The Honourable Jim Flaherty, Minister of Finance for Canada
on behalf of Antigua and Barbuda, Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Ireland, Jamaica, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines
The dominant issue at our meeting today is how to meet the target that we set in Singapore to reach agreement on an ambitious package of International Monetary Fund (IMF) reforms by the fall of this year. The deadline is short, but this provides a strong incentive to move ahead quickly. In doing so, it will be important that we do not lose sight of the rationale underlying this reform exercise—improve the Fund's legitimacy and effectiveness through a broad package of reform measures. This package should include IMF governance arrangements that better reflect the evolving economic weights of members, effective surveillance of members and the global economy, and a better set of tools for the prevention and resolution of financial crises. With these reforms, the Fund will be better able to respond to the challenges of economic and financial globalization, and remain a credible and effective guardian of a stable, market-based international financial and monetary system.
We are encouraged that the outlook for the global economy remains positive, with the IMF projecting global growth of around 5 per cent in 2007 and 2008. Over the past year, growth has become more balanced, with Europe experiencing its strongest growth in six years in 2006 and the recovery in Japan gathering momentum. Combined with a moderation of growth in the United States, these growth patterns are favourable to unwinding global imbalances. Global economic fundamentals remain very strong, despite some recent turbulence in equity markets. The major world economies share many characteristics: strong growth, relatively low inflation, improving public finances, rising asset prices and low risk premia. However, there are risks to this outlook. As output gaps continue to narrow, there is a risk of rising inflation. Commodity prices are expected to remain at elevated levels, or perhaps increase further, a development that would be unlikely to contribute substantially to dampening inflationary pressures. In recent years, the economic and financial system has coped well with shocks, and we expect this to continue for the foreseeable future. But we must continue to work together to ensure that this remains the case.
Although the rebalancing of global growth is supportive of the unwinding of global imbalances over time, the size and persistence of these imbalances continue to pose a risk. In a global economy that is increasingly integrated, no country is fully isolated from disturbances in another. Therefore, it is clear that if we judge there to be risks of a disorderly adjustment, we must all play a role in helping ensure that these imbalances are unwound in an orderly fashion. As well, the Fund has a key role to play in this debate given its mandate to promote international monetary cooperation, and members must continue to support the Fund's multilateral surveillance efforts to this end.
Canada's economy continues to operate at a high level of activity after a few years of robust growth. Final domestic demand remains strong and continues to be the main driver of growth. Canadian real gross domestic product (GDP) growth slowed moderately recently, given weaker U.S. demand, the past appreciation of the Canadian dollar and a cooling of the Canadian housing market. In 2006, real GDP increased 2.7 per cent—down slightly from a year earlier—while final domestic demand grew 4.5 per cent on solid support from non-residential investment and consumer spending. Total consumer price inflation has been volatile in recent months, largely due to energy prices. However, well-anchored expectations have helped keep core consumer price inflation relatively stable and near the Bank of Canada's 2-per-cent inflation target. Solid personal income gains, very strong job growth and still-low interest rates, coupled with Canada's strong monetary and fiscal fundamentals, should support the Canadian economy through 2007, with growth accelerating towards 3 per cent in 2008.
Canada's fiscal situation remains solid. According to the Organisation for Economic Co-operation and Developmen (OECD), on a total government basis, Canada was the only Group of Seven (G7) country in surplus in 2006 and will likely be the only G7 country to remain in surplus in 2007 and 2008. Total government net debt, as a percentage of GDP, has also declined steadily from a peak of nearly 71 per cent in 1995 to about 27 per cent in 2006. Canada has had the lowest total government net debt-to-GDP ratio of any G7 country since 2004, and we expect this to remain the case. To strengthen Canada's ability to deal with economic shocks and challenges such as population aging, the Government aims—and is on track—to eliminate Canada's total government net debt by 2021 at the latest. By doing so, Canada will be able to count itself among the very few OECD countries that are in a net asset position.
Let me now turn to developments in Ireland and the Caribbean countries I represent.
The Irish economy recorded another very successful year in 2006. Real GDP grew by 6 per cent, somewhat ahead of potential, and only a slight slowdown is expected in 2007. With unemployment steady at around 4 per cent, there is effectively full employment and the economy continues to attract substantial inward migration. Growth in 2006 was heavily focused on the building and construction sectors as the economy continues to close the large deficit in infrastructure and housing. The strength of domestic demand and the relative weakness of the export sector resulted in a current external deficit of more than 3 per cent of GDP.
The strength of the economy and higher energy prices contributed to an increase in the rate of inflation. The harmonized index of consumer prices (HICP) rose by 2.75 per cent on average in 2006. The inflation differential over other Monetary Union countries widened somewhat. The European Central Bank tightened monetary policy through the course of 2006, and a moderation in the HICP to 2.5 per cent is expected in 2007. The strength of domestic demand, and especially the housing sector, contributed to a very strong fiscal outturn. Buoyant revenue led to an unexpectedly large surplus of 2.3 per cent of GDP and a fall in the debt-to-GDP ratio to 25 per cent. For 2007, a surplus of 1.2 per cent of GDP is budgeted. Within the budget, there is a continuing major emphasis on infrastructural investment to ease bottlenecks and boost the productive capacity of the economy.
In 2006, the Caribbean countries I represent experienced another year of economic expansion. Growth was robust, underpinned by the rebound in the tourism and agricultural sectors, as well as stimulus from activities related to the Cricket World Cup 2007 and continued strong foreign direct investment flows. Inflation was moderate, in spite of high oil prices and robust growth. On the fiscal side, strong growth in revenue resulted in higher primary surpluses in a number of countries. However, the debt overhang remains a major challenge for many countries.
Progress has been made in deepening and advancing the regional integration process with the implementation of the Caribbean Single Market component of the Caribbean Single Market and Economy (CSME). Agreements have also been reached on contributions for the Regional Development Fund, which will provide assistance to those disadvantaged by the operations of the CSME. The Fund should be fully operational by July 2007. We encourage the international donor community to support this crucial integration effort.
Caribbean countries are extremely vulnerable to natural disasters. This has led Caribbean governments to seek assistance to access affordable catastrophic risk insurance. Thanks to the response of the World Bank and with the support from several donors, including Canada (the largest donor), the Caribbean Catastrophe Risk Insurance Facility, the first ever multi-country catastrophic insurance vehicle, is now a reality. We also believe this innovation can be expanded to small developing states in other regions of the world.
In September 2006, I concluded my statement to the International Monetary and Financial Committee by emphasizing the need for a more comprehensive IMF reform package that goes beyond quota reform and addresses a broader agenda, including Fund surveillance, the institution's role in crisis prevention and resolution, and the Fund's financing sources. Fully implemented, this package of measures will enhance the Fund's capacity to safeguard global financial stability.
This statement still holds true today. We accomplished a great deal in Singapore, but we must work together to accomplish more. The Managing Director's Medium-Term Strategy has identified a number of priority areas for reform. Today, I would like to focus on four of these issues.
Successful governance reform is critical to enhancing the IMF's legitimacy in the eyes of its member countries. This requires significant progress in better realigning quota shares with the economic weight of member countries in the global economy. It also means that quotas and voting shares need to be responsive to changes in the global economy. I believe a successful quota reform exercise should have the following elements:
Enhancing the participation and voice of low-income countries in the IMF is another important element of the reform package. I am encouraged that the Fund is making headway on developing the mechanism for increasing and protecting the level of basic votes, as well as studying ways to strengthen the effectiveness of small and low-income member participation in Executive Board discussions.
It should be noted that a new quota formula and subsequent quota realignment are not ends in themselves. They are means to an end. Agreement on quotas that are more representative of the global economy will enhance the Fund's legitimacy and the persuasiveness of its policy advice. To get that agreement, however, Fund members will have to demonstrate flexibility. Members must be prepared to rise above narrow self-interest in pursuit of an institution that can better deliver the global public good of a stable world economy. In short, quota and voice reforms must be principled and robust, and reinforce Fund legitimacy over the long term.
No less important to the IMF reform agenda is ensuring that the Fund has the tools and the appropriate governance structure to carry out candid, targeted and even-handed surveillance that is capable of identifying threats to external stability. More effective surveillance will improve the Fund's capacity to evaluate monetary, fiscal, financial sector and exchange rate policies that have the potential to adversely affect the international monetary system. It will also allow the Fund to engage in a constructive dialogue with members aimed at addressing risks to their prosperity and that of the global economy.
In this respect, reform of the framework that underpins Fund surveillance is an important issue that must be addressed. Over the past 30 years, significant differences have emerged between the 1977 Decision on Surveillance Over Exchange Rate Policies and current surveillance practices. This divergence has made it increasingly difficult to guide surveillance activities and to hold the Fund accountable. To update and improve the Fund's surveillance activities, progress is necessary in two key areas:
It is also important that these changes can be made without introducing new obligations for members, or changing the Fund's emphasis on constructive dialogue and persuasion.
A third element that is highlighted in the Medium-Term Strategy as key to the long-term viability of the Fund is changes to the institution's financing model to promote greater predictability of income. Financial conditions in emerging markets have improved considerably over the last five years, and affordable access to international capital has reduced many emerging market countries' reliance on Fund resources. Paradoxically, this has exposed the Fund to significant financial pressures, as it has traditionally funded the bulk of its operations from its lending operations. The recent decline of lending volumes combined with the early debt repayment by major borrowers has reduced Fund income to historically low levels. The IMF is facing an income shortfall and will run a budget deficit for fiscal year 2007, with rising deficits expected in subsequent years.
It will be important for Fund members to work together to identify a sustainable financing model that supports the lending, surveillance and technical cooperation roles of the Fund, while ensuring that the institution remains on a solid financial footing. To this end, I welcome the recent release of the report by the Committee of Eminent Persons on the sustainable financing of the Fund, commissioned by the Managing Director to assess this problem. The Committee's recommendations are balanced and innovative, and provide a sound basis for progress. I look forward to a constructive and open debate on the Fund's financing model, as well as how the Fund can further improve its operational efficiency given current budgetary constraints.
Our low-income members face particular challenges in establishing macroeconomic stability, building efficient financial sectors, developing sound legal and business frameworks and crafting effective policies for particular key sectors. In a global economy where jurisdictions compete for scarce direct investment, it remains a preoccupation even for members that have attained middle-income or advanced industrial status.
In their efforts, these authorities will require the Fund's continued attention to prevent the re-accumulation of unsustainable debt, to accommodate aid flows, and to observe international standards and codes in public financial management, financial sector policy and data dissemination. The absence of timely and reliable economic and financial data can be an impediment to policy-making, as we have observed in the discussions toward a new quota formula.
In our constituency, our Caribbean authorities appreciate the Caribbean Regional Technical Assistance Centre's (CARTAC) help in improving public expenditure management, tax and customs policy and administration, and macro policy analysis. CARTAC has proven to be an efficient multi-donor program and a fine example of Paris Declaration principles in action; we encourage other donors to join the United Kingdom, the European Union, Ireland and Canada in this effort.
