Archived - Canada at the European Bank for Reconstruction and Development 2009
Report on Operations Under the European Bank for Reconstruction and Development
Archived information is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.
The Official Development Assistance Accountability Act (ODAAA)
The ODAAA came into force on June 28, 2008, and applies to all federal departments providing Official Development Assistance, including the Department of Finance. The Act lays out three conditions that must be satisfied for international assistance to be considered Official Development Assistance: (1) contributes to poverty reduction; (2) takes into account the perspectives of the poor; and (3) is consistent with international human rights standards.
The ODAAA requires the Minister of Finance to provide information related to Canada’s engagement with the BWIs. To facilitate Finance specific reporting required in the Act, the BWI report provides a summary of any representation made by Canadian representatives at the BWIs (as seen throughout the report), summarizes how Canada’s activities under the Bretton Woods and Related Agreements Act have contributed to the ODAAA (as seen throughout the report), and documents the position taken by Canada on any resolution adopted by the BWI’s Board of Governors (as seen in the section "Canada’s IMF and World Bank Voting Record and Outreach in 2009"). CIDA’s annual ODAAA and statistical reports will document Finance’s 2008–09 ODA payments, consisting of IDA, bilateral debt relief, MDRI, and arrears clearance.
As part of Finance’s implementation of the Act, it held Web consultations in December 2008, inviting input from the Canadian public, civil society organizations, governments and international agencies on whether the Department’s international assistance payments met the three conditions listed above. Finance also asked how the next consultation process in December 2010 could be improved.
To support communication with the Canadian public, the Government has taken the initiative to significantly improve the scope and depth of the annual BWI report. This report, in combination with CIDA’s annual ODAAA and statistical reports, meets the ODAAA’s reporting requirements.
Finance’s Four Types of ODA Payments
Total fiscal year 2008–09 payments (April 1, 2008-March 31, 2009) = C$705.70 million
1.International Development Association
IDA is the World Bank’s principal financing tool for the world’s poorest countries, providing them with interest-free loans and grants. More information is available on IDA’s website.
2. Bilateral Debt Relief: $172,111,00014
Bilateral and multilateral debt relief disbursements are considered to be ODA-eligible as they contribute to poverty reduction by freeing up resources (which would otherwise be used to service sovereign debts) for use toward social expenditures. Further, debt relief recipients self-direct poverty alleviation efforts based on their individual heavily indebted poor countries (HIPC) Poverty Reduction Strategy Paper and must demonstrate that debt relief efforts include equity (e.g. human rights) commitments.
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, most indebted countries. More information is available on the following websites: Club de Paris and (HIPC) The Enhanced Heavily Indebted Poor Countries Initiative.
3. Multilateral Debt Relief: $149,280,000
Canada has been active in the development and formatting of debt relief through the Multilateral Debt Relief Initiative (MDRI). Canada committed to provide the IMF, the World Bank and the African Development Fund (ADF) with $2.5 billion to cover its MDRI share. More information is available on the MDRI website at imf.org/external/np/exr/facts/mdri.htm.
4. Arrears Clearance: $0
When poor countries are in arrears to multilateral institutions, they are not eligible to receive any additional program funding from these institutions, thus inhibiting their ability to reduce poverty. When Canada clears these arrears on behalf of a poor country, we help the country to obtain additional program funding from international institutions and adopt debt relief initiatives such as HIPC and MDRI.
Canadian Statements at the International Monetary and Financial Committee of the Board of Governors of the IMF
The Honourable Jim Flaherty, Minister of Finance for Canada
on behalf of Antigua and Barbuda, Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Ireland, Jamaica, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines
April 25, 2009
This meeting is taking place against the backdrop of the most synchronized global recession since the International Monetary Fund (IMF) was created 65 years ago. The credit crisis that originated in the financial systems of advanced members has radiated out to other Fund members, resulting in the contraction of credit, and sudden stops and reversals in capital flows. Moreover, the crisis has spread from the financial sector to the "real" economy as output, employment and trade volumes have fallen dramatically.
These effects have been felt by Fund members around the globe. In Canada, real GDP declined by 3.4 per cent in the fourth quarter of 2008 and current indicators point to a further sharp decline in the first quarter of 2009. The Government’s Economic Action Plan, which was tabled in January, provides support to the Canadian economy over the next two years equivalent to 3.2 per cent of gross domestic product (GDP), including leverage from other levels of government. In addition, the Plan includes a $200-billion Extraordinary Financing Framework to improve access to financing for Canadian households and businesses. As a result, after a decline in Canadian real GDP of 2.5 per cent in 2009, the IMF expects a rebound in growth to 1.2 per cent in 2010—the strongest performance of any Group of Seven (G7) economy. This relative vigour reflects the sound policy frameworks and comparative strength of Canadian banks, which support credit flows and provide the foundation for a resumption of growth.
Ireland’s economy is set to contract by 7.75 per cent this year as a combination of deteriorating domestic and external conditions weigh upon activity. In the recent supplementary budget, a number of revenue-raising measures and public expenditure cuts were implemented in order to limit the deterioration in the general government deficit to 10.75 per cent of GDP for 2009. In addition, to address the issue of asset quality in the banking system, the Government will establish on a statutory basis a National Asset Management Agency to which certain assets will be transferred from the banks. The purpose of this initiative will be to strengthen the banks’ balance sheets and achieve a sustained flow of credit to the economy.
In our Caribbean constituencies, economic activity has decelerated: tourism, the region’s major foreign exchange earner, has declined; similarly, remittances, a major contributor to the region’s national income, are down; and there has been a substantial drop in foreign direct investment flows. While seeking to address these challenges, the region remains committed to implementing sound macroeconomic policies and reforms to strengthen the economic and financial architecture to reduce vulnerabilities and to build the necessary safeguards for the future. The role of the international financial institutions and other development partners remains critical in assisting the Caribbean region in implementing short- and long-term financial and macroeconomic policy responses to the crisis.
Some of our Caribbean countries have significant financial sector activities. There is a risk that changes to financial sector regulation in advanced countries could have negative unintended consequences on these activities. In particular, there is a risk that measures taken against non-cooperative jurisdictions, including tax havens, could have unintended negative impacts on well-regulated, transparent, financial centres. I believe that this should be avoided. Countries that comply with international standards should be protected from such measures.
The Global Recession and the International Response
The severity of the current downturn has naturally led to comparisons with earlier episodes of global economic contractions, particularly the Great Depression. The Fund was designed to assist its members to avoid the policy pitfalls that contributed to the prolonged economic stagnation of the 1930s: monetary policy did not provide liquidity in response to severe financial shocks; fiscal policy turned pro-cyclical as national economies started to contract; and trade protectionism exacerbated the downturn, turning a severe recession into a global depression.
We have learned from these policy failures. In the last six months, global leaders have agreed on the importance of taking concrete steps to quarantine impaired assets and recapitalize banks, where necessary; to implement fiscal and monetary stimulus as quickly as possible; to guard against protectionism in all of its forms; and to strengthen the financial system through sound national regulatory and supervisory frameworks and better international cooperation and surveillance.
