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Foreword by the Minister of Finance

I am pleased to present to members of Parliament and the Canadian public the Department of Finance's 2008 report Canada at the IMF and World Bank—Report on Operations Under the Bretton Woods and Related Agreements Act. This report summarizes the leading role Canada has once again played in the ongoing transformation of both international financial institutions over the past year, and the challenges that remain amidst continuing international economic uncertainty.

The role the International Monetary Fund (IMF) and the World Bank Group play in the global economy is vital, and this will be particularly true during the current synchronized global recession and the worst financial market crisis since the Great Depression. As 2008 came to a close, economic forecasts were being revised downward to project global growth at its lowest level since the Second World War—the very economic downturn that led to the creation of the Bretton Woods institutions.

At such an uncertain time, it is in every nation's interest that we have strong and effective international institutions and that national authorities commit to work together to overcome collective challenges and mitigate risks. In this respect, Canada has continued to play a positive role: our country was a pioneer of the joint IMF-World Bank Financial Sector Assessment Program, which helps to strengthen national financial systems, and we took one of the largest share cuts of any country in the recent IMF governance reform exercise to ensure greater representation for dynamic emerging economies. Since becoming Finance Minister in 2006, at international meetings and in the pages of the Financial Times, I have repeatedly stressed that effective global integration requires the full participation of emerging economies at the global decision-making table, as well as the commitment of all countries to live up to our collective responsibility to promote global stability and sustainable growth.

Canada has played a recognized leadership role in the global economy in good times and we will continue to do so as the world enters a more difficult economic period. As a highly open economy, this significant level of international engagement is essential to achieve our own domestic prosperity. This report is evidence of Canada's ongoing determination to pursue ambitious short- and long-term priorities for the IMF and World Bank, and to be accountable for our commitments. While the report continues to be organized under the themes of Governance and Accountability, Institutional Effectiveness, and Sustainable Poverty Reduction and Growth, it outlines a number of new Canadian objectives, in light of the recent global financial crisis and economic downturn.

As the international economy winds its way through an unstable time, the report being tabled today demonstrates Canada's unwavering commitment to strong and representative international financial institutions. The world can continue to count on Canada to lead in global efforts to make the IMF and World Bank more legitimate, more effective and more accountable.

The Honourable James M. Flaherty, P.C., M.P.
Minister of Finance

Acronyms Used in This Report

ADF African Development Fund
AFRITAC      Africa Regional Technical Assistance Centre
AMC Advance Market Commitment
   
CAO Compliance Advisor Ombudsman
CAPTAC Central America-Panama Technical Assistance Centre
CARICOM Caribbean Community
CARTAC Caribbean Regional Technical Assistance Centre
CAS Country Assistance Strategy
CCRIF Caribbean Catastrophe Risk Insurance Facility
CGIAR Consultative Group on International Agricultural Research
CIDA Canadian International Development Agency
CIF Climate Investment Funds
   
DSF Debt Sustainability Framework
DTCs developing and transition countries
DC Development Committee
   
ESAP Enhanced Structural Adjustment Facility
ESF Exogenous Shocks Facility
   
FPA Fiduciary Principles Accord
FSAP Financial Sector Assessment Program
FSF Financial Stability Forum
FY fiscal year
   
G7 Group of Seven
G8 Group of Eight
G20 Group of Twenty
GAVI Global Alliance for Vaccines and Immunization
GDP gross domestic product
GEF Global Environment Facility
GFATM Global Fund to Fight Aids, Tuberculosis and Malaria
GFRP Global Food Response Program
GFSR Global Financial Stability Report
GRA General Resources Account
   
HIPC heavily indebted poor country
HNPSP Health, Nutrition and Population Sector Program
   
IBRD International Bank for Reconstruction and Development
ICSID International Centre for Settlement of Investment Disputes
IDA International Development Association
IEG Independent Evaluation Group
IEO Independent Evaluation Office
IFC International Finance Corporation
IMF  International Monetary Fund
IMFC International Monetary and Financial Committee
INT Department of Institutional Integrity
LIC low-income country
   
MDG Millennium Development Goal
MDRI Multilateral Debt Relief Initiative
MDTF Multi-Donor Trust Fund
MIGA Multilateral Investment Guarantee Agency
   
NCBP Non-Concessional Borrowing Policy
   
ODA official development assistance
OECD Organisation for Economic Co-operation and Development
OECS Organisation of Eastern Caribbean States
   
PBA Performance-Based Allocation
PDMAS Programme de Développement des Marchés Agricoles du Sénégal
 (Development Program for Agricultural Markets in Senegal)
   
PRDP Palestinian Reform and Development Plan
PRGF Poverty Reduction and Growth Facility
PRSP Poverty Reduction Strategy Paper
PSI Policy Support Instrument
PSIA Poverty and Social Impact Analysis
   
QAG Quality Assurance Group
   
R&D research and development
RTAC Regional Technical Assistance Centre
   
SAF Structural Adjustment Facility
SBA Stand-By Arrangement
SDR Special Drawing Right
SFCCD Strategic Framework on Climate Change and Development
SLF Short-Term Liquidity Facility
SSP Statement of Surveillance Priorities
SWF Sovereign Wealth Fund
   
TF Transfer Fund
   
UN United Nations
UNFCCC United Nations Framework Convention on Climate Change
   
WBG World Bank Group
WEO World Economic Outlook

Executive Summary

2008 was a pivotal year for the global economy. The different crises that have destabilized developed, emerging and developing countries have highlighted the need for strong and effective international institutions. As the International Monetary Fund's (IMF's) ninth largest shareholder and the World Bank's seventh largest shareholder, Canada has played a central role in shaping outcomes related to international financial stability and global poverty reduction.

Building on significant improvements made to last year's report, this year's Report on Operations Under the Bretton Woods and Related Agreements Act aims to provide Canadians with an understanding of how the Government of Canada is contributing to international efforts to help ensure that the IMF and World Bank can fulfill their mandates to the best extent possible. The 2008 report has three main components:

  1. A basic introduction to the IMF and World Bank Group, including information on how they operate, what they do, and how Canada participates in their governance (see the sections "Canada and the Bretton Woods Institutions: Mandates and Operations," "An Introduction to the International Monetary Fund" and "An Introduction to the World Bank Group").
  2. A section on the key developments in 2008 at the IMF and the World Bank summarizing Canada's role in the institutions' response to the financial and food and fuel crises (see the section "Canada at the Bretton Woods Institutions: What Happened in 2008").
  3. A section on Canada's short- and medium-term priorities which describes Canada's progress on the 2007 report's priorities and planned actions, as well as measures to be taken in the next three years to continue working on these priorities (see the section "2008 Report on Canada's Commitments at the Bretton Woods Institutions").

Key Developments in 2008

Developments in financial markets and the high degree of volatility in the prices of food staples and fuel were key issues in 2008. Accordingly, activities at both the IMF and World Bank mainly focused on addressing the challenges created or exacerbated by these crises.

In the second half of 2008, the IMF's actions focused on emergency financing, reform of fund lending facilities, drawing lessons from the crises, coordinating efforts and advancing surveillance reforms. The Canadian government played an important role in contributing to the Fund's work in all these areas. More specifically, Canada supported all new financing commitments to countries affected by the global financial crisis; pushed for a broad review of the IMF's lending role and facilities; and engaged vigorously in restoring stability to the international financial system through such initiatives as the Group of Twenty (G20) Action Plan.

In light of the financial and food and fuel crises in 2008, the World Bank Group's efforts centered on boosting lending, increasing the speed of disbursements to low-income countries, amplifying private sector support, enhancing investment guarantees, augmenting agricultural investment and launching risk management tools. Canada strongly endorses the World Bank Group's practical responses to the pressing challenges brought on by the crises.

Canada's involvement in the Bretton Woods Institutions' responses to the financial and food and fuel crises is discussed in detail in the section "Canada at the Bretton Woods Institutions: What Happened in 2008."

Canada's Priorities at the Bretton Woods Institutions

In the 2007 report, the Government outlined in detail Canada's short- and medium-term priorities for engagement at the IMF and World Bank. This year's report provides the first opportunity to review Canada's progress and challenges in pursuing these priorities.

Among Canada's main achievements at the IMF in 2008 was the central role it played in the conclusion of the two-year negotiation of reforms to "quota and voice," aimed at making the Fund more legitimate and representative. Canada also realized its goal of promoting budget reforms resulting in a more cost-effective IMF that practices good financial governance. Regarding the IMF's surveillance role, Canadian officials worked hard in 2008 to support the development of a new Statement of Surveillance Priorities, which lays out a clear focus for monitoring and promotes greater Fund accountability for the quality of its surveillance. Finally, through recent efforts by Canada and other countries, the IMF has become an increasingly transparent institution. For example, in 2008 the IMF responded to Canadian calls for greater transparency by improving and making public its database on lending programs.

In 2008 Canada supported steps by the World Bank Group to increase financial support for post-conflict countries, to reconcile resource needs and sources within a flat real budget for 2009, and to show leadership in innovative development initiatives. Also, significant progress was made on Canada's goal of promoting closer working relationships between the World Bank Group's different organizations. Finally, in 2008, through the efforts of Canada and other countries, the World Bank Group became a more equitable organization, completing the first phase of reforms regarding voice and participation, which increased the voting power of the least developed countries.

However, there was limited progress on some priorities outlined in 2007. For example, while the IMF has made efforts to strengthen it surveillance role, there is still a lot to accomplish in the integration of economic and financial sector analysis and the willingness of IMF members to heed Fund advice. In addition, at the World Bank Group, limited progress was made in expanding the Advance Market Commitment concept to other global public goods. This highlights the difficulties in moving an agenda forward in institutions where Canada is only one of 24 voices at the Executive Boards.

More remains to be done to make progress on Canada's short- and medium-term priorities, which, as last year, are grouped under three broad themes:

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

In light of the extraordinary financial crisis, a fundamental rethink of how Canada can pursue its priorities at the IMF and World Bank Group has taken place. Consequently, while the above themes remain valid, many actions that Canada committed to in 2007 had to be modified. Canada's progress on its short- and medium-term priorities, along with new actions for 2009–2011, are described in the section "2008 Report on Canada's Commitments at the Bretton Woods Institutions." Anticipated timelines, ranging from one to three years, are listed for each action and subsequent reports will continue to assess further progress against these priorities.

Canada and the Bretton Woods Institutions: Mandates and Operations

The IMF and the World Bank
  • While the IMF and the World Bank were both founded at the Bretton Woods conference in 1944, they are separate institutions.
  • The IMF aims to maintain a stable international monetary system, in order to facilitate international trade and investment and bring prosperity to all the world's economies.
  • The World Bank provides support to developing countries and is committed to poverty reduction.
  • Their complementary mandates contribute to sustainable economic growth and the reduction of global poverty.

The IMF and World Bank were founded at the United Nations Monetary Conference held at Bretton Woods, New Hampshire, in 1944. They were created to promote reconstruction following the devastation of the Second World War and to establish the basis for a stable world monetary system that would sustain growth and prosperity. Together they are informally known as the Bretton Woods Institutions.

Canada is the ninth largest member of the IMF and the seventh largest member of the World Bank, out of a total membership of 185 in both institutions. These strong membership positions give Canada an important voice in the two leading international institutions devoted to promoting international financial stability and poverty reduction. Canada's status as a member and leading donor also contributes to Canada's strong position on the international stage.

The IMF and World Bank are governed by their member countries. The management and staff of each institution are accountable to their members through their respective Boards of Governors and Boards of Executive Directors. They also report on their performance to members and the general public through annual reports, policy documents, country reports and analytical studies.

The IMF and World Bank each have a separate Board of Governors, comprising 185 Governors representing each member country. Each Board is the highest authority governing these institutions. They are responsible for core institutional decisions and meet once a year at the IMF and World Bank Annual Meetings. The Minister of Finance is Canada's Governor for both the IMF and the Bank.

The Boards of Governors have two sub-committees: the International Monetary and Financial Committee (IMFC),1 which advises on global monetary and financial issues for the IMF, and the Development Committee (DC),2 which advises on critical development issues for both the IMF and World Bank. IMFC and DC Meetings are held twice a year during the IMF and World Bank Spring Meetings and Annual Meetings. Twenty-four Governors sit on each committee. When participating in the IMFC and DC, Canada's Minister of Finance represents a constituency that includes Antigua and Barbuda, the Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Guyana,3 Ireland, Jamaica, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines.

Table 1
Canadian Influence at the IMF and World Bank
The Canadian government makes its views known through a number of channels:

Governor's statements at the International Monetary and Financial Committee and Development Committee Meetings See Annexes 1 and 2

Policy advice to the Executive Director Described in the section "2008 Report on Canada's Commitments at the Bretton Woods Institutions"

Contributions to Multi-Donor Trust Funds See Annex 10

The Boards of Governors delegate the day-to-day running of the IMF and World Bank to Executive Boards. The IMF Executive Board has 24 full-time Executive Directors. Following recent voice and participation reforms, the World Bank will have 25 full-time Executive Directors. The Executive Boards reside in Washington, DC, and meet several times each week. Each Executive Director typically represents a constituency, which corresponds with IMFC and DC constituencies.

The Executive Directors that represent Canada are employees of the IMF and World Bank, and are elected by the Governors of their constituents every two years, traditionally based on a nomination made by the Canadian Governor. Mr. Michael Horgan has represented our constituency at the IMF since August 2008 and Mr. Samy Watson has represented our constituency at the World Bank since November 2006. The Government of Canada provides advice to the Executive Directors and their staff, which they draw upon in developing positions for discussions at the Executive Board. Executive Directors also receive advice from other country members in their constituency and apply their own judgment as officers of the institutions.

Governors are typically asked to vote on specific resolutions and other matters requiring their approval, either at the Annual Meetings of the Boards of Governors or by mail at other times throughout the year. In contrast, most decisions by the Executive Boards are adopted in a spirit of consensus and formal recorded votes are rare (though, when a vote is taken, the Executive Director casts the votes of the entire constituency).

The voting power of members is mainly a function of their relative economic strength. A small share of a member's voting power is also determined by basic votes, which are distributed equally among all members. Canada's current voting share at the IMF and World Bank is 2.89 per cent and 2.78 per cent,4 respectively.

Within the Government of Canada, the Department of Finance coordinates Canada's policy advice on IMF and World Bank issues, consulting closely with other government departments and agencies, particularly the Bank of Canada, the Canadian International Development Agency (CIDA) and the Department of Foreign Affairs and International Trade. The Governor of the Bank of Canada, Mark Carney, is Canada's Alternate Governor at the IMF, and CIDA President Margaret Biggs is Canada's Alternate Governor at the World Bank.

It is important to note that while Canada has a number of avenues through which it can influence IMF and World Bank policies, it is one of 185 members. Canada is also part of a constituency and, as a result, while it can provide advice to the Executive Directors, they will also take into account the views of all of the members of our constituency. The Executive Directors will also consider all constituency members' funding obligations to the institutions in developing positions on matters before the Board.

Outreach in 2008

Canada's Executive Directors at the IMF and World Bank met with a variety of stakeholders, including governmental and civil society organizations and those pursuing business opportunities at the respective institutions.

In 2008, the IMF Executive Director and his staff met with many Canadian, Irish and Caribbean officials and civil society organizations, often alongside their counterparts from the Executive Director's Office at the World Bank. These meetings included representatives from the Brookings Institution, the Peterson Institute for International Economics, Trócaire, the Halifax Initiative, Results-Résultats Canada, the Social Justice Committee and Transparency International. Staff from the IMF Executive Director's Office also met with delegations from the Canadian Forces College and the Centre for International Governance Innovation. The IMF Executive Director also co-chaired the Second Annual Ideas Conference in Kingston, Jamaica.

In 2008, the World Bank Executive Director's Office met with representatives from Canadian and international civil society, including Debt and Development Coalition Ireland, Results-Résultats Canada, Oxfam International, ActionAid International, the Halifax Initiative and the Social Justice Committee of Montreal. Staff from the Executive Director's office also met with students from the Canadian Forces College.

An Introduction to the International Monetary Fund

The IMF works to safeguard the stability of the international monetary system while promoting sustainable economic growth and raising global living standards.

The primary responsibilities of the IMF are to:

  • Promote international monetary cooperation.
  • Facilitate the expansion and balanced growth of international trade.
  • Promote exchange rate stability.
  • Assist in maintaining a multilateral system of payments.
  • Provide resources to members experiencing balance of payments difficulties.
Balance of Payments

The balance of payments is a summary of the economic transactions—including transactions in goods, services, income, transfers and financial assets and liabilities—between the residents of a country and non-residents over a specific period of time, usually a year.

Membership and Governance Structure

Headquartered in Washington, DC, the IMF is governed by and accountable to the governments of its 185 member countries. Each of the 185 member countries appoints one Governor and one Alternate Governor, usually the Minister of Finance and/or the Governor of the central bank, to the Board of Governors.

