure policy on a regular basis, with the next review scheduled for 2008. Canada will continue to encourage the Bank to make as much information public as possible while respecting the need for some confidentiality to preserve the opportunity for frank discussion at the Executive Board and with client countries.

Restrictions on Disclosure of Executive Board Discussions at the IMF and World Bank The IMF and World Bank have increasingly adopted disclosure policies based on the presumption that material should be disclosed whenever possible. This presumption of disclosure also applies to the workings of the institutions' Executive Boards. Reflecting this approach, considerable information is provided to the public concerning the decision-making processes of the Boards, including their work programs and agendas, as well as the overwhelming majority of country and policy documents submitted for consideration by Executive Directors. In many cases, a summary of Executive Board discussions and conclusions is also published. The disclosure policies do not, however, allow disclosure of representations made by Executive Directors in their respective Executive Boards. This policy reflects in part the nature of the IMF and World Bank as financial institutions, providing advice and financing to members on matters that may require discussion of commercially confidential or market-sensitive information. Further, the IMF and World Bank provide forums for the debate of politically sensitive national policies, in a similar manner to the functioning of the Canadian Cabinet system. The effectiveness of the institutions often hinges on their ability to act as trusted advisors and provide a forum for frank debate on policy development. Canada supports this policy.

Looking for Targeted Improvements at the IMF

For the IMF, proactive transparency efforts regarding its loan conditionality, especially in low-income countries, needs to be improved. This was highlighted in the IEO report An IEO Evaluation of Structural Conditionality in IMF-Supported Programs, which focused on the impact of recent streamlining conditionality initiatives at the institution and the need for better communication of the goals and design of conditionality.

In Canada's view, better communication in IMF documents and outreach sessions about the nature of program conditions and their desired impact would have two beneficial results. First, it would ensure that conditionality is well rooted in the core goals of the country program. Second, it would provide interested parties with a better understanding of the reasoning behind various conditions that might otherwise appear poorly conceived.

Canada will continue to push for these measures at the IMF Executive Board. At the World Bank, progress on transparency and further opportunity for disclosure will be assessed as part of a planned review of its transparency policy in 2008.

Action: Encourage the IMF (through the Executive Board) to improve public understanding of its role in low-income countries and the nature of its conditionality using existing documents and communication channels. Timeline: 2008–2010

2) Institutional Effectiveness

Consistent with Government of Canada core principles, a second major Canadian objective is to ensure that the BWIs are achieving demonstrated effectiveness in carrying out their mandates. This means tailoring their services to focus on what they are best at and what member countries want, being well coordinated with other international partners and exploring innovative new ways to reach their goals.

Priority 2.1: IMF Surveillance and Crisis Prevention

While Canada is encouraged by recent progress at the IMF in strengthening its surveillance role, more remains to be done on current initiatives, and there is room for greater innovation in other areas.

In 2008, we plan to monitor the Fund's progress in incorporating best practices into its Article IV reviews of member economies, with a view to providing a critical assessment of its success and suggesting areas for improvement. Canada will also contribute to the development of the triennial Statement of Surveillance Priorities (SSP), which is intended to provide clear direction on surveillance priorities and enhance IMF accountability for the focus and quality of its surveillance.

Operational priorities beyond 2008 will be developed in response to our experiences over the coming year. However, efforts to strengthen the IMF's key role in global surveillance will continue to be a priority. Canada will also support the Managing Director's vision for the IMF as the international institution with a comparative advantage in linking financial sector developments with the real economy. The global financial turmoil since mid-2007 demonstrates the importance of this link for effective surveillance.

Further, beyond traditional bilateral surveillance (e.g. Article IV reviews) and multilateral surveillance (e.g. the World Economic Outlook and Global Financial Stability Report), Canada believes the IMF can play an increasingly important role as a forum for discussions on addressing global imbalances and future challenges that may require concerted action by national governments. This would be a natural extension of the Fund's surveillance work and should lead to better policy making in member countries. While the IMF's first experience with bringing together key players for consultations on global imbalances in 2006 and 2007 was a limited success, the institution should learn from experience and build on its initial efforts.