Moreover, we have a set of institutions to promote international economic and financial cooperation. The IMF’s mandate of promoting international monetary cooperation and global financial stability, which has facilitated the expansion of international trade, has never been more relevant.
Response to the Crisis
In London a few weeks ago, global leaders reaffirmed the central role of the IMF by agreeing to a number of measures to ensure that the Fund has the capacity to address the current crisis. These measures include:
- Negotiating temporary bilateral credit arrangements with the Fund totaling US$250 billion, of which Canada has agreed to provide US$10 billion.
- Expanding the New Arrangements to Borrow (NAB) by up to US$500 billion. Canada’s proposed US$10-billion bilateral credit arrangement will be rolled into a new NAB commitment, increasing our stake in this important multilateral arrangement five-fold. We encourage other creditor members to follow suit, particularly those who are not currently NAB members.
- A general Special Drawing Right allocation equal to US$250 billion, which will quickly provide almost US$100 billion in reserve assets to emerging market and low-income countries.
- Doubling the IMF’s concessional lending capacity for low-income countries in a manner that is consistent with debt sustainability.
- Implementing the 2008 quota agreement as quickly as possible, which will increase the IMF’s quota resources by almost 12 per cent. Canada is completing the domestic steps required to ratify this agreement and I urge other IMF members to do the same.
- And, finally, completing the next review of IMF quotas by January 2011, accelerating the process by two years.
Reforms have also taken place at the IMF in response to this crisis, such as the development of the Flexible Credit Line for precautionary purposes. All of these efforts reflect the ongoing relevance of the IMF and demonstrate that the role of the institution will never be static.
The Changing Role of the IMF
As important as these measures are, it is clear that further concerted efforts are needed if the Fund is to play a stronger role in resolving this crisis and in preventing future ones. Prior to the current crisis, there were fundamental tensions among the membership with respect to the legitimacy, credibility and effectiveness of the Fund. These issues remain, notwithstanding the broad agreement on the continued importance of the Fund in assisting its members in the current crisis, and will have to be addressed to the satisfaction of the entire membership. Indeed, as IMF Governors, we have a collective responsibility to set a long-term course for the Fund. The upcoming quota review provides a unique opportunity to develop this common vision. A clear agreement on the IMF’s role will ultimately help us to determine the resources and tools that it should have at its disposal, the responsibilities its members have to the institution and each other, and how it is best organized and governed.
The fundamental objective of the Fund remains the same—to promote international monetary cooperation and financial stability by assisting its members respond appropriately to external shocks through a judicious balance of financing and adjustment. And, yet, we have to recognize that, as a result of the remarkable process of financial integration that we have witnessed over the past two decades, the environment in which the Fund operates has changed. Our collective challenge is to ensure that the Fund is capable of fulfilling its mandate.
As a result, the quota review should consider a number of fundamental questions:
- What are the appropriate tools and level of IMF resources required for effective short-term crisis response? The present environment has revealed the difficulties in distinguishing between illiquidity and insolvency. In examining the IMF’s role in providing liquidity to members, it is important that we determine whether we have the appropriate mechanisms to address sovereign insolvency cases in a timely and orderly fashion.
- What responsibilities do IMF members have to the institution and to each other? The IMF relies on the willingness of its members to participate in the surveillance of macroeconomic and macroprudential policies, such as through Article IV and Financial Sector Assessment Program reviews. We need to determine the extent of the liberties we, as Governors, are willing to give IMF management and staff in pursuit of their independent surveillance and advisory mandates.
- For low-income countries (LICs), do we have the right balance between short- and medium-term support, to help countries respond to temporary shocks, and longer-term assistance to help LICs with entrenched macroeconomic and structural imbalances?
The quota review also provides a good basis for parallel consideration of the appropriate governance structure for the IMF. We are pleased that, in London, governments agreed on the need for an open process for the selection of the Managing Director, a long-standing position held by Canada. Leaders also agreed to study IMF governance and ways to increase Governors’ involvement in the institution. Reports from the eminent persons’ committee, chaired by Trevor Manuel, and from the Independent Evaluation Office (IEO) provide valuable insights deserving of reflection.
Looking forward, key governance questions include:
- How is the IMF best organized and governed? We need to achieve an appropriate balance between respecting Fund independence and maintaining appropriate oversight.
- What are the appropriate responsibilities of each level in the organization? Consistent with recommendations of the IEO and the eminent persons’ committee, there should also be a clear delineation of the roles and responsibilities of each level of decision maker (within a transparent accountability framework).
As a key element of the quota review, which should start as soon as possible after these Spring Meetings, it is incumbent upon Governors, the Board and the Staff to engage on these fundamental mandate and governance questions in a thoughtful, constructive and collegial manner.
The extraordinary responses of IMF members to the economic and financial crisis reaffirm the international community’s determination not to repeat the errors of the Great Depression. Under the Managing Director’s leadership, the Fund has played a critical role in mobilizing international efforts to limit the risks of a prolonged global slump. Our work is not over, however, and we must continue to work collectively and cooperatively to return the global economy to the path of sustained growth.
The past few months have demonstrated the critical importance of the IMF in promoting international coordination and providing crisis support. Canada remains committed to the underlying objectives of the Fund—to promote international monetary cooperation, financial stability and international trade—which are the foundations of global growth and wellsprings of prosperity for all. As we move towards the next quota review, of central interest to all members is ensuring that the IMF is able to fulfill its mandate of promoting the public good of international monetary and financial stability in an effective manner. This will require a pragmatic discussion of the role of the IMF and the instruments, resources and governance structure required to achieve its mandate.
The international community has demonstrated how it can effectively come together to respond to a crisis. We must show a similar degree of collaboration and commitment in ensuring the IMF is equipped to play a central role in the 21st-century global economy.
October 4, 2009
I thank our Turkish hosts for creating a very welcoming venue for the 2009 International Monetary Fund (IMF) and World Bank Annual Meetings.
This past year has been very challenging for us all. Confronted with the biggest threat to the global economy in 70 years, many countries took extraordinary measures to protect both their economies and citizens from economic collapse. The "green shoots" of stabilization and recovery that we are now seeing are the result of the collective policy response that individual countries have implemented in a spirit of cooperation. As we emerge from a crisis atmosphere, we cannot reduce our efforts to deal with the many, shared global challenges.
- Despite encouraging signs of stabilization and indications of modest growth in the second half of 2009, the global outlook remains weak and a private-sector led recovery has yet to be established. Moreover, mounting unemployment rates have yet to stabilize and will remain a challenge in many countries in 2010. As such, it is essential that stimulus measures continue through 2010 and are fully implemented.
- Looking forward to the post-crisis period, attention must shift to fiscal consolidation and medium-term debt sustainability. The goal should be to maintain confidence and create the fiscal space needed to meet long-term challenges such as climate change and aging populations.
- As well, all financial sector regulatory reform elements that were agreed within the Group of Twenty (G20) need to be implemented.