In the provision of technical assistance, it is key that the Bank and the Fund collaborate effectively with each other and with other bilateral and international agencies. I therefore welcome the recently released report to the Managing Director and the World Bank President by the External Review Committee on IMF–World Bank Collaboration.
The overarching goal of the package of reforms under the Managing Director's Medium-Term Strategy is to ensure that the IMF remains a relevant, effective and representative institution in an era of large and open global capital markets and increasingly dynamic economies. Canada remains committed to an ambitious reform agenda. Quota and voice reforms are fundamental to improved governance, while policy reforms are critical to enhancing the Fund's role in surveillance and crisis prevention. I look forward to working with my colleagues to achieve a successful outcome in these important areas.
On behalf of Canada, Ireland, and the Caribbean countries I represent in this Committee, I would like to extend my heartfelt appreciation to Managing Director de Rato at this, his last Annual Meeting. Through his leadership, including development of the International Monetary Fund's (IMF's) Medium-Term Strategy, Mr. de Rato has strengthened the Fund's capacity to fulfill its mandate of supporting a prosperous global economy.
I welcome the appointment of Mr. Dominique Strauss-Kahn as the new Managing Director. He brings to the IMF a wealth of experience and a strong vision for the Fund. I also welcome the appointment of Mr. Tommaso Padoa-Schioppa as the new Chairman of the International Monetary and Financial Committee (IMFC). I look forward to the new ideas and perspectives from both of these appointees, which will enable further progress to be made on the important challenges facing this institution.
We meet amidst reminders of these challenges, owing to the heightened uncertainty associated with the financial market turbulence that began this summer. Despite this increased uncertainty, I draw confidence that our institutions stand at the ready to support well-functioning markets. Central banks around the world are to be commended for their effective response to the sudden liquidity squeeze that hit short-term capital markets. Moreover, given the sound fundamentals supporting the global economy, I expect that the global economy will continue to register strong growth.
Nevertheless, the resilience of the global economy and financial system is clearly being put to the test by current developments. The challenge facing policy-makers is to carefully examine the root causes of the current financial volatility and draw the appropriate lessons for policy responses at the national and international levels. The rapid transmission of distress in the relatively small U.S. subprime mortgage market to global financial markets testifies to our global interdependence and our need for effective international institutions. In this regard, we must be doubly committed to reaching agreement on and implementing reforms to the IMF, including a realignment of quota that better reflects the evolving economic weights of members. Reform will strengthen the Fund, ensure its continued relevance, and allow it to effectively respond to new challenges in our global economic system.
Since our last meeting, the global economy has been slightly weaker than anticipated, and the outlook has further clouded as a result of the turmoil in financial markets triggered by the collapse of the U.S. subprime mortgage market. The losses in that relatively small market quickly disseminated to global markets via the market for asset-backed securities, resulting in a global credit squeeze. Although quick action on the part of the Bank of Canada and other major central banks helped sustain market liquidity, certain market segments remain stressed, and the IMF anticipates a protracted period of adjustment. Nevertheless, the fundamentals of the global economy remain sound, and the IMF continues to project growth of around 5 per cent in 2007 and 2008.
To date, financial market turbulence has had the largest impact on the U.S. and Europe. Unlike past episodes of heightened uncertainty, the current adjustment in risk tolerance did not spark a wave of capital flight from emerging market economies. In part, this reflects the great strides made in Latin American and other emerging market economies in improving macroeconomic policies, which have increased investor confidence. Although the outlook for China and India has moderated owing to lower external demand, their domestic economies remain at risk of overheating due to strong investment and capital inflows. The emerging economies are increasingly shifting from being primary beneficiaries of global growth to its major drivers.
The slowing of the U.S. economy and the associated depreciation of the U.S. dollar should help moderate the U.S. current account deficit and help unwind global imbalances. However, global imbalances remain significant, and continued progress is needed on implementing the recommendations that emerged from the multilateral consultations. Finally, although global inflationary pressures have eased, we must remain vigilant and committed to inflation control.
Canada's economy continues to operate at a high level of activity, owing to robust domestic demand. However, the tightening of credit conditions, the appreciation of the Canadian dollar to parity with its U.S. counterpart and the weakness in the U.S. housing market are expected to reduce Canadian exports and negatively affect growth. As a result, the IMF expects Canadian growth to ease to the 2.5-per-cent range in 2007 and 2008.
Final domestic demand remains strong and continues to be the main driver of growth. Canadian real gross domestic product (GDP) growth slowed moderately in 2006, given weaker U.S. demand, the past appreciation of the Canadian dollar and a cooling of the Canadian housing market. In 2006, real GDP increased 2.8 per cent—down slightly from a year earlier—while final domestic demand grew 4.7 per cent on solid support from non-residential investment and consumer spending. Solid personal income gains, very healthy job growth and still-low interest rates, coupled with Canada's strong monetary and fiscal fundamentals, are supporting the Canadian economy. In each of the first two quarters of 2007, growth exceeded 3 per cent at an annual rate.
Total consumer price inflation has been volatile over the last year, largely due to energy prices. However, well-anchored expectations have helped keep core consumer price inflation relatively stable and near the Bank of Canada's 2-per-cent inflation target.
Canada's fiscal situation remains solid. On a total government basis, Canada was the only Group of Seven (G7) country in surplus in 2006 and will likely be the only G7 country in surplus in 2007 and 2008. Total government net debt, as a percentage of GDP, has also declined steadily from a peak of nearly 71 per cent in 1995 to about 27 per cent in 2006. Canada has had the lowest total government net debt to GDP of any G7 country since 2004, and we expect this to remain the case. To strengthen Canada's ability to deal with economic shocks and challenges such as population aging, the Government aims—and is on track—to eliminate Canada's total government net debt by 2021, at the latest. By doing so, Canada will be able to count itself among the very few industrialized countries that are in a net asset position.
Now let me turn to developments and policy directions in Ireland and the Caribbean countries. The performance of the Irish economy remains very strong, although the pace of expansion is likely to decelerate significantly over the period ahead. Real GDP grew by 5.7 per cent in 2006, with growth this year likely to be around 4.5 per cent and dipping to 3 per cent in 2008. While slowing, growth will remain strong by international standards. Apart from somewhat moderated international investment, the easing of growth reflects a fall-off in activity in the construction sector, which has been particularly buoyant in recent years. The less buoyant economy should contribute to an easing in inflation, which has tended to be somewhat faster than in partner monetary union countries.
The fiscal position remains strong. Exceptional revenue buoyancy in 2006 pushed the surplus close to 3 per cent of GDP, but a more normal pattern of a small surplus is in prospect for this year. On a net basis, the government debt ratio has fallen to only 12 per cent of GDP. With the economy slowing, employment growth will ease and migration flows will moderate, but there should be little change in the unemployment rate. While there are some downside risks, the overall prospect is for a fairly smooth transition from a period of exceptionally high growth to a still-strong but sustainable growth pattern.
The Caribbean countries that I represent continued to record robust economic activity in 2007, led by a strong recovery in tourism. Regional economic growth, which had fallen sharply with the decline in tourism in the wake of September 11, 2001, has rebounded strongly and inflation is moderate, despite high oil prices. Several countries took advantage of the favourable economic conditions to strengthen fiscal balances which, in combination with debt restructurings in some countries, has led to a modest decline in debt ratios. The region nonetheless remains vulnerable to exogenous shocks due to the still-high public debt levels and large current account deficits.
Regional integration continues to be an integral part of our Caribbean members' economic strategy, with implementation of the Caribbean Single Market and Economy scheduled for next year. The authorities of these small, open countries view the regional integration process as critical to helping them overcome some of the limitations imposed by size and compete more effectively in the global economy. While the timetable for the establishment of the Regional Development Fund has slipped, work continues apace on its full implementation.
The region is vulnerable to natural disasters, particularly hurricanes. The World Bank Caribbean Catastrophe Risk Insurance Facility (CCRIF) was established earlier this year as the first multi-country catastrophic insurance to help reduce the fiscal costs of hurricanes. The recent experience with Hurricane Dean has demonstrated, however, that the facility is far from a panacea. In fact, it underscores the need for continued self-insurance via continuing investment in disaster preparedness and mitigation efforts. There is also a need to build awareness and deepen understanding of the CCRIF.
Significant progress has been made on the Medium-Term Strategy since our meetings in the spring. In particular, the adoption of the 2007 Decision on Bilateral Surveillance will improve the way surveillance is conducted, including assessing the potential for domestic policies to have spillover effects. I also note that the Executive Board agreed that a triennial Statement of Surveillance Priorities will help identify a focused, forward-looking set of priorities for surveillance. These are very promising developments, but our task is not yet finished. It is important that the Statement of Surveillance Priorities be accompanied by a strong accountability framework.
Agreement on a package of reforms to the structure of IMF quota and voting power is a key priority for Canada, Ireland, and the Caribbean members of my constituency. Progress in this area, aimed at better aligning IMF governance arrangements with developments in a rapidly changing global economy, is essential to strengthening the legitimacy of the IMF as a cooperative international monetary institution, and is the foundation for progress on the wide range of initiatives that comprise the IMF's Medium-Term Strategy.
Important progress has indeed been made in recent months. We all agree on the overall objectives of quota reform, which is to increase the voting share of developing countries (particularly dynamic economies) and to increase the voting share of Poverty Reduction and Growth Facility countries. We also agree on some elements of the quota formula, and there have been some innovative proposals aimed at reconciling the broad spectrum of interests across the Fund's membership. However, divisions remain on key issues, and we will need to redouble our efforts if an agreement is to be reached by the spring meetings.
Progress will require flexibility on the part of all members of the IMF. We ask all members to look beyond their short-term interests and work together toward agreement on a package of reforms that will keep the IMF as the institution at the centre of the international monetary system of the 21st century.
Surveillance over member exchange rate and economic policies is fundamental to the IMF's mandate and central to reforms under the Medium-Term Strategy. I welcome the progress since our last meeting in ensuring that the Fund has the tools and the appropriate governance structure to carry out candid, targeted and even-handed surveillance that is capable of identifying threats to external stability. This progress has been realized in two ways.
First, this June, the Executive Board adopted the 2007 Decision on Bilateral Surveillance, replacing the 30-year old 1977 Decision. The 2007 Decision puts more emphasis on members' domestic policies, as well as giving the Fund the ability to better identify domestic macroeconomic and exchange rate policies that lead to external instability. It also reinforces the principle that surveillance should be applied to all members in a uniform and even-handed fashion that promotes open, two-way dialogue. Despite some inevitable teething pains related to its implementation, the benefits of the new Decision are already apparent.