Action: Analyze the impact of the 2007 Decision on Bilateral Surveillance on Fund surveillance outputs (Article IVs). Depending on the outcome, possibly push for more rigorous implementation of the revised policies. Timeline: 2008 Action: Work to implement a Statement of Surveillance Priorities in conjunction with the Triennial Surveillance Review, ensuring sufficient input and buy-in from national capitals. Timeline: 2008 Action: Work to improve the integration of the IMF's analysis of financial system developments in the Global Financial Stability Report with the assessment of trends in the real economy provided by the World Economic Outlook. Support Fund work to make this analysis more applicable to policy making in member countries. Timeline: 2008–2010

Priority 2.2: Aid Effectiveness

Getting the best development outcome from our aid spending is a priority for the Government of Canada. In this regard, the federal budget for 2007 set out an ambitious agenda to improve the effectiveness of Canada's bilateral aid program. This emphasis on effectiveness also extends to our participation in multilateral initiatives.

Innovative Technical Assistance Delivery at the IMF

In FY2007, the IMF provided more than 438 person-years^[17] of technical assistance, roughly three quarters of which was directed to low-income and lower-middle-income countries and roughly one-quarter of which was funded by donors. In recent years, the IMF has taken a number of steps to improve the management and delivery of its technical assistance to strengthen country ownership and to better align technical assistance priorities with its surveillance function.

Commensurate with Canada's view that the IMF must focus on its core mandate and comparative advantages when considering budget-cutting proposals, we believe the Fund must focus on areas of core competency in its technical assistance activities. Further, there must be a cost-effective, competency-based division of labour with the World Bank in all training efforts, such as is being achieved through the Caribbean Regional Technical Assistance Centre.

Improving the capacity of member countries to monitor, analyze and report on accurate and robust economic data sets is fundamental to promoting sound monetary and macroeconomic policies and enabling effective IMF surveillance.

In 2008, the Government of Canada will encourage the IMF to examine and implement innovative training solutions to address the need for increased technical capacity, including the introduction of needs- and means-tested, demand-driven programming. We will also continue to support a strong role for the BWIs in the global effort to monitor and provide technical assistance regarding national anti-money-laundering and counter-terrorist-financing regimes.

Improving Country-Level Effectiveness at the World Bank

For the World Bank, challenges remain on a number of fronts:

• Harmonization and Alignment: Over the last few years, many developing countries have seen aid become more fragmented, with a rapid increase in the number of donors and organizations offering assistance, but each providing smaller amounts and often earmarking for specific activities. This has created major problems in terms of coordination and an increased administrative burden, and is a significant barrier to effective development.

• Measuring Results: Canada applauds the Bank's strengthened focus on results (e.g. IDA's Results Measurement System, results-based CASs). However, it is clear that results cannot be properly measured and tracked without the collection of accurate, timely and useful statistics. We strongly support the efforts the Bank has made to help build statistical capacity in developing countries, and believe this work can be strengthened. Measuring for results will present an even greater challenge as the Bank moves into the area of global public goods.
• Poverty and Social Impact Analysis: Another aspect of delivering aid effectively is to properly understand how a proposed reform will affect all stakeholders. For the Bank, this analysis often comes in the form of Poverty and Social Impact Analyses (PSIAs), which evaluate the impact of policy reforms on the welfare of different stakeholder groups, with particular focus on the poor and vulnerable. However, some stakeholders have expressed concerns that the Bank has not been systematically conducting PSIAs and have questioned the quality of some of the analysis.

Action: Promote focused IMF technical assistance that is demand-driven and, more specifically, helps build macroeconomic and financial statistics capacity, and encourages sustainable debt management policies and public revenue regimes, and effective capital market regulation. Timeline: 2008 Action: Encourage the Bank to rationalize the Trust Funds under Bank management and ensure that they are strategically aligned with broader Bank priorities and initiatives. Timeline: 2008 Action: Advocate that the Bank foster real partnerships with other donors and organizations, such as the UN and the IMF, to ensure that efforts are coordinated on the basis of a single country-owned development strategy. Timeline: 2008–2010 Action: Urge the Bank to accelerate its progress towards the Paris Declaration targets, including reduction of parallel implementation units, use of joint missions and analytical work, and related decentralization of staff and decision-making powers. Timeline: 2008–2010 Action: Promote a closer IFC and IDA partnership to ensure the best use of resources to maximize the Bank's contribution to private sector development in the poorest countries. Timeline: 2008–2010 Action: Encourage the Bank to devote adequate resources to helping its clients build the capacity to properly measure development results. Timeline: 2008–2010 Action: Urge the Bank to ensure that the quality and systematic use of PMAs are sustained and strengthened. In particular, push the Bank to update its good practice note on PSIAs and post PSIAs on the external website for public comment. Timeline: 2008–2010