- Finally, as the global recovery takes hold, unbalanced patterns of global growth will also need to be addressed. While global imbalances have eased in the wake of the global financial crisis, the improvement may prove temporary unless the factors underlying their emergence are resolved. We need to facilitate timely, orderly adjustment in the global economy.
Given its core mandate of promoting international monetary and economic cooperation, the Fund has a central role in helping us—its members—face these challenges and facilitate orderly adjustments to an evolving global economy.
In Canada, the rate of decline in real gross domestic product (GDP) eased to -3.4 per cent in the second quarter of 2009 after dropping by 6.1 per cent in the first quarter of 2009. However, Canada has fared much better than most other major advanced economies over the last year. Canada was the last major advanced country to enter recession, and the fall in output in Canada has been among the lowest of all Group of Seven (G7) countries since the start of the global recession. Current indicators suggest that the Canadian economy will recover in the second half of 2009 and gain momentum through 2010. To ensure that the economic recovery is secured, the Government will complete the implementation of Canada’s Economic Action Plan so that growth takes hold and jobs are created and maintained. Canada’s fiscal stimulus package of 4 per cent of GDP over the next two years, including leverage from other levels of government, is tied with Japan as the largest in the G7 and is among the highest in the G20. In line with an expected sustained recovery, the IMF expects a rebound in growth of 2.1 per cent in 2010, the strongest performance of any G7 economy.
Irish and Caribbean Developments
The Irish economy is undergoing a very substantial adjustment. Output last year declined by 3 per cent, and is projected to fall by a further 7.75 per cent this year. With a further decline expected next year, activity is projected to fall by a cumulative 15 per cent in the three years to 2010. For a number of years, activity had been artificially boosted by excess production of residential housing. The resulting increase in living standards was consequently unsustainable. The most recently published data do provide tentative grounds for some optimism. While activity continues to decline, it is doing so at a slower pace, helped in part by demand for exports. The deterioration in the economic environment, especially the downturn in tax-rich sectors, has had severe implications for the public finances. To limit the deterioration, measures amounting to 5 per cent of GDP this year have been adopted. Employment has fallen significantly, and despite outward migration, unemployment has risen to its highest rate in over a decade. On a harmonized basis, prices in Ireland are falling at the fastest rate in the euro area (-2.4 per cent year-on-year in August), in part due to excess economic capacity.
The past year has also been a difficult one for the Irish financial system. A cleansed and reformed banking system is fundamental to underpin economic recovery and the Irish Government has taken a number of decisive actions in this regard. Most recently, the Irish Government has published legislation to establish a National Asset Management Agency, to remove certain portfolios of risky property-related assets from the balance sheets of relevant banks. This will remove the systemic threat posed by these assets and allow Irish banks to focus on their core function, lending to the real economy to support businesses and ordinary people.
As a result of the global crisis, output in the Caribbean is projected to contract in 2009, with only a very mild recovery likely during 2010. Countries experienced declines in tourism, foreign investments, mining sector exports and remittance inflows. This has placed increased negative pressures on net international reserves. However, the financial sectors remained relatively stable as a result of enhanced regulatory and supervisory frameworks and prompt actions to contain spillover risks. With governments already facing serious resource constraints, the need to mitigate the impact of the crisis has contributed to significantly increased deficits. Outcomes could have been worse if the authorities had not pursued prudent policies before the crisis. Nevertheless, there is a serious risk of eroding the recent gains made in improving social indicators. The need for access to concessional financing from international financial institutions is therefore important, as governments commit to medium-term structural reforms to reduce debt levels. Support is also vital as authorities explore medium-term strategies to strengthen economic activities and reduce vulnerabilities.
Financial sector activities are a significant part of some Caribbean economies. Regional authorities remain concerned that the changes contemplated to regulations in advanced countries could have negative unintended consequences on these activities. There is still a risk that transparent well-regulated jurisdictions could be harmed by the measures taken against non-cooperative jurisdictions, including tax havens. Again, countries that comply with international standards should be protected from such measures.
Our response to the recent crisis has put into sharp focus the critical role the IMF has to play in supporting our collective efforts. The Fund faced criticism in recent times as it tried to deal with 21st century crises stemming from volatile international capital flows, but using tools aimed at combating 20th century current account problems. Since last year, the Fund has moved swiftly to adapt its operations to help members weather the economic and financial turmoil—we should applaud their efforts over the last year. While the IMF and its membership acted decisively to address shortcomings, we need to take advantage of this momentum to push for further progress on strengthening the Fund and preparing it to fulfil its role of promoting global stability. This includes the need for members to provide clearer direction on the role we want the IMF to play in surveillance and lending.
We need the IMF to meet three tests in order to be ready for the challenges going forward. The IMF needs to be legitimate, credible and effective:
- A legitimate Fund requires that voice and representation reflect the economic realities of the 21st century.
- A credible IMF requires the necessary resources and instruments to achieve its agreed mandate, but also the trust of its members.
- Finally, an effective Fund requires a strategic and accountable governance structure, as well as members committed to carrying out their responsibilities to the institution and to each other.
These three characteristics are interrelated, and unless we make progress on all three fronts, we will have missed an historic opportunity.
In terms of legitimacy, a key challenge is to ensure that the Fund reflects the changing economic weight of members in the global economy, while also safeguarding the voice of the Fund’s poorest low-income members. In this respect, I hope all IMF members will support the historic agreement among G20 Leaders in Pittsburgh:
- to a shift in quota share to dynamic emerging market and developing countries of at least 5 per cent from over-represented to under-represented countries using the current IMF quota formula as the basis to work from; and
- to protect the voting share of the poorest in the IMF.
Legitimacy, however, is not just about quota. It is also reflected in an open, transparent and merit-based selection process for the Managing Director and senior management that does not reserve a place for select countries. The best candidate for the job needs to be selected, irrespective of nationality, based on their qualifications and factoring in the need for diversity.
By the 2010 Spring Meetings, the Executive Board should present to Governors a process for Managing Director and senior management appointments that fulfills these criteria. We as Governors should endorse that process through a Governors’ vote and implement it for all future competitions. This effort at the IMF needs to be matched by the World Bank and the regional development banks, as endorsed by G20 Leaders in Pittsburgh.
The second pillar that we need to continue to make concrete progress on is IMF credibility, which means two things. First, the IMF needs sufficient resources and the right tools to do the job. I am encouraged here because much has been achieved in the last year to bolster Fund resources and reform its lending facilities. Indeed, its credibility as global firefighter has been re-established through innovations like the Flexible Credit Line and low-income country facility reforms, the Special Drawing Right allocation, New Arrangements to Borrow expansion efforts, and the upcoming increase in IMF quotas. We now need to take time to see how these important reforms will work out in practice before we look to implement further changes.
But, as we look ahead, it is important that we collectively give greater consideration to the future role of the IMF in promoting international economic stability. While the traditional role of the Fund—to promote international monetary cooperation and economic stability by supporting a judicious balance of financing and adjustment—will continue to remain relevant, we must also face the reality that our economies now operate in an environment where private capital flows dwarf those from the official sector. Indeed, the international financial crises of the past 15 years have demonstrated the need to deal effectively with volatile cross-border flows of capital in a way that does not impose an unsustainable burden on members on the one hand, or undermine the efficient allocation of capital on the other.
