Archived - Backgrounder: Department of Finance Consultation on Official Development Assistance, 2012
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The Department of Finance today launched an online consultation on its Official Development Assistance disbursements, giving Canadian stakeholders an opportunity to comment on whether the disbursements meet criteria under the Official Development Assistance Accountability Act.
The Official Development Assistance Accountability Act came into force on June 28, 2008. Its purpose is to ensure that Canadian Official Development Assistance is provided in a manner that:
- Contributes to poverty reduction;
- Takes into account the perspectives of the poor; and
- Is consistent with international human rights standards.
The Department of Finance currently makes different kinds of international assistance payments on behalf of the Government of Canada:
- World Bank:
- International Development Association
- International Bank for Reconstruction and Development
- Debt Relief
- Bilateral Debt Relief
- Multilateral Debt Relief
International Development Association
The International Development Association (IDA) is the World Bank Group’s principal financing tool for the world’s poorest countries, providing them with interest-free loans and grants. The Department of Finance provided $384 million to IDA in 2011–12, completing its commitments under the 15th replenishment round. Beginning in 2012, the Government of Canada will provide $1.3 billion to IDA in total over three years, as part of the 16th replenishment round. This funding allows IDA to enhance its focus on effective aid delivery and provide special assistance for fragile states such as Afghanistan and Haiti, while ensuring countries do not take on unsustainable levels of debt.
More information is available on the IDA website.
International Bank for Reconstruction and Development
In response to the 2008–2009 financial crisis, a series of coordinated capital increases were granted to the major multilateral development banks. The members of the International Bank for Reconstruction and Development (IBRD) authorized a capital increase of US$86 billion, of which Canada’s share is US$1.6 billion, comprised of:
- US$98 million to be paid in cash; and
- US$1.5 billion as a guarantee subject to call in the event of future capital requirements.
This recapitalization supports higher lending levels from the IBRD, supporting core programs and priorities such as education, health care, social protection, agriculture and rural development, tackling climate change, promotion of gender equality, and infrastructure improvements.
Members have five years during which to subscribe to the shares allocated in this increase. Canada has chosen to front-load a significant portion of its share purchase, having contributed $954 million ($57 million paid in and $897 million callable capital) in 2011–12.
Canada’s equity contribution to the IBRD also assists the world’s poorest countries through significant transfers of net income to IDA. In its fiscal year ending June 30, 2012, the IBRD transferred US$520 million to IDA and a further US$55 million to the Trust Fund for Gaza and West Bank, both from its net income.
More information is available on the IBRD website.
Canada remains a leader in the area of debt relief. Debt relief allows recipient countries to channel additional resources, which otherwise would have been used to make debt payments, into investments that are consistent with a country’s Poverty Reduction Strategy. Canada provides debt relief through its participation in international debt relief initiatives, such as the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI), and through its participation at the Paris Club.
HIPC and MDRI debt cancellations are only provided once an eligible poor country has completed the HIPC process. The time needed by countries to do so varies according to the implementation timing of their Poverty Reduction Strategy, the macroeconomic stability they can sustain under Poverty Reduction and Growth Trust-supported programs, and whether they carry out required key structural and social reforms. The International Monetary Fund (IMF) and World Bank Executive Boards are jointly responsible for reviewing progress and for determining when a country has completed all of the tasks necessary to receive HIPC and MDRI debt relief.
Bilateral Debt Relief
Canada has been an international leader in the area of poverty reduction by forgiving more than $1 billion in debt owed to it by the world’s poorest and most indebted countries. Specifically, Canada is a committed participant in the HIPC Initiative. Canada delivers this debt relief through its participation in the Paris Club. Moreover, Canada goes beyond the requirements of the HIPC Initiative through the Canadian Debt Initiative, under which Canada forgives all remaining debt owed by eligible HIPCs, resulting in complete bilateral debt cancellation. If a country’s performance does not meet the required target, debt relief is delayed until adequate progress is made.
In 2011–12, Canada provided Official Development Assistance-eligible debt relief to Côte d’Ivoire ($2,039,000).
Multilateral Debt Relief
Canada has also been very active in the development and financing of multilateral debt relief through the MDRI. Canada has committed to provide the IMF, World Bank and African Development Fund (ADF) with $2.5 billion in order to cover Canada’s share of the costs over the life of the MDRI, which extends until 2054. In 2011–12, Canada provided $51.2 million to the initiative.
In 2009, with the passage of Bill C-59 (the Economic Recovery Act), the Government of Canada modified and strengthened the payment mechanism for its annual MDRI payments. The modification places Canada’s MDRI payments under statutory authority and provides further reassurance to the IMF, World Bank and ADF that Canada is fully able to honour its $2.5-billion commitment. This legislation enabled the Government of Canada to sign new MDRI instruments of commitment with the ADF and IDA in February 2011.
More information is available on the MDRI website.
Canada has been a leader in innovative approaches to development challenges. At the 2012 G-20 Los Cabos Summit, Canada announced $40 million over five years to launch AgResults, an innovative initiative that will use pull mechanisms such as advance market commitments to leverage private sector investment and innovation toward addressing global agriculture challenges. Food security is an essential element of poverty reduction, and innovation will be critical to achieving agriculture productivity gains required to meet growing global demand. Initial pilot projects will target improved harvest management and nutritional fortification of staple crops with payments to innovators only once results are achieved. Canada provided $9 million in grant support to the World Bank in 2011–12, as part of the total $40-million commitment, to develop and fund pilot projects.
Further information on AgResults is available on the World Bank website.
The consultation period will end on January 31, 2013. Canadian civil society organizations, governments, international agencies and other participants should provide the following information when e-mailing their comments:
- Full name of the official;
- Name of the organization;
- Full mailing address, including postal code;
- Telephone number, including area code; and
- Reply e-mail address.
Submissions should be e-mailed to: APD-consultation-ODA@fin.gc.ca.