Priority 2.3: Innovation for Private Sector Participation in Development

Canada has been a strong advocate at the Bank for innovative initiatives that harness the strengths of the private sector for development. We believe this is particularly important as the Bank explores its role in the provision of global public goods. The magnitude of the financial and technical challenge that many of these issues present is beyond the scope of what governments can provide on their own, and we cannot expect to succeed unless this challenge is also taken up in the marketplace.

Canada has been working closely with the Bank in this area. In particular, the Advance Market Commitment (AMC) initiative is designed to mobilize private sector investment to develop a safe and affordable vaccine for pneumococcal disease. We believe the time is ripe for donors to consider how the AMC model or other innovative mechanisms might be used to tackle insufficient investment in the development of other global public goods, such as clean energy technologies.

Similarly, the Caribbean Catastrophe Risk Insurance Facility, the world's first regional disaster insurance facility, is a truly innovative initiative, bringing private sector skills, expertise and institutions to work alongside Caribbean governments and development partners. We encourage the Bank and other international partners to consider the merits of expanding it or linking it with other similar initiatives

The IFC is the key multilateral actor in promoting private sector development in developing countries. Canada has been encouraging the IFC to accelerate its engagement in frontier countries (i.e. least developed and other high-risk countries). Looking ahead, we will also engage with other donors and IFC staff to identify measures to enhance the development value-added of IFC operations.

Action: Encourage the Bank to take a leadership role on innovative approaches to development finance by acting as a financial intermediary for the AMC for pneumococcal disease in a manner that maximizes the efficiency, simplicity and credibility of the initiative. Timeline: 2008 Action: Assess the strengths and limits of the Caribbean Catastrophe Risk Insurance Facility and consider the merits of expanding it or linking it with other similar initiatives. Timeline: 2008 Action: Push for consideration of the use of the AMC concept or other innovative tools to mobilize private sector investment to tackle global public goods. Timeline: 2008–2010 Action: Continue to encourage the IFC to accelerate its engagement in frontier markets and to identify measures to enhance the development value-added of IFC operations. Timeline: 2008–2010

3) Sustainable Poverty Reduction and Growth

The real benefits of sustained and equitable economic growth to poverty reduction and societal well-being cannot be overstated. Another main objective for Canada is to ensure that the poverty reduction, growth and macroeconomic stability that the IMF and World Bank help foster today will have lasting results in the long run.

For both institutions, this will include encouraging developing countries to maintain sustainable debt positions and helping failed and fragile states onto a sustainable path of recovery. In addition, broad poverty reduction cannot be achieved unless growth is equitable, including the economic empowerment of women. Finally, both institutions have a role in helping countries consider environmental issues more fully in their development planning.

Priority 3.1: Debt Sustainability

Canada is strongly committed to reducing the debt burdens of the most heavily indebted poor countries to sustainable levels. We have been very active in the development and financing of the Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative, which have helped recipient countries redirect freed-up resources to poverty reduction initiatives.

Under these initiatives, the G7, IMF and World Bank have all provided significant debt relief. Canada has been at the forefront by cancelling roughly $1 billion in debts owed to Canada by HIPCs since 2000. We have provided a further $509.8 million to the IMF, World Bank and African Development Fund since 1998 to compensate for the debts these institutions have cancelled. Canada will provide these institutions with a total of $2.5 billion over the next 40 years for debt relief.