This points to the need to strengthen the Fund’s mandate of macrofinancial stability in all its dimensions—financial sector, domestic macroeconomic policies, and currency arrangements. Credibility demands that the Fund’s mandate remain relevant and up-to-date.
To this end, I am very pleased that the Chairman of the International Monetary and Financial Committee (IMFC) is hosting a meeting dedicated solely to the question of the IMF’s mandate. It will be important that we all work together to articulate a common vision of the Fund’s role in the global architecture, one that reinforces that macrofinancial stability is at the core of the Fund’s mandate. Our first task in Istanbul must be to define a venue to continue this productive discussion, so that this important review may begin.
The second front on IMF credibility is gaining the trust of members, which—while the situation has definitely improved—in some cases remains a challenge for the IMF. In practice, this means the Fund must give its members analytically strong, candid, even-handed policy advice. Even-handed means similar circumstances yield similar advice, while reflecting relevant national circumstances. But the membership must also be receptive to critical advice. We cannot compromise on the Fund’s role as a tough truth teller.
The third pillar of IMF reform is effectiveness, and it means two things. First, the IMF needs a modern, accountable governance structure. Governors need an effective venue to set the strategic direction for the Fund and Bank, which argues for seeking improvements to the IMFC. I applaud our Chair for taking initiative in this regard. The format of this meeting is an improvement over the past, and we should continue to seek improvements in the deputies’ and communiqué development processes.
In turn, the Managing Director needs to implement the strategic direction set by Governors. That means giving the Managing Director the leeway to operate, but Governors and the Executive Board in turn must hold the Managing Director and senior management to account for their performance. The Executive Board needs to focus on strategic policies, streamline its workload and promote institutional accountability.
In short, we need to make progress on corporate governance issues if the Fund is to reach its full potential. This reform effort should maintain an effective forum for Governors to provide strategic direction to the Fund, and engage capitals in holding the IMF to account for its lending and surveillance decisions. Article IV reviews and the governance arrangements for IMF lending should encourage efficiency and accountability. Management and staff must have the independence they need to speak truth to power, but must be constrained by clearly defined responsibilities, performance standards, and reporting mechanisms. The Manuel Committee report and the recommendations of the IMF’s Independent Evaluation Office will be very useful in this exercise.
While I believe these reforms are needed, they are not enough. The IMF is a member-based institution, and if members do not take their responsibilities seriously, it does not matter if the IMF is legitimate or credible. It still will not be effective. The Fund membership needs to improve its record of responding to and implementing IMF policy advice.
As mentioned, this latest crisis has demonstrated the interconnectedness of the global economy. We all face immense challenges that will only be tackled through collective action and we need to avoid policies that have negative spillover effects for each other. Thus, transparency amongst governments and with markets is critical. Article IV and Financial Sector Assessment Program (FSAP) reports have a key role—IMFC members should publish their reports as a symbol that we are taking our responsibilities seriously. Systemically important countries should also commit to regular, published FSAP updates.
Beyond transparency, real cooperation is needed between IMF members and with the Fund. This is why I fully support G20 efforts to institute a new peer review mechanism under the G20 Framework for Strong, Sustainable, and Balanced Growth, announced in Pittsburgh last week. While the modalities for this exercise must be set, I see a strong role for the IMF in this process as a trusted advisor and tough truth teller.
In closing, we have made significant progress on IMF reform since last year. We now need to finish the job to ensure the institution is legitimate, credible and effective. We all need to show flexibility, look beyond narrow self-interests and invest political capital in making this happen, because we need a strong IMF to help sustain the cooperation we need to succeed over the coming years. I hope the roadmap that I have laid out here will help in this regard.
Canadian Statements at the Development Committee of the Boards of Governors of the World Bank and IMF
The Honourable Jim Flaherty, Minister of Finance for Canada
on behalf of Antigua and Barbuda, Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Guyana, Ireland, Jamaica, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines
April 26, 2009
The financial and economic turmoil that began in advanced economies is now truly a global crisis that is spilling over into developing countries, and with serious repercussions. This meeting of the Development Committee is an opportune time for us to discuss the risks for developing countries and share views on what can be done to help.
It is now clear that for many countries, the effects of the crisis are being felt sooner and are harder than expected. Over the last few months, the International Monetary Fund (IMF) and World Bank have adjusted their growth projections for developing countries downwards rapidly and sharply, with negative growth now projected for Latin America and the Caribbean, Central and Eastern Europe, and Central Asia.
The crisis is hitting developing countries from a number of directions—a deterioration of trade, sharply lower commodity prices, and a serious fall in private capital flows, foreign direct investment and remittances. This is made worse by the fact that the crisis is following on the heels of a global food and energy crisis that has drawn down the fiscal space that existed in many countries. The risks in terms of deepening poverty, child mortality and loss of development progress are significant.
Staving off an extended global recession and promoting early recovery is of primary importance in containing the impact on all countries, whether advanced, middle-income or low-income economies. In this respect, leaders provided a strong response at the London Summit on April 2, 2009, including commitments in the four highest priority areas: fixing the financial system and getting credit flowing, implementing coordinated stimulus activity, avoiding protectionism and strengthening financial market regulation. Restoring global growth to a sustainable, balanced path is the most significant thing members can do to help mitigate the impact of the crisis on developing countries.
At the same time, assistance to help developing countries through the turmoil will be critical. The World Bank Group and IMF have begun responding to needs and working to improve the tools they have available. We need to ensure that the World Bank and IMF can play a counter-cyclical role through the crisis, providing additional assistance to developing countries through the economic downturn. This is not only a matter of providing a higher volume of assistance, but also of having the right tools to provide assistance that is timely and targeted to the most vulnerable populations. At the same time, however, we need to be mindful of avoiding a new build-up of unsustainable debt levels in low-income countries and not jeopardizing the financial sustainability of the international financial institutions themselves. Finally, it remains important to make progress on governance reforms at the World Bank to strengthen it as a platform for international cooperation.
World Bank Group Assistance
We very much support the concrete actions taken by the World Bank Group and IMF in this respect. For the World Bank, this includes the near tripling of lending from the International Bank for Reconstruction and Development (IBRD) to provide up to $100 billion over three years, the crisis response facilities set up by the International Finance Corporation (IFC), and the new Vulnerability Financing Facility to fast-track funding to low-income countries for critical social and infrastructure spending, food security and social safety nets to protect the most vulnerable. We commend the Bank for moving quickly on these initiatives, for exploring innovative responses and for its efforts to mobilize broad participation by donors and the private sector.
We note that small island states in the Caribbean region have been particularly hard hit by the fuel, food and economic crises. These events have caused a significant fall in remittances, inflation in essential food items, and negative growth in their tourism sector. We hope to see the World Bank direct more resources to these countries, especially with the new crisis mechanisms in place, and we urge it to develop innovative approaches to assist these countries and to look at what policies might be unduly constraining their access to financing.