The relationship between the IMF Board of Governors, the International Monetary and Financial Committee, the joint IMF-World Bank Development Committee and the IMF Executive Board is described in the section "Canada and the Bretton Woods Institutions: Mandates and Operations" and is illustrated in Figure 1.

The Managing Director is nominated and appointed by the Executive Board for a renewable five-year term. The Managing Director serves as chair of the Executive Board and chief of the operating staff of the IMF. The present Managing Director, Mr. Dominique Strauss-Kahn, took office on November 1, 2007.

IMF staff members are appointed by the Managing Director and are solely responsible to the IMF. As of April 30, 2008, the IMF employed 2,586 staff (from 145 member countries). Efforts are made to hire qualified nationals from the largest possible number of members. In April 2008, the Board approved a budgetary envelope that will deliver $100 million in annual savings in real terms over the next three years, and implies a downsizing of staff of 380 over the same period. This downsizing was accomplished largely through a voluntary separation process that will take effect during FY2009–2011.

The Independent Evaluation Office (IEO) conducts independent evaluations of IMF policies and activities. The IEO is fully independent of IMF management and operates at arm's length from the Executive Board. The Director of the IEO is selected by the Executive Board for a renewable four-year term, and IEO staff is recruited from both inside and outside the IMF.

Figure 1 - IMF Organizational Chart

What the IMF Does

IMF activities focus on three primary areas, all aimed at promoting a prosperous global economy by contributing to international monetary stability:

  • Surveillance: Promoting financial and macroeconomic stability and growth through surveillance activities and policy advice that can help members prevent or resolve financial crises, sustain strong economic growth and alleviate poverty.
  • Program support: Providing temporary financing and policy support to member countries to help them address balance of payments and/or fundamental macroeconomic problems.
  • Capacity building: Providing technical assistance and training to help countries build the expertise and institutions they need to implement sound economic policies.
A Brief History of the IMF

1945—Canada and 28 other governments sign the IMF Articles of Agreement.

1947—IMF begins operations; first loan drawn by France.

1971—United States informs IMF that it will no longer freely buy and sell gold to settle international transactions; the established US dollar-gold fixed exchange rate system (Bretton Woods System) collapses.

1974—IMF adopts "Guidelines for the Management of Floating Exchange Rates."

1976—IMF establishes Trust Fund to provide balance of payments assistance to developing country members with profits from the sale of gold.

1977—To adapt to the new world of largely floating exchange rates, IMF Executive Board adopts the "1977 Decision" to guide IMF surveillance of member economies and exchange rate policies.

1986—IMF establishes Structural Adjustment Facility, later replaced by the Enhanced Structural Adjustment Facility (1987) and the Poverty Reduction and Growth Facility (1999), to provide balance of payments assistance on concessional terms to low-income developing countries.

1993—Systematic Transformation Facility established to assist countries of the former U.S.S.R. that face balance of payments difficulties arising from the transformation from a planned to a market economy.

1996—IMF endorses joint debt relief initiative for heavily indebted poor countries (HIPC Initiative).

2007—IMF Executive Board adopts a new Decision (to replace the 1977 Decision) that will serve as a modern guide for strengthened bilateral surveillance of member economies and exchange rate policies.

2008— IMF Executive Board endorses a package of governance reforms including a new quota formula and targeted quota increases for developing countries based on this formula.

Surveillance—Oversight of the Global Economy

The IMF identifies risks to global economic and financial stability through the surveillance of national, regional and global economic developments. Article IV of the IMF Articles of Agreement requires the Fund to undertake regular consultations with each member country on economic conditions and policies. Through its regular Article IV consultations with each member, the IMF identifies policy strengths and weaknesses and provides advice on necessary corrective measures. Under Article IV, each member country agrees to seek to pursue policies conducive to the stability of the international monetary system, and global growth and prosperity. The Article IV consultations consist of regular (usually annual) staff visits with government and central bank officials. Additionally, IMF staff generally meets with legislators and representatives from the financial sector, industry, trade unions and academia to broaden its exposure to ongoing policy debates and promote better understanding of IMF views with stakeholders. Following these consultations, staff prepares a report, which is considered by the IMF's Executive Board. In almost all cases, the staff report is published, along with a summary of Executive Directors' views as expressed in the Board discussion.

Summary of Article IV Obligations

Article IV of the IMF Articles of Agreement sets the "rules of the game" that each member country has voluntarily committed to abide by to ensure the smooth functioning of the international monetary system. Each member country is obligated to:

  • Pursue economic and financial policies that promote orderly economic growth with reasonable price stability.
  • Promote a stable monetary system by fostering orderly underlying economic and financial conditions.
  • Avoid manipulating exchange rates or the international monetary system to prevent effective balance of payments adjustment or gain an unfair competitive advantage over other members.
  • Facilitate the information necessary for the Fund to exercise firm surveillance over the exchange rate policies of members.

In return, the IMF is bound to adopt specific principles for the guidance of all members with respect to exchange rate policies consistent with the above, but that respect the domestic social and political policies and circumstances of members.

Recognizing the growing importance of regional linkages, the IMF has placed an increased emphasis on regional surveillance and possible spillovers from national economic policies. For example, the IMF holds discussions with representatives of currency unions, such as the Eastern Caribbean Central Bank, and produces semi-annual regional economic outlooks that discuss recent economic developments and prospects for countries in various regions.

In addition to its bilateral consultations with members under Article IV, the IMF conducts important regional and multilateral surveillance of developments in the overall global economy and financial and monetary system. The main products of IMF multilateral surveillance are the semi-annual World Economic Outlook (WEO) and the Global Financial Stability Report (GFSR). A few times a year, the IMF also publishes Regional Economic Outlook reports that discuss recent economic developments and prospects for countries in various regions. All of these reports foster discussion at the Executive Board and with capitals, and are subsequently published.5 The Executive Board also holds regular informal discussions on world economic and financial market developments.

Capacity Building

Technical assistance is another core function of the IMF. The IMF offers technical assistance in its areas of expertise such as macroeconomic policy, tax and revenue administration, public expenditure management, monetary policy, exchange systems, financial sector reform and statistical capacity building.

Table 2
Regional Technical Assistance Centres (RTACs)
Centre Name (Location) Year Opened Beneficiary Countries and Territories

Pacific RTAC (Suva, Fiji) 1993 Cook Islands, Fiji, Kiribati, Marshall Islands, Micronesia, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tokelau, Tonga, Tuvalu, and Vanuatu.

Caribbean RTAC (Bridgetown, Barbados) 2001 Anguilla, Antigua and Barbuda, the Bahamas, Barbados, Belize, Cayman Islands, Dominica, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Turks and Caicos, and Virgin Islands.

East AFRITAC—Africa Regional Technical Assistance Centre (Dar es Salaam) 2002 Eritrea, Ethiopia, Kenya, Malawi, Rwanda, Tanzania, and Uganda.

West AFRITAC (Bamako, Mali) 2003 Benin, Burkina Faso, Côte d'Ivoire, Guinea, Guinea-Bissau, Mali, Mauritania, Niger, Senegal, and Togo.

Middle East RTAC (Beirut, Lebanon) 2004 Islamic Republic of Afghanistan, Egypt, Iraq, Jordan, Lebanon, Libya, Sudan, Syrian Arab Republic, West Bank and Gaza, and Republic of Yemen.

Central AFRITAC (Libreville, Gabon) 2007 Burundi, Cameroon, Central African Republic, Chad, Democratic Republic of Congo, Republic of Congo, Equatorial Guinea, and Gabon.

Central America-Panama TAC (Guatemala) Opening planned for 2009 Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.

In collaboration with member countries, the IMF delivers technical assistance through missions from headquarters, short-term expert assignments, long-term resident advisors and regional centres. In addition to the IMF Institute, based in Washington, DC, seven regional training institutes for country officials and six RTACs deliver more accessible and regionally tailored programming to member countries across the globe. The Fund is planning to open four new centres: two in Africa, one in Central America and one in Central Asia.

Canada is a major contributor to the IMF training programs, including the provision of support for the Africa Regional Technical Assistance Centres, the Caribbean Regional Technical Assistance Centre, the Financial Sector Reform and Strengthening Initiative and the Iraq Technical Assistance Program. In addition, in 2008, Canada pledged to support the establishment and operation of a new technical assistance centre: the Central America-Panama Technical Assistance Centre. Improving the technical capacity of member countries is fundamental to promoting sound monetary and macroeconomic policies and enabling effective IMF surveillance.

Program Support—Lending and Policy Advice

The IMF provides program support to its members through a variety of financial and policy instruments to help countries with balance of payments problems. Each mechanism is tailored to a member country's particular circumstances.

The IMF works much like a credit union. Although the IMF has only limited resources of its own, it has access to a large pool of liquid resources provided by its members, comprising convertible national currencies, Special Drawing Rights (SDRs), and other widely used international currencies. It makes these resources available to help members finance temporary balance of payments problems.

When requested to do so, members provide resources to the IMF  in amounts determined by quotas reflecting each country's relative economic weight in the global economy. A country's quota in turn helps determine the amount of IMF resources that it may access should it experience economic difficulties. At the end of September 2008, the total quota for the Fund's 185 members stood at SDR 217.4 billion (about US$327.4 billion).6 Canada's contribution to this total is presently SDR 6.37 billion (about US$9.6 billion).7 Canada's quota represents 2.93 per cent of total quota assigned and corresponds to the maximum amount that it would be asked to lend to the IMF, from its international reserves, to assist other members experiencing financial difficulties.

Special Drawing Right (SDR)

An SDR is the international reserve asset created by the IMF to supplement the existing official reserves of member countries. The SDR serves as the unit of account of the IMF and its value is based on a basket of key international currencies.

A member country may seek an IMF financial program in response to a serious balance of payments or fiscal problem. In these cases, the IMF provides financing to allow the country to purchase needed imports or bolster its foreign exchange reserves. The member country obtains access to the general resources of the IMF by purchasing (drawing) other members' currencies with an equivalent amount of its own currency. A member repays the IMF by repurchasing its own currency with other members' currencies over a specified period of time, with interest. In this way, a member country borrows from other members, with the IMF as an intermediary.

Members providing the resources lent to a country facing balance of payments difficulties receive a competitive rate of interest on the resources they have provided. The interest rate approximates the return members would have received on alternative safe and liquid investments. As members receive interest, and do not provide grants to finance the Fund's general operations, membership in the IMF  does not entail a direct budgetary cost.

Members requesting financial assistance reach an agreement with the IMF staff on a set of economic measures and reforms aimed at removing the underlying source of the country's balance of payments difficulty. The details of this integrated economic program (often referred to as conditionality) and the amount and duration of financing are then approved by the Executive Board. Typically, IMF financial assistance is provided in stages, or tranches, with the release of each tranche accompanied by verification that the country is continuing to follow the agreed economic program, and is meeting agreed policy conditions.

Depending on the prospective size and duration of the problem, these measures are agreed to as part of a Stand-By Arrangement, which typically lasts one to two years, or an Extended Fund Facility, which generally runs for three years. Short-term financing for balance of payments difficulties related to crises of market confidence is also available through the Supplemental Reserve Facility. Moreover, members affected by a natural disaster or emerging from a conflict can access IMF facilities on an expedited basis under the emergency access policy. Finally, in response to the 2008 financial crisis, the IMF has approved the creation of a Short-Term Liquidity Facility. It is a quick-disbursing financing instrument for countries with strong economic policies that are facing temporary liquidity problems in global capital markets.

Over the past decade, the IMF has developed new instruments to strengthen its support to low-income member countries. Below market rate (concessional) financing to low-income developing countries is made available through the Poverty Reduction and Growth Facility (PRGF) in the form of low-interest loans with extended repayment periods. The Exogenous Shocks Facility (ESF), established in 2006, provides timely concessional support to low-income countries that are facing a balance of payments problem resulting from exogenous shocks, such as a spike in energy prices or a significant deterioration in terms of trade. The interest rate on PRGF and ESF loans is 0.5 per cent, and loans are repaid over a period of 10 years, with 5½ years' grace.

A Policy Support Instrument (PSI) is available to members that do not need or want IMF financial assistance but voluntarily request IMF endorsement and continued monitoring of their policies. A PSI signals IMF support for a member country's policies, helping to inform the decisions of private and public creditors, official donors and the general public. Canada was a strong advocate of the development of this instrument, which was introduced in late 2005. As of 2008, Cape Verde, Mozambique, Nigeria, Senegal, Tanzania and Uganda have benefited from PSI arrangements.

Table 3
IMF Lending Facilities
Credit Facility
(Year Established)

Purpose

Conditions

Credit Tranches and
Extended Fund Facility

Stand-By Arrangements (1952) Medium-term assistance for countries with balance of payments difficulties of a short-term character. Adopt policies that provide confidence that the members' balance of payments difficulties will be resolved within a reasonable period.

Extended Fund Facility (1974) Longer-term assistance to support members' structural reforms to address balance of payments difficulties of a long-term character. Adopt a 3-year program with a structural agenda and an annual detailed statement of policies for the next 12 months.

Special Facilities    

Supplemental Reserve
Facility (1997)
Short-term assistance for balance of payments difficulties related to crises of market confidence. Available only in the context of Stand-By or Extended Arrangements with an associated program and with strengthened policies to address loss of market confidence. Although amounts provided can be larger than those under a regular Stand-By Arrangement, interest is charged at a penalty rate to encourage early repayment.

Compensatory Financing
Facility (1963)
Medium-term assistance for temporary export shortfalls or cereal import excesses. Available only when the shortfall/excess is largely beyond the control of the authorities and a member has an arrangement with upper credit tranche conditionality, or when its balance of payments position excluding the shortfall/excess is satisfactory.

Emergency assistance—
natural disasters (1962)
and post-conflict (1995)
Assistance for balance of payments difficulties related to natural disasters or the aftermath of civil unrest, political turmoil or international armed conflict. Minimal conditions are applied, consisting of reasonable efforts to overcome balance of payments difficulties with a focus on institutional and administrative capacity building to pave the way toward an upper credit tranche arrangement or PRGF.

Short-Term Liquidity
Facility (2008)
Large, upfront, quick-disbursing, short-term financing to help countries with strong policies and a good track record address temporary liquidity problems in capital markets. Financing is made available without the standard phasing and loan conditions of more traditional IMF arrangements. However, borrowers are expected to certify that they are committed to maintaining strong macroeconomic policies.

Facilities for
Low-Income Members

Poverty Reduction and
Growth Facility (1999)
Longer-term assistance for deep-seated balance of payments difficulties of a structural nature; aimed at sustained poverty-reducing growth. Adopt 3-year PRGF arrangements based on a Poverty Reduction Strategy Paper prepared by the country in a participatory process and integrating macroeconomic, structural and poverty reduction policies.

Exogenous Shocks
Facility (2006)
Short-term assistance to address a temporary balance of payments need arising from an exogenous shock (e.g. a spike in energy prices). Adopt a 1-2 year program involving macroeconomic adjustments allowing the country to adjust to the shock and structural reform is considered important for adjustment to the shock, or mitigating the impact of future shocks.

Source: www.imf.org.

IMF Lending Activity in 2008

A relatively benign global economic and financial environment in recent years drove a substantial reduction in demand for borrowing from the IMF. However, with the onset of the global credit crunch and financial crisis, particularly in the latter half of 2008, demand for borrowing has surged dramatically (see Chart 1). Many developing and emerging market countries, primarily in Eastern Europe, benefited during recent years from massive foreign capital inflows, which funded large current account deficits, but these inflows have drastically diminished or reversed, creating large balance of payments funding gaps. The IMF's Stand-By Arrangement (SBA) loans to Hungary (SDR 10.5 billion) and Ukraine (SDR 11 billion) were the largest since an SDR 12.8 billion SBA loan to Turkey in 2002 (see Chart 2).

Chart 1 - IMF Credit Outstanding for All Members, 1984-2008

Increased IMF lending activity in 2008 includes:

  • Georgia, Honduras, Hungary, Iceland, Latvia, Pakistan, Seychelles and Ukraine have received IMF SBA loans, while the Kyrgyz Republic, Malawi and Senegal have received ESF loans, altogether totalling over SDR 30.3 billion.
  • In terms of concessional lending, the Executive Board approved nine new PRGF arrangements during 2008 (totalling SDR 499.9 million) for Armenia, Burundi, Djibouti, Republic of Congo, Liberia, Mali, Niger, Togo and Zambia.

Chart 2 - Large Approved IMF Lending Amounts, 1995-2008

IMF IEO Evaluations in 2008

The IEO completed one evaluation report in 2008 addressing a topic that is important to Canada and vital to the work of the Fund: corporate governance. While this evaluation is retrospective, it provides insightful analysis and presents well-considered recommendations for improving the work of the IMF.