It is also important to note that, in the spirit of consensus, this reform was agreed to without introducing new obligations for members or changing the Fund's emphasis on constructive dialogue and persuasion. I look forward to the continued integration of the 2007 Decision into the Fund's daily work, as well as the regular review of progress in Fund efforts to focus on those priorities in an effective and even-handed manner.
The second area of progress took place in August, when the Executive Board came to consensus on the desirability of a triennial Statement of Surveillance Priorities. The Statement of Surveillance Priorities will work in conjunction with the Fund's triennial surveillance reviews to ensure that the right issues are focused on in a frank, fair and flexible manner in support of global economic and financial stability.
I am also pleased that many on the Executive Board supported the idea that the effectiveness of the Statement of Surveillance Priorities would be enhanced if it were endorsed by the IMFC. In my view, endorsement of surveillance priorities by the IMFC and ultimately by all Governors is key to ensuring widespread political buy-in and effective accountability for targeted, balanced and effective Fund surveillance, as well as support for the tough policy actions that are often needed to promote international monetary stability and orderly adjustment of imbalances.
As we know, the Fund's traditional means of financing its operations has become increasingly unsustainable. In January, the Committee of Eminent Persons on the sustainable financing of the Fund (the Crockett Committee) released its report containing a range of possible financing options. Staff have begun to elaborate on these options, and I look forward to further analysis. At this time, I would encourage members to continue to keep all options on the table, as a package of measures will likely be required to successfully address the current situation.
I also commend Staff and Management for their ongoing efforts to identify efficiency-enhancing measures, improve the link between inputs and outputs in the budgeting process, and slow the growth in nominal administrative expenses. These efforts are timely, as they provide a basis to build on going forward. New income streams for the Fund should be advanced in parallel with substantial reductions in expenditure, including not only the search for further efficiencies, but also larger questions about how the Fund's outputs and priorities could be refocused in line with its comparative advantages and the evolving needs of its members.
The Fund's low-income members face particular challenges in establishing macroeconomic stability, building efficient financial sectors, developing sound legal and business frameworks and investing in infrastructure. Those that have been the recipients of the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative debt relief should use the fiscal space created by debt relief to accelerate economic growth and reduce poverty. This requires a commitment to restrain excessive external borrowing to avoid another run-up of unsustainable debt.
In their efforts, these authorities will require the well-coordinated assistance of the Fund, the Bank and the rest of the international community. I therefore welcome the recently approved Joint Management Action Plan to improve coordination and communication between the Staffs of the Fund and the Bank and the more focused role for the Fund in the Poverty Reduction Strategy process and low-income countries more generally. I also encourage all borrowers and lenders to participate fully in the HIPC debt relief process, and to respect the Low-Income Country Debt Sustainability Framework.
The authorities of our constituency extend their appreciation to the Caribbean Regional Technical Assistance Centre (CARTAC) for its help in improving macro policy analysis, public expenditure management, and tax and customs policy and administration. CARTAC has proven to be an efficient multi-donor program and a fine example of Paris Declaration principles in action; I would welcome other donors to join Canada, Ireland, the United Kingdom and the European Union in this effort.
The Honourable Jim Flaherty, Minister of Finance for Canada
on behalf of Antigua and Barbuda, Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Guyana, Ireland, Jamaica, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines
Our discussions this weekend have a common theme: ensuring that the Bretton Woods institutions remain relevant and effective in an evolving global economy. Both the International Monetary Fund (IMF) and World Bank face situations in which many middle-income members that have traditionally relied on international financial institution financing are now increasingly able to access private markets. While this is a testament to the success of the development process, most of these countries continue to suffer from large and persistent pockets of poverty. The development issues associated with low-income countries, including fragile states such as Afghanistan and Haiti, also continue to pose challenges. And for all borrowing countries, there is a strong desire for a more effective voice to reinforce developing country ownership of World Bank lending programs and policy advice.
As discussion of IMF reform continues to gather steam, we need to constructively review the challenges facing the World Bank to ensure that it can continue to effectively and credibly fulfill its poverty reduction mandate. Recently, the Government of Canada announced a three-point program for enhancing the focus, efficiency and accountability to ensure the effective use of aid resources in our international assistance efforts. These principles are equally valid for international institutions.
Our first priority is strengthening focus. Shareholders are looking to the Bank to sharpen its priorities and improve the focus of its operations. This will require a candid assessment of the budgetary pressures and spending trade-offs as well as a stronger focus on results. The Bank's strategic vision must be aligned with its core competencies and comparative advantages. In this vein, we look forward to the Bank's forthcoming analysis on its long-term strategy to identify priority actions and internal capacity to promote global poverty reduction efforts over the next 10 years. We would stress that it will be critical for this exercise to take full stock of the Bank's two-pillar development strategy—improving the investment climate and empowering people—to ensure that it can successfully meet these new challenges and take advantage of new opportunities.
As recommended by the report of the United Nations Secretary-General's High-Level Panel on UN System-Wide Coherence, the Bank, IMF and UN must work more closely together to remove unnecessary duplication and build on their respective strengths. In this regard, there are two areas of comparative advantage where we see the Bank playing an increasingly important role.
While much of the Bank's work is undertaken at the country level, the institution also has a critical role to play in addressing issues that transcend national boundaries. In 2000, the Development Committee asked the Bank to focus on five broad priorities for global collective action: communicable diseases, economic governance and financial stability, the environmental commons, trade integration and the knowledge revolution. In our view, these issues are even more important today. Moreover, to the extent that the financing for public goods is critical for poverty reduction, there is even a larger role for the Bank.
Let me take this opportunity to also commend the Bank for several of its recent initiatives. In particular, we welcome:
Going forward, the Bank will need to clearly identify its areas of comparative advantage and adopt a collaborative approach in the provision of global public goods.
The World Bank also needs to play a critical role in supporting women's economic empowerment. At our 2006 Spring Meeting, Canada strongly encouraged the Bank to fulfill its commitment to develop a gender action plan that is integrated into its broader activities. Canada commends the Bank for having launched its Gender Equality as Smart Economics Action Plan, which outlines the Bank's comparative advantages in and commitments to achieving the gender equality and women's empowerment Millennium Development Goal. To underscore the importance of this work, Canada has contributed C$1.5 million to support this plan. We strongly encourage the Bank to devote the resources necessary to ensure full implementation of the gender action plan.
Our second priority is improving efficiency. At the World Bank, this means providing aid that effectively addresses a spectrum of development needs. The 2005 Paris Declaration describes aid effectiveness in terms of a new partnership for development based on the principles of local ownership, alignment and harmonization, managing for results and mutual accountability. In addition to ownership, countries need the capacity to deliver their development agendas. The World Bank's report on Harmonization and Alignment for Greater Aid Effectiveness recognizes the importance of building strong institutional capacity and the important role that the Bank must play to achieve sustainable development results.
Now, more than ever, we have an opportunity to make real progress in
Sub-Saharan Africa as governance reforms, higher commodity prices, increased aid flows and debt relief have significantly improved the region's economic outlook. To take advantage of this opportunity, we must carefully consider those areas where donors and the Bank can have the largest developmental impact.
A key area is improving debt management policies and enhancing debt sustainability. The Heavily Indebted Poor Countries and Multilateral Debt Relief Initiatives have provided the world's poorest and most indebted countries with an unprecedented opportunity to focus resources on poverty reduction. It is critical that we use this opportunity wisely and avoid the
re-accumulation of unsustainable debt and another lend-and-forgive cycle.
Going forward, the Bank and IMF need to undertake a more rigorous analysis of mechanisms that can signal when a country's debt accumulation threatens to become unsustainable. This should involve transparent guidelines for borrowers and creditors, which encourage responsible financing practices and create incentives for the provision of more accurate and timely data to the World Bank's Debt Reporting System.
Investments in health and education are also key to ensuring that people can take advantage of stronger economic conditions. At the Annual Meetings in September, Canada joined the Netherlands, Norway, Sweden and the United Kingdom to release a statement in support of broad-based long-term predictable financing in education in order to realize the full potential of these investments. Canada is a strong supporter of the Education For All – Fast Track Initiative (EFA-FTI), which encourages donor and recipient countries to work in a spirit of partnership to achieve the education Millennium Development Goals. Last year, Canada announced a $25-million contribution to multilateral assistance through the EFA-FTI. This is in addition to the $240 million that Canada had earlier committed under its bilateral aid program in support of the EFA. We look forward to a successful meeting in Brussels in May.
Successfully reintegrating failed and fragile states into the global economy represents another major challenge. Almost 500 million people live in fragile states, with about half of these populations earning less than a dollar a day. Canada, Ireland and the Caribbean welcome the decision to include fragile states as a special theme in the IDA15 replenishment exercise. A key issue is how the International Development Association (IDA) can best help fragile states to strengthen their institutional capacity and improve their governance structures. Weak capacity and governance not only hinder development, but also limit aid allocations under IDA's Performance-Based Allocation System. We must give priority to early efforts to build capacity in post-conflict countries and, as a matter of prevention, other fragile states. Analysis is also needed on possibly expanding the financial instruments IDA has available to meet the needs of fragile states, including both duration and eligibility for post-conflict allocations. A well-targeted and monitored capacity-building plan should be a central piece of the Bank's overall reform program and Country Assistance Strategies in post-conflict and other fragile states. Further, we strongly suggest close cooperation with the UN in setting the stage for international efforts in early recovery and medium-term reconstruction.
We welcome the World Bank's recent evaluation of its role in International Bank for Reconstruction and Development (IBRD) partner countries. The Bank's engagement in these countries must be based on its comparative advantages and reinforce the institution's poverty reduction mandate. A key comparative advantage of both Bretton Woods institutions is the provision of technical assistance to strengthen both economic policy-making and institutional capacity. This is clearly the best way to ensure that conditionality is kept at a minimum, while improving investment climates and reducing income inequalities.
While more can be done to streamline lending operations in many IBRD partner countries, we would underscore the continued need to maintain strong project social and environmental safeguards. These strong standards are critical to ensure that the Bank's operations continue to have a strong developmental impact. It follows that the Bank needs to exercise caution that these standards are not eroded in countries, which have access to financing from private financial institutions.
Efforts to advance the development agenda cannot overlook the particular challenges facing small states, particularly in the Caribbean region. The Bank has an important role to play in assisting small states to position themselves for success in an increasingly globalizing world. There is a clear need for additional analytical work on options to promote competitiveness, diversification and increased trade. The continuing loss of critical skills in many small states as a result of migration also presents an important challenge. Support for human resource development is crucial as these countries expand services and other exports in which they have a comparative advantage. On the related issue of remittances, we encourage the Bank to continue to work with other international financial institutions and partner countries to better understand these arrangements and improve their effectiveness. To that end, we look forward to upcoming work by the World Bank on the Canada-Caribbean remittance corridor.