Canada believes that it is critical to ensure that this debt relief puts countries back onto a path of sustainable, long-term financial management and to prevent a return to the "lend-and-forgive" cycles of the past. We will continue to find opportunities to support efforts at the IMF and World Bank to help developing countries avoid unsustainable borrowing and to encourage creditor countries to lend in a way that is consistent with borrowing countries' development plans and capacity to repay.

The IMF and World Bank have a significant role to play in these efforts, including through the development of the Debt Sustainability Framework to better monitor and prevent the reaccumulation of unsustainable debt, the Debtor Reporting System to collect debt data to improve the transparency of lending and borrowing activities, and the Non-Concessional Borrowing Policy to create the proper incentives for countries to borrow on concessional terms and ensure that debt sustainability is maintained. However, given that many countries are still at a high risk of debt distress and are reaccumulating unsustainable levels of debt, we see scope to further strengthen these tools. In particular, the IMF and World Bank must receive full disclosure from creditor and borrower countries on lending and borrowing activities to enable a robust reconciliation of data.

Action: Continue to monitor whether the Debt Sustainability Framework is effectively changing borrowing/lending behaviour to prevent the reaccumulation of unsustainable debt levels and assess whether improvements might be needed. Timeline: 2008–2010 Action: Push for the BWIs to consider both non-concessional and concessional lending when assessing the appropriate level of debt reaccumulation post debt relief. Timeline: 2008–2010 Action: Continue to improve the transparency of lending and borrowing data, and help to build debt management capacity in low-income countries. Timeline: 2008–2010

Priority 3.2: Failed and Fragile States

Successfully reintegrating failed and fragile states into the global economy represents another major challenge. Over 14 per cent of the world's population, or 870 million people, live in fragile states, and it is estimated that they represent: 35 per cent of people living in absolute poverty; 46 per cent of the total number of children not receiving a primary education; and 51 per cent of the children who die before age 5 each year. Moreover, in the future, poverty is expected to become increasingly concentrated in these states. Canada has therefore been advocating for stronger multilateral support for these countries, as well as enhancing our own bilateral programs.

The IMF's core role in failed and fragile states is to aid national authorities in re-establishing macroeconomic stability and growth in the country. Canada supports the IMF's role in countries such as Afghanistan, Haiti and Lebanon, and will continue to encourage the IMF to focus on its core areas of expertise and adapt its policy advice and intervention methods to respect country-specific situations, while coordinating closely with the World Bank and other relevant organizations.

The World Bank is very active in this area, with IDA having provided US$16 billion (19 per cent of its resources) over the last decade to fragile states. The Bank has also set up two large funds, the Post-Conflict Fund and the Low-Income Countries Under Stress Trust Fund, to provide a quick response and flexible funding mechanism. In addition, the Bank administers a number of Multi-Donor Trust Funds to mobilize additional donor financing for specific countries. Canada has contributed a total of $466 million to the Afghanistan Reconstruction Trust Fund and $40 million to the Sudan Multi-Donor Trust Funds at the World Bank and provides considerable assistance to a number of fragile states through our bilateral aid programs.

Afghanistan Canada is part of a community of more than 60 nations and organizations that have committed to helping the Afghan people recover from decades of turmoil and upheaval. Canada has pledged substantial funding in support of these reconstruction and development efforts, making us one of the world's top donors to the country, and making Afghanistan our largest bilateral aid recipient. As part of these efforts, Canada collaborates extensively with the World Bank. In particular, Canada, through the Canadian International Development Agency (CIDA), is a major participant in the World Bank-administered Afghanistan Reconstruction Trust Fund (ARTF), having contributed $466 million to date and participating on the ARTF's donor committee, which is regularly convened in Kabul. CIDA financing for the ARTF has been targeted to several national priority programs, including: The Recurrent Cost Window: Supports the Government of Afghanistan in its efforts to re-establish a fully functioning and representative government system. It reimburses a portion of the Afghan government's day-to-day operating expenses, including wages for government employees, thereby helping to maintain and expand the delivery of basic services, such as health and education, to its citizens. The National Solidarity Program: The Afghan government's primary program for community development, aiming to reduce poverty by empowering communities to take initiative, improve local governance and increase social, human and economic capital. The Microfinance Investment Support Facility for Afghanistan: Supports local microfinance institutions that, in turn, provide small loans and financial services to poor Afghans. The Education Quality Improvement Project: Helps increase access, quality and gender equality in Afghanistan's education sector.