The report, entitled Governance of the IMF: An Evaluation,8 examines the effectiveness, efficiency, accountability and voice of IMF governance mechanisms. In recent years, the Government and the Bank of Canada have been key players in prompting corporate governance improvements through messaging at the Executive Board and discussions with staff and the IEO, but also publicly. Former Bank Governor David Dodge also focused on the issue in his speeches, and the Bank has undertaken research and outreach on the issue. Overall, the report indicates that effectiveness has been the strongest aspect of Fund governance while accountability and voice have been its weakest aspects. The key findings of the evaluation include:

  • There is a lack of clarity on the respective roles of the different governance bodies, and in particular between the Board and management.
  • The Fund needs more systematic ministerial involvement, and the IMFC lacks a mandate for setting strategic directions.
  • The Board's effectiveness is hindered by excessive focus on executive, rather than supervisory, functions.

The report's recommendations include:

  • Clarify the roles and responsibilities of each of the different governance bodies with a view to minimizing overlap and addressing possible gaps.
  • Activate the Council of Ministers, provided for in the Articles of Agreement, as the ultimate decision-making body for the institution.
  • Reorient the Executive Board's activities from executive day-to-day operational activities towards a supervisory role.
  • Establish a framework to hold management accountable for its performance.

In order to enhance IMF effectiveness for the benefit of all stakeholders, the Fund must take a coherent and comprehensive approach to governance reform. Canada supports the report's findings regarding both the gaps (e.g. accountability) and ambiguities (e.g. in roles and responsibilities) in the Fund's governance structure. In particular, the Government supports the development of a framework to hold management accountable and has been promoting a re-invigoration of the IMFC. In Canada's view, the Board also needs to be strengthened by focusing more on strategic issues and policy implementation within the institution. Canada was a big proponent of the IEO report and pushed at the Executive Board for a systemic follow-up to the many issues raised. In light of this pressure from Canada and some other like-minded members, a Joint Committee of management and the Executive Board is being formed to follow up on IMF corporate governance issues, including the role of the Executive Board. The Government will continue to push for progress based on the principle that good corporate governance is critical to institutional effectiveness, accountability and representativeness.

Canada and the IMF

As one of 185 member countries, Canada plays an important collaborative role with our international partners to ensure that the IMF has the tools it needs to fulfill its mandate of promoting international monetary and financial stability. A healthy global economy helps create more jobs for Canadians, promotes stable prices for goods and services, and improves our standard of living. Canada's participation at the IMF encourages international cooperation, sustainable economic growth and better living standards for citizens across the globe.

As a result of the relatively large size of the Canadian economy, and its openness to international trade, Canada has a significant voting share at the IMF (see Table 4). As a result, a Canadian has historically held a seat on the Executive Board, which is composed of 5 appointed member countries and 19 elected member countries and constituencies. Canada's seat on the Executive Board represents a constituency that includes Ireland and member countries from the Commonwealth Caribbean. Although Canada's voting share at the IMF  is 2.89 per cent, the Executive Director casts the votes of all members of the constituency, for a total of 3.64 per cent. In the event of a vote, the Executive Directors of multi-country constituencies must cast all of the votes of their members as a block.

Table 4
Voting Shares of the 12 Largest Members of the IMF
Country % of Total Voting Shares

United States 16.77
Japan 6.02
Germany 5.88
United Kingdom 4.86
France 4.86
China 3.66
Italy 3.19
Saudi Arabia 3.16
Canada 2.89
Russia 2.69
Netherlands 2.34
Belgium 2.09

Office of the IMF  Executive Director for the Canadian, Irish and Caribbean Constituency
Executive Director Michael Horgan (Canada)
Alternate Executive Director Stephen O'Sullivan (Ireland)
Senior Advisor Glenn Purves (Canada)
Senior Advisor Murna Morgan (Jamaica)
Senior Advisor Pierre St. Amant (Canada)
Advisor Shawn Ladd (Canada)
Advisor Peter McGoldrick (Ireland)
Administrative Assistant Catherine Byrne (Ireland)
Administrative Assistant Basia Manitius (Canada)
Phone/fax 202-623-7778/202-623-4712
Address 11-112, 700 – 19th Street N.W.,
Washington, DC 20431, USA

Canada's Voting Record in 2008

Since the vast majority of decisions at the IMF are taken on a consensus basis, formal votes by Governors and the Executive Board are rare. Canada attempts to influence the development of policy proposals before they are brought to the Board (through informal discussion with staff and management) or to influence other members of the Executive Board before or during the course of Board deliberations. Below is Canada's position on the three resolutions taken by the Board of Governors in 2008. As well, the Executive Director representing Canada, Ireland and the Caribbean recorded one abstention in 2008.

Voting Record of the Canadian Governor in 2008
  • In April 2008, Canada's Governor approved the landmark reforms to quota and voice and amendments to the Articles of Agreement to implement the new income model for the IMF. Canada played a central role in the IMF reform effort and strongly supports the agreements aimed at strengthening the legitimacy and credibility of the IMF.
  • In July 2008, Canada's Governor abstained on the proposal to increase the salaries for the Executive Directors at the IMF due to Canadian views on the need for the IMF to further control its expenses.
  • In September 2008, Canada's Governor approved a change to the policy for reimbursement of Governors' expenses to attend Annual Meetings. This change was aimed at reducing Fund expenses, as part of budget reforms approved earlier in 2008. Canada never sought reimbursement for expenses to attend Annual Meetings.

Voting Record of the Executive Directors Representing Canada in 2008
(Only Oppositions or Abstentions Listed)
  • In January 2008, Canada's Executive Director at the IMF abstained on some elements of the vote to approve the completion of the final review of the Dominican Republic's Stand-By Arrangement due to concerns regarding payment arrears on a loan that had, unintentionally, not been reported to the Fund.

An Introduction to the World Bank Group

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

Figure 2 - Five Agencies-One Group

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

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

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

World Bank Group Agencies9

IBRD—International Bank for Reconstruction and Development

IBRD at a Glance
  • Established: 1944
  • Members: 185
  • Mission: Broad poverty reduction
  • Clients: Middle-income and creditworthy low-income countries
  • Tools: Loans, guarantees, analytical and advisory services
  • Size: US$13.5 billion in new commitments, 2008

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

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

Chart 3 - Total IBRD Lending By Region, 2008

Chart 4 - Total IBRD Lending By Sector, 2008

The IBRD does not seek to maximize profit; rather, it aims to earn enough to ensure its financial strength and to sustain its development activities. In 2008, the IBRD raised US$19 billion on world capital markets and committed US$13.5 billion to 99 projects in developing countries.

Latin America and the Caribbean receive the largest portion of IBRD funding (32 per cent in 2008), followed by Europe and Central Asia. IBRD lending for infrastructure (transportation, energy and mining, and water, sanitation, and flood protection) accounted for approximately 53 per cent of total lending in 2008.

IDA—International Development Association

IDA at a Glance
  • Established: 1960
  • Members: 168
  • Mission: Broad poverty reduction
  • Clients: Poorest countries
  • Tools: Interest-free loans, grants, analytical and advisory services
  • Size: US$11.2 billion in new commitments, 2008

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

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

In FY2008, the largest share of IDA resources were committed to Africa, which received US$5.7 billion, or 50 per cent of total IDA commitments. South Asia also received a large share of total funding, with US$2.8 billion in new commitments. Vietnam and India were the largest single recipients of IDA funding. Sectorally, public administration, infrastructure, health, education and agriculture were major focuses for IDA financing.

Chart 5 - Total IDA Lending By Region, 2008

Chart 6 - Total IDA Lending By Sector, 2008

Supporting Developing Countries' Priorities

Development programs are most successful when the country has a true sense of ownership and is deeply involved in their design and execution.

Over the last decade, the World Bank has made progress in focusing its lending on borrower countries' development priorities. IDA borrowers begin by setting out their vision for their country's development in a Poverty Reduction Strategy Paper (PRSP). These documents describe the policies and programs they would put in place to promote growth and reduce poverty, as well as associated external financing needs, and are prepared through a participatory process involving civil society and development partners.

Using the PRSP as its starting point, the World Bank works with the country and other stakeholders to prepare a Country Assistance Strategy (CAS). The CAS identifies the key areas where the Bank Group's assistance can have the biggest impact on poverty reduction and sets out a selective program of Bank Group support, including the level and composition of financial, advisory and/or technical support.

Canada is very supportive of the efforts the Bank has made to advance the country-led development model. Canada encourages it to continue helping client countries build the institutional capacity to properly define and implement national strategies and to promote truly participatory processes for the development of the PRSP, involving all interested stakeholders.

IFC—International Finance Corporation

IFC at a Glance
  • Established: 1956
  • Members: 179
  • Mission: Promote private sector investment
  • Clients: Businesses in developing countries where there is limited access to capital
  • Tools: Commercial-rate loans, equity investments, resource mobilization, advisory services
  • Size: US$11.4 billion in new commitments, 2008

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

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

In 2008, the IFC committed $11.4 billion in new investments. Its portfolio grew 28 per cent to US$32.4 billion from US$25.4 billion the previous year. New commitments in East Asia and the Pacific increased by 73 per cent to US$1.6 billion. New commitments in Latin America and the Caribbean rose by 65 per cent to US$2.9 billion, while new commitments in Europe and Central Asia increased by 50 per cent to US$2.7 billion. In contrast, the three regions that received the largest new commitments last year saw minimal enhancements this year. New commitments in the Middle East and North Africa increased by 18 per cent to US$1.4 billion, while new commitments in South Asia were up 18 per cent to US$1.3 billion. New commitments in Sub-Saharan Africa remained steady at US$1.4 billion.

Chart 7 - New IFC Investments by Region, 2008

Chart 8 - New IFC Investments by Sector 2008

MIGA—Multilateral Investment Guarantee Agency

MIGA at a Glance
  • Established: 1988
  • Members: 173
  • Mission: Promote foreign direct investment in developing countries
  • Clients: Investors and lenders
  • Tools: Political risk insurance, advisory and legal services
  • Size: US$2.1 billion issued in risk guarantees, 2008

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

In 2008, the total amount of guarantees issued for projects in MIGA's developing member countries reached US$2.1 billion. This represents the fourth consecutive year of steady growth in guarantees issued by the agency.

Of the new guarantees issued, US$690 million went to projects in IDA-eligible countries and US$99 million went to projects in conflict-affected countries.

Chart 9 - Total MIGA Risk Guarantees Issued by Region, 2008

Chart 10 - Total MIGA Risk Guarantees Issued by Sector, 2008

ICSID—International Centre for Settlement of Investment Disputes

ICSID at a Glance
  • Established: 1966
  • Members: 143
  • Mission: Investment dispute resolution mechanism

ICSID provides a conciliation and arbitration mechanism for investment disputes between member countries and private investors. Canada is not currently a member of ICSID. However, in 2008, Canada passed Bill C-9, An Act to implement the Convention on the Settlement of Investment Disputes between States and Nationals of other States, which has received Royal Assent. The act will come into force on a day to be fixed by order of the Governor in Council. ICSID membership would provide Canadian investors with an additional mechanism for the resolution of investment disputes pursued under international arbitration.

The World Bank Group's Internal Checks and Balances

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

The Independent Evaluation Group (IEG)

The IEG is an independent unit within the World Bank Group reporting directly to the Bank's Executive Board. The IEG assesses the development impact of IBRD, IDA, IFC and MIGA programs. Its goals are to provide an objective assessment of their work, provide accountability in the achievement of the Bank's objectives and ensure that the Bank learns from its experiences. In 2008, the IEG conducted nine evaluations of individual Bank projects, one country-level evaluation, two sector evaluations and four corporate reviews. These reports are available online at www.worldbank.org/ieg.

Quality Assurance Group (QAG)

QAG's primary objective is to promote increased internal accountability at the Bank by providing staff with credible, timely feedback on operational performance and identifying systemic issues affecting operational performance. It highlights the skills and resources needed to ensure high-quality work and uses lessons learned to support staff training. QAG's home page is located at http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/QAG/0,,pagePK:109619~theSitePK:109609,00.html.

Compliance Advisor Ombudsman (CAO)

The Office of the CAO is committed to enhancing the development impact and sustainability of IFC and MIGA projects by responding quickly and effectively to complaints from affected communities. It also supports the IFC and MIGA in improving the social and environmental outcomes of their work and fostering a high level of accountability. The CAO has received 99 complaints since 2000, including 19 in 2008. The CAO's Annual Report can be accessed at




pdf http://www.cao-ombudsman.org/html-english/documents/CAOAnnualReport2008_English.pdf.

The Inspection Panel

The primary purpose of the Inspection Panel is to address the concerns of people who may be affected by IBRD and IDA projects and to ensure that the Bank adheres to its operational policies and procedures during the design, preparation and implementation phases of projects. The Panel is appointed by and reports directly to the Executive Board. In 2008, it completed two investigations and received six new requests for inspection. The Panel's Annual Report can be accessed at



pdf http://siteresources.worldbank.org/EXTINSPECTIONPANEL/Resources/Insp_Panel_2008Final-LowRes.pdf.

Department of Institutional Integrity (INT)

INT investigates allegations of fraud and corruption in Bank Group operations as well as allegations of staff misconduct, and reports its findings directly to the President. INT also assists in preventative efforts to protect Bank Group funds and ensure they are used for intended purposes. More information on the Department of Institutional Integrity can be found at http://go.worldbank.org/1ZEK9VGAR0.

Canada and the World Bank

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

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

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

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

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

Table 5
Voting Shares of the 12 Largest Members of the World Bank (IBRD)
Country % of Total Voting Shares

United States 16.38
Japan 7.86
Germany 4.49
United Kingdom 4.30
France 4.30
China1 2.78
Canada 2.78
Italy 2.78
India 2.78
Russia 2.78
Saudi Arabia 2.78
Netherlands 2.21

1 China has slightly more votes than Canada, Italy, India, Russia and Saudi Arabia.

Canada is the seventh largest shareholder at the Bank, having contributed a total of US$5.5 billion in capital subscriptions to the IBRD, IFC and MIGA and US$6.4 billion in donor contributions to IDA. Canada's voting power ranges from 2.51 per cent to 3.39 per cent within the Bank's different institutions.

Table 6
Canada's Capital Subscriptions, Contributions and Voting Power as of June 30, 2008
  IBRD IDA IFC MIGA

(US$ millions, unless otherwise indicated)
Capital subscription 5,403.8 81.3 56.5
Amount paid in 334.9 6,366.61 81.3 10.7
Amount callable 5,068.9 45.8
Subscription share (%) 2.85 3.60  3.44 2.99
Voting power (%) 2.78 2.76  3.39 2.50

Sources: World Bank, IFC and MIGA 2008 Annual Reports.
1 Represents Canada's cumulative contributions.

Members of the Executive Director's Office at the World Bank
Executive Director Samy Watson (Canada)
Alternate Executive Director Ishmael Lightbourne (the Bahamas)
Senior Advisor Terry Winsor (Canada)
Senior Advisor François Pagé (Canada)
Senior Advisor Donal Cahalane (Ireland)
Senior Advisor Cal MacWilliam (Canada)
Advisor Robert Chiew (Canada)
Advisor Carl Oliver (the Bahamas)
Advisor Anne Donegan (Ireland)
Executive Assistant Monique Piette
Program Assistant Monica Morris
Phone/fax 202-458-0082/202-477-4155
Address MC-12-175, 1818 H Street N.W.
Washington, DC 20433, USA

IDA Replenishments

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

The Benefits of World Bank Membership

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

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

Canada's Voting Record in 2008

Canada and other shareholders typically raise questions or concerns about specific Bank operations before they get to the Executive Board. As a result, decisions at the Board are generally taken by consensus. Executive Directors may, however, abstain or vote against projects or policies in consultation with their constituencies. In 2008, the Executive Director representing Canada supported all policies and projects approved by the Board, with one exception, as detailed below.

Voting Record of the Executive Director Representing Canada in 2008

(Only Oppositions or Abstentions Listed)

  • In January 2008, Canada's Executive Director at the World Bank abstained on the Executive Board decision to increase the amount of debt relief provided to Guinea-Bissau during the interim period of the Heavily Indebted Poor Countries (HIPC) Initiative. While it was recognized that all shareholders wished to be supportive of Guinea-Bissau's reform efforts and did not want the country to fall into arrears to IDA, Canada and other donors felt that Guinea-Bissau had not demonstrated a strong enough commitment to good governance nor to sound macroeconomic programs to warrant the requested increase in debt relief. Furthermore, Guinea-Bissau did not qualify for a Poverty Reduction Growth Strategy from the IMF, a required program under the HIPC Initiative.
  • Canada is of the view that the existing criterion within the HIPC Initiative framework ensures that good performance (i.e. sound macroeconomic policies, good governance and a commitment to poverty reduction) is a prerequisite for substantial sums of debt cancellation. The HIPC framework provides strong incentives for countries to pursue sound economic reforms, and this incentive structure must remain robust. As such, Canada's Executive Director approved of a one-year extension in the provision of interim debt relief, but not to the amount requested at the Board discussion, as we felt that it was too large given Guinea-Bissau's performance. While Guinea-Bissau does not owe Canada any bilateral debt, we expressed the view that further progress could be made and hoped that the country would return within one year with stronger evidence of its commitment to good governance and macroeconomic stability.