Our third priority is increasing accountability. At the World Bank, we aim to do this in a variety of ways, including through governance reforms. The World Bank and IMF have different mandates, and it is not necessary for governance reform at the two institutions to proceed in lockstep. However, there is a clear need to assess how best to enhance the voice of developing countries within both institutions. The discussion in the Bank should include consideration of how to improve transparency and accountability of selecting the President, the scope to increase staffing resources for African Executive Board constituencies, and how developing countries could be encouraged to take up their full IDA subscriptions. The institution also needs to review how best to attract qualified developing country candidates to senior management appointments. On this point, I would congratulate the Bank on its recent appointment of two dynamic African women as new Vice Presidents.
In moving ahead with governance reforms, the differences between the two Bretton Woods institutions also need to be respected. In particular, World Bank reforms must appreciate the Bank's capital structure and ensure the preservation of the IBRD's credit rating in international capital markets.
In closing, it is essential that the World Bank remain a strong and viable institution in a changing global economic environment. It has been almost a decade since the Bank's financial situation was reviewed by an independent committee in the wake of the Asian financial crisis. For my part, I believe that serious consideration could usefully be given to a new exercise that would review the implications of the growing access of many middle-income country members to international capital markets for the Bank's longer-term financial situation, as well as current proposals to consider more active risk management practices as a way to bolster its net income in the coming years.
On behalf of my constituency, I would like to take this opportunity to welcome Robert Zoellick as the new President of the World Bank. He takes his post at an important juncture for the Bank. I am confident that the wealth of experience and knowledge that Mr. Zoellick brings to the job, and the clear commitment of Bank management and staff, will ensure that the Bank can effectively deliver on its development mandate.
Today, we focused much of our discussion on defining the future role of the World Bank. In our view, there are two aspects that must be addressed as we move forward in our discussions on a strategic direction for the Bank. First, shareholders and the Bank must work together to ensure an appropriately focused role. Second, the governance structure of the Bank must enhance its accountability and effectiveness. These efforts can only succeed if underpinned by strong financial stewardship, now and in the future.
Important progress is already being achieved. In particular, we welcome President Zoellick's articulation of key priorities for the Bank going forward, underpinned by the thoughtful analysis in the Long-Term Strategic Exercise. Clearly, the opportunities and challenges the President has identified are important ones for the institution. However, the challenge remains to translate these broad priorities, as well as the Bank's detailed sector strategies, into an overarching vision for the World Bank Group. We urge the President to work closely with the Executive Board to ensure that the long-term strategy is finalized and implemented in a timely manner.
The Bank's strategic direction must be aligned with its core competencies and comparative advantages. On this, we would stress four key points:
We would also like to take this opportunity to commend the Bank for important work in several areas.
Fragile states: The Bank's work in fragile states reinforces the work of bilateral donors, such as Canada and Ireland, in a number of countries, including Afghanistan, Haiti and Sudan. Its support for fragile states aptly integrates emerging best practices, including the provision of longer-term financial assistance through IDA15. The prospect of renewed cooperation with the UN system, based on a clear division of labour, is a welcome step. Canada and Ireland are major supporters of the Afghanistan Reconstruction Trust Fund (ARTF), and we believe it is a model of "best practice" for structuring and managing trust funds in post-conflict situations. We share a need to ensure that the ARTF's strong development results are not only achieved, but also better communicated to Afghans and external stakeholders.
IDA: We recognize the International Development Association's unique role in creating an enabling environment, or platform, which supports the successful delivery of other bilateral and vertical programs. Canada, Ireland and the Caribbean strongly support the Bank in its work to help the poorest countries. We consider contributions to IDA to be money well spent. In this regard, we welcome the recent commitments by the IFC and the International Bank for Reconstruction and Development (IBRD) to transfer US$3.5 billion to IDA15. We look forward to the IDA Deputies' meeting to be held in Dublin, Ireland, next month and a successful IDA15 replenishment.
Small states: Efforts to advance the development agenda cannot overlook the particular challenges facing small states, particularly in the Caribbean region. The Caribbean Catastrophe Risk Insurance Facility Trust Fund and the Canada-Caribbean remittance corridor study are two important initiatives for this region. However, crime and violence has emerged as a major development issue, not just for this region but, as the recent UN-HABITAT report asserts, worldwide. The trend, particularly among male youth, is on the rise and undermines efforts to improve governance, investment climates and regional integration. The international community needs to take a fresh and deeper look at this issue.
In redefining and focusing its strategic direction, the Bank must recognize that governance matters and it must evolve with changes in the international economy to ensure a legitimate and credible World Bank. Shareholders must begin a serious discussion on how to move this agenda forward, as well as a process with predefined timelines.
The issue of voice has been a long-standing concern at the World Bank, just as it has been at the International Monetary Fund (IMF). While there are links between the IMF and World Bank shareholding structures, discussions on World Bank reform must take into account differences in the ownership structures, as well as the differing roles played by these two institutions in the global community.
We are open to a package that would include at least a doubling of basic votes as a way of enhancing the voting power of the Bank's smallest and poorest members. However, to ensure that all developing members can benefit, we would also support proposals to introduce selective capital increases. It will be important to ensure that any adjustments to shareholdings continue to be primarily based on each member's weight in the global economy. Moreover, we must be sensitive to the need to preserve the IBRD's ability to borrow at the lowest interest rate spreads from international capital markets.
But voice and reform would benefit from a multifaceted approach that goes beyond basic votes and capital increases. We would be open to exploring ways to ensure that clear demonstrations of members' strong and consistent support to the Bank, such as through IDA contributions and other Official Development Assistance spending related to the Bank, are more fully recognized in the institution. In this respect, we would encourage developing countries to take up their full subscriptions to IDA. The institution also needs to review how best to attract qualified developing country candidates to senior management appointments. On this point, I would congratulate the Bank on its recent appointment of Ngozi Okonjo-Iweala as a Managing Director.
Underlying all of our efforts is the need for solid financial stewardship, which is essential to ensure a strong World Bank going forward. The Bank's business model must evolve if it is to continue to meet the demands of its members and provide services that effectively address a spectrum of development needs. To this end, I would urge consideration of a full review of the Bank's longer-term financial situation. This should be with a view to finding significant efficiencies, as well as a better understanding of the growing demands on net income and the potential to leverage Bank resources to meet development needs. Such a review should be treated as an important component of the Long-Term Strategic Exercise.
1. The International Monetary and Financial Committee held its fifteenth meeting in Washington, D.C. on April 14, 2007 under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom.
2. The Committee welcomes the continued strong, broad-based expansion of the global economy. Growth is becoming regionally more balanced, and is expected to remain strong in 2007 and 2008. Global financial stability continues to be underpinned by solid economic foundations. Downside risks requiring continued vigilance arise from the possibility of a reassessment of risks in global financial market conditions, of a sharper-than-expected slowdown in the U.S. economy, and of a revival of inflationary pressures as output gaps close or if oil prices rebound. The risk to the global economy from a possible rise in protectionism and the substantial foregone growth should the Doha Round fail make trade policy a key medium-term concern. The Committee welcomes progress and continued focus, in IMF surveillance, on the agreed strategy for promoting an orderly unwinding of global imbalances over the medium term. The Committee encourages policies that allow countries to take advantage of financial globalization while containing vulnerabilities.
3. In the advanced economies, monetary policy needs to remain committed to maintaining price stability while taking account of the situation of different countries. Fiscal positions are strengthening, and now is a good time to further advance fiscal consolidation and the fundamental reforms that will help ensure fiscal sustainability in the long term. The focus should be on measures to ensure the viability of healthcare and pension systems in the face of population aging. Potential growth will be bolstered by reforms to enhance the capacity of labor to adapt to, and take full advantage of, globalization, complemented in many countries by further steps to enhance productivity and competition in product and services markets and further steps for free trade and market access.
4. Emerging market and other developing countries continue to perform strongly and are making progress in improving their resilience to possible turbulence in financial markets and volatility in commodity prices. To consolidate this performance and promote sustained growth that is broadly shared, continued efforts are needed to strengthen budgetary positions and improve debt management practices, entrench the credibility of monetary and fiscal policies, and ensure the sustainability of external positions. Advancing reforms to improve the functioning of domestic financial markets and enhance the business and investment environment remains a key medium-term priority. Among some surplus countries, there is a continued need to boost domestic demand and allow for greater exchange rate flexibility.
5. The Committee is particularly encouraged by the continued robust growth in low-income countries, including in Sub-Saharan Africa. The Committee calls on poor countries and donors to continue working in partnership to build on this strong performance so as to accelerate progress towards achieving the Millennium Development Goals (MDGs). Countries should persevere with sound macroeconomic policies and reforms to foster vibrant and diversified market-based economies. The international community should support these countries' efforts with increased and more efficient aid, including through fulfilling the pledges made by donors to double aid to Sub-Saharan Africa by 2010. The Committee also stresses the importance of further trade liberalization and delivering Aid for Trade commitments. In this context, it looks forward to the early establishment of the enhanced Integrated Framework.
6. The Committee welcomes the report it has received from the Managing Director and the participants in the multilateral consultation on global imbalances launched following the Spring 2006 IMFC meeting. It agrees that resolving imbalances in a manner compatible with sustained global growth is a shared responsibility, and notes that the policy plans set out by the participants-China, the Euro area, Japan, Saudi Arabia, and the United States-represent further progress in the implementation of the strategy the Committee has previously set forth and endorsed. The Committee also notes the assessment by Fund staff that as these policies are implemented, they will make a significant contribution to reducing global imbalances. The Committee considers that the experience gained so far demonstrates that the multilateral consultation approach has been useful for addressing global issues through discussion and cooperation among members, and should prove to be a valuable instrument going forward for enhancing and deepening Fund surveillance. It looks forward to the Executive Board's review of the experience with the process and the conclusions of the first multilateral consultation and of the lessons for the future.
7. The Committee welcomes the resumption of the Doha Round trade negotiations, and calls on WTO members to work with a renewed commitment to urgently achieve an ambitious outcome. Benefiting from the report by WTO Director-General Pascal Lamy on the current status of the negotiations, the Committee looks for strong political leadership from those countries now playing a central role in the negotiations to forge the necessary breakthrough. The Committee emphasizes that all members stand to benefit from a Doha Development Round outcome that promotes growth and fosters economic development by reducing trade barriers and strengthening the multilateral trade system. The Committee considers it critically important to ensure that the benefits of globalization are widely shared and help reduce poverty and income disparities.