Canada stands ready to assist developing countries through the crisis. We are providing US$200 million to the IFC’s Global Trade Liquidity Program to help counter the ongoing collapse of trade finance in the developing world.
Last year, Ireland was the sixth-largest aid donor in the world in per capita terms. Notwithstanding recent difficult decisions in relation to adjustments of the Irish overseas aid program, this is likely to be maintained in 2009. Ireland remains very much engaged in overseas development, with a clear emphasis on hunger, food security and poverty alleviation, especially in Africa.
At the time of the United Nations (UN) Summit last September, Ireland launched the Report of the Hunger Task Force, which was warmly welcomed and focuses on three areas where action can have a great impact: increasing smallholder agricultural productivity in Africa; targeting maternal and infant under-nutrition; and making hunger eradication a priority at both the national and international level. Ireland also announced, in January 2009, that the eradication of hunger would become a cornerstone of the Irish aid program, and appointed a Special Envoy for Hunger to assess the international response to the global food security crisis and advance measures to tackle this challenge. Ireland is also actively working with the UN Secretary-General’s High Level Task Force on the Global Food Security Crisis, and is keen to see the development of a new partnership that can put hunger at the top of the political and development agenda.
IMF Assistance for Low-Income Countries
The IMF has an essential role to play in assisting those with urgent balance of payment needs and we therefore welcome the action it has taken to promptly implement the outcomes of the London Summit, including the proposed doubling of access limits for low-income countries in a manner that is consistent with debt sustainability. Looking ahead, the IMF has laid out an ambitious work plan to thoroughly review its low-income country facilities and financing framework to ensure that it has the right tools to help the poorest and most vulnerable respond to this and future crises. I am encouraged by the direction in which this work is headed, and I encourage the Fund to work with the Executive Board to complete this review process rapidly.
As the international financial institutions and donors continue to explore ways to mobilize additional resources to help low-income countries through the crisis, it will be important to keep in mind the need to avoid a new build-up of unsustainable debt levels. We must be mindful of safeguarding the significant progress achieved under the Enhanced Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative. We believe that the emphasis should be on providing additional resources to low-income countries in the form of grants, and proposals to provide more non-concessional resources to low-income countries should be approached with great caution, as countries’ risk of debt distress could shift in line with deteriorating economic conditions.
World Bank Financial Sustainability
As a financial institution, the World Bank has itself been affected by the crisis, with the result that, should this be a prolonged crisis, the IBRD and IFC will experience pressure on their capital adequacy and ability to generate net income, including for continued contributions to support the International Development Association. It is essential that the IBRD and IFC remain financially healthy and viable in order to play their critical role in economic growth and poverty reduction, and we ask management to fully assess the implications of a prolonged crisis on the resource adequacy of these institutions and the role they will be able to play in crisis response. Management should bring forward a range of measures to strengthen the IBRD and IFC’s financial positions, for consideration by the Executive Board.
World Bank Governance Reforms
The economic crisis underscores the need for the international community to work together, and in this respect the World Bank and IMF play a critical role as both are key platforms for international cooperation and dialogue. A clear demonstration of this is the central role they are playing in monitoring the impact of the crisis on developing countries, bringing it to the attention of the international community and encouraging action. These institutions are important assets for the international community, and it is important that we ensure their legitimacy and effectiveness for the future. An important part of this is completing the World Bank’s governance reforms.
This includes the ongoing work to improve the voice and participation of developing countries in the institution’s decision-making processes. We were very supportive of the agreement reached last fall to add a third seat on the Executive Board for Sub-Saharan Africa and to double "basic votes" to increase the relative voting power of the poorest and smallest member countries. Within this constituency, the governments of Ireland, Jamaica, Barbados, the Bahamas and Saint Lucia have already formally ratified this agreement and others, including the Government of Canada, are now taking necessary steps to do so.
Over the next few months, we will actively participate in shaping a further phase of reforms, focused on a review and realignment of shareholding. We believe that an equitable shareholding alignment would be best achieved through the regular and reliable application of a World Bank-specific formula that has global economic weight as its foundation, but may also include other relevant factors given the institution’s development mandate.
In addition, we note the importance of the work being done by the Executive Board on internal governance reforms, to support efficient and effective Executive Board decision-making, and to ensure that it provides strong oversight, accountability and strategic direction, while also leaving World Bank management with enough flexibility to respond to changing recipient country needs and circumstances in a timely manner.
We also strongly believe that the heads and senior leadership of the international financial institutions, including the World Bank and IMF, should be appointed through open, transparent and merit-based selection processes, regardless of nationality. We are pleased that many members have expressed support for this.
October 5, 2009
We would like to thank our host, the Turkish government, for having us here today in this beautiful and historic city.
The financial and economic crisis has underscored just how valuable it is for us to have strong international financial institutions to support us in global cooperation. These institutions have been instrumental in alerting us to the challenges facing developing countries through the crisis and have been on the front line in responding to their needs.
This meeting comes at an important juncture. We have worked hard over the last few months to ensure swift action. The multilateral development banks have ramped up their lending significantly and are on track to meet the goal set at the London Summit of providing $100 billion in additional financing. They have also set up specialized crisis facilities to tackle critical gaps, such as food security and trade finance. And, shareholders have helped to support this with capital and other financial contributions.
We now have an opportunity to harness this momentum to move forward on key institutional reforms. In this regard, I want to reiterate the importance of strengthening the legitimacy, credibility and effectiveness of the World Bank Group. We need to take the steps necessary to ensure that this institution meets all three of these essential tests if we want it to continue to serve as a strong platform for our cooperation into the future.
- A legitimate World Bank Group requires that voice and representation reflect the economic realities of the 21st century.
- A credible World Bank Group requires sufficient resources and responsive toolkits.
- Finally, an effective World Bank Group requires a strategic and accountable governance structure.
It is important that we continue to move forward on the World Bank Group’s voice and participation reforms and meet our goal of reaching a final agreement by spring 2010.
Last fall we reached an agreement on phase one of these reforms. We now need to follow through with it, and to do so, we need members to signal their formal acceptance. Many of the members in our constituency have done so, including members from the Caribbean, as well as Ireland. I am pleased to say that Canada has taken many of the steps required for formal acceptance and we intend to complete the process as soon as possible.
On phase two of these reforms, including the realignment of shareholding, we think it is worth taking stock of the progress we have made so far. In our view, we have taken two very important steps forward. First, we have broad recognition that the World Bank should finally have its own unique formula for representation and that the past practice of basing it loosely on International Monetary Fund quotas and making ad hoc adjustments is no longer adequate. Second, we have support for this to be a dynamic process, so that representation can reflect the natural evolution of our global economy. This will provide the foundation to move over time towards parity in voting power and beyond, between developed and developing countries. At the Pittsburgh Summit, Leaders agreed that in this phase there would be an increase of at least 3 per cent of voting power for developing and transition countries.
Developing a formula that is acceptable to the membership as a whole and is right for the Bank as a financial institution will require a lot of work over the next six months. In Pittsburgh, Leaders also laid down key principles to help guide this exercise.