Similarly, the Board of Governors is asked to vote on a number of resolutions throughout the year. Below are Canada's positions on the five resolutions taken in 2008.

Voting Record of the Canadian Governor in 2008
  • Canada supported the fifteenth replenishment of IDA resources (IDA15). IDA is the arm of the World Bank that provides financing to the poorest countries.
  • Canada supported Lithuania's membership request to join IDA.
  • Canada supported Latvia's request to change from a Part II member to a Part I member of IDA.
  • Canada abstained from voting on a proposed transfer of US$55 million from the IBRD surplus to replenish the Trust Fund for Gaza and West Bank due to Canada's legal and foreign policy position.
  • Canada supported the transfer of US$200 million from the IBRD surplus to the Food Crisis Response Trust Fund.

Canada's Financial Contributions in 2008

Canada is an important provider of donor funding for the World Bank Group. In 2008, Canada made the following contributions:

  • IDA: In January 2008, Canada made its third and last payment of $318 million, as pledged under the IDA14 agreement. Also, in February 2008, Canada made a one-time cash payment of $34 million for IDA15. Finally, in December 2008, Canada issued its first demand note for IDA15 for $384 million.10
  • Multi-Donor Trust Funds (MDTFs): Canada also makes use of World Bank–administered MDTFs, where the World Bank manages funds on behalf of multiple donors. Annex 10 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 the country level. Canada contributed $67 million to World Bank MDTFs from April 1 to December 31, 2008.
  • Global initiatives: 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), the Global Environment Facility (GEF), the Advance Market Commitment (AMC) and the Consultative Group on International Agricultural Research (CGIAR). Canada contributed $110 million to these initiatives from April 1 to December 31, 2008.

Chart 11 - Canada's Financial Contributions in 2008

The Official Development Assistance Accountability Act

The new Official Development Assistance Accountability Act came into force on June 28, 2008. The act applies to all federal departments providing official development assistance, including the Department of Finance. At a practical level for the Department, the act relates to Canada's operations at the Bretton Woods Institutions.

The act lays out three conditions that must be satisfied for international assistance to be considered as official development assistance under the act. These conditions are that assistance:

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

As part of the Department of Finance's implementation of the act, Web consultations were held from December 5 to 31, 2008, to invite input from the Canadian public, civil society organizations, governments and international agencies on whether the Department's international assistance payments meet the three conditions listed above. Comments were also solicited on how the consultation process could be improved in future years.

Comments received helped to inform the Department's internal analysis of eligibility for official development assistance. The comments will also feed into the Department's contribution to the annual report on the Official Development Assistance Accountability Act, which will be submitted to Parliament beginning in the fall of 2009 and issued by the Minister of International Cooperation. A number of useful comments focused on how future consultations could be improved through better scheduling, improved information sharing, broader solicitation of comments from stakeholders, greater transparency and more advanced notice of consultations. The Department of Finance has shared the feedback received with partner departments to help inform their consultations under the act.

To facilitate transparency, the act also requires the Minister of Finance to provide information related to Canada's engagement with the Bretton Woods Institutions. Canada at the IMF and World Bank provides this information. Over the last three years, the Government has significantly improved the scope and depth of this report to enhance transparency and communication with the Canadian public. The report now sets out Canada's priorities in a clear manner, reports on progress, and provides other information on Canada's financial contributions to the World Bank and IMF.

Canada at the Bretton Woods Institutions:
What Happened in 2008

2008 was a challenging year, with a global food and fuel crisis and a significant global financial crisis. The responses of the IMF and the World Bank Group to these crises demonstrate that they are an important asset for the international community; in both crises, these institutions played a major role in helping their members cope with shocks through financing and policy advice, and provided a platform for international collective action. This section summarizes the actions of the IMF and World Bank Group, and Canada's role in shaping these responses. 

The Global Financial Crisis

The financial crisis that began in August 2007 deepened significantly in September 2008 as concerns over the solvency of numerous financial institutions exposed to weak housing markets and opaque and illiquid financial assets prompted a series of collapses among banks and insurance companies.

In response to the crisis, governments around the world have announced extraordinary actions to shore up confidence, support key financial institutions and restore credit market conditions.

In early October 2008, the Group of Seven industrialized nations (G7) met in Washington and unveiled a five-point plan of decisive actions aimed at reversing the credit crisis. The plan was immediately endorsed by the IMFC and the G20 countries. Following the G7 meeting, a Leaders Summit was announced with the objective of bringing together the leaders of the world's leading economies to discuss the global financial crisis. The G20 Leaders Summit on Financial Markets and the World Economy took place on November 14-15 in Washington, DC, and included, in addition to the G20 leaders, representatives from the Nertherlands and Spain, the Managing Director of the IMF, the President of the World Bank, the United Nations (UN) Secretary General, and the Chair of the Financial Stability Forum.

Canada played a leading role at the summit, presenting a five-point plan for avoiding future financial crises. The Prime Minister emphasized that good regulation begins at home and underlined the importance of strengthening international coordination and surveillance, including through the IMF-World Bank Financial Sector Assessment Program.

Canada also played a strong role in developing a Plan of Action. The leaders committed to implement principles for reform in five broad areas to address weaknesses that led to the market turmoil:

  • Strengthening transparency and accountability.
  • Enhancing sound regulation.
  • Promoting integrity in financial markets.
  • Reinforcing international cooperation.
  • Reforming international financial institutions.

At the end of the summit, it was agreed that four working groups would be established to implement the deliverables contained in the Plan of Action. Canada will co-chair the working group on Enhancing Sound Regulation and Strengthening Transparency, and as part of that effort, will make recommendations to support a "macroprudential" orientation (an approach that takes a system-wide view of risks in the financial sector, and how government regulation and other interventions in the financial sector affect business cycles and the broader economy) for regulatory frameworks. The three other working groups are focused on reinforcing international cooperation and promoting integrity in financial markets, reforming the IMF, and reforming the World Bank and other multilateral development banks. Canada is participating vigorously in their work.

Financial Stability and the Global Economy: Canada's Five-Point Plan

Ahead of the G20 Leaders Summit in November 2008, the Honourable Jim Flaherty, Minister of Finance, appeared as a guest columnist in the Financial Times. Below is Canada's five-point plan to restore stability to the international financial system, as outlined by the Finance Minister in his November 12, 2008 column.

  • First, we need to regulate all pools of capital that rely on leverage. The crisis has demonstrated the devastating impact that unregulated entities can have. Transparency requirements must be the price of admission to global markets.
  • Second, capital and liquidity buffers need to be large enough to handle big shocks. Moreover, regulators must restrain overall use of leverage.
  • Third, it is not enough for regulation to look at individual institutions. It needs to look at the system as a whole. Risks that may appear sensible in isolation can be unsustainable from a systemic perspective.
  • Fourth, we need to make market infrastructure more transparent and resilient. Non-transparent over-the-counter trades and naked short-selling reduced the stability of the system.
  • Countries may hesitate to impose new requirements on their own institutions if these measures will create a competitive disadvantage. This points to the importance of the fifth step: strengthening international co-ordination, review and surveillance to create a better second line of defence. Canada was a pioneer of the joint International Monetary Fund-World Bank financial sector assessment programme. This independent review of domestic financial systems should be mandatory and public. We need to strengthen the role of international colleges of supervisors to ensure better understanding of systemic risks and to co-ordinate national actions.

Source: www.ft.com/cms/s/0/2210d41c-b0f2-11dd-8915-0000779fd18c.html

IMF Response to the Financial Crisis

The financial turmoil has drawn attention to the central role of the IMF as a "crisis responder", as well as to the contribution it can make to long-term systemic reform of the international financial system to prevent future crises. Fund activities since the second half of 2008 have been centered on a few key areas:

  • Emergency financing. The Fund has deployed substantial lending resources both rapidly and flexibly. From September to December 2008, the Fund approved loan commitments totalling SDR 30 billion through Stand-By Arrangements and its Exogenous Shocks Facility. The IMF also provided additional financial assistance to low-income countries through Poverty Reduction and Growth Facility arrangements. Detailed information on recent IMF lending activities is provided in Annex 6.

    Canada views emergency lending as a core activity of the Fund. In 2008, the Government supported all new commitments to countries affected by the global financial crisis. In doing so, Canadian officials paid close attention to program details to promote appropriate intervention by the Fund and sustainable policy responses by loan recipients.
  • Reform of fund lending facilities. As the crisis spread, the Fund established in late October a new Short-Term Liquidity Facility (SLF) to help countries with strong fundamentals and domestic policies cope with short-term liquidity pressures arising from external market developments. The new facility is part of a wider review launched earlier in 2008 to make sure the Fund has the right instruments to meet countries' needs in a world characterized by growing—and increasingly complex—cross-border financial flows.

    In 2008, Canada pushed for a broad review of IMF lending, given that the global economy has changed considerably since many of the Fund's lending facilities were designed. The financial crisis necessitated more urgent actions, and Canada was active in the debate on the design of the SLF, supporting its creation as a tool to provide important liquidity to normally sound emerging market economies. Canada supported the creation of the new facility only when the full transparency requirements of other IMF facilities were applied to the SLF. To safeguard IMF resources, Canada also called for a rigorous application of the eligibility criteria, given the lack of traditional loan conditionality under this facility. While the introduction of the SLF showed the determination of the IMF to respond flexibly and quickly to the financial crisis, it has yet to be used. It is not clear whether this is due to design weaknesses or to the availability of financing for certain countries thus far through other bilateral channels. Going forward, ad hoc changes to the Fund's lending toolkit will not be sufficient to ensure its coherence and effectiveness. Canada will push for a rationalization of facilities and further reforms that are informed by a fundamental review of the Fund's lending and crisis prevention role in today's global economy.
  • Drawing lessons from the crisis and early-warning capabilities. The Fund is undertaking a comprehensive analysis of the causes of the crisis and the lessons for macroeconomic policy and financial stability frameworks. It has also intensified work on monitoring systemic and country-specific vulnerabilities, and has committed to collaborate with the Financial Stability Forum to develop better early-warning capabilities.

    Given that the financial crisis has underlined the need for better analysis of global stability risks, Canada considers the actions taken by the Fund to be important to the credibility and future effectiveness of the institution. Going forward, Canada will work with the IMF and our G20 partners to support a central role for the Fund in crisis prevention and resolution.
Was IMF Surveillance Effective?

There is much debate over how well the current global financial crisis was predicted by policy makers and international institutions. Did the IMF see it coming? By studying recent World Economic Outlooks, Global Financial Stability Reports and Article IV reviews, it is clear that some of the key risks that contributed to the crisis were identified in recent years:

  • Increasing global imbalances, with emerging market economies and oil producers running large current account and, in some cases, capital account surpluses funded by capital inflows from foreign investors, which could quickly diminish with increased market volatility. On the other hand, the IMF identified persistent US current account and government deficits as a concern.
  • Misaligned exchange rates, which encouraged heavy investment in tradable goods in China, and rising long-term interest rates, which could tighten short-term global liquidity conditions and undermine growth.
  • Risks posed by a "search for yield" and the development of complex structured products, securitization models, and procyclicality of risk management models.
  • A cooling US housing market and weaknesses in the US financial system and regulation, such as systemic risks and moral hazard concerns related to government policies, lax lending standards in the subprime mortgage market (and a possible sharp rise in delinquencies) and fragmentation of the regulatory framework.

The Fund warned that these conditions could produce liquidity problems due to unexpected financial market stress, particularly in complex new financial instruments. The Fund also mentioned the need for regulatory and supervisory authorities to strengthen financial market infrastructure. In contrast to these risks, however, the IMF's spring 2007 World Economic Outlook downplayed the risks to the global economic outlook, noting that the world economy "looks well set for continued robust growth in 2007 and 2008."

Therefore, while the IMF has constantly stressed the downside risks facing the financial system and raised some appropriate red flags, it did not predict—and was hardly alone in this—the massive credit crunch and financial crisis that occurred in 2008. Arguably, the warnings that were raised were not communicated effectively enough and many failed to "connect the dots" and identify transmission mechanisms for contagion. In response to the threat of global imbalances, the IMF convened a number of implicated economies in 2006 to seek solutions, but this process of multilateral consultations produced negligible results. In light of all this, the Fund membership must ask how a similar situation can be avoided in the future, through better warnings and by greater commitment by governments to heed and act on those warnings.

  • Coordinating efforts and strengthening collaboration. As mentioned earlier, the Fund has been working closely with G20 working groups established after the November 2008 Leaders Summit. One of the working groups is in charge of studying how to reinforce international cooperation and promote integrity in financial markets, including ways to strengthen collaboration between the Fund and other bodies such as the Financial Stability Forum.
  • Advancing surveillance reforms. In October 2008, the IMFC endorsed a set of surveillance priorities for 2008–2011, contained in the Statement of Surveillance Priorities (SSP). In response to the crisis, the Fund has also committed to undertake a special review of the stability of the exchange rate system and a review of the Financial Sector Assessment Program (jointly with the World Bank) to assess the need for any improvements to this tool, drawing on the lessons from the financial crisis.

Canada is encouraged by the actions of the IMF on surveillance reforms and helped develop the SSP. Improvements in IMF surveillance and crisis prevention, including through closer collaboration with an expanded Financial Stability Forum, will be a key area of focus for the Fund and for Canada going forward.

World Bank Group Response to the Financial Crisis

Across the developing world, the financial crisis is leading to weaker growth, cutting into government revenues, and reducing countries' ability to invest in social programs and productivity-enhancing infrastructure investments needed for sustainable economic growth. The World Bank has responded quickly to these challenges and has put in place a number of initiatives across the institution to help mitigate the impacts on the world's most vulnerable people. In particular, Canada supported the following World Bank Group actions:

  • IBRD: The World Bank Group has announced that the IBRD stands ready with new lending of up to $100 billion over the next three years. This year lending could almost triple to more than $35 billion, compared to $13.5 billion last year, to meet additional demand from developing countries. Already, the Bank has approved $500 million for structural reforms in Ukraine and $3 billion in increased investment for India.
  • IDA: The Bank Group has also set up a new facility to fast-track $2 billion in funding from IDA15 funds. The money will be used for safety net, infrastructure, education and health expenditures.
  • IFC: Through the IFC, the World Bank is ramping up support to the private sector. In particular, the IFC plans to:
  • Double its Global Trade Finance Program from $1.5 billion to $3 billion and mobilize funds from other resources.
  • Bolster distressed banking systems via a global equity fund to recapitalize distressed banks. The IFC plans to invest $1 billion over three years and Japan plans to invest $2 billion.
  • Keep infrastructure projects on track by investing a minimum of $300 million and mobilizing at least $1.5 billion from other sources to provide roll-over financing and help recapitalize viable infrastructure projects facing financial distress.
  • Refocus advisory service programs to help clients cope with the current crisis.
  • MIGA: Through MIGA, the World Bank Group is providing guarantees to foreign banks to help inject liquidity and bolster confidence in financial systems. So far, banks in Ukraine and Russia have been beneficiaries. Similar guarantees are expected in Eastern Europe and Africa.

Canada fully supports the World Bank Group's proactive response to the pressing challenges brought on by the financial crisis. The World Bank and other multilateral development banks have an integral role to play in helping the most vulnerable through this crisis. Canada is working with its G20 partners to ensure that these international financial institutions have the proper tools and resources to respond to the crisis. Part of this work is also focused on ensuring that the governance and effectiveness of the World Bank Group and other multilateral development banks continue to improve so that they are well positioned to respond to future challenges.

The Food and Fuel Crisis

In 2008, the high degree of volatility in the prices of food staples and fuel contributed to the emergence of serious problems in many developing countries, both at the household and macroeconomic levels. While the more recent global financial crisis and corresponding fall in commodity prices have shifted the focus, the food crisis continues to require a robust international response addressing immediate and long-term food security needs.

IMF Response to the Food and Fuel Crisis

Stemming from the large price increases in food and fuel in 2008, many low- and middle-income countries experienced a substantial weakening of their balance of payments and an acceleration of inflationary pressures. Canada supported the Fund's response: working closely with the World Bank and international partners to ensure that low-income countries are provided with the tools they needed to deal with the crisis. The Fund's assistance has been delivered through all three of its primary mechanisms: policy advice, technical assistance and lending. More specifically, the Fund responded to the crisis using two different financing channels:

  • New Poverty Reduction and Growth Facility (PRGF) arrangements and augmentation of existing arrangements. Four new PRGF arrangements were approved in 2008 in connection with the food and fuel price shock. Moreover, 11 countries were granted augmentations under existing PRGF arrangements. Overall, additional financing under PRGF arrangements in 2008 totalled about US$260 million.11
  • A reformed Exogenous Shocks Facility (ESF): The ESF was established two years ago to enhance the Fund's ability to help low-income members deal with sudden exogenous economic shocks. Canada gave $25 million in 2006 to help fund this facility. The fact that the ESF had never been used, despite the worsening global economic conditions and the surge in fuel and food prices, triggered its review. The changes reflect a broad consensus for ESF resources to (i) be provided more rapidly; (ii) be based on streamlined loan conditionality focused on addressing the exogenous shock; (iii) provide higher access; and (iv) better complement other Fund instruments, for example, the Poverty Support Instrument. Since the changes, three countries have drawn on the ESF.