8. The Committee welcomes the steps being taken to strengthen and modernize IMF surveillance to ensure its effectiveness as globalization deepens. The Committee calls on the Executive Board to continue to give priority to further work on all aspects of this reform, including updating the 1977 Decision on Surveillance over Exchange Rate Policies. The goal should be to improve the quality of surveillance, its focus, candor, and evenhandedness. In this context, ensuring a medium-term perspective and external stability is important. In this connection, the Committee looks forward to the discussion of the Independent Evaluation Office's (IEO) report on the Evaluation of the IMF's Advice on Exchange Rate Policy. The Committee, with a view to gaining broad support across the membership, agrees that the following principles should guide further work: first, there should be no new obligations, and dialogue and persuasion should remain key pillars of effective surveillance; second, it should pay due regard to country circumstances, and emphasize the need for evenhandedness; and third, it should retain flexibility to allow surveillance to continue evolving.
9. The Committee supports the efforts being made to strengthen the way financial sector, capital market, and exchange rate issues are addressed in surveillance, and to enhance the focus of surveillance on key risks facing members and on cross-country spillovers. It notes the effort of the Fund in enhancing the methodology for assessing the effectiveness of surveillance. The Committee welcomes the continuing work by the Board on independence and accountability in surveillance, as well as on a remit, which could provide a clear statement of surveillance priorities. The Committee welcomes the priority being given by the Fund to enhancing and deepening the international community's understanding of financial stability issues, which will need to be an increasing focus of the Fund's surveillance. It looks forward to further steps by the Fund to promote dialogue on how financial markets and innovation can work to foster economic growth and financial stability, including possibly in the context of further multilateral consultations. The Committee looks forward to the review of streamlined Article IV consultations.
10. Recognizing the need for more predictable and stable sources of Fund income, the Committee expresses its gratitude to the Committee of Eminent Persons to Study Sustainable Long-Term Financing of the IMF for its report recommending a package of measures to better align the IMF's income with its diverse activities. The Committee considers that the report provides a sound basis for further work on the development of a new income model aimed at broadening its income base that can garner broad support across the membership. It looks forward to proposals on a new income model by the Managing Director for consideration by the Executive Board. The Committee underscores that ensuring a sustainable overall budgetary position to underpin the implementation of the IMF's medium-term strategy also requires action on the expenditure side. This now includes real spending reductions. The Committee welcomes the Fund's ongoing efforts to improve resource allocation and cost effectiveness in line with the priorities of the medium-term strategy. The Committee looks forward to a report on progress on expenditure issues.
11. The Committee reiterates the importance of implementing the program of quota and voice reforms adopted by the Board of Governors in Singapore, in line with the timetable set out in the Resolution. It welcomes the broad consensus reached in the Executive Board on the legal framework of an amendment of the Articles of Agreement regarding basic votes. The Committee welcomes the initial informal Board discussions on a new quota formula and stresses the importance of agreeing on a new formula, which should be simple and transparent and should capture members' relative positions in the world economy. This reform would result in higher shares for dynamic economies, many of which are emerging market economies, whose weight and role in the global economy have increased. The Committee also stresses the importance of enhancing the voice and participation of low-income countries, a key mechanism for which is an increase in basic votes, at a minimum preserving the voting share of low-income countries. The Committee calls on the Executive Board to continue its work on the reform package as a matter of priority.
12. The Committee attaches high importance to further steps by the IMF to strengthen its engagement with emerging market economies. The Committee welcomes the recent progress made in clarifying some key aspects of the design of a new liquidity instrument for market access countries. It calls on the IMF to accelerate its work on addressing the design challenges in developing an instrument that would enhance IMF support to these countries' own strong policies and ensure that substantial and timely financing will be available if needed, while safeguarding IMF resources and paying due regard to the interaction with existing IMF facilities.
13. The Committee looks forward to progress on steps to assist members to deepen financial sectors, including local capital markets. It also looks forward to a review of the Fund's policy on lending into arrears. The Board should also conclude its review of charges for Fund financial assistance and its maturity structure.
14. The Committee stresses that the IMF should remain fully engaged with its low-income members in helping them achieve macroeconomic stability supportive to sustainable growth, critical to the achievement of the MDGs. This includes well-designed financial and policy support in the context of surveillance, Fund arrangements, and technical assistance. The Committee calls for continued efforts to help countries reap the benefits of higher aid and debt relief, and avoid a new build-up of unsustainable debt. The Committee welcomes the recent enhancements to the debt sustainability framework for low-income countries. It urges all creditors and borrowers to work with the World Bank and the IMF to use the framework as a tool for fostering coherent and responsible lending practices, identifying emerging debt-related vulnerabilities, and elaborating country-owned debt strategies. The Committee looks forward to further work on the IMF's role in the poverty reduction strategy process and its collaboration with donors.
15. The Committee expresses its gratitude for the work of the members of the External Review Committee on IMF-World Bank Collaboration. The Committee welcomes the report's message that a culture of close cooperation between the IMF and the World Bank, taking into account each institution's comparative advantages, respective mandate and responsibilities, is key to delivering services to members more effectively and efficiently. The Committee looks forward to proposals from the two institutions to strengthen collaboration.
16. The Committee calls for closer cooperation between the IMF and Financial Action Task Force in promoting stronger implementation of international anti-money laundering and combating terrorist financing (AML/CFT) standards and encourages publication of comprehensive country evaluations.
17. The Committee recommends members' acceptance of the Fourth Amendment of the Articles of Agreement for a special one-time allocation of SDRs.
18. The Committee values highly the contribution of the IEO to the learning culture of the IMF and to facilitating oversight and governance. It welcomes the evaluation of the IMF and Aid to Sub-Saharan Africa, and the steps being taken to ensure that the IEO recommendations endorsed by the Executive Board are effectively internalized in the work of the IMF.
19. The Committee expresses its appreciation of the work of Agustín Carstens as Deputy Managing Director, and wishes him success in his new responsibilities as Secretary of Finance and Public Credit of Mexico and Chairman of the Development Committee.
20. The next meeting of the IMFC will be held in Washington, D.C. on October 20, 2007.
1. The International Monetary and Financial Committee held its sixteenth meeting in Washington, D.C. on October 20, 2007 under the Chairmanship of Mr. Tommaso Padoa-Schioppa, the Minister of Economy and Finance of Italy. The Committee welcomes Mr. Padoa-Schioppa, the new IMFC Chairman; it expresses its deep gratitude to Mr. Gordon Brown for his invaluable contributions to the work of the Committee and the Fund throughout the eight years of his Chairmanship of the Committee, and extends its best wishes.
2. The Committee welcomes the strong global growth in the first half of 2007. It notes that the global economy continues to be underpinned by strong fundamentals and the robust growth of emerging market and other developing economies. Recent disturbances in financial markets in advanced economies are expected to have a moderating effect on growth in the near term, and downside risks to the outlook have increased. The Committee underscores the importance of sound macroeconomic policies in the medium term and continued vigilance to maintain well-functioning financial markets and to strengthen the foundations for sustained high growth. The Committee notes with satisfaction the resilience of emerging market and other developing economies in the face of recent financial market turbulence.
3. Central banks in advanced economies have been playing a critical role in ensuring the smooth functioning of money markets by providing necessary liquidity while remaining watchful that financial markets continue to operate effectively. At the same time, monetary policy should focus on achieving price stability while continuing to assess carefully the inflation outlook, taking into account both the inflationary pressures stemming from tight commodity markets and rising oil and food prices, and downside risks to growth.
4. Ministers and central bank governors had a useful discussion today on the lessons emerging from the current episode of financial market turbulence, and are committed to continuing to work together, including multilaterally, to analyze the nature of the disturbances and consider lessons to be learned and actions needed to prevent further turbulence. The Committee agrees that financial innovation and securitization, while having contributed to enhanced risk diversification and improved market efficiency, have also created some new challenges that need to be properly addressed.
5. The Committee stresses that national authorities, standard-setting bodies, the Financial Stability Forum, the Bank for International Settlements, and the IMF, working together in line with their respective mandates, have complementary roles to play in analyzing financial stability issues, helping to identify and address information gaps and providing fora for discussions and actions. Areas to be addressed include: risk management practices related to complex structured products; valuation and accounting for off-balance sheet instruments, especially in times of stress; clarifying the treatment of complex products by ratings agencies; addressing basic principles of prudential oversight for regulated financial entities; and liquidity management. The Committee will take stock of the work undertaken at its next meeting.
6. The Committee welcomes the progress being made in prioritizing financial sector issues in the IMF's work. It calls for continued efforts to broaden and deepen the IMF's financial expertise to identify future issues, and to better integrate the findings of the IMF's multilateral surveillance in its regional and bilateral surveillance. The Committee also notes the growing importance of Sovereign Wealth Funds in international financial markets. While recognizing their positive role in enhancing market liquidity and financial resource allocation, the Committee welcomes the work by the IMF to analyze issues for investors and recipients of such flows, including a dialogue on identifying best practices. It stresses the importance of resisting protectionism and maintaining an open global financial system.
7. The Committee underlines the importance of further action to strengthen the foundations for sustained high growth over the medium term. Many countries need to pursue ambitious medium-term fiscal consolidation plans to address pressures on social spending arising from population aging. Structural reforms to take full advantage of the opportunities provided by globalization and technological advances should include further liberalization of service sectors in advanced economies, as well as further actions to improve infrastructure and the business environment and develop a sound financial sector in emerging market and other developing countries. To address growing income disparities, the Committee stresses the importance of strengthening education, creating jobs in the most dynamic sectors, pursuing well-designed tax policies, and providing adequate safety nets. Further trade opening, improved access to markets, and fulfillment of aid commitments by donors will be key to sustaining their robust growth performance.
8. The Committee calls for sustained implementation of the policy plans reaffirmed at the Spring 2007 IMFC meeting by the participants in the multilateral consultation on global imbalances. It reiterates that an orderly unwinding of global imbalances, while sustaining global growth, is a shared responsibility involving: steps to boost national saving in the United States, including continued fiscal consolidation; further progress on growth-enhancing reforms in Europe; further structural reforms and fiscal consolidation in Japan; reforms to boost domestic demand in emerging Asia, together with greater exchange rate flexibility in a number of surplus countries; and increased spending consistent with absorptive capacity and macroeconomic stability in oil-producing countries.
9. The Committee expresses concern with the continued lack of progress with the Doha multilateral trade round, and urges WTO members to work toward a prompt and ambitious conclusion of the Doha Round trade negotiations launched in 2001 as a development round.
10. The Committee stresses the critical importance of the implementation of the program of quota and voice reforms adopted by the Board of Governors in Singapore. The Committee welcomes the report of the Executive Board to the Board of Governors, takes note of the progress made on several elements of the program, and urges the Executive Board to continue working to achieve an agreement within the timetable and objectives set forth in the Singapore Resolution. In particular, the Committee supports the inclusion of GDP in the new formula as the most important variable. It also considers that PPP-GDP should play a role, along with a compression factor. The Committee stresses that the total quota increase should be of the order of ten percent, with at least a doubling of basic votes. The Committee reiterates that the reform should enhance the representation of dynamic economies, many of which are emerging market economies, whose weight and role in the global economy have increased. An outcome of the second round of reforms should be a further increase in the voting share of emerging market and developing economies as a whole. The Committee also stresses the importance of enhancing the voice and representation of low-income countries. The Committee encourages the Executive Board to continue its work in order to allow agreement on all the elements of the package by Spring 2008.