First, as the World Bank is a financial institution, economic weight should remain the primary foundation for the shareholding formula. The formula should be dynamic in order to take into account changes over time in economic weightings.
Second, the formula should take into account the relative strengths of donors’ contributions to the International Development Association (IDA), in order to provide incentives to maintain strong support.
Third, there is a need to be fair to everyone in this exercise, which means setting one standard from which under-represented countries will move up and over-represented countries will move down in shareholding, regardless of whether they are categorized as a developed or developing country. That said, we support the preservation of the voting power of the smallest and poorest states, to ensure an adequate minimum level of voice.
And finally, voice must be matched by responsibility. In this regard, it will be critical that new shares have an appropriate paid-in portion, so that we are all making equal effort to support the Bank’s financial capacity.
The efforts of the World Bank Group in responding to the crisis should be recognized—it moved quickly to more than triple lending and put in place innovative, specialized crisis facilities such as the Global Food Response Program and the Global Trade Liquidity Facility. By being flexible and creative, the World Bank Group has succeeded in front-loading a large amount of resources.
The World Bank Group’s vigorous response has placed pressure on its resources and we are open to a dialogue on its financial capacity—it must have enough resources to address the crisis and fulfill its important mandate post-crisis.
However, several important factors remain unknown at this point. The path of the recovery is unknown, and this has a great influence on what its financing needs will be going forward. It is also unclear how much of the $1.5 billion in paid-in capital that is currently in an unusable form at the Bank will be released as usable equity. We also do not know how much capital will come in through the upcoming voice reform agreement.
As the World Bank Group does not face an immediate financing shortfall, however, we can take the time necessary to evaluate its long-term needs and do a comprehensive analysis of all possible solutions, including temporary ones. We should consider how mechanisms such as contingent capital could be used to increase World Bank lending at times of crisis. On this same timeline, we can also look at whether the current pricing model is sustainable.
Credibility also requires the World Bank Group to have a toolkit that is responsive to the needs of its clients. Through the crisis, the Bank has made a lot of effort to help developing countries protect public expenditure programs and implement urgent measures. But we need to continue strengthening the Bank’s crisis response capabilities, especially in the predictability and flexibility of its financial support. In particular, the Bank has had limited flexibility in responding to the needs of low-income countries, and we need to look at options to address this. An important consideration is how to provide assistance through times of difficulty without creating future debt sustainability problems.
With respect to fostering a more strategic and accountable governance structure, we think the internal governance reforms led by the Executive Board’s Committee on Governance and Administrative Matters are very important. The reforms aim to lift the Executive Board and senior management out of transactional procedures to allow them to focus more on setting strategic direction. However, we need to make sure that we follow through properly on these, and we believe it would be useful to confirm in the spring that full implementation has been achieved.
Another area for continued attention is deepening the country-led development model and enhancing the Bank’s ability to listen and respond to its client’s individual needs. In this respect, true decentralization of decision making is critical, including in fragile states. We believe we also need more opportunities to hear directly from borrowing countries about their experiences with the Bank. In this respect, we would ask management to strengthen the voice of borrowing countries in the IDA replenishment discussions, including new ways of facilitating real dialogue and collaborative generation of ideas.
Finally, I want to reiterate my support for open, merit-based and transparent selection processes for the heads and senior leadership, irrespective of nationality, at the World Bank Group and at all other international financial institutions.
In conclusion, the crisis has demonstrated the importance of international cooperation. The international financial institutions, including the World Bank Group, are a concrete manifestation of that cooperation and it is incumbent on the membership to ensure that they are capable of supporting and sustaining our collective efforts. This requires that we work together to strengthen their legitimacy, credibility and effectiveness.
Communiqués of the International Monetary and Financial Committee of the Board of Governors of the IMF, 2009
April 25, 2009
1. The International Monetary and Financial Committee held its nineteenth meeting in Washington, D.C. on April 25, 2009, chaired by Dr. Youssef Boutros-Ghali, the Minister of Finance of Egypt. It will hold its next meeting in Istanbul, Turkey on October 4, 2009.
2. We restate our resolve to work collaboratively to restore international financial stability and global growth. We underline the central role of the IMF and welcome the vigorous actions taken to support countries in responding to the crisis. We commit ourselves to further strengthening the Fund’s ability to assist in meeting members’ external needs. We welcome the prompt response by Fund members in committing sizable support to the Fund’s loanable resources, and encourage others to come forward.
3. We are committed to taking additional actions needed to ensure economic recovery, and in particular to:
- Take further decisive and cooperative action necessary to ensure the soundness of systemically important institutions, and to restore the financial health of banks, domestic lending, and international capital flows;
- Deliver the scale of sustained fiscal effort necessary to restore growth, within credible fiscal frameworks to ensure long-term sustainability;
- Maintain expansionary monetary policies where appropriate and for as long as needed, consistent with price stability; and
- Develop credible exit strategies from extensive government action as the crisis subsides.
4. We stress the importance of members taking account of the effects of their economic, financial, and investment policies on others, and refraining from protectionism in any form. The IMFC calls for urgently concluding an ambitious and balanced Doha Development Round, which will help boost the recovery of the global economy, and emphasizes the importance of ensuring the availability of sufficient trade finance.
5. We call on the IMF to assess regularly the actions taken and still required to restore macroeconomic stability, sustainable growth, and international financial stability. We will evaluate progress and the need for further action at our next meeting.
6. We welcome the G-20 Leaders’ Statement, including the Declaration on Strengthening the Financial System. We underscore the importance of enhancing sound regulation, strengthening transparency, and reinforcing international cooperation. We urge the IMF to play a key role in contributing to international efforts toward these ends, consistent with its mandate.
Mobilizing Fund Resources
7. We call on the IMF to continue acting promptly to make available, under adequate safeguards, substantial resources to member countries with external financing needs. Since the IMF is, and shall remain, a quota-based institution, we urge a prompt start to the fourteenth general review of quotas so that it is completed by January 2011. We have agreed to increase the resources available to the IMF through immediate financing from members of US$250 billion, subsequently incorporated into expanded and more flexible New Arrangements to Borrow (NAB), increased by up to US$500 billion, and to consider market borrowing if necessary. We welcome progress by the NAB meeting yesterday, chaired by Japan and attended by NAB current and potential participants, and ask the group to carry this work forward expeditiously. While an expanded NAB is an important backstop for Fund resources, we recognize that it is not a substitute for a quota increase. We also stress the need to ensure that the Fund has adequate financing capacity to meet the needs of low-income countries.
8. A key achievement of today’s meeting is ensuring the doubling of the Fund’s loanable resources. The Committee commends the loan by Japan already approved, and recent commitments made by Canada, members of the European Union, Norway, Switzerland, and the United States.