Canada was one of the donor countries pushing for fragile states to be a key theme for the IDA15 replenishment discussions, and we are pleased that a number of important enhancements were agreed to for IDA's engagement in these countries, including an increase in the level and duration of special allocations to post-conflict countries and a framework to clear the arrears owed to IDA and the IBRD by heavily indebted countries (like Liberia and Sudan), so that they can again benefit from IDA's support as they emerge from conflict. We will be actively monitoring these enhancements in order to help ensure that they are meeting the needs of these states, and are working to put them on a sustainable path for the future.

It is also important to note that the UN plays a very critical role in conflict-affected countries, often leading efforts where government capacity is non-existent or severely constrained. In this respect, the Bank and the UN have recognized a need to improve their coordination and clarify their respective roles in these countries. They are currently working towards a partnership agreement, and we urge them to ensure that these efforts translate into concrete improvements at the ground level.

Action: Through the Executive Board, continue to support greater focus of IMF engagement in fragile states (i.e. policy support for obtaining macroeconomic stability and facilitating arrears clearance where appropriate). Timeline: 2008–2010 Action: Monitor whether IDA's new framework for arrears clearance operations preserves incentives for countries to complete reforms under the HIPC process after arrears clearance and determine whether improvements are needed. Timeline: 2008–2010 Action: Monitor the enhancements to IDA's exceptional financing for post-conflict countries, as agreed in IDA15, to see that they provide enough financing to help post-conflict countries make development gains, and that the transition back to regular financing does not endanger their progress. Timeline: 2008–2010 Action: Monitor the concrete steps taken by the Bank to improve its coordination with the UN in fragile states. Timeline: 2008–2010

Priority 3.3: Gender

As a partner in the achievement of the Millennium Development Goals, the World Bank can and needs to play a critical role in supporting gender equality and women's empowerment. Canada has been a strong supporter of the Bank developing a Gender Action Plan, which seeks to integrate gender equality into its broader activities, and we welcomed its launch in September 2006. To underscore the importance of this work, Canada contributed $1.5 million to support the Action Plan and accepted to be a member of the World Bank-sponsored Advisory Council for Women's Economic Empowerment. Canada strongly encourages the Bank to devote the resources necessary to ensure full implementation and accountability for its commitments.

Canada believes that the World Bank could improve its performance in achieving and reporting on gender equality results. In this context, Canada will urge the Bank to effect changes to the operations manual to mandate the full integration of gender equality objectives into Country Assistance Strategies and results reporting at the country level, including evaluation reports. In addition, Canada will encourage the Bank to allocate adequate resources to ensure every country program has an assigned gender equality specialist.

Finally, progress on gender equality outcomes at the country level cannot be monitored and gaps cannot be properly identified without proper statistics. In this regard, during the IDA15 discussions, Canada pushed for IDA to commit to collect gender-disaggregated statistics, and we were pleased that IDA agreed to work towards this goal. We hope to see real progress both in terms of tracking gender outcomes and reporting on them.

Action: Encourage the World Bank to update its operations manual to mandate the full integration of gender equality objectives into Country Assistance Strategies, results reporting and evaluations at the country level. Timeline: 2008–2010 Action: Urge the World Bank to allocate sufficient budget resources to assign a gender equality specialist to each country program. Timeline: 2008–2010 Action: Push the World Bank to collect and analyze gender-disaggregated statistics at the country level to properly track progress and report back on gender equality and use these statistics to improve policies and programs for the future. Timeline: 2008–2010

Priority 3.4: Environment

Sustainable growth cannot be achieved without significant progress in addressing the world's environmental challenges. In many developing countries, the costs of environmental degradation have been estimated at 4 to 8 per cent of GDP annually. Natural resource degradation—depleted soils, insufficient water supply, rapidly disappearing forests, collapsed fisheries—threatens the health of millions of people. Pollution, too, continues to present a major health threat; an estimated 6 million people die annually, and many more get sick, in developing countries from water-related diseases, indoor air pollution, urban air pollution and exposure to toxic chemicals.