As a significant donor to the IMF's PRGF-ESF Trust, Canada welcomed the ESF review and actively debated the specifics of its reform as part of our commitment to effective development spending. However, given the scale of the food and fuel crisis, as well as open questions regarding the anticipated long-term upward trend in food prices, Canada was quick to remind the IMF that a crisis such as this requires the leadership of the World Bank, which provides grants and higher-concessionality financing to poor countries.

World Bank Group Response to the Food and Fuel Crisis

Recognizing the impact of the crisis on poverty, hunger and malnutrition, the World Bank Group responded quickly, putting in place projects and programs across the institution to help moderate the impacts of the food crisis on the world's most susceptible people.

Canada welcomed the World Bank's call to combat hunger and malnutrition through a New Deal for Global Food Policy in developing countries. The policy was endorsed by the Development Committee, including the Canadian Minister of Finance, at the Spring Meetings on April 12. It embraces short-, medium- and long-term responses, including support for safety nets, investments to boost agricultural production, and a commitment to undertake analytical work on the causes of the crisis. In addition, Canada encouraged the World Bank Group to finalize the proposal on the Energy for the Poor initiative, which will support projects that reduce countries' longer-term vulnerability to high and volatile fuel prices.

World Bank Group actions included:

  • Approving a new $1.2-billion rapid financing facility, the Global Food Response Program (GFRP), to guide its policy and financial assistance in order to speed aid to the neediest countries. Canada's Minister of Finance voted to support the transfer of US$200 million from the IBRD surplus to the GFRP, and as of January 2009 the GFRP has approved and begun disbursing $856 million in 28 countries. In addition, the World Bank has created a new Multi-Donor Trust Fund to support the GFRP.
  • Increasing agriculture funding from $4 billion to $6 billion in the coming year.
  • Launching risk management tools, such as crop insurance and weather derivatives.
  • Investing, through the IFC, more than $1.3 billion in agribusiness supply chains.
  • Doubling lending for social protection, nutrition and food security, and social risk mitigation to $800 million over the next year and approving $90 million in IDA funding for food projects beyond the GFRP funds.

The Government of Canada supports the World Bank Group's response to date, specifically the $1.2-billion rapid financing facility. In addition, Canada supports the World Bank's engagement in using recipient countries' social protection systems, particularly social safety nets, to mitigate the negative effects of this crisis on the most vulnerable.

For its part, although not specifically World Bank Group support, Canada was the fourth largest donor to the World Food Programme in 2008, contributing US$275 million. Furthermore, Canada completely untied its food aid in 2008, opening it up to international procurement with a special emphasis on developing countries. In addition, Canada is currently reviewing its food security programming in agriculture, nutrition and food assistance.

2008 Report on Canada's Commitments at
the Bretton Woods Institutions

To promote greater accountability and transparency, the Government took the initiative in the 2007 report to outline in detail Canada's priorities for the IMF and World Bank Group which would guide the Government's engagement at the institutions from 2008 to 2010. The priorities were listed under three themes: governance and accountability, institutional effectiveness, and sustainable poverty reduction and growth. To pursue these priorities, the 2007 report indicated specific short- and medium-term actions the Government would take.

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

This report provides the first opportunity to review Canada's progress and challenges in pursuing its 2007 commitments. In light of the significant global financial crisis and economic downturn, a fundamental rethink of how Canada can meet its priorities at the IMF and World Bank Group has taken place. Consequently, while Canada's three main themes and the priorities identified in 2007 remain valid, many actions that Canada committed to had to be modified. As well, in response to the current crisis, we have added "resources and lending facilities" as a new priority for Canada and outlined several new actions for 2009–2011.

Canada made significant progress in many areas in 2008, such as promoting budget and quota and voice reforms at the IMF, and increasing the voting power of the least developed countries at the World Bank Group. However, given that Canada is only one of 24 voices at the Executive Board of the IMF and the World Bank Group, we also faced some challenges. At the IMF, further work is needed regarding the effectiveness of surveillance, and at the World Bank Group we observed inadequate implementation of Poverty and Social Impact Analyses. Going forward, we will continue to work with partners to advance our agenda. More than ever, Canada must focus on issues that are of core importance to the mandates of the Bretton Woods Institutions.

Assessment of Progress on the 2008 Priorities and Planned Actions Going Forward

Canada made strong efforts to focus on the priorities set out in the 2007 report. The following summary chart provides a colour-coded assessment of the Bretton Woods Institutions' progress against Canada's priorities (not Canada's efforts to achieve the priorities). Full reporting on actions, results and remaining challenges is provided after the summary chart.

Colour code: Little progress, Some progress, Good progress

1. Governance and Accountability

Priority Short-Term Action
(2008)
Medium-Term Action
(2008–2010)

1.1 Governance Reforms

Enhance the legitimacy of the Bretton Woods Institutions through a more representative governance structure.

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

1.2 Sound Finances

Sustainable income/expenditure models for the IMF and World Bank that support effective and efficient institutions.

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

1.3 Transparency

Build on real past progress on institutional transparency.

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

2. Institutional Effectiveness

Priority Short-Term Action
(2008)
Medium-Term Action
(2008–2010)

2.1 IMF  Surveillance and Crisis Prevention

Support progress on implementing recent surveillance reforms to increase effectiveness, even-handedness and candour.

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

2.2 Aid Effectiveness

Get the most development impact from IMF and World Bank resources.

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

2.3 Innovation for Private Sector Participation in Development

Continue to support innovative new ways to promote private sector participation.

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

3. Sustainable Poverty Reduction and Growth

Priority Short-Term Action
(2008)
Medium-Term Action
(2008–2010)

3.1 Debt Sustainability

Avoid another lend-and-forgive cycle.

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

3.2 Failed and Fragile States

Better tools for assisting fragile states.

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

3.3 Gender

A real mainstreaming of gender considerations across operations.

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

3.4 Environment

Linking development and environment in a manner that is consistent with the core mandates of the Bretton Woods Institutions.

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

1. Governance and Accountability

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

Priority 1.1: Governance Reforms

A key challenge for the Bretton Woods Institutions over the last few years has been to adopt a more representative governance structure in order to reflect a changing global economy. Both institutions also faced budgetary challenges in 2007–08. Finally, transparent decision making and operations are essential for well-governed institutions, and Canada committed to press the IMF and World Bank to build on considerable recent progress in these areas.

IMF Quota and Voice Reforms

Good progress

As a top priority in 2008, Canada pushed at the IMF for the conclusion of the two-year negotiation of reforms to quota and voice, aimed at making the Fund more legitimate and representative. The Minister of Finance, as Canada's Governor at the IMF, engaged extensively with his foreign colleagues, and Canadian officials engaged with representatives on the IMF Executive Board. In all fora, Canada looked to play a bridging role and propose innovative solutions to achieve a consensus. As a result, the IMF membership came to an agreement in April 2008 on a package of important governance reforms.

Based on a new, simpler formula for calculating members' quotas, the calculated and actual quota shares of dynamic emerging market economies will increase, better reflecting their growing influence in the global economy.12 At the same time, by tripling basic votes, the voting share of low-income countries will be increased. In all, 120 countries will receive an increase in voting shares, with total developing country voting power increasing from 39 per cent to 42 per cent of total votes—dynamic emerging markets such as China will see the biggest gains. The direct impact of this reform on Canada and some other industrialized countries is a decline in their voting shares. Indeed, Canada will see one of the largest quota decreases, with our resulting voting share falling 0.4 per cent to 2.56 per cent. Canada agreed to this result due to our belief that IMF legitimacy hinges on the institution being more representative of its membership, and all members have a responsibility to ensure that the institution is as credible and effective as possible. The quota and voice reforms will take effect once 85 per cent of the membership has ratified domestically the related changes to the IMF's Articles of Agreement.

Table 7
Changes in Voting Power as a Result of the Quota and Voice Reform
  Initial Voting Share
(%)
Final Voting Share
(%)
Change
(Percentage Points)
Advanced countries 60.57 57.92 -2.65
Developing countries 39.43 42.08 +2.65
G7 countries 45.13 43.05 -2.08
Emerging markets 22.31 24.35 +2.04
Brazil, Russia, India and China 8.98 10.24 +1.26

In Canada's view, the 2008 quota and voice agreement is an important milestone for the IMF. Canada will complete the domestic steps required to ratify this agreement in 2009 and will urge other IMF members to do the same on an expedited basis in order to bring into force the agreed changes to member voting structure and representation. However, due to the dynamics of the global financial crisis and subsequent calls for more fundamental reforms to global governance, including at the IMF, some countries have already signalled that the 2008 quota and voice reforms did not go far enough to redistribute power. Should sufficient support exist for pursuing further quota reforms over the medium term, Canada will engage with Fund members to seek an equitable, lasting agreement.

Going Forward  
New
Short-Term Action: Ratify the 2008 agreement on IMF  quota and voice and urge other members to do the same.
Timeline: 2009

Pushing for IMF Corporate Governance Reforms in 2009

Going forward, the IMF must ensure its institutional governance framework supports effective engagement with member governments to meet the challenges of the global financial crisis. This is critical for the legitimacy, effectiveness and credibility of the IMF. The Fund must be able to make decisions quickly and transparently, member governments must be ready to act to combat threats identified by Fund surveillance, and IMF management and staff must be more accountable for the quality of their work. In early September 2008, the IMF  Managing Director appointed a committee of eminent persons to assess the adequacy of the Fund's current framework for decision making and advise on any modifications that might enable the institution to fulfill its global mandate more effectively. The Committee on IMF Governance is chaired by Trevor Manuel, Minister of Finance of South Africa, and is expected to report in April 2009. Canada will carefully consider its recommendations.

Also, informed by the recent IEO evaluation, Canada intends to focus its efforts to seek improvements in IMF corporate governance, including the role of the Executive Board and the IMFC, the performance and accountability of IMF management, and ways to promote better member engagement with the institution. Canada will pursue this work through the Executive Board, the IMFC and our active involvement at the G20 working group in charge of reforming the IMF.

Going Forward  
New
Medium-Term Action: Work to promote IMF corporate governance changes that increase IMF legitimacy, effectiveness and credibility.
Timeline: 2009–2011
Enhancing Developing Countries' Voice and Participation at the World Bank

Some progress

Canada actively participated in the first phase of reforms to the World Bank's voice and participation agenda, which was agreed to at the 2008 fall Annual Meetings.13 The reforms focused on giving more voice to the least developed countries and small states, including:

  • An additional seat for Sub-Saharan Africa on the Executive Board.
  • An increase in the voting power of the least developed countries and small states through a doubling of basic votes.14
  • A commitment to move forward on Board effectiveness reforms.
  • A deepening of Bank responsiveness to developing country views at the operational level.
  • A statement on the importance of an open, merit-based process to select the Bank's President.

Equally important, Canada also participated in laying out the process for a second phase of reforms. This second phase will be focused on giving more voice to countries with economies in transition through a shareholding review and realignment, which will take place over the next two years. The Government of Canada believes that a Bank-specific formula, applied in a regular and reliable manner, will do more than any other measure to provide equitable voting power across the membership. This formula should be based primarily on economic weight, but Canada is also open to exploring the inclusion of other factors, such as contributions to IDA.

Canada was highly supportive of the first phase reforms, and is currently pushing for a clear process and timeline for shareholding reforms under the second phase. The Government of Canada encouraged others to support these reforms at the Board and at the fall Development Committee meeting. However, these developments will not translate into real voice and participation reform without concrete follow-through.

Pushing for World Bank Governance Reforms in 2009

While much was accomplished last year, culminating in the agreement on the first phase of voice and participation reforms, 2009 provides a unique opportunity for accelerated progress on governance and effectiveness improvements through both internal and external processes. The current global financial crisis has reinforced the importance of reforming the World Bank Group and other international financial institutions so that they can more adequately reflect changing economic weights in the world economy and better position themselves to respond to future challenges. 

In addition to the work on the second phase of reforms agreed to in October 2008, there are two important external processes underway: a G20 working group on the World Bank and other multilateral development banks and a High Level Commission on Modernization of World Bank Group Governance, led by former Mexican President Ernesto Zedillo. The Zedillo Commission was appointed by the World Bank President in October 2008 with the main purpose of offering an external and independent view on how the Bank's governance needs to adapt to the international economic realities of the 21st century. The Commission is expected to report later this year, and Canada will consider its recommendations at that time.

The G20 working group was created following the G20 Leaders Summit in November 2008. It is made up of the World Bank's largest shareholders, both advanced and emerging market economies, and was created with a mandate to ensure that the World Bank and multilateral development banks have sufficient resources and instruments to respond to the financial crisis, as well as to provide momentum for further governance and effectiveness reforms. Canada is actively participating in the working group and will use it to push several governance issues, including an accelerated timeline for reforms and an open, transparent, competitive and merit-based selection process for top executive managers, regardless of their nationality.

Going Forward  
New
Medium-Term Action: Work towards greater voice and participation of developing and transition countries to more adequately reflect changing economic weights in the world economy and contributions to IDA. Commensurate with increased voice and participation, Canada will also push the major emerging market economies to take on more responsibility in donor financing, including IDA.
Timeline: 2009–2011

Priority 1.2: Sound Finances

Another major challenge for the Bretton Woods Institutions in 2008 was ensuring that they were financially sound and sustainable for the future. This required stakeholders to review the Fund and Bank Group's income and expenditure models.

IMF Income Model Reforms and Cost Cutting

Good progress

In 2007 and early 2008, the IMF was facing a large expected operating deficit over the medium term due to its reliance on lending income, which had fallen substantially and was expected to stay low. In early 2008, Canada supported the development of a package of measures that would eliminate the IMF's budget deficit and restore its finances to a sustainable footing. In particular, Canada pushed at the Executive Board and through correspondence with IMF Managing Director Dominique Strauss-Kahn for the inclusion of substantive expenditure and staff reductions as a complement to measures to increase IMF income. The Executive Director for Canada, Ireland and the Caribbean also showed leadership in pushing for Executive Board cost cuts in line with those to the IMF's operations.

The primary income reform measures were to give the IMF greater flexibility to invest its reserves in higher-return assets, and the scope to invest future proceeds of a possible sale of some of its gold holdings. Both measures were focused on reducing the Fund's reliance on lending interest income and providing it with more steady income over the long term. While the recent unexpected resurgence of IMF lending has calmed fears of running operating deficits, the new income measures will enable the Fund to deal with fluctuations in lending levels in the future. In all, Canada realized its goal of promoting budget reforms that result in a more cost-effective IMF.

Review of the IBRD's Long-Term Financial Health

Some progress

In 2008, a review of the IBRD's strategic capital adequacy was undertaken.15 The review showed that the IBRD is well capitalized, with its equity-to-loans ratio reaching a very comfortable 38 per cent,16 which was well above its target range of 23 per cent to 27 per cent. However, there were questions about the IBRD's ability to generate enough income due to a drop in loan prices in 2007 and falling short-term interest rates. At the same time, the demands being placed on the IBRD's income have been increasing as a result of upward pressure on administrative expenses, higher annual transfers to IDA, transfers to other development priorities, and a need to adequately contribute to its reserves.17

In response, several measures were proposed to help stabilize and enhance IBRD income generation, including an initiative to decrease the sensitivity of income to short-term interest rates; the establishment of a long-term investment portfolio to improve income generation; and the allocation of a sizeable amount of net income from 2008 into a surplus account to smooth over an expected income dip over 2009–2010. Canada believes these were good measures to ensure that the IBRD would have enough income to continue contributing to important development initiatives.

Although some progress has been made in ensuring the IBRD's long-term financial sustainability, much has changed since the financial crisis broke in late 2008. The Government of Canada expects that the IBRD will see a dramatic surge in lending over the next three years, and the Government will need to assess what this increased lending means for the institution's current and future capital and income positions. Accordingly, Canada will continue to monitor the IBRD's long-term financial sustainability and encourage other Executive Directors to revisit the discussions on the IBRD's financial situation in light of the economic crisis.

The World Bank's (IDA and IBRD) Budgeting Process

Good progress

Canada expects the World Bank to have a strong budgeting process18 capable of dynamically shifting resources towards areas of emerging priority and activities that are yielding strong results, while shifting resources away from areas with weak results.

Noticeable improvements were made to the Bank's budgeting process in 2008. A new Vice-Presidents' peer review forum allowed the Bank to identify its funding priorities earlier and with broader engagement and consensus across the different operational units. The proposals coming out of this process were also much better communicated to the Board through planning documents with substantially more quantitative and descriptive information on the overall proposed changes to the Bank's work program. This helped to foster a better common understanding of the objectives and trade-offs involved in the budget allocations.