Fund Programs and the Global Financial Safety Net
9. We welcome the overhaul of the IMF’s lending and conditionality framework, including the new Flexible Credit Line (FCL) and high access precautionary arrangements (HAPAs). We also welcome the doubling of normal access limits for all borrowers, including under the PRGF and ESF. We support sufficient flexibility within IMF-supported programs, consistent with the Fund’s mandate. In particular, we support giving due attention to the fiscal needs of countries with solid medium-term fiscal prospects, and the needs arising from bank restructuring and recapitalization, working with MDBs as appropriate. We call on the IMF to ensure the successful and evenhanded implementation of this new lending and conditionality framework, and ask the Managing Director to report on progress at our next meeting.
10. To strengthen the global financial safety net in the face of this severe crisis, the Committee supports:
- Doubling the Fund’s concessional lending capacity for low-income countries, while ensuring debt sustainability, and exploring scope for increased concessionality. Subsidies could be financed through a combination of bilateral contributions—possibly by new donors—and the Fund’s resources and income, including the use of additional resources from agreed gold sales, consistent with the new income model. Separately, the Committee calls on donors to honor their existing ODA commitments;
- Rapid completion of the reform of the Fund’s facilities for low-income countries to make them more responsive to diverse country needs, and the review of options to enhance the flexibility within the Debt Sustainability Framework; and
- Rapid approval by members of (a) the pending amendment of the Articles of Agreement for a special one-time allocation of SDRs; and (b) a general allocation of SDRs equivalent to US$250 billion, to become effective well before the 2009 Annual Meetings. We call on the IMF to put forward a concrete proposal assessing the case for the allocation and describing how it could be implemented.
11. We stress the need for efforts by both the Fund and members to enhance the effectiveness of surveillance and follow up by members of the Fund’s recommendations. Particular attention to sources of systemic risks will be essential to help prevent future crises. We call for improving the surveillance process through, inter alia, greater focus on the effectiveness of the policy dialogue and clear communications, with an emphasis on candor, evenhandedness, and independence. We look forward to reviewing the Fund’s transparency policy by the Annual Meetings.
12. We call for enhancing IMF surveillance through improving its analysis of the macro-financial linkages, cross-border spillovers, and sources of systemic risk wherever they may arise. We welcome the work of the IMF with the Financial Stability Board (FSB) to provide better indicators of systemic risks and address data gaps, and underline the importance of international cooperation in preventing such systemic risks. We welcome the work so far on the joint IMF-FSB early warning exercise, and look forward to discussing means of facilitating peer review and incorporating continuous monitoring of risk indicators in surveillance exercises that would provide signals of increased vulnerability and needed policy responses at our next meeting. We will also review progress in reshaping the FSAP. Embedding financial sector surveillance more effectively as an element of the Article IV consultation, and integrating its results into the broader macroeconomic surveillance work are important. We welcome the commitment by G20 members to undertake an FSAP.
Quota and Voice Reform
13. Early action by national authorities to make the April 2008 agreements on quota and voice reform and on the Fund’s new income model effective is crucial. The upcoming review of quotas is expected to result in increases in the quota shares of dynamic economies, particularly in the share of emerging market and developing countries as a whole. The Committee also looks forward to further work by the Executive Board on elements of the new quota formula that can be improved before the formula is used again. This work should start before the 2009 Annual Meetings.
14. Also, broader reforms to ensure International Monetary and Financial Committee active participation in the Fund’s strategic decision making process should be promptly considered. The Committee calls on the Executive Board to report on this issue, as well as the Report by the Eminent Persons Group, and the work done by other groups, on enhancing the IMF governance structure by the next Annual Meeting in October 2009.
October 4, 2009
The International Monetary and Financial Committee held its twentieth meeting on October 4, 2009 in Istanbul, chaired by Dr. Youssef Boutros-Ghali, Minister of Finance of Egypt.
Policies for Sustainable Recovery and Financial Stability
1. Decisive and concerted policy actions are yielding signs of early recovery. We commit to maintaining supportive fiscal, monetary, and financial sector policies until a durable recovery is secured, and stand ready to act further as needed to revive credit, recover lost jobs, and reverse setbacks in poverty reduction. We emphasize that agreed financial sector and regulatory reforms should be completed without delay. We reaffirm our collective responsibility to avoid protectionism in all its forms. It is also important to continue international support for low-income countries’ efforts to implement their long-term development plans and to combat poverty, and to continue monitoring the impact of the crisis on these economies.
2. We welcome the outcomes of the G-20 Summit in Pittsburgh and support its commitment to articulating policies for strong, sustained, and balanced growth in the global economy. Building on the IMF’s central role in bilateral and multilateral surveillance, we call on the Fund to assist the G-20 mutual assessment by developing a forward-looking analysis of whether policies are collectively consistent with more sustainable and balanced trajectories for the global economy. We will remain vigilant to prevent financial sector excesses and the reaccumulation of unsustainable global imbalances. To this end, all countries need to reinvigorate their structural reform agendas supported by sound fiscal, monetary, exchange rate, and financial sector policies. We look forward to an update on these efforts by the time of our next meeting.
3. As the recovery takes hold, we are committed to work together in articulating and implementing credible and coordinated exit strategies for the withdrawal of public support for the financial sector, orderly unwinding of monetary policy support, and fiscal consolidation needed to underpin long-term sustainability. We call on the Fund to develop, by the time of our next meeting, principles for orderly and cooperative exit strategies taking into account country specific circumstances, and to advise on the development of exit policies and their consistency with global recovery and macro-financial stability.
4. Quota reform is crucial for increasing the legitimacy and effectiveness of the Fund. We emphasize that the IMF is and should remain a quota-based institution. We recognize that the distribution of quota shares should reflect the relative weights of the Fund’s members in the world economy, which have changed substantially in view of the strong growth in dynamic emerging market and developing countries. In this context, we support a shift in quota share to dynamic emerging market and developing countries of at least five percent from over-represented countries to under-represented countries using the current quota formula as the basis to work from. We are also committed to protecting the voting share of the poorest members. We urge all members to promptly consent to the still pending 2008 quota and voice reform. We call on the Executive Board to meet the agreed target of January 2011 for completing the Fourteenth General Review of Quotas. We ask the Fund to report on progress achieved in these areas at our next meeting.
5. We thank the Executive Board for its report on Fund governance reforms. We ask the Executive Board to continue to examine the full range of governance reforms. The Executive Board will report on progress on these issues at our next meeting. We intend to adopt an open, merit-based and transparent process for the selection of IMF management at our next meeting.
Fund Surveillance and Mandate
6. Important strides have been made to enhance Fund surveillance, including the launch of the IMF-FSB Early Warning Exercise, and ongoing efforts to strengthen financial sector and cross-country analysis. We ask the Fund to begin implementing rapidly the new flexible framework for the Financial Sector Assessment Program (FSAP), and to ensure that it can deliver sharper macro-financial surveillance and better integration into bilateral surveillance. Undertaking regular FSAP reviews and updates, particularly by systemically important countries, would contribute to effective macro-financial surveillance. We encourage further strengthening cross-country, regional, and multilateral surveillance, and look forward to the review and enhancement of the Fund’s transparency policy. We endorse the updated Surveillance Priorities, and call on members to work with the Fund in achieving its goals.