The IMF recently announced that it will undertake research to assess the fiscal aspects of climate change mitigation measures, including developing the appropriate public finance responses, evaluating some of the economic issues involved in choosing mitigation policies, and determining the impact of climate change policies on the IMF's core functions. The October 2007 World Economic Outlook briefly outlined elements of climate change and their potential economic impact, including:

• Negative impacts on output and productivity from long-term temperature change.
• Costs arising from efforts to mitigate carbon emissions.
• Costs from sea-level rise and increased severity of flooding.

Canada will support the IMF's efforts to increase analytical capacity concerning the impacts of climate change on national economies, in coordination with the World Bank, with a view to assessing appropriate policy responses.

The World Bank has had an Environment Strategy in place since 2001 to guide its work to help client countries identify and address their environmental challenges. World Bank policies also require environmental assessments to ensure that its projects and programs integrate principles of environmental sustainability. More recently, some of the Bank's members have been encouraging a move towards a stronger role in relation to climate change. At the 2005 G8 Summit in Gleneagles, Canada, along with other G8 countries, called on the World Bank to develop an investment framework for clean energy and sustainable development in developing and emerging markets. Canada is supportive of the resulting Clean Energy Investment Framework and we believe it provides a useful approach to address the interconnected areas of energy access, mitigation and adaptation.

The World Bank is currently exploring new tools for clean energy and climate change, including potential new financing mechanisms. While we are supportive of this effort, we believe that any new mechanism should complement or enhance existing initiatives, and promote future participation by developing countries in international agreements to reduce greenhouse gas emissions. In addition, as mentioned above, we encourage the Bank to consider how the AMC or other innovative financing approaches can be used to encourage clean energy technology development.

Action: Support IMF efforts to increase analytical capacity concerning the impacts of climate change on national economies (e.g. fiscal implications) in coordination with the World Bank. Timeline: 2008 Action: Support the Bank's adoption of new tools for clean energy and climate change-related actions that complement or enhance existing initiatives. Timeline: 2008–2010