This improved budgeting process culminated in the approval of a budget plan for the Bank's 2009 fiscal year that Canada considered to be quite sound.19 In particular, it clearly demonstrated strong efforts to reconcile resource needs and sources within a flat real budget, despite considerable cost pressures associated with new activities under the six strategic themes20 and the Bank's decentralization program.

It is expected that staying within a flat real budget will continue to be a challenge for the Bank over the next budgeting cycle, especially given the resources that will be needed to support the scale-up in IBRD and IDA financing in response to the current economic crisis, as well as ongoing pressures from decentralization and new climate change activities.

Priority 1.3: Transparency

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

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

Improvements in IMF Transparency

Good progress

Canada noted in the 2007 report that transparency of IMF loan conditionality, especially in low-income countries (LICs), needed to be improved. It made a case at the IMF Executive Board that better communication about the nature of program conditions and their desired impact would help to ensure that conditionality was well rooted in the core goals of the country program, as well as provide interested parties (e.g. external stakeholders) with a better understanding of the reasoning behind various conditions that might otherwise appear poorly conceived.

In January 2009, the IMF responded to Canada and other advocates for more transparent conditionality by improving and making public its database on lending programs. This database, dubbed Monitoring of Fund Arrangements, is designed as a comprehensive and readily accessible source of information on Fund-supported programs. New information is added to the database a few weeks following Board approvals of IMF arrangements, or the completion of Board reviews of existing programs. The database can be accessed at www.imf.org/external/np/pdr/mona/index.aspx.

The IMF also published a paper in June 2008 on its activities and priorities in LICs. Canada noted at the time that, while comprehensive, it lacked details in some important areas including how the Fund could ensure optimal outcomes in a tight budget environment. Following discussion of this paper, in July 2008, the Executive Board approved a new policy, as well as a related public mission statement, on the role of the Fund in LICs. Canada supports the Fund's initiative to bring into focus an overall policy plan for LIC engagement but is seeking continued work to further improve outcomes and collaboration with the World Bank. Canada will seek opportunities at the Executive Board over the medium term to relay these messages, but views IMF  progress over the last year on proactive transparency efforts as very encouraging.

Further Strengthening Transparency at the World Bank Group

Canada believes that the World Bank Group has made considerable progress towards greater transparency over the past decade. It considers it important that the Bank's Disclosure Policy, which was enhanced in 2005, makes an enormous amount of operational information available to the public, from Country Assistance Strategies and sector studies to project-related reports. The Bank also makes public certain information related to Executive Board discussions, including its forward work program, the minutes of its meetings, Chairman's summaries, and the large majority of the policy documents approved by the Board.

Its policy does not, however, allow disclosure of the representations made by the Executive Directors in Board discussions. This policy reflects in part the nature of the Bank as a financial institution, providing advice and financing to members on matters that may require discussion of commercially confidential or market-sensitive information. Further, the Bank provides a forum for the debate of politically sensitive national policies, in a similar manner to the functioning of the Canadian Cabinet system. The effectiveness of the institution often hinges on its ability to enable Executive Directors to act as trusted advisors and provide a forum for frank debate on policy developments. The Government of Canada supports this policy.

Going forward, Canada will continue to champion transparency during the World Bank's review of its Disclosure Policy in 2009. In particular, Canada will push the Bank to change the Disclosure Policy from one that lists the types of information that can be disclosed to one that allows disclosure of any information, except for what is on a limited list of exclusions. This is similar to how Canada's Access to Information law works. This change would also make it easier for the public and Bank staff to understand exactly what can and cannot be released.

Positive Independent Evaluations

One World Trust

The Global Accountability Index by One World Trust is the first initiative to measure and compare the accountability of transnational actors from the intergovernmental, non-governmental and corporate sectors. Thirty of the world's most powerful organizations were assessed on how they integrate good practice principles in four dimensions of accountability: transparency, participation, complaint and response, and evaluation.

One World Trust's 2006 report showed that the IBRD compared favourably to other multilateral organizations: the IBRD ranked second in evaluation capabilities, second in transparency, ninth in participation, and first in complaint and response mechanisms. The 2008 report indicated that the IFC also performed well compared to other multilateral organizations. It was tied for third overall (when compared to other international governmental organizations, international non-governmental organizations and transnational companies) due to its specific transparency policy, strong evaluation capabilities, and high-quality complaint-handling mechanisms. In contrast, international non-governmental organizations such as CARE International and the International Committee of the Red Cross ranked 15th and 9th respectively. These reports are available at www.oneworldtrust.org/.

Easterly and Pfutze Paper

In 2008, William Easterly and Tobias Pfutze released a paper entitled "Where Does the Money Go? Best and Worst Practices in Foreign Aid." In a comparison of multilateral aid agencies, IDA was ranked as the number one agency in transparency. It was also ranked higher than all national aid agencies, the number one overall agency, in aid effectiveness.

This paper is available at



pdf www.nyu.edu/fas/institute/dri/Easterly/File/Where_Does_Money_Go.pdf

Going Forward  
New
Short-Term Action: Push the Bank towards greater transparency during the review of its Disclosure Policy in 2009 by advocating for a move from the current policy that lists the types of information that can be disclosed to one that allows disclosure of any information, except for a limited list of exclusions.
Timeline: 2009

2. Institutional Effectiveness

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

Priority 2.1: IMF Surveillance and Crisis Prevention

The IMF has made concerted efforts to strengthen its surveillance role in recent years; however, as evidenced by a general lack of warning regarding the current global financial crisis, more remains to be done.

In 2007, Canada committed to monitor the Fund's progress in incorporating best practices into its Article IV reviews of member economies, with a view to providing a critical assessment of its success and suggesting areas for improvement. Canada also committed to contribute to the development of the triennial Statement of Surveillance Priorities, which is intended to provide clear direction on surveillance priorities and enhance IMF accountability for the focus and quality of its surveillance. Canada accomplished both of these objectives.

Follow-up on the 2007 Decision on Bilateral Surveillance

Good progress

After lobbying hard for a new guidance document to ensure the IMF follows best practices for surveillance, in 2007 the Executive Board agreed on a new Surveillance Decision (www.imf.org/external/np/sec/pn/2007/pn0769.htm#decision). In 2008, Canada endeavoured to hold the IMF accountable for implementing this Decision and promoting change at the institution in support of effective, even-handed surveillance. The Department of Finance and the Bank of Canada cooperated to track possible improvements in IMF Article IV surveillance reports in 2008, such as promoting better focus on core government policies (fiscal, monetary, financial and exchange rate) as well as expanding discussions of spillover risks from international economic conditions, or potential spillovers to other countries from policies pursued by the member country under review. Overall, as reported by the Bank of Canada,21 the quality and focus of surveillance has improved. Although robust discussion of possible risks and "what if" scenarios are still often missing, it appears that the surveillance culture is changing for the better. Canada will continue to hold the Fund accountable for high-quality Article IV reports going forward.

Successful Implementation of a Statement of Surveillance Priorities

Good progress

Department of Finance and Bank of Canada officials also worked with the IMF and like-minded members to support the development of a new Statement of Surveillance Priorities (SSP), which lays out the intended focus of IMF surveillance over the next three years and provides for greater Fund accountability for the quality of its work. The SSP was approved by the Executive Board and endorsed by the IMFC in October 2008. Canada views the new SSP as an important complement to the 2007 Decision on Bilateral Surveillance in that it is an opportunity to enhance the focus of IMF surveillance on the most pressing issues. As well, ministerial endorsement of the SSP through the IMFC provides an explicit link to member governments, promoting greater member buy-in for effective, results-based surveillance.

The New Statement of Surveillance Priorities at a glance

The fall 2008 SPP highlighted key priorities guiding IMF  surveillance through 2011:

Economic priorities

  • Resolve financial market distress.
  • Strengthen the global financial system.
  • Adjust to sharp changes in commodity prices.
  • Promote the orderly reduction of global imbalances.

Operational priorities

  • Risk assessment.
  • Financial sector surveillance and real-financial linkages.
  • Multilateral perspective.
  • Analysis of exchange rates and external stability risks.

Source: www.imf.org.

More Work to Be Done in Integrating IMF Financial and Economic Analysis

Some progress

The Government stated its intent in the 2007 report to promote, over the medium term, improved integration of the IMF's analysis of financial system developments in the Global Financial Stability Report with its assessment of trends in the real economy provided in the World Economic Outlook. Canada also committed to support Fund work to make this analysis more applicable to policy making in member countries. The spread of the global financial crisis to real economic activities over the course of 2008 demonstrates the importance of this type of surveillance.

Canada took advantage of Executive Board discussions on surveillance reforms and priorities in the summer and fall of 2008 to encourage the integration of economic and financial sector surveillance and push for the Fund to play a lead role in helping countries determine appropriate responses to emerging financial risks that could harm their economies. In 2008, the IMF Managing Director stated his intent to have the IMF be a centre of excellence on macro-financial surveillance, identifying linkages between real economy and financial sector developments. Canada will remain engaged on this issue in 2009 given its key importance in the current global environment.

Going Forward  
Medium-Term Action: Continue to work to improve the integration of the IMF's analysis of financial system developments in the Global Financial Stability Report with the assessment of trends in the real economy provided by the World Economic Outlook. Support Fund work to make this analysis more applicable to policy making in member countries.
Timeline: 2009–2011
New Actions for 2009

Despite recent improvements in Fund surveillance, there is still a lot to accomplish regarding its effectiveness and the willingness of IMF members to heed Fund advice, publish all surveillance reports and cooperate to identify solutions to common economic and financial threats. The recent financial crisis and its effects on the real economies of member countries have highlighted a number of weaknesses in the global financial architecture.

To encourage greater transparency regarding financial sector vulnerabilities, Canada has been working hard to increase participation in the joint IMF/World Bank Financial Sector Assessment Program (FSAP). Canada was the first country to participate in the program in 1999, the first to publish the results of its assessment and, more recently, one of the first to undergo an FSAP update. Moreover, Canada championed mandating public FSAPs within the G20 and ensured that G20 members each committed to undertake an FSAP review in the Washington Declaration. Over the medium term, Canada will continue to push other members to undertake and publish the results of FSAP reviews. It will also encourage better integration of FSAP results into IMF Article IV reviews of member economies, enhancing the usefulness of those annual surveillance exercises.

IMF collaboration with the Financial Stability Forum (FSF), a group of leading national financial sector regulators and policy makers, has become a hot topic over the last year. As both an FSF and IMF member, Canada has supported calls to broaden the membership of the FSF to include key emerging market economies and enhance IMF/FSF collaboration to build "early-warning" systems to identify national and international financial sector threats, and then determine appropriate regulatory responses.

Going Forward  
New
Medium-Term Action: Continue to push other IMF members to undertake and publish the results of FSAP reviews. Encourage better integration of FSAP results into IMF  Article IV reviews of member economies and call for mandatory publication of Article IV reviews, enhancing the usefulness of those annual surveillance exercises.
Timeline: 2009–2011
New
Medium-Term Action: Support enhanced IMF-FSF collaboration on early-warning systems for financial sector weaknesses and determining regulatory responses.
Timeline: 2009–2011

Priority 2.2: Aid Effectiveness

Getting the best development outcome from our aid spending is a priority for the Government of Canada. In this regard, the 2007 federal budget set out an ambitious agenda to improve the cost-effectiveness, focus and results of our aid programs, including multilateral initiatives.

Innovative Technical Assistance Delivery at the IMF

Good progress

In FY2008, close to 200 person-years (or about 52,000 working days)22 of assistance was delivered to IMF member countries, more than three-quarters of which was directed to low-income and lower-middle-income countries. Roughly 60 per cent of technical assistance field delivery was funded through external funds. In recent years, the IMF has taken a number of steps to improve the management and delivery of its technical assistance to strengthen country ownership and to better align technical assistance priorities with its surveillance function.

Commensurate with its view that the IMF must focus on its core mandate and comparative advantages, Canada believes the Fund must concentrate on areas of core competency in its technical assistance activities. Further, there must be a cost-effective, competency-based division of labour with the World Bank in all training efforts, such as is being achieved through the Caribbean Regional Technical Assistance Centre (CARTAC). Improving the capacity of member countries to monitor, analyze and report on accurate and robust economic data sets is also fundamental to promoting sound monetary and macroeconomic policies and enabling effective IMF surveillance.

The 2007 report committed the Government of Canada to encourage the IMF in 2008 to examine and implement innovative training solutions to address the need for increased technical capacity, including the introduction of needs- and means-tested demand-driven programming. Canada took the opportunity of budget-cutting discussions at the Executive Board in the winter of 2008 and LIC-engagement debates at the Executive Board in the summer to send these messages.

As well, in 2008 Canada worked actively with the IMF on the establishment of a new technical assistance centre: the Central America-Panama Technical Assistance Centre (CAPTAC). This proposed centre will serve the technical assistance needs of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and Panama. It will build on the success of CARTAC, which Canada funds and played a significant role in establishing. CAPTAC will focus its technical assistance efforts on tax and customs administration, medium-term expenditure frameworks, money and public debt markets, financial sector supervision, and regional harmonization of fiscal and balance of payments statistics. Strategic guidance for CAPTAC's work program will be provided by a steering committee comprising representatives from beneficiary countries, donors, the IMF and other participating international institutions. In December 2008, Canada pledged $5 million over five years to support the establishment and operation of CAPTAC. This makes Canada a lead donor to an initiative that is also in line with the Government's Strategy for the Americas.

Rationalization and Strategic Alignment of World Bank Group Trust Funds

Some progress

The administration of trust funds has emerged as a mainstream line of the World Bank Group's work, and these funds have become increasingly important sources of development finance and multilateral cooperation. The Bank's portfolio of trust funds has grown rapidly, with annual disbursements growing from US$1.9 billion in 2002 to US$5.8 billion in 2007.

Canada believes it is important to ensure that trust funds are subject to proper oversight and are well aligned with the rest of the Bank's work. Canada welcomes the steps the Bank has taken to this end, most importantly the updated Trust Fund Management Framework, which was approved by the Executive Board in late 2007 and aims to:

  • Better align trust funds with the Bank's broader strategic priorities and country-level strategies.
  • Ensure consistent application of Bank standards and controls, as well as improved monitoring of program implementation and evaluation of results.
  • Find efficiencies to reduce the cost of administering these funds and seek more cost recovery, where appropriate, to ensure they are not adding to the Bank's overall administrative expenses in an unsustainable way.

Actions have already been taken, with supporting revisions to the Bank's operational policies approved by the Executive Board in June 2008. A new policy to change the Bank's fee structure for trust funds is expected in 2009 and a full review of the updated management framework will take place in 2009 or 2010.

Another positive step taken by the Bank Group in 2008 was to include trust funds that support the Group's own work program in the framework for considering the Bank's administrative budget. This was something Canada has wanted to see, given that these funds now account for a significant portion of the Bank's overall administrative resources.

However, Canada believes more progress could have been made regarding the integration of these trust funds into the World Bank Group's budget discussions. Canada will encourage the bank to deepen trust fund rationalization and strategic alignment by:

  • Questioning how these funds support the Bank's work program and are aligned with its broader long-term strategy.
  • Requiring assurances that these funds are not improperly driving the work program or long-term strategy.
  • Considering how volatility or uncertainty in the level of donor contributions to these funds would affect the Bank's ability to carry out its work program and whether anything can be done to mitigate this sort of risk.
Progress Towards the Paris Declaration Targets on Aid Effectiveness

Good progress

The World Bank has taken a leadership role in the aid effectiveness agenda and co-sponsored both the Paris Declaration on Aid Effectiveness in 2005 and the Accra Agenda for Action High Level Forum in 2008.23 The Bank Group's core strengths in financial resources, its knowledge base and the quality of its policy advice position it to play a central role in enhancing harmonization and alignment at the country level. It also works at the international level to help define the aid effectiveness agenda, identify good aid practices and monitor implementation.

Canada is pleased with the current work on the World Bank Group's draft Aid Effectiveness Action Plan, which will detail actions in support of the five key principles of the Paris Declaration (ownership, alignment, harmonization, managing for results and mutual accountability). Specifically, the Action Plan is expected to commit the Bank to:

  • Modernize its operational framework to enhance aid effectiveness.
  • Take the lead role where it is best placed to do so in managing partnerships at the international and country level.
  • Strengthen the capacity of partner countries to help to build ownership.
  • Decentralize staff and decision making to better meet partner country needs.
  • Develop internal incentives for staff to work on harmonized and aligned arrangements in terms of budget, time and recognition, and provide management guidance.

Canada welcomes efforts to increase cooperation within the World Bank Group, and is especially pleased with the increased collaboration between IDA and the IFC. In 2008, the IFC made a $1.75-billion commitment to support IDA through 2011, and a new IDA/IFC secretariat was created to forge more collaboration across the World Bank Group. Canada intends to discuss IDA-IFC cooperation at the next IDA mid-term review.