11. The Committee recognizes the need for more predictable and stable sources of Fund income to finance its diverse activities. It welcomes the progress made in developing operational guidelines to implement the recommendations of the Committee of Eminent Persons chaired by Mr. Andrew Crockett. The Committee notes that both income and expenditure will need to contribute to putting the Fund's finances on a sustainable footing. While welcoming the Fund's ongoing efforts to reduce administrative expenditures, the Committee sees the need for greater efficiency and saving through Fund-wide priority setting. This should be achieved within a new medium-term budget envelope, while preserving the effectiveness of the Fund in fulfilling its core mandate. The Committee therefore calls on the Executive Board to develop specific proposals on the new income model and the new expenditure framework by the time of the 2008 Spring meeting, and to agree on a new and detailed medium-term budgetary envelope for the FY 2009 budget that is consistent with the emerging income and expenditure framework.
12. The Committee welcomes the progress on strengthening IMF surveillance, including: the adoption of the Bilateral Surveillance Decision in June 2007; the agreement in principle on the adoption by the Executive Board of a statement of surveillance priorities in the context of the 2008 Triennial Surveillance Review, to guide the Fund's surveillance work and enhance accountability; and the ongoing integration of financial sector issues into macroeconomic analysis and bilateral surveillance. Evenhanded implementation of the new Decision is an essential element of the Medium-Term Strategy. The Committee looks forward to review the progress and experiences in these areas, as well as the upcoming review of experience with streamlined Article IV consultations.
13. The Committee supports the priority being given in the Fund's policy advice to emerging market economies in working with them on the timely identification of vulnerabilities, the strengthening of debt management practices and deepening of local capital markets, and the design of policy responses in the face of large capital inflows. The Committee notes the work undertaken in designing a new liquidity instrument to help countries' crisis prevention efforts, while providing adequate safeguards to Fund resources. While there has been support on key elements of such an instrument, concerns regarding potential demand for it and important design features still need to be resolved. The Committee calls on the Executive Board to continue its work on the instrument's design, paying due regard to the interaction with existing IMF facilities and to the views of potential users. The Committee looks forward to the follow-up on the review of charges and maturities for Fund financial assistance, and to the review of the Fund's policy on lending into arrears.
14. The Committee welcomes the progress on clarifying the role of the Fund in low-income countries. This includes well-designed financial and policy support in the context of surveillance, Fund arrangements, and technical assistance. The Committee looks forward to a comprehensive operational framework, which will draw together the various strands of the Fund's work in low-income countries with a view to enhancing the focus and effectiveness of the Fund's engagement with these countries. The Committee stresses the importance of delivering aid for trade commitments and encourages ongoing initiatives by the WTO and other institutions to enhance aid for trade and improve its coordination and delivery. The Committee attaches high priority to helping countries reap the benefits of higher aid and debt relief, while avoiding a new build-up of unsustainable debt. The Committee welcomes recent initiatives to help low-income countries build on the debt sustainability framework to design medium-term debt strategies, as well as efforts to foster sustainable lending. It calls on all creditors and borrowers to use the framework as a key tool for adhering to responsible and transparent lending practices. The Committee urges full participation by all official bilateral and commercial creditors in the HIPC Initiative; it expresses concern about growing litigation against HIPCs, which presents a major challenge to the implementation of the Initiative. The Committee looks forward to urgent progress on financing assurances by member countries to allow Liberia to benefit from debt relief. The IMF is prepared to consider other similar cases in due course.
15. The Committee welcomes the Joint Management Action Plan on Bank-Fund collaboration, which will foster closer and more efficient cooperation and clear delineation of responsibilities between the Bank and the Fund, including in their work on low-income countries.
16. The Committee recommends members' acceptance of the Fourth Amendment of the Articles of Agreement for a special one-time allocation of SDRs.
17. The Committee values highly the contribution of the IEO to the learning culture of the IMF and to facilitating oversight and governance. It welcomes that the enhanced framework for implementing the IEO recommendations endorsed by the Executive Board is now fully operational.
18. The Committee pays tribute to Mr. Rodrigo de Rato for his skillful and strategic leadership as Managing Director of the International Monetary Fund. As architect of the Fund's Medium-Term Strategy, he has positioned the Fund well to meet the challenges of a rapidly evolving global economy. Mr. de Rato deepened the integration of financial sector issues in the Fund's work and launched a bold reform to strengthen the voice and representation of low-income and emerging market countries in the Fund. He brought clarity to the role of the Fund in its bilateral surveillance and successfully introduced the new multilateral consultation instrument. Mr. de Rato's persuasiveness in convincing the membership of the need for a new income model for the Fund has been instrumental in launching a strategic reflection on the Fund's income and expenditure that will help ensure the Fund's financial sustainability in the new international environment. The Committee wishes to express its thanks to Mr. de Rato for his dedication and vision, which have helped set the Fund on a strong and positive path to the future.
19. The Committee warmly welcomes the appointment of Mr. Dominique Strauss-Kahn as the new Managing Director, and looks forward to working closely with him in meeting the challenges ahead.
20. The next meeting of the IMFC will be held in Washington, D.C. on April 12, 2008.
1. We met today to review progress on actions, resources and policies needed to accelerate progress towards the Millennium Development Goals (MDGs), drawing on data and analysis in the fourth annual Global Monitoring Report (GMR). We also reviewed the World Bank Group's Africa Action Plan, and a report on the evolving Aid Architecture.
2. We welcomed the progress being made in reducing income poverty, reflecting both the continued strong growth of the global economy and the impact of improved country policies and institutions. However, progress towards the MDGs has been uneven across countries and sectors. A lot of challenges remain and much more needs to be done.
3. We noted that total Official Development Assistance (ODA) flows have grown in real term over the past decade. A significant part of this increase reflects debt relief, which is making important contributions to country-level financial resources and progress. However, there is a concern that total ODA actually declined in real terms in 2006. The pledges made in 2005 to double aid for Africa by 2010 have not yet been translated into increased total donor resources for programs on the ground. We reiterated our call to those donors who have not done so to make concrete efforts towards the target of 0.7 percent of Gross National Income as ODA in accordance with their commitments. Consistent with the Monterrey Consensus and donor commitments, we called for renewed efforts at scaling-up financing to support sound country-owned programs for the achievement of the MDGs. In this context, we look forward to a successful 15th replenishment of the International Development Association (IDA), including dollar for dollar replenishment of lost credit flows due to the Multilateral Debt Relief Initiative (MDRI) and the HIPC Initiative. As financial flows increase, it will be important to maintain debt sustainability. We encouraged the Bank and the Fund to report regularly on the extent of full creditor participation in HIPC and delivery of donor commitments to financing the full cost of debt relief. We urged debtors and creditors to use the Bank-Fund debt sustainability framework to guide their decisions. We also urged the Bank and the Fund to intensify their efforts to enhance creditor coordination around the debt sustainability framework, and to support borrowers in building debt management capacity and in devising and implementing sound external finance strategies.
4. We welcomed new and emerging public and private sources of aid that bring more resources to help poor countries reach their MDGs. At the same time, we noted the increasing risks of aid fragmentation and earmarking of aid leading to higher transaction costs for recipients and reduced aid effectiveness. We therefore emphasized the importance of the country-owned approach to development, which provides an essential platform for aligning multiple sources of development finance, including global programs, with national priorities and country systems. We reiterated the importance of reinforcing donor coordination, including between traditional and emerging donors, as well as enhancing efforts to ensure aid effectiveness, and progress in implementing the Paris Declaration. We look forward to follow-up work on the Bank's role in the international aid architecture, focusing on how best the Bank Group can add value by playing a strategic or supportive role, including through partnerships, at country, regional and global levels. In this context, we welcomed the Bank management's decision to launch a review of the Bank Group's long term strategy to assure it is best positioned to effectively meet the needs of the world's poor. We also look forward to receiving a report on the Bank's progress in developing a framework for its role in delivery of global and regional public goods including criteria for its involvement and financing modalities.
5. There are encouraging signs in current efforts to meet the human development MDGs, including major increases in primary school completion and vaccination coverage. In this respect, we welcomed the recent launch of the Advance Market Commitments initiative. Yet only a few countries are on track to meet the MDG for reducing child mortality, and in all regions some countries are off track on reducing childhood malnutrition and maternal mortality. We called for further reinforcement of country, donor and MDB efforts targeting the MDGs' quantitative goals in health and education, including for the prevention and treatment of HIV/AIDS, malaria and tuberculosis. We also stressed the need for heightened attention to universal access to reproductive health services and to improving and monitoring the quality of education and health services. We appreciated the Bank's continuing support to the Education for All - Fast Track Initiative, but recognized that more support is needed to finance national education plans. We encouraged the Bank and other donors to play their part.
6. Gender equality and the empowerment of women are important not only for achieving gender-specific aspects of the MDGs (such as progress on gender equality in school enrollments and literacy, and the share of women in non-agricultural employment and national parliaments), but also for the attainment of the MDGs as a whole. We welcomed the progress many countries have made on girls' school enrollment, while noting that there is still much to be done in many countries. We noted that progress in the social sectors has not, in general, been matched by comparable advances in the productive sectors. We called for full and rapid implementation of the Bank's Gender Action Plan, focusing on areas where it has comparative advantage, including scaling up support for economic empowerment of women. We emphasized the need for further gender mainstreaming in Bank operations using a country based approach, and for the integration of gender aspects into the Bank's results framework. We also called for improvements in the statistical basis for monitoring progress, working closely with the UN and other agencies.
7. Fragile states, defined by the weakness of their institutions and governance, and frequently associated with recent conflicts, account for 9 percent of the population of developing countries but about 27 percent of the extreme poor. They are the countries least likely to achieve the MDGs. Yet several countries have shown that it is possible to transition from weak institutions and the legacy of conflict to sustained gains in growth and poverty reduction. We encouraged the International Financial Institutions (IFIs), working in partnership with the UN and other donors, to review their policies, procedures and incentives, including the development of a comprehensive framework for the settlement of protracted arrears cases. Collective efforts are also needed to formulate, in a coherent and harmonized manner, tailored strategies that pay attention to timely, well-sequenced interventions that build capable, accountable and responsive states, reflecting each actor's comparative advantage. In this context, we called for effective and expeditious implementation of the measures recently approved by the Bank's Board to strengthen the Bank's rapid response and long-term engagement in fragile states.
