- International Activities -

Ottawa, September 24, 2005

Archived - Statement prepared for the Development Committee of the World Bank and International Monetary Fund

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The Honourable Ralph Goodale,
Minister of Finance of Canada

Washington, D.C.

Check Against Delivery

As we meet here in Washington this weekend, it is a time to reflect on how we can work together to make positive change in our world. Our focus must continue to be on the poorest countries. But the ravages of Hurricane Katrina felt in the southern United States last month remind us that we are all vulnerable to loss, and in our darkest moments we rely on each other for strength, support and, above all, hope. It is a lesson that must guide us in all our efforts, this weekend and beyond. I would like to take a moment to express my sincere condolences to those Americans who have lost so much over the past several weeks. Canada offers you our friendship and support as you begin the difficult process of rebuilding.

Efforts Must Continue

Five years ago world leaders laid out a development vision with the Millennium Development Goals (MDGs) that set clear targets for eradicating poverty. This was followed in 2002 by the Monterrey Consensus, which stressed the mutual accountability of developed and developing countries in achieving these goals. With only a decade left to meet these MDG targets, current stock-taking suggests their achievement will require a significant scaling up of actions. As was made clear just a few days ago in New York at the United Nations (UN) Summit, without faster progress we risk not achieving the MDGs.

Certainly, progress has been made. We have seen developing countries improve their policies and governance with the result that they have experienced acceleration in their economic growth. Developed countries have increased aid and introduced actions to make it more effective, including the reduction of transaction costs, increased emphasis on partner-led development and the rationalization of donor effort. As well, initial steps have been taken towards reducing trade barriers to the poorest countries.

And we know that in some areas of the world-in particular, East Asia, Latin America and the Caribbean-real gains have been realized. Indeed, global poverty rates are falling, led by Asia.

But in other parts of the world, we are quite simply not making the progress that we hoped. This is especially the case in Africa, where many countries are off track on all the MDGs and where more than 300 million people still live in abject poverty, where education for all remains a dream rather than a reality, and where 2 million people will die this year from HIV/AIDS.

This challenge provided the rationale for the work of the Commission for Africa. The Commission emphasized the underlying principle that development-and the achievement of the MDGs-must be led by Africa itself. And it also laid out concrete actions where donors could support African initiative.

We must continue our efforts toward the attainment of the MDGs. An agreement on debt cancellation will be a significant step forward. We welcome the World Bank's Africa Action Plan as a concrete contribution to support the countries of Sub-Saharan Africa in scaling up their efforts towards accelerating growth and achieving the MDGs.

A Development Strategy

No amount of aid will have a meaningful impact on countries that do not work to improve their domestic institutions and create an environment that allows enterprise and human initiative to flourish. To this end, we must continue to work to strengthen Poverty Reduction Strategies (PRSs) by broadening their policy content, strengthening their pro-poor focus and improving the effectiveness of the participatory processes through which they are prepared and implemented, including greater involvement of parliamentarians and civil society. Where conditions are appropriate in terms of policy frameworks, capacity and governance, developing partner countries may wish to develop credible, costed PRSs that scale up to achieve their MDG targets and that can serve to attract greater levels of support.

We must put countries in a position where they can help themselves escape poverty. In particular, more concentrated efforts must be made to level the playing field and to ensure that developing countries become better integrated into the global trading system. A successful Doha round that lowers tariffs and non-tariff barriers, for example, could lift more than 100 million people out of poverty by 2015. This was a key message of the Commission for Africa report, supported by the Bank's own analytical work. And for those countries not able to immediately benefit from the elimination of trade barriers due to various constraints, we welcome the work of the World Bank and International Monetary Fund (IMF) on "Aid for Trade."

We must ensure that scarce development funds are used effectively. It will be important to continue discussions on capacity building to ensure that developing countries have the capacity to employ the increased flow of resources effectively. It is particularly important that aid delivery mechanisms are in place. Hence, the increasing emphasis on mutual responsibility and accountability between donors and recipients for results. We know that a combined focus on higher aid volumes and aid efficiency and effectiveness is critical in ensuring that commitments actually translate into action and positive outcomes that improve prospects of the poorest countries and poorest people. To this end, we strongly support the Bank's direction to enhance its framework for monitoring, reporting and follow-up on the delivery of aid commitments. We are also encouraged by the World Bank's efforts to deepen the harmonization and alignment of aid resources, including through taking steps to implement the Paris Declaration on Aid Effectiveness and to modernize and simplify its own internal processes. To further progress on effective aid delivery and use, it will be critical to ensure that our commitments with respect to untying aid are met, including greater use of local procurement mechanisms in developing countries. We welcome the initiative by the Development Assistance Committee of the Organisation for Economic Co-operation and Development to move this forward.

Aid budgets must keep pace with ongoing development challenges. Recent commitments made by donor countries mean that total annual official development assistance (ODA) flows in 2010 will be around US$50 billion more than in 2004. Significantly, at least half of this increase will be directed to Africa-resulting in a doubling of ODA to that continent. In 2005, the Canadian government budgeted funds necessary to double Canadian aid to Africa by 2008. And consistent with our commitments to the UN, we will also double our overall international assistance by 2010. As announced in New York last week, Ireland has set out a firm plan to achieve the UN target of 0.7% of gross national income by 2012. Ireland's ODA budget has doubled since 2000, and will triple over the next seven years.