Canada is also pleased with efforts to increase partnership with other donors and organizations. In 2008, the World Bank Group launched the Legal Harmonization Initiative with other international financial institutions, bilateral aid agencies and UN agencies. This initiative is aimed at harmonizing and streamlining legal and administrative tools among donors and partner countries in order to remove some of the key impediments to harmonized approaches. It also endeavors to cut the high transaction costs imposed on recipient countries and increase the effectiveness of aid.

Going forward, Canada recognizes the importance of randomized impact evaluations to design and select effective, evidence-based programs and policies. Similar to methods used to evaluate the effectiveness of pharmaceutical products, these impact evaluations randomly allocate a program across control and treatment groups to determine the effects of specific interventions. The World Bank Group's Independent Evaluation Group offers a strong base to enhance the aid effectiveness agenda at the Bank.

Going Forward  
New
Medium-Term Action: Urge the World Bank Group to increase the use of randomized impact evaluations to affect policy decisions. To enhance the World Bank Group's accountability, push the Group to make more of its program evaluations public in a timely fashion.
Timeline: 2009–2011
New
Short-Term Action: Push the World Bank Group to put in place meaningful decentralization of authority and personnel to enable it to play its critical role in donor coordination, for example through its management of Multi-Donor Trust Funds at the country level.
Timeline: 2009
Resources to Help Recipient Country Capacity

Good progress

The Government of Canada is pleased with the World Bank Group's effort in 2008 to help recipient countries build the necessary capacity to properly measure development results through the Trust Fund for Statistical Capacity Building, the application of its Country Policy and Institutional Assessment, and the use of country procurement systems.

During the IDA15 replenishment discussions, Canada urged IDA to strengthen its work on statistical capacity building to ensure results were being properly measured and that the data was being used to shape policies and programs. The 2008 Partner Report on Support to Statistics of the Organisation for Economic Co-operation and Development's Development Assistance Committee cited the World Bank as one of the top three providers of financial support to statistical development.

Poverty and Social Impact Analyses (PSIAs)

Little progress

PSIAs provide an analysis of the distributional impact of policy reforms on the well-being or welfare of different stakeholder groups, with particular focus on the poor and vulnerable. Although it conducted over 50 pieces of PSIA-type analytical work in 2008, progress on implementing PSIAs in the Bank Group's analytical work in 2008 was limited.

In response to a request from the World Bank's Board of Executive Directors, the Independent Evaluation Group is currently conducting a study of PSIAs. Canada will closely monitor the implementation of the recommendations of this evaluation.

Going Forward  
Medium-Term Action: Urge the Bank to use PSIAs, as appropriate, for programs Canada jointly supports with the World Bank Group. In addition, ensure that Bank management implements the recommendations from the current independent assessment of PSIAs.
Timeline: 2009–2011

Priority 2.3: Innovation for Private Sector Participation in Development

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

Advance Market Commitment (AMC)

Pneumococcal AMC

Good progress

An AMC is an innovative way to protect the lives of the world's poorest children by making vaccines available in developing countries more quickly. Although vaccines are an extremely cost-effective development tool, vaccine makers invest relatively little to create vaccines for diseases prevalent in developing countries, given the perception that the countries will have limited capacity to pay for them. Under an AMC, donors put money aside with a promise to supplement the purchase price of vaccines once they are developed. This is expected to stimulate vaccine makers to accelerate efforts, as they have more certainty about recouping the costs of developing these vaccines and bringing them to market.

Canada has played a leadership role in moving the AMC model from a promising theoretical concept to a functioning program. Working closely with the World Bank, the Global Alliance for Vaccines and Immunization and a handful of other donors, Canada has actively participated in the design and financing of the AMC for the creation of vaccines to address pneumococcal disease, a leading cause of childhood mortality in the developing world. Canada was also the first to make a financial commitment to the initiative, with an announcement at the G8 Summit in St. Petersburg in 2006, a move that helped galvanize commitments from other donors over the months that followed. Including Canada's total contribution of US$200 million, donors committed a total US$1.5 billion for this initiative.

The pilot AMC aims to accelerate the introduction of a pneumococcal vaccine for the developing world by up to 13 years, from 2023 to 2010. It is estimated that this could save 5.8 million lives by 2030. Pneumococcal vaccines were chosen for the pilot AMC because the science and technology for effective pneumococcal vaccines are well understood and there is a robust pipeline that includes efficacious vaccines for low-income countries. The AMC pilot is designed to speed up the availability of these vaccines in poor countries by providing the financial incentive for firms to scale up manufacturing capacity or allocate a higher share of manufacturing capacity for the developing world soon after the new vaccines are available. This AMC also intends to accelerate vaccine uptake by ensuring predictable vaccine supply through commitments with participating companies to supply the vaccine at low, long-term and sustainable prices.

As one of the key implementing agencies, the World Bank has done a great deal of work over the past year to help advance the pilot AMC. Subject to Board approval, the Bank will be the financial intermediary for the AMC. In this role, the Bank would act as the conduit for future donor contributions if a pneumococcal vaccine suitable for developing countries is made available subject to the terms of the AMC. Canada believes this will make the AMC offer more credible to the vaccine industry and contribute to the financial efficiency of the mechanism.

Advance Market Commitment

Donor funding is guaranteed as long as vaccines meet stringent, pre-agreed criteria regarding effectiveness, cost and availability; there is demand from developing countries for the vaccines; and the vaccine maker agrees to continue supplying vaccines at fair prices that developing countries can afford after the pool of donor funding has been exhausted.

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

Expanding the AMC concept

Little progress

The design phase of the pilot AMC has taken longer than expected, and the operational launch of this initiative is now expected to be in the spring of 2009. Going forward, Canada will encourage the World Bank to consider other innovative mechanisms to correct market failures in areas of international development based on the experience and lessons learned from the establishment of this AMC pilot.

Going Forward  
New
Medium-Term Action: Push for greater use of innovative tools to tackle global public goods (e.g. AMC, Caribbean Catastrophe Risk Insurance Facility).
Timeline: 2009–2011
Caribbean Catastrophe Risk Insurance Facility (CCRIF)

Good progress

The CCRIF offers rapid and guaranteed cash payment when a catastrophic natural disaster hits a country insured under the facility. Such rapid access to funds fills the post-disaster liquidity gap, finances immediate post-disaster recovery, and allows governments time to mobilize additional resources for longer-term reconstruction activities.

Canada has been involved in the CCRIF since its beginning stages, actively working with our Caribbean constituents to create a financing option that responds to their needs. The Executive Director representing Canada at the Bank played a key role in gaining full Caribbean participation in the facility. Canada has also demonstrated its commitment to the CCRIF by contributing US$17.5 million to the initiative, making Canada the facility's largest donor, as well as actively encouraging other donors to contribute.

As it pools the individual risks of participating countries, the CCRIF lowers the cost of insurance coverage by approximately 40 per cent, thereby providing Caribbean countries with an insurance option that would be too costly to undertake individually. In addition, donor contributions to the facility serve to lower premium payments even further (IDA has also provided financing to help countries such as Dominica, Grenada and Haiti pay their premiums). Effective June 1, 2008, the facility lowered their premiums by 10 per cent, making the insurance even more affordable. Notably, all 16 signatory countries renewed their memberships to the CCRIF, effective June 1, 2008. The CCRIF's first two payouts proved the facility's efficiency; payouts were made 14 days after the first catastrophic event (earthquake in 2007) and 23 days after Hurricane Ike hit the Caribbean Islands.

A limitation of the CCRIF is its ability to only insure against catastrophic natural disasters and not against more frequently occurring natural events such as flash floods. The CCRIF was originally designed to insure catastrophes that occur, on average, every 20 years. The costs and premiums reflected this risk level.

Going forward, Canada will encourage the Bank and other international partners to consider the merits of expanding the CCRIF or linking it with other similar initiatives. As a pilot project for a new and innovative disaster financing tool, the CCRIF will continue to evolve over time as experiences are incorporated, member country needs are refined and expectations clarified. The Government of Canada will look into possible risk insurance options and seek feedback from constituency partners at the Commonwealth Finance Ministers Meeting.

Going Forward  
New
Medium-Term Action: Leverage Canada's leadership position as the CCRIF's largest donor to further improve the CCRIF and push for expanded insurance facilities in areas such as heavy rainfall and agricultural risk.
Timeline: 2009–2011
IFC Engagement in Frontier Markets

Some progress

The IFC is the key multilateral actor in promoting private sector development in developing countries. Canada has successfully encouraged the IFC to accelerate its engagement in frontier countries (i.e. least developed and other high-risk countries). The IFC's engagement in frontier markets has been growing in recent years. The IFC currently aims at raising its share of investments and advisory work in countries served by IDA from 40 per cent to 50 per cent by 2011.

Ensuring that a significant share of the IFC's activities are taking place in frontier markets is no guarantee of efficient development results. Less than half of the projects in Africa, Asia and the Middle East regions have met or exceeded development benchmarks and standards. In 2008, an independent evaluation of the IFC's development results found that the quality of the IFC's activities has often fallen short in projects taking place in Asia and Africa because, in addition to facing capital shortages, businesses in these regions often lack crucial technical know-how. The high-risk business environment in which investments were made may partially explain the situation.

New Priority 2.4: Resources and Lending Facilities

At the IMF

While the IMF remains highly liquid, the global financial crisis and recent surge in lending have prompted the IMF Managing Director and some Fund member governments to call for a significant increase in lending resources. In their November 2008 Action Plan for combatting the global financial crisis, the world's leaders committed to assess whether the IMF's resources are sufficient to meet potential demand and, if necessary, determine how to increase them. In Canada's view, the IMF must have adequate resources to fulfill its lending role and provide confidence to members and markets. Canada will work with its G20 partners and the IMF in 2009 to ensure the Fund has adequate liquidity, using mechanisms that are flexible, can be quickly implemented, and promote transparency and good governance.

Beyond resources, the Fund must have a rational and effective lending toolkit to meet members' needs. The 2007 report predicted that IMF lending reforms would begin to take centre stage in the near future, and this is now the case. Indeed, one of the short-term action items in the November G20 leaders' declaration focuses on adapting the lending instruments to adequately meet members' needs and revise the lending role in light of the ongoing financial crisis. The IMF has worked hard in 2008 to provide more focused and appropriate assistance to low-income members, but some argue that the institution still lacks an effective lending framework to support the needs of modern emerging market economies that could be susceptible to international financial crises and contagion problems. In Canada's view, the Fund's lending toolkit must be rationalized and evolve to keep up with the diverse needs of the membership and the globalized economy. Going forward, we will push at the IMF not only for appropriate reforms to the existing lending toolkit, but also for a more detailed review of the IMF's optimal lending role.

Going Forward  
New
Short-Term Action: Engage at the IMF to ensure the IMF has adequate lending resources through transparent, flexible and timely mechanisms.
Timeline: 2009
New
Short-Term Action: Support IMF efforts to modernize and rationalize its lending toolkit. Promote finding a common view within the membership on the lending role of the Fund in today's globalized economy.
Timeline: 2009
At the World Bank Group

As described in the previous section, the negative effects of the financial crisis on employment and growth in developing countries are becoming more pronounced and are threatening hard-won development gains.

The World Bank has an important role to play in helping developing countries cope with the crisis in terms of both financing and policy advice. Canada has an important role to play in ensuring, along with other shareholders, that the World Bank Group (and other international financial institutions) has sufficient resources and the right instruments to respond. Canada is actively participating in a G20 working group focusing on this issue. Through this group and through Canada's Executive Director and his office, Canada will push to ensure that the Bank's instruments are sufficiently flexible and that it has sufficient resources to help those members in need of assistance during the global economic downturn. Specifically, Canada's focus will be on ensuring that: (i) the IBRD has adequate capital to enable it to meet the needs of middle-income members; (ii) IDA can frontload resources as well as provide increased grants to countries in risk of debt distress; and (iii) the IFC's private sector facilities aimed at helping maintain trade flows, private sector lending and infrastructure development are sufficiently funded.

Going Forward  
New
Short-Term Action: Work with G20 partners to ensure that the World Bank has sufficiently flexible resources and instruments to respond to the financial crisis.
Timeline: 2009

3. Sustainable Poverty Reduction and Growth

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

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

Priority 3.1: Debt Sustainability

The IMF and the World Bank have played a vital role in reducing the debts of the world's poorest and most heavily indebted countries. Canada has also taken a leadership role in these efforts through the continuous evaluation and provision of constructive input on: (i) the Debt Sustainability Framework, which monitors and aims to prevent the reaccumulation of unsustainable debt; (ii) the enhancement of the Debtor Reporting System to collect debt data to improve the transparency of lending and borrowing activities; and (iii) the creation of the Non-Concessional Borrowing Policy to put in place stronger incentives for countries to ensure that debt sustainability is maintained. However, many countries are still at a high risk of debt distress, including many that have received comprehensive debt relief under the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative, and their efforts to make progress are further complicated by the current financial crisis. It is imperative that development banks and donors alike continue their efforts to ensure that low-income countries are provided with the tools and advice they need to maintain their debts at sustainable levels. Canada remains strongly committed to these efforts and will continue to support low-income countries in reaching their long-term development goals.

The Debt Sustainability Framework (DSF)

Good progress

Canada has continued to monitor the DSF through its participation in all Executive Board discussions on the DSF. We have actively engaged with both creditors and debtors to increase transparency and the dissemination of information on both lending and borrowing decisions.

The effectiveness of the DSF in preventing another lend-and-forgive cycle crucially depends on compliance from all creditors on new lending decisions. Canada notably supported the Organisation for Economic Co-operation and Development's January 2008 "Principles and Guidelines to Promote Sustainable Lending Practices in the Provision of Official Export Credits to Low Income Countries," which commits Canada to meet minimum applicable concessionality requirements derived from the DSF in its bilateral lending practices. However, Canada will need to push for greater compliance by all major sovereign and private low-income countries' creditors to ensure that new financing to low-income countries is provided in accordance with the countries' long-term repayment capacities.

Going Forward  
New
Medium-Term Action: Push for the full compliance of all participants in the joint IMF/World Bank Debt Sustainability Framework.
Timeline: 2009–2011
Debt Management Capacity in Low-Income Countries

Good progress

In 2008, Canada continued to push for improvements in the transparency of debt data and for increased debt management capacity in low-income countries through its participation and leadership in the World Bank's new Debt Management Facility for Low-Income Countries. This facility responds directly to Canada's previous requests and builds on the Bank's unique strengths and abilities. The facility focuses on:

  • Improving coordination between those providing capacity-building services and low-income countries in need.
  • Applying the Debt Management Performance Assessment tool in low-income countries in order to measure country progress in building capacity.
  • Helping low-income countries develop their own medium-term debt strategy.

The Bank is well placed to focus on these areas. To demonstrate its support, Canada was one of the first donors to commit $2 million over two years to this facility and become a member of its Board of Governors. Canada is optimistic that the facility will contribute to progress in the area of debt sustainability by providing low-income countries with the tools they need to improve the collection of debt data, to have more accurate economic forecasts, and to maintain their debts at sustainable levels.

Going Forward  
New
Medium-Term Action: Leverage Canada's leadership role in the World Bank's new Debt Management Facility for Low-Income Countries to build capacity in heavily indebted poor countries.
Timeline: 2009–2011
Appropriate Level of Debt Reaccumulation Post Debt Relief

Some progress

Canada has suggested that the Bank expand the scope of the Non-Concessional Borrowing Policy (NCBP) to consider not just the rate of accumulation of non-concessional debt, but also the rate of accumulation of concessional debt (i.e. low- or no-interest loans provided by donors and organizations like IDA) when assessing IDA clients' debt situations. While this was not agreed to by all participants for the IDA15 period, IDA did agree to provide regular updates on its experience with the NCBP, and Canada will continue to monitor its effectiveness and advocate for the Bank to recognize the role of concessional loans in debt sustainability. Canada also encouraged focused intervention by the IMF during the food and fuel crisis, given the humanitarian aspects of the crisis and the ability of the World Bank to offer more concessional financing and grants to countries facing food shortages and greatly increased food and fuel import bills.

In light of the effects of the current financial and economic crisis on low-income countries, Canada believes that IDA (and other multilateral development banks) should look to increase grants to the poorest IDA-only countries to allow them to invest in meeting basic development needs, such as health and education, without jeopardizing their future debt sustainability. Such an approach would offer financing in line with the majority of bilateral development assistance funding.

Going Forward  
New
Medium-Term Action: Promote increased levels of IDA grant financing to low-income countries to enable them to weather the current crisis without jeopardizing their debt sustainability.
Timeline: 2009–2011

 

Multilateral Debt Relief

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

In 2008, Canada went above and beyond its traditional commitment to the MDRI and provided IDA and the ADF with an accelerated payment schedule to cover a greater share of the costs of this initiative. This stronger commitment to the MDRI provides significant benefits to both IDA and the ADF as these institutions face a shortfall in donor financing. Canada's accelerated payment not only enables the institutions to cover their debt relief costs if countries progress at a faster rate than anticipated, but also allows them to immediately increase their program lending to low-income countries.