8. We reviewed the implementation of the Africa Action Plan (AAP) and the proposed revisions to the Plan. While welcoming indications that the overall implementation of the Plan has been progressing relatively satisfactorily, we broadly supported the proposed modifications to the AAP, which promise to increase selectivity and sharpen the focus on results. At the same time, we emphasized the continued relevance we attach to the original strategic goals of the AAP, including support for African countries' efforts to accelerate pro-poor growth and maximize achievement of the MDGs. We stressed that the Bank's support should continue to be determined by countries' own plans and that implementation of the AAP should not leave any countries behind or undermine agreed resource allocation systems. We also called for the Bank to make greater use of outcome indicators to measure progress and results. We strongly endorsed the AAP's strategy for mobilizing additional development partner resources, including from non-OECD/DAC and private donors, in a coordinated way, consistent with the Paris Declaration.
9. We noted the importance of trade as a driver of growth and poverty reduction and expressed our continued hope for a breakthrough in the Doha Development Round negotiations. We agreed that there is much at stake for all member countries and we recognized that failure to seize the current opportunity could come at considerable cost to the global economy and in particular, to developing countries. We called upon all parties to demonstrate the flexibility needed to achieve a successful outcome. To complement trade reforms and assist developing countries in fully exploiting existing and new trade opportunities, we look to the Fund and, particularly, the Bank for leadership in further strengthening the mechanisms for Aid for Trade and accelerating its implementation.
10. We welcomed the report of the Executive Directors of the World Bank and the accompanying paper entitled "Strengthening Bank Group Engagement on Governance and Anticorruption (GAC)." We expressed our appreciation for the Bank's response to our guidance, including the extensive consultations that contributed to the revised strategy. We endorsed the strategy's principles of transparency, predictability, consistency and equity of treatment across member countries. Effective implementation, including further development of actionable and disaggregated indicators, will now be critical to achieving the GAC strategy's desired results. In this context, we welcomed the agreed Board engagement and oversight during implementation.
11. We noted the progress made in implementing the World Bank Group's Strategy for Engagement with IBRD Partner Countries. We look forward to receiving a full report on implementation of all the elements of the strategy at our next meeting.
12. We noted the progress made with the Clean Energy for Development Investment Framework. Lack of access to energy is an acute problem in many low income countries. We welcomed the World Bank Group's Action Plan and generally endorsed the activities contained there. We look forward to receiving a progress report by our next meeting. In particular, we look forward to seeing progress on: (i) additional financing and implementation of the energy access agenda in Sub-Saharan Africa; (ii) application and further development of existing financial instruments to promote the transition to a low carbon economy, including increased support for cost effective, affordable, efficient and renewable energy; (iii) mainstreaming considerations of climate variability and change into development projects; (iv) consultation and collaboration with the private sector; and (v) an action plan for strengthened collaboration with the Regional Development Banks.
13. We took note of the Bank's analysis of "Fiscal Policy for Growth and Development" and encouraged the Bank to develop and operationalize growth-oriented, country-specific approaches to fiscal policy design. We endorsed the need for effective Bank-Fund collaboration to ensure consistent policy advice to member countries. We concurred with the conclusion that countries will need assistance to strengthen fiscal institutions, which are key to effective policy.
14. We welcomed the "Options Paper on Voice and Representation," setting out a comprehensive range of options for enhancing the voice of developing and transition countries in the Bank's decision-making framework, which we note is key to strengthening the credibility and legitimacy of the institution. We recognized that further consultations are necessary to reach a political consensus and expect the Bank to continue carrying out technical work to assist such consultations. We look forward to a report from the Bank by our next meeting.
15. We thanked the External Review Committee for its report on Bank-Fund collaboration. We look forward to hearing from the two institutions about concrete proposals to foster a culture of collaboration.
16. We have to ensure that the Bank can effectively carry out its mandate and maintain its credibility and reputation as well as the motivation of its staff. The current situation is of great concern to all of us. We endorse the Board's actions in looking into this matter and we asked it to complete its work. We expect the Bank to adhere to a high standard of internal governance.
17. We welcomed Minister Agustín Carstens as the new Chairman of the Committee. We expressed appreciation for the service of the former Chairman, Alberto Carrasquilla.
18. The Committee's next meeting is scheduled for October 21, 2007 in Washington, DC.
1. We met today in Washington, DC on Sunday, October 21, 2007.
2. We welcomed the opportunity to discuss the future strategic direction of the World Bank Group, and thanked the President for his presentation. We recognized the potential of the goal of inclusive and sustainable globalization to guide the Bank mission of promoting economic growth and reducing poverty, including helping countries attain the Millennium Development Goals (MDGs). We welcomed the President's commitment to develop and refine the strategic framework in a consultative manner under the guidance of the Bank Board, and looked forward to reviewing progress at our next meeting. We emphasized the importance of efforts to strengthen synergy among the Bank Group institutions, building upon their respective areas of competence.
3. We agreed that strengthened support for the inclusion and empowerment of the poorest in development, especially in Sub-Saharan Africa, and for active engagement by the Bank Group in fragile and conflict-affected states, must be key elements in the strategic framework. We also noted that gender equality and women's rights are crucial for sustainable poverty reduction. The Bank Group must also ensure its continued relevance to the needs and demands of Middle Income Country members. We welcomed progress in implementing the framework for partnership with IBRD clients, and the recent simplification and reduction in IBRD pricing. We urged the Bank to make further progress in reducing the non-financial cost of doing business, including enhancing the use of country systems where appropriate.
4. We welcomed the report on the Bank Group's role in Global Public Goods (GPGs) and its emphasis on integrating the GPG agenda into country-owned programs at country and regional levels. We stressed the importance of the Bank responding to global challenges, while exercising selectivity, focusing on its comparative advantage, filling institutional gaps and cooperating closely with other international institutions. We underlined the importance of innovative financing mechanisms. We also encouraged the Bank to further strengthen its work as a knowledge-broker on development policy.
5. We welcomed the recent adoption of strategies on health and the financial sector. We emphasized the importance of successful implementation of the governance and anti-corruption strategy.
6. We welcomed the progress made by many low-income countries in strengthening development strategies and implementing policy and institutional reforms, and noted that many countries have enhanced their capacity to absorb larger amounts of aid productively. We emphasized the need to sharpen the focus of poverty reduction strategies on stronger, shared, private sector- led growth, to link these strategies better to budgetary frameworks, and to implement them effectively. We reaffirmed the importance of the country-based model, founded on strong country ownership, which is crucial for improving aid effectiveness and harmonization.
7. We called on donors to meet their respective commitments to scale up aid for development, improve aid predictability and address financing gaps for meeting the MDGs. We reiterated our call to those donors who have not done so to make concrete efforts towards the target of 0.7% of gross national income as Overseas Development Assistance in accordance with their commitments. We noted that emerging new donors and creditors bring much-needed resources and development knowledge, while underscoring that the effectiveness of these resources will depend on their alignment with country priorities, as well as creditors' commitment to the debt sustainability framework. We encouraged wider implementation of the Results, Resources, and Partnership approach. We underlined the need for a strong IDA15 replenishment to enable IDA to play its crucial platform role in the evolving aid architecture. We welcomed the very substantial contribution to IDA from IBRD and IFC earnings, and the proposed enhanced collaboration between IFC and IDA on private sector development.
8. We noted that global economic growth remains strong and the direct impact of recent financial market turbulence on developing countries has been limited. We urged governments to continue implementing policies supporting economic resilience, and urged the Bank and the Fund to support and monitor those efforts.
9. We welcomed progress in implementing the Bank's Clean Energy Investment Framework. We recognized the critical importance of energy access for growth. We asked the Bank Group to increase its support for access to modern, cost-effective, clean energy, especially among the poorest and in Sub-Saharan Africa. We also called for expanded work on energy efficiency and renewable energy, and facilitation of the development and dissemination of related knowledge and technology.
10. Bearing in mind the scale of the challenge of addressing the causes and impacts of climate change, we called on Bank management to develop a strategic framework for Bank Group engagement, including support for developing countries' efforts to adapt to climate change and to achieve low-carbon growth while reducing poverty. In this connection, we urged the Bank Group to enhance cooperation and harmonization with other development partners, based on comparative advantages, and to help catalyze substantial additional resources from both public and private sources, including concessional finance as appropriate (e.g., Global Environment Facility). We welcomed the focus on environmental sustainability in the 2008 Global Monitoring Report.
11. We noted the progress in implementing the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI), and stressed the need for all creditors to participate on an equitable basis, including non-Paris club and commercial creditors. We stressed the importance of providing dollar for dollar compensation for lost credit reflows due to the MDRI and HIPC initiatives, as agreed. We observed that, improved debt burden indicators notwithstanding, the risk of debt distress in many HIPCs remains a challenge to their long-term debt sustainability. In this regard, we emphasized the importance of sound lending and borrowing decisions guided by the Bank-Fund Joint Debt Sustainability Framework (DSF), and the strengthening of public debt management, for preventing unsustainable accumulation of debt by HIPCs. We welcomed the efforts of the OECD Export Credit Group to develop sustainable lending guidelines embodying the DSF.
12. We reiterated our strong support for intensified efforts to agree on an ambitious pro-development Doha Round. We stressed the need to integrate trade and competitiveness within national development strategies, while stepping up support for Aid for Trade, as proposed by the Bank and Fund.
13. We welcomed the Options Paper on Voice and Participation. We recognized that further consultations among shareholders will be necessary to reach a political consensus on a comprehensive package and look forward to a timely report on the progress achieved.
14. We are encouraged that the World Bank Board, together with management, is continuing to review and reform key aspects of the Bank's governance.
15. We took note of the Joint Management Action Plan prepared by the World Bank and the Fund as a follow up to the report of the External Review Committee on Bank-Fund Collaboration.
16. We welcomed Robert B. Zoellick on his appointment as World Bank President and look forward to working with him. We thanked Paul Wolfowitz for his contribution to the work of the World Bank. We expressed our deep appreciation for the leadership of Rodrigo de Rato at the IMF, and welcomed the selection of Dominique Strauss-Kahn as his successor.
17. The Committee's next meeting is scheduled for April 13, 2008 in Washington, DC.
The flow of IMF repurchases and repayments were larger than the flow of disbursements in FY2006 and FY2007. However, the gap between the two figures is smaller, reflecting both a slight increase in disbursements, and repurchase and repayment by several member countries in FY2006.
IMF Resource Flows as of April 30
(millions of SDRs)
|Total repurchases and repayments||35,991||14,678|
|Note: Numbers may not add due to rounding.|
Outstanding credits decreased substantially from FY2006 to FY2007, primarily due to reductions in the purchase (use by members) of Stand-By Arrangements and Extended Arrangements.
Outstanding Credit by Facility and Policy as of April 30
(millions of SDRs)
|Supplemental Reserve Facility||–||–|
|Compensatory and Contingency Financing Facility||84||79|
|Systemic Transformation Facility||–||–|
|Subtotal, General Resources Account||19,227||7,333|
|Note: Numbers may not add due to rounding.|
Please see the IMF 2007 Annual Report for detailed data regarding the policies and finances of the IMF. All data referenced in this annex can be found in the Appendices of the IMF 2007 Annual Report.