Summary of Canada's Medium-Term Priorities at the Bretton Woods Institutions

1) Governance and Accountability
Priority	Short-Term Action  (2008)	Medium-Term Action  (2008–2010)
1.1 Governance Reforms Enhance the legitimacy of the BWIs through a more representative governance structure.	Support discussions across the membership and play a bridging role on a new IMF quota formula, ad hoc quota increase and basic votes increase.	Support the development of a reform package at the World Bank that enhances the voice of developing country members through an appropriate mix of reforms to voting, shareholding and other institutional processes, while preserving the Bank's ability to borrow at the lowest possible interest rates.
1.2 Sound Finances Sustainable income/expenditure models for the IMF and World Bank that support effective and efficient institutions.	Work with IMF members to agree on a new sustainable and equitable income model for the Fund. Continue to support expenditure and staff reductions at the IMF with a focus on core institutional strengths and good financial governance. Work actively with the goal of concluding this exercise in 2008. Advocate for a full review of the IBRD's long-term financial health, with a view to understanding the outlook for capital adequacy and prospects for net income, and whether any changes need to be made to the Bank's income model.	Advocate for improvements in the Bank's budgeting process to help ensure that its budget serves as a tool to strategically align its resources with its current priorities, and to identify savings from activities that have become less relevant.
1.3 Transparency Build on real past progress on institutional transparency.		Encourage the IMF (through the Executive Board) to improve public understanding of its role in low-income countries and the nature of its conditionality using existing documents and communication channels.
2) Institutional Effectiveness
Priority	Short-Term Action (2008)	Medium-Term Action (2008–2010)
2.1 IMF Surveillance and Crisis Prevention Support progress on implementing recent surveillance reforms to increase effectiveness, even-handedness and candour.	Analyze the impact of 2007 Decision on Bilateral Surveillance on Fund surveillance outputs (Article IVs). Depending on the outcome, possibly rigorous implementation of the revised policies. Work to implement a Statement of Surveillance Priorities in conjunction with the Triennial Surveillance Review, ensuring sufficient input and buy-in from national capitals.	Work to improve the integration of the IMF's analysis of financial system developments in the Global Financial Stability Report with the assessment of trends in the real economy provided by the World Economic Outlook. Support Fund work to make this analysis more applicable to policy making in member countries.
2.2 Aid Effectiveness Get the most development impact from IMF and World Bank resources.	Promote focused IMF technical assistance that is demand-driven and, more specifically, helps build macroeconomic and financial statistics capacity, and encourages sustainable debt management policies and public revenue regimes, and effective capital market regulation. Encourage the Bank to rationalize the Trust Funds under Bank management and ensure that they are strategically aligned with broader Bank priorities and initiatives.	Advocate that the Bank foster real partnerships with other donors and organizations, such as the UN and the IMF, to ensure that efforts are coordinated on the basis of a single country-owned development strategy Urge the Bank to accelerate its progress towards the Paris Declaration targets, including reduction of parallel implementation units, use of joint missions and analytical work, and related decentralization of staff and decision-making powers. Promote a closer IFC and IDA partnership to ensure the best use of resources to maximize the Bank's contribution to private sector development in the poorest countries Encourage the Bank to devote adequate resources to helping its clients build the capacity to properly measure development results. Urge the Bank to ensure that the quality and systematic use of Poverty and Social Impact Analyses (PSIAs) are sustained and strengthened. In particular, push the Bank to update its good practice note on PSIAs and post PSIAs on the external website for public comment.
2.3 Innovation for Private Sector Participation in Development Continue to support innovative new ways to promote private sector participation.	Encourage the Bank to take a leadership role on innovative approaches to development finance by acting as a financial intermediary for the AMC for pneumococcal disease in a manner that maximizes the efficiency, simplicity and credibility of the initiative. Assess the strengths and limits of the Caribbean Catastrophe Risk Insurance Facility and consider the merits of expanding it or linking it with other similar initiatives.	Push for consideration of the use of the AMC concept or other innovative tools to mobilize private sector investment to tackle global public goods. Continue to encourage the IFC to accelerate its engagement in frontier markets and to identify measures to enhance the development value-added of IFC operations
3) Sustainable Poverty Reduction and Growth
Priority	Short-Term Action (2008)	Medium-Term Action (2008–2010)
3.1 Debt Sustainability Avoid another lend-and-forgive cycle.		Continue to monitor whether the Debt Sustainability Framework is effectively changing borrowing/lending behaviour to prevent the reaccumulation of unsustainable debt levels and assess whether improvements might be needed. Push for BWIs to consider both non-concessional and concessional lending when assessing the appropriate level of debt reaccumulation post debt relief. Continue to improve the transparency of lending and borrowing data, and help to build debt management capacity in low-income countries.
3.2 Failed and Fragile States Better tools for assisting fragile states.		Through the Executive Board, continue to support greater focus of IMF engagement in fragile states (i.e. policy support for obtaining macroeconomic stability and facilitating arrears clearance where appropriate). Monitor whether IDA's new framework for arrears clearance operations preserves incentives for countries to complete reforms under the HIPC process after arrears clearance and determine whether improvements are needed. Monitor the enhancements to IDA's exceptional financing for post-conflict countries, as agreed in IDA15, to see that they provide enough financing to help post-conflict countries make development gains, and that the transition back to regular financing does not endanger their progress. Monitor the concrete steps taken by the Bank to improve its coordination with the UN in fragile states.
3.3 Gender A real mainstreaming of gender considerations across operations.		Encourage the World Bank to update its operations manual to mandate the full integration of gender equality objectives into Country Assistance Strategies, results reporting and evaluations at the country level. Urge the World Bank to allocate sufficient budget resources to assign a gender equality specialist to each country program. Push the World Bank to collect and analyze gender-disaggregated statistics at the country level to properly track progress and report back on gender equality and use these statistics to improve policies and programs for the future.
3.4 Environment Linking development and environment in a manner that is consistent with BWI core mandates.	Support IMF efforts to increase analytical capacity concerning the impacts of climate change on national economies (e.g. fiscal implications) in coordination with the World Bank.	Support the Bank's adoption of new tools for clean energy and climate change-related actions that complement or enhance existing initiatives.

- Table of Contents - Previous - Next -