Priority 3.2: Failed and Fragile States

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

Progress at the IMF

Some progress

The IMF's core role in failed and fragile states is to aid national authorities in re-establishing macroeconomic stability and growth in the country. As a medium-term action, Canada committed in the 2007 report to encourage the IMF to focus on its core areas of expertise (i.e. policy support for obtaining macroeconomic stability and facilitating arrears clearance where appropriate) and adapt its policy advice and intervention methods to respect country-specific situations, while coordinating closely with the World Bank and other relevant organizations.

In 2008, the IMF continued its engagement with fragile states to improve economic management and stability. In addition to providing emergency post-conflict assistance to Côte d'Ivoire, Guinea Bissau and Lebanon, the IMF also continued to provide technical assistance, policy advice and financing to a number of fragile states through its regular instruments. This includes support to countries of particular importance to Canada such as Afghanistan and Haiti.

Also, in mid-March 2008, Liberia's arrears to the IMF were cleared, thanks in large part to Canada and the G7's leadership in securing sufficient financial assurances to help cover the costs of this operation. Canada and other G7 countries committed funding above and beyond what was expected of them. In total, Canada committed C$44 million to clear Liberia's arrears to multilateral development banks, which provided the country with access to over US$2.8 billion in debt relief under the Heavily Indebted Poor Countries Initiative and US$147 million under the Multilateral Debt Relief Initiative.

In addition, in April 2008 the Executive Board discussed a review of the Fund's engagement in fragile states and post-conflict countries. The review found that while the Fund has been engaged in some form—surveillance, staff-monitored programs, financial assistance and capacity building—in almost all fragile states, it did not have a specific and differentiated policy toward them (although the Fund's Medium-Term Strategy calls for greater flexibility in program design in fragile states).

The review suggested changes to the Fund's approach to make it more tailored to the needs of fragile states. In particular, a more systematic, graduated approach was recommended to improve the coherence of the Fund's engagement through a medium-term framework that explicitly adjusts Fund policy advice and monitoring, capacity building, signalling and financial assistance to a country's evolving capacity to formulate and implement macroeconomic policy and its commitment to reform.

Following an initial discussion of the review and corresponding policy proposals by the Executive Board, IMF management indicated that it would return to the Board with a follow-up paper once there has been a chance to take into account the views and suggestions expressed by Executive Directors and to consult with donors and potential recipients of Fund support. Canada will remain vigilant in this area.

Progress at the World Bank

IDA Arrears Clearance Framework

Good progress

IDA's new arrears clearance framework enables countries emerging from conflict to clear their arrears in a systematic and timely fashion. Canada has paid its full share of this program and continues to monitor its progress. In 2008, Togo used the program to clear its arrears in a timely and clear-cut fashion, enabling it to become eligible for US$674 million in debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative.

Canada will continue to monitor the application of IDA's new framework for arrears clearance operations to ensure that these are done in a timely fashion while at the same time preserving incentives for countries to complete reforms under the HIPC process after arrears clearance.

Monitor Success of IDA's Post-Conflict Enhancements

Good progress

As outlined in last year's report, the World Bank has done a great deal over the last several years to help fragile states overcome their unique development challenges. President Zoellick has identified post-conflict and fragile states as one of six strategic themes for the Bank Group to focus on in support of the goal of inclusive and sustainable globalization. With the start of the IDA15 period, the Bank Group implemented several significant changes to its financing arrangements to better reflect the unique needs of fragile states—both those emerging from conflict and those re-engaging with IDA after a prolonged period of inactivity. The steps taken have allowed the Bank to significantly enhance its capacity to provide financial support throughout the period of recovery from conflict.

Since 2007, the World Bank has also employed a new emergency response policy. This new policy has allowed the Bank to be much faster in its support for peace building and stabilization projects and in responding to post-disaster and post-conflict situations. About 50 projects worth some $1 billion have already been processed under the new policy. Overall, in FY2008 the Bank and IFC have committed $3 billion to fragile and post-conflict countries such as Afghanistan, Cambodia, Kosovo, Timor-Leste, Togo, Papua New Guinea, West Bank and Gaza, and the Solomon Islands.

Regarding fragile states that have not succumbed to conflict but are rather re-engaging with IDA after a prolonged period of inactivity, eligible countries receive two years of exceptional allocations with three years of phase-in to regular Performance-Based Allocations (PBAs). Canada is concerned that this facility does not go far enough for countries like Haiti, as they may not have enough time to build up their capacities sufficiently to transition to the PBA mechanism without experiencing a major fall in funding from IDA. Engagement in fragile states is a long-term commitment, as reflected in the Development Assistance Committee's principles for fragile states engagement. As such, Canada intends to raise this issue again in the context of the IDA15 mid-term review.

Going Forward  
New
Medium-Term Action: Use the IDA15 mid-term review to advocate for a longer period of exceptional IDA allocations for countries that have not succumbed to conflict but are rather re-engaging with IDA after a period of prolonged inactivity.
Timeline: 2009–2011
World Bank Group Coordination With the United Nations in Fragile States

Good progress

Canada has often expressed concern about the limited coordination between the World Bank Group and the UN in crisis and post-crisis environments, which can jeopardize the effectiveness of programming at the ground level. In 2008, the World Bank Group improved its coordination with the UN in fragile states by:

  • Establishing the State- and Peace-Building Fund to replace two previous funds—the Post-Conflict Fund and the Low-Income Countries Under Stress Trust Fund.
  • Formalizing a UN-World Bank Group agreement, the UN-World Bank Partnership Framework for Crisis and Post-Crisis Situations, which affirms the World Bank Group and UN's commitments to work together more effectively in countries affected by conflict or natural disasters.
  • Signing a Fiduciary Principles Accord (FPA). It is expected that the FPA will significantly speed up joint efforts in crisis and emergency response by better defining financial processes on the ground and facilitating collaboration on funding mechanisms.

In 2008, Canada contributed $3.5 million to support Track II of the Global Facility for Disaster Reduction and Recovery, a partnership between the World Bank Group and the UN. The facility's main goal is to help low- and middle-income countries improve their responses to future natural disasters (disaster risk reduction). The facility will achieve this goal by providing technical and financial assistance to help these countries incorporate plans into their country assistance and poverty reduction strategies, which will improve their reactions to and preparedness for natural disasters.

Priority 3.3: Gender

Canada has been a strong advocate of gender issues at the World Bank Group. The World Bank Group has quality policies on gender and development in place, but their implementation has been uneven. Canada looks forward to the Independent Evaluation Group's forthcoming evaluation of the World Bank's Gender Action Plan and expects that the evaluation will be used constructively to inform future policy and programs.

The World Bank Group's Operational Manual—Gender Equality Integration

Some progress

The operations manual includes a directive to consider the gender dimension in the preparation of Country Assistance Strategies and, if an objective is identified, to monitor and evaluate progress in achieving the relevant results. While Country Gender Assessments are regularly produced, at times they appear to have little impact on actual programs on the ground. Canada believes it would be useful to extend the directive in the operations manual to apply, for example, to Poverty Reduction Support Credits or other tangible World Bank programs.

Going Forward  
Medium-Term Action: Encourage the World Bank to update its operations manual to mandate the full integration of gender equality objectives into tangible Bank programs.
Timeline: 2009–2011
Sufficient Budget Resources for Gender Equality Specialists

Good progress

The World Bank Group's Gender Action Plan provides funds to increase dedicated staff time for work on gender and augment the number of gender specialists. We believe that full implementation of the plan, and specifically its action to "engender operations and technical assistance in economic sectors," will increase the Bank's effectiveness.

However, the Gender Action Plan is due to terminate in 2011, and Canada would like to see this momentum sustained over the longer term. The Government of Canada will urge the World Bank to take the necessary actions to put in place the required resources, to increase the number of specialists where needed, and to empower staff to enable them to address gender considerations in their work.

World Bank Group Collection and Analysis of Gender-Disaggregated Statistics

Good progress

Canada regularly advocates as a partner to ensure that the Bank's policies, programming and projects include gender results; this applies in particular to projects that Canada supports financially through trust funds. For example, Canada recently intervened to ensure that gender results are addressed in the upcoming evaluation of the World Bank Group's country assistance in employment creation and earnings growth.

Through the Doing Business Gender Project, the IFC and the World Bank are gathering data to identify and address discriminatory practices in the regulatory regimes of developing countries for both men and women. The Government of Canada believes it is important that the Bank collect and track gender indicators not only for the overall progress of gender equality, for example on MDG3 on gender equality and women's economic empowerment, but also at the project level where the impact on gender is the greatest. Accordingly, Canada will urge the World Bank to continue to include gender results in its programming and will monitor the Bank's progress in this area.

In addition, the IFC has identified indicators to track gender impacts across its private sector programming, and has incorporated them as mandatory indicators within its Development Outcome Tracking System. Canada will closely follow the progress of this innovation.

Priority 3.4: Environment

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

IMF: Filling a Niche on Climate Change

Good progress

In the 2007 report, Canada committed to support the IMF's efforts to increase analytical capacity concerning the impacts of climate change on national economies, in coordination with the World Bank, with a view to assessing appropriate policy responses.

In 2008, two Fund publications illustrate its contribution to the challenges raised by climate change. Early in the year, a policy paper dealing with the fiscal implications of climate change was prepared for the Executive Board. In addition, the spring 2008 World Economic Outlook devotes a full chapter to the issue, in which the Fund emphasizes that policies to mitigate climate change can have potentially rapid and wide-ranging macroeconomic consequences. The Fund points to some lessons as to how the cost of mitigation policies can be minimized. For example, it mentions some options for pricing carbon emissions.

The Minister of Finance welcomed the Fund's recent work on climate change in his April 2008 remarks to the IMFC. In Canada's view, the IMF is filling an important niche. Canada continues to support further work by the IMF that allows it to raise awareness and provide advice to member countries in which environmental problems can have a significant impact on economic growth and development.

World Bank: Climate Change and the Environment

Good progress

Although international climate change policies are being negotiated through the United Nations Framework Convention on Climate Change (UNFCCC) process, the World Bank has an important role to play in helping to build both the adaptation and mitigation capacity of developing countries to address this urgent global challenge. The World Bank Group responded in 2008 to the mounting concern over the state of the global environment by producing two specific deliverables related to climate change.

First, it developed a strategic framework for engagement on climate change. Development and Climate Change: A Strategic Framework for the World Bank Group was released at the 2008 Annual Meeting and was endorsed by Bank Governors. The six action areas of the strategic framework are:

  • Supporting climate actions in country-led development processes.
  • Mobilizing additional concessional and innovative finance.
  • Facilitating the development of market-based financing mechanisms.
  • Leveraging private sector resources.
  • Supporting accelerated development and deployment of new technologies.
  • Stepping up policy research, knowledge and capacity building.

Canada was broadly supportive of the strategic framework, in particular of the Bank utilizing its global influence to mobilize the broad political will and the substantial financial resources that will be required to operationalize the proposed actions. The framework shows that the Bank Group is well on its way to becoming a leading global institution in the area of climate change and development.

Second, on July 1, 2008, the World Bank's Board of Directors approved the Climate Investment Funds, a collaborative effort among the multilateral development banks and countries to bridge the financing and learning gap between now and a post-2012 global climate change agreement. The Climate Investment Funds are comprised of two funds: the Clean Technology Fund, which will accelerate transformation to low carbon growth paths through cost-effective mitigation of greenhouse gas emissions, and the Strategic Climate Fund, which will provide financing to pilot new approaches through a series of targeted funding programs.

During the Sommet de la Francophonie in October 2008, Prime Minister Stephen Harper demonstrated leadership on this issue when he announced Canada's intention to contribute $100 million to international efforts to assist developing countries adapt to the effects of climate change. A significant portion of this funding will be channelled through the Bank.

Canada believes that the Climate Investment Funds offer an important opportunity to take meaningful action on climate change. Designed as an interim measure for financing and building knowledge on climate action within the global community, the best practices captured by the Climate Investment Funds will help inform the negotiations under the UNFCCC and a post-2012 international agreement.

Going Forward  
New
Medium-Term Action: Leverage Canada's position as a major donor to the Climate Investment Funds to stress the importance of performance measurement and to ensure that new climate change financing initiatives have effective monitoring and evaluation frameworks in place.
Timeline: 2009–2011

Summary of Canada's Priorities for 2009–2011

The following summary chart highlights actions identified in last year's report that will be carried forward as priorities for 2009–2011, plus any new actions introduced in the previous section.

Canada's Medium-Term Priorities for 2009–2011

1. Governance and Accountability

Priority Short-Term Action
(2009)
Medium-Term Action
(2009–2011)

1.1 Governance Reforms

Enhance the legitimacy of the Bretton Woods Institutions through a more representative governance structure.

Ratify the 2008 agreement on IMF quota and voice and urge other members to do the same. Work towards greater voice and participation of developing and transition countries to more adequately reflect changing economic weights in the world economy and contributions to IDA. Commensurate with increased voice and participation, Canada will also push the major emerging market economies to take on more responsibility in donor financing, including IDA.

Work to promote IMF corporate governance changes that increase IMF legitimacy, effectiveness and credibility.


1.2 Transparency

Build on real past progress on institutional transparency.

Push the Bank towards greater transparency during the review of its Disclosure Policy in 2009 by advocating for a move from the current policy that lists the types of information that can be disclosed to one that allows disclosure of any information, except for a limited list of exclusions.

2. Institutional Effectiveness

Priority Short-Term Action
(2009)
Medium-Term Action
(2009–2011)

2.1 IMF Surveillance and Crisis Prevention

Support reforms to give more "bite" to surveillance.

  Continue to work to improve the integration of the IMF's analysis of financial system developments in the Global Financial Stability Report with the assessment of trends in the real economy provided by the World Economic Outlook. Support Fund work to make this analysis more applicable to policy making in member countries.

Support enhanced IMF-FSF collaboration on early-warning systems for financial sector weaknesses and determining regulatory responses.

Continue to push other IMF members to undertake and publish the results of FSAP reviews. Encourage better integration of FSAP results into IMF Article IV reviews of member economies and call for mandatory publication of Article IV reviews, enhancing the usefulness of those annual surveillance exercises.

2.2 Aid Effectiveness

Get the most development impact from IMF and World Bank Group resources.

Push the World Bank Group to put in place meaningful decentralization of authority and personnel to enable it to play its critical role in donor coordination, for example through its management of Multi-Donor Trust Funds at the country level. Urge the World Bank Group to increase the use of randomized impact evaluations to affect policy decisions. To enhance the World Bank Group's accountability, push the Group to make more of it's program evaluations public in a timely fashion.

Urge the Bank to use PSIAs, as appropriate, for programs Canada jointly supports with the World Bank Group. In addition, ensure that Bank management implements the recommendations from the current independent assessment of PSIAs.


2.3 Innovation for Private Sector Participation in Development

Continue to support innovative new ways to promote private sector participation.

  Push for greater use of innovative tools to tackle global public goods (e.g. AMC, CCRIF).

Leverage Canada's leadership position as the CCRIF's largest donor to further improve the CCRIF and push for expanded insurance facilities in areas such as heavy rainfall and agricultural risk.


2.4 Resources and Lending Facilities (New)

Ensure that the IMF and World Bank Group have adequate resources and appropriate instruments to fulfill their mandate.

 
Work with G20 partners to ensure that the World Bank has sufficiently flexible resources and instruments to respond to the financial crisis.

Engage at the IMF  to ensure the IMF has adequate lending resources through transparent, flexible and timely mechanisms.

Support IMF efforts to modernize and rationalize its lending toolkit. Lead international efforts to develop a common view on the lending role of the Fund in today's globalized economy.
 

3. Sustainable Poverty Reduction and Growth

Priority Short-Term Action
(2009)
Medium-Term Action
(2009–2011)

3.1 Debt Sustainability

Avoid another lend-and-forgive cycle.

 
  Push for the full compliance of all participants in the joint IMF/World Bank Debt Sustainability Framework.

Leverage Canada's leadership role in the World Bank's new Debt Management Facility for Low-Income Countries to build capacity in heavily indebted poor countries.

Promote increased levels of IDA grant financing to low-income countries to enable them to weather the current crisis without jeopardizing their debt sustainability.

3.2 Failed and Fragile States

Better tools for assisting fragile states.

Use the IDA15 mid-term review to advocate for a longer period of exceptional IDA allocations for countries that have not succumbed to conflict but are rather re-engaging with IDA after a period of prolonged inactivity.

3.3 Gender

A real mainstreaming of gender considerations across operations.

Encourage the World Bank to update its operations manual to mandate the full integration of gender equality objectives into tangible Bank programs.

3.4 Environment

Linking development and environment in a manner that is consistent with the core mandates of the Bretton Woods Institutions.

Leverage Canada's position as a major donor to the Climate Investment Funds to stress the importance of performance measurement and to ensure that new climate change financing initiatives have effective monitoring and evaluation frameworks in place.

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