Active IMF Lending Arrangements—as of December 31, 2007
(in millions of SDRs)
|Member||Date of arrangement||Expiration date||Amount approved||Undrawn balance|
|Dominican Republic||January 31, 2005||January 30, 2008||437.8||77.0|
|Gabon||May 7, 2007||May 6, 2010||77.1||77.1|
|Iraq||December 19, 2007||March 18, 2009||475.3||475.3|
|Macedonia, former Yugoslav Republic of||August 31, 2005||August 30, 2008||51.6||41.1|
|Paraguay||May 31, 2006||August 31, 2008||30.0||30.0|
|Peru||January 26, 2007||February 28, 2009||172.3||172.3|
|Turkey||May 11, 2005||May 10, 2008||6,662.0||2,248.4|
|Extended Fund Facility Arrangements—Total||8.5||3.6|
|Albania||February 1, 2006||January 31, 2009||8.5||3.6|
|Poverty Reduction and Growth Facility—Total||844.3||440.7|
|Afghanistan, Islamic Republic of||June 26, 2006||June 25, 2009||81.0||45.2|
|Albania||February 1, 2006||January 31, 2009||8.5||3.6|
|Armenia, Republic of||May 25, 2005||May 24, 2008||23.0||3.3|
|Benin||August 5, 2005||August 4, 2008||6.1||3.5|
|Burkina Faso||April 23, 2007||April 22, 2010||6.0||5.5|
|Burundi||January 23, 2004||January 22, 2008||69.3||7.1|
|Cameroon||October 24, 2005||October 23, 2008||18.5||7.9|
|Central African Republic||December 22, 2006||December 21, 2009||36.2||15.5|
|Chad||February 16, 2005||February 15, 2008||25.2||21.0|
|Congo, Republic of||December 6, 2004||June 5, 2008||54.9||31.4|
|Gambia, The||February 21, 2007||February 20, 2010||14.0||10.0|
|Grenada||April 17, 2006||April 16, 2009||10.5||8.9|
|Guinea||December 21, 2007||December 20, 2010||48.1||41.3|
|Haiti||November 20, 2006||November 19, 2009||73.7||38.0|
|Kyrgyz Republic||March 15, 2005||May 31, 2008||8.8||1.2|
|Madagascar||July 21, 2006||July 20, 2009||54.9||39.2|
|Malawi||August 5, 2005||August 4, 2008||38.1||16.2|
|Mauritania||December 18, 2006||December 17, 2009||16.1||7.7|
|Moldova, Republic of||May 5, 2006||May 4, 2009||110.8||45.7|
|Nicaragua||October 5, 2007||October 4, 2010||71.5||59.6|
|Niger||January 31, 2005||May 31, 2008||26.3||0.9|
|Rwanda||June 12, 2006||June 11, 2009||8.0||4.5|
|Sâo Tomé and Príncipe||August 1, 2005||July 31, 2008||2.9||0.8|
|Sierra Leone||May 10, 2006||May 9, 2009||31.1||22.0|
|Note: Numbers may not add due to rounding.
Operational highlights and key financial indicators for World Bank Group associations are summarized in the following table. IBRD lending commitments to member countries were $12.8 billion in FY2007, reflecting a decrease of $1.3 billion from FY2006 levels of $14.1 billion. Comparatively, IDA lending reached a record high at $11.9 billion for 189 projects—a 25 per cent increase in dollar terms from FY2006. The IFC invested over $8 billion in FY2007, about a third of these investments went to frontier and IDA countries. Commitments approved by the MIGA Board of Directors amounted to $1.9 billion, and fiscal-year guarantees issued were up approximately 5 per cent in FY2007 compared to FY2006.
World Bank institutions continued to maintain strong financial positions in FY2007. The IBRD maintained its FY2006 return on average assets level of 0.8 per cent in FY2007. The IFC continued to grow and posted a strong return on investment of 6.4 per cent in FY2007; this was up from 3.6 per cent in FY2006. MIGA return on operating capital before provisions was up significantly from FY2006 at 6.1 per cent in FY2007.
International Bank for Reconstruction and Development
(millions of US dollars)
|Number of projects||112||112|
|Principal repayments including prepayments||13,600||17,231|
|Return on average assets (per cent)||0.8||0.8|
|Equity-to-loans ration (per cent)||33||35|
International Development Association
(millions of US dollars)
|Operating income (loss)||(2,043)||(2,075)|
|Total applications of development resources||102,871||111,330|
|Number of projects||167||189|
International Finance Corporation
(millions of US dollars)
|Operating income (loss)||1,409||2,611|
|Number of projects||284||299|
|Loan and equity investments, net||12,731||15,812|
|Return on average assets (per cent)||3.6||6.4|
Multilateral Investment Guarantee Agency
(millions of US dollars)
|Administrative and other expenses||31.3||30.1|
|Statutory underwriting capacity||10,216||10,570|
|Cumulative guarantees issued||16,000||17,400|
|Fiscal-year guarantees issued||1,302||1,368|
|Number of projects||41|
|Operating capital/net exposure (per cent)||26.1||29.6|
|Return on operating capital, before provisions (per cent)||2.0||6.1|
|Source: The World Bank Group Annual Report, 2007.|
IBRD Loans and IDA Credits—Summary Statistics for Fiscal Year 2007
(millions of US dollars)
|East Asia and Pacific||2,806.6||1,237.4||4,043.9|
|Europe and Central Asia||3,340.1||422.1||3,762.2|
|Latin America and the Caribbean||4,353.3||200.0||4,553.3|
|Middle East and North Africa||691.9||216.0||907.9|
|By Theme||Total Amount|
|Environmental and Natural Resources Management||2,017.0|
|Financial and Private Sector Development||4,260.8|
|Public Sector Governance||3,389.7|
|Rule of Law||424.5|
|Social Development, Gender and Inclusion||1,250.3|
|Social Protection and Risk Management||1,647.6|
|Trade and Integration||1,569.9|
|Source: The World Bank Group Annual Report, 2007.|
Projects Approved for IBRD and IDA Assistance in Fiscal Year 2007, by Region and Country
(millions of dollars)
|IBRD loans||IDA loans||Total loans|
|Central African Republic||2||100.0||2||100.0|
|Congo, Democratic Republic of||2||330.0||2||330.0|
|Congo, Republic of||1||35.0||1||35.0|
Projects Approved for IBRD and IDA Assistance in Fiscal Year 2007, by Region and Country (cont'd)
(millions of dollars)
|IBRD loans||IDA loans||Total loans|
|East Asia and Pacific|
|Lao People's Democratic Republic||3||28.0||3||28.0|
|Papua New Guinea||1||37.3||1||37.3|
|Europe and Central Asia|
|Bosnia and Herzegovina||3||39.4||3||39.4|
|Macedonia, former Yugoslav|
Projects Approved for IBRD and IDA Assistance in Fiscal Year 2007, by Region and Country (cont'd)
(millions of dollars)
|IBRD loans||IDA loans||Total loans|
and the Caribbean
|Middle East and
|Egypt, Arab Republic of||2||182.1||2||182.1|
|Yemen, Republic of||3||50.0||3||50.0|
Beyond the financial resources that Canada provides to the Bank through capital subscriptions, IDA replenishments and multilateral debt relief, we also contribute to a number of the Bank's multi-donor trust funds.
The table below shows Canada's contributions over the past few years. These trust funds have been set up to mobilize donor resources to address key strategic development priorities at country level.
CIDA Disbursements Through World Bank Group Administered Trust Funds
(millions of dollars)
Key disbursements in FY06/07 and FY07/08 (until December 31, 2007) include:
(millions of dollars)
December 31, 2007)
|Caribbean Catastrophe Risk Insurance||20.0||–|
|Iraq IRFFI TF||5.0||–|
|Note: Includes only contributions above $5 million.|
The World Bank also acts as a financial administrator for a number of global initiatives, such as the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM), the Global Alliance for Vaccines and Immunization (GAVI Alliance), the Global Environment Facility (GEF), the Advance Market Commitment (AMC) and the Consultative Group on International Agricultural Research (CGIAR). The table below shows Canada's contributions to these initiatives.
Canadian Contributions to Global Initiatives administered by the World Bank
(millions of dollars)
|Source: Canadian International Development Agency, February, 2008.|
Disbursements by IBRD and IDA Borrowers:
Goods and Services From Canada—To June 30, 2006
(millions of US dollars)
|By Fiscal Year|
|1 As of fiscal year 2005, data reflects goods and service contracts awarded and not payments.
2 2006–07 estimates.
Source: World Bank, 2007.
During calendar year 2007, the IBRD issued one bond denominated in Canadian dollars, the IBRD's C$850 million 4.30 per cent Global Bonds due December 15, 2012.
1 Reports to the IMF's Board of Governors.[Return]
2 Reports to the IMF and World Bank's Boards of Governors.[Return]
3 The constituency includes Guyana for the DC only.[Return]
4 For the October 2007 WEO see: www.imf.org/external/pubs/ft/weo/2007/02/index.htm and for the October 2007 GFSR see: www.imf.org/External/Pubs/FT/GFSR/2007/02/index.htm.[Return]
11 The streamlining initiatives aimed to reduce the volume and scope of structural conditionality, focusing on conditions that are critical to the achievement of the program goals over time. [Return]
12 All figures and activities in this section are for the World Bank's 2007 fiscal year (July 1, 2006 to June 30, 2007)[Return]
13 Money contributed by governments and companies in Organisation for Economic Co-operation and Development countries to purchase project-based greenhouse gas emission reductions.[Return]
14 Budgets 2006 and 2007 reaffirmed Canada's commitment to double aid spending to about $5 billion per year by 2010–11 (from 2001–02 levels of about $2.5 billion) through IAE growth of 8 per cent per year. The increase in our IDA contribution will be funded out of this 8-per-cent growth.[Return]
15 Including the Global Fund to Fight AIDS, Tuberculosis and Malaria (Canadian contributions of $528 million since 2001), the Global Alliance for Vaccines and Immunization ($188 million since 2001), and the Global Polio Eradication Initiative ($235 million since 1988).[Return]
16 Up to December 31, 2007 only.[Return]
17 One person-year equals 260 working days. [Return]
18 The Committee of Eminent Persons was chaired by Andrew Crockett, and included Hamad Al-Sayari, Mohamed El-Erian, Alan Greenspan, Tito Mboweni, Guillermo Ortiz, Jean-Claude Trichet, and Zhou Xiaochuan.[Return]
19 The external Review Committee was chaired by Pedro Malan, and included Michael Callaghan, Caio Koch-Weser, William McDonough, Sri Mulyani Indrawati, and Ngozi Okonjo-Iweala.[Return]