Our focus has been on the poorest countries. Canada this year announced a plan to focus our bilateral assistance on 25 countries-14 of them in Africa-where the need is great and the conditions exist to implement effective poverty reduction programs. With strong support from Canada, Ireland and other donors, the International Development Association (IDA) has been able to increase funding for its programs by 25% over the previous replenishment-the largest expansion of IDA resources in two decades. Canada's contribution increased by almost 40% under IDA14, while Ireland increased its contribution from about SDR 35 million to over SDR 58 million, representing a two-third increase.

But there is an international consensus that additional financing is needed, whether from budgetary resources or "innovative financing" proposals. Certainly, there are no "silver bullets" among alternative proposals, but as they do not require unanimity for implementation, donors can choose to act based on their own circumstances and preferences. Canada and Ireland continue to emphasize the importance of traditional sources of aid. However, we welcome the further exploration of advance market commitments, which stand out because they address a critical market failure. The failure to sufficiently produce vaccines for diseases primarily affecting developing countries affects millions of people, and has tremendous social and economic consequences. We would also consider financing proposals that would harness private contributions-Canada already offers fiscal incentives for charitable donations.

Debt Relief

Debt relief is another key component of our development strategy. By sharply reducing their debt-service payments, poor countries have more resources to invest at home. For more than a decade, Canada has been a leader in fighting for greater debt relief. We have contributed more than $2.3 billion to this cause to date, and we are committed to a further $1.3 billion in further and better debt relief. And it is important to keep the momentum going.

This past summer, G8 Finance Ministers proposed to cancel 100% of the debts owed by heavily indebted poor countries (HIPCs) to IDA, the African Development Fund and the IMF. The new debt proposal provides additional resources for poor countries, ensures that poor countries are treated equitably, maintains the financial capacity of international financial institutions (IFIs), and provides the proper incentives toward better performance, good governance, transparency, the end of conflict and the reinvestment of resources into constructive new initiatives. Canada and Ireland will do our share to implement this initiative.

There remain many issues to be resolved, both policy and technical, but we have the momentum to move forward. It is our hope that we can come to an agreement this weekend to push ahead with this proposal. With their debts gone, these countries will be able to redirect more of their precious financial resources to productive investments in better health care, education, social development and economic growth for their people.

But if we want to ensure that poor countries have the fiscal flexibility to promote macroeconomic stability/growth and implement poverty reduction strategies, we also need to be sure that the more vulnerable countries do not slide back into a debt trap. And debt sustainability is about more than the ability to repay debt. It also must ensure the ability to maintain an adequate level of expenditure on services and investment in health, education, agriculture, water supply and sanitation, roads and other infrastructure, without which growth, development and poverty reduction are impossible. It is essential that the measures we implement to ensure debt sustainability do not result in a reduction of resources for countries judged to be at risk for debt distress. To this end, the strategic provision of grants is a key tool in ensuring that a new buildup of unsustainable debts does not occur. We are pleased with IDA's grant allocation framework, which is based on debt sustainability considerations. And we look forward to working together with the IFIs to ensure that appropriate mechanisms-compatible with a forward-looking debt sustainability framework-are put in place to meet these goals.

The Development Challenges Faced by Small States

It has been five years since the creation of the Commonwealth Secretariat/World Bank Joint Task Force on Small States, and we believe that we will find much progress has been made. However, our efforts to advance the development agenda must continue to take into proper account the special challenges of small states, including those in the Caribbean. And the importance of regional approaches cannot be emphasized enough.

We are pleased with action that the Bank has taken on this front. We welcome the decision of IDA to increase its financial support by raising the minimum IDA allocation to small states by 10% from SDR 3.0 million to SDR 3.3 million during the IDA14 period. In future, to ensure small states remain a priority, we would recommend fixing the minimum as a percentage share of future replenishments.

We know these states are particularly vulnerable to natural disasters. To this end, the World Bank's efforts to study possible insurance schemes for public assets and the International Finance Corporation's work to find new mechanisms to insure private dwellings are critical. We will continue to support the Bank's development of this new approach to comprehensive catastrophe insurance in the Caribbean and other small states, and call upon other donor governments and the private sector to also support these efforts.

Working Together for a Positive Change in Our World

Today I have addressed some of the issues that our constituency feels need to be the focus of our attention. But there are others-in particular, World Bank conditionality, HIPC, climate change and voice and representation-that will need our continued attention over the coming year. We would like to thank Bank staff for giving us a strong basis from which we can explore these issues further.

A decade remains until 2015. Poverty on a global scale is falling, but the challenges of meeting the MDGs in Africa remain. This weekend we are discussing how we can make achieving the MDGs in all parts of the world a reality. The only way to do so is to work together. The importance of the Bretton Woods Institutions in this effort cannot be understated. During our discussions on their future direction, we need to ensure that they maintain their ability to contribute to the development effort. At the same time, it is critical that the governments of developing countries work together with all their development partners, including the private sector and civil society. Only with the strength of a truly collaborative effort will we be able to make tomorrow better for all people.