7. More broadly, the crisis has shown that a further reassessment of the Fund’s mandate is in order. We call on the Fund to review its mandate to cover the full range of macroeconomic and financial sector policies that bear on global stability, and to report back to the Committee by the time of the next Annual Meetings.
Fund Financing and International Liquidity
8. We thank members that have committed temporary resources to the Fund, allowing more than a tripling of its lending capacity in response to the crisis, and welcome the expected agreement on a renewed and more flexible NAB expanded by over US$500 billion, which will be reviewed in light of the outcome of the Fourteenth General Review of Quotas. In the context of this review, the Fund should examine the appropriate size and composition of its resources needed to safeguard its long-term ability to meet members’ needs, consistent with the Fund’s status as a quota-based institution. We look forward to discussing the size of the overall increase in quotas, which also helps facilitate changes in quota shares.
9. We commend the Fund’s innovative efforts to improve financial safety nets for member countries. Fund financial support to many members as well as the SDR allocations of US$283 billion have helped restore confidence. The Flexible Credit Line (FCL), in particular, has provided important support to a number of emerging market economies. At the same time, increased concessional support has provided additional space in low-income countries for countercyclical policies.
10. The Fund should continue to strengthen its capacity to help its members cope with balance of payments problems, including financial volatility, and reduce the perceived need for excessive reserve accumulation. We ask the Fund, by the time of the next Annual Meetings, to study and report on the future financing role of the Fund. Building on the success of the FCL and high access precautionary arrangements, this study should consider whether there is a need for enhancing financing instruments and whether this can offer credible alternatives to self-insurance, while preserving adequate safeguards. We also call on the Fund to study other policy options to promote long-term global stability and the proper functioning of the international monetary system.
11. The overhaul of the Fund’s concessional lending framework and its commitment to more than double concessional lending are welcome and significant steps. They will help meet the increased financing needs of low-income countries, with due regard for debt sustainability. We look forward to full implementation of the new income model, including the agreement on gold sales, and the commitment to provide additional subsidy resources. We welcome the commitment by some members to provide additional loan and subsidy resources. We urge other potential contributors to step up expeditiously their loan and subsidy contributions to ensure adequate resources for the agreed increase in IMF concessional lending.
12. The next IMFC meeting will be held in Washington, D.C. on April 24, 2010. An IMFC Deputies’ meeting will be convened to prepare our next meeting and to take stock on progress made.
Communiqués of the Development Committee of the Boards of Governors of the World Bank and IMF, 2009
April 26, 2009
1. The Development Committee met today, April 26, in Washington, D.C.
2. The global economy has deteriorated dramatically since our last meeting. Developing countries face especially serious consequences, as the financial and economic crisis turns into a human and development calamity. Hard-earned progress towards the Millennium Development Goals (MDGs) is now in jeopardy. The crisis has already driven more than 50 million people into extreme poverty, particularly women and children. We must alleviate its impact on developing countries and facilitate their contribution to global recovery.
3. The World Bank Group (WBG) and the IMF have shown leadership and complement each other in helping developing countries respond to the crisis, enabling countercyclical measures, and helping to bridge the huge financing gap, including efforts to revive private capital flows. Multilateral institutions need the resources and capacity for effective crisis response and prevention. We welcomed member countries’ commitments to a substantial increase in resources for the IMF.
4. More needs to be done as the crisis unfolds further. We now need to translate our respective commitments, including those made by the participants at the recent London Summit, into concerted action and additional resources. We urged all donors to accelerate delivery of commitments to increase aid, and for us all to consider going beyond existing commitments.
5. We welcomed the WBG’s efforts to ensure a timely crisis response while maintaining its focus on long term development challenges, including those posed by climate change and the need to accelerate progress towards the MDGs. We noted the expected trebling of IBRD lending this fiscal year and the fast tracking of IDA 15 commitments. We supported the initiatives the WBG has launched and encouraged their timely implementation:
- To protect the poorest, the Bank has set up the Vulnerability Financing Facility, including the Global Food Crisis Response Program and the new Rapid Social Response Program. IFC has also created the Microfinance Enhancement Facility to help poor borrowers.
- To reinvigorate trade finance, IFC has expanded its Global Trade Finance Program from $1 billion to $3 billion, and has also launched its Global Trade Liquidity Program, expected to support up to $50 billion of trade over the next three years.
- To maintain infrastructure development and create jobs, the Bank has established the Infrastructure Recovery and Assets Platform. The Bank will lend up to $15 billion a year for infrastructure, while IFC has launched the Infrastructure Crisis Facility.
- To help support the financial sector, IFC has created the Capitalization Fund, to provide additional capital for developing country banks. MIGA has extended guarantees to loans to Eastern Europe for coverage of $500 million.
Many of these initiatives are designed to mobilize more resources, both public and private. We welcomed the additional contributions that have been made and urged governments to consider further support. In addition, we called upon the WBG to update as appropriate its policies, instruments and strategies in light of lessons learned from the crisis.
6. We confirmed our support for making optimal use of IBRD’s balance sheet with lending of up to $100 billion over three years. Given the possibility of a slow recovery, we considered the potential need to deploy additional resources and asked the WBG to review the financial capacity, including the capital adequacy, of IBRD and IFC, and the adequacy of the concessional resources going to IDA countries, for our further consideration at the 2009 Annual Meetings.
7. The crisis and the need for a strong multilateral response further highlight the relevance of ensuring enhanced voice and participation of developing and transition countries in the governance of the WBG. Based on agreement at our last meeting for the Board to develop principles, criteria and proposals for Bank shareholding, we agreed to accelerate work on the second phase of the reform with a view to reaching agreement by the 2010 Spring Meetings. This must involve all shareholders in a transparent, consultative and inclusive process.
8. We welcomed the Board’s review of internal governance and asked the WBG to continue the work, as part of the comprehensive approach to strengthening WBG governance and overall effectiveness.
9. The Committee’s next meeting is scheduled for October 5, 2009 in Istanbul.
October 5, 2009
1. The Development Committee met today, October 5, in Istanbul. We wish to convey our sympathy to the people of Asia and the Pacific affected by the recent natural disasters, and the Bank stands ready to assist them.
2. The global economy has shown signs of recovery, but risks remain. In many developing countries, the impact on poverty and on the most vulnerable people is rising. As a result of the crisis, by end-2010, some 90 million more people risk being forced into extreme poverty. Hard-earned progress towards the Millennium Development Goals is in danger of being reversed. To protect the poor, we urged members to follow through on commitments to increase aid and its effectiveness. Developing countries play an important role in the global recovery and their progress will be essential for future growth. We welcomed continued progress by developing countries to improve their policy frameworks, and recognized that addressing financing constraints and investing in developing countries is critical for sustainable growth. We also acknowledged that the revival of world trade and investment will drive growth and urged members to avoid protectionist measures.
3. We welcomed the vigorous response by the World Bank Group (WBG) to the crisis, noting that IBRD’s commitments almost tripled to $33 billion this year, and IDA’s reached an historic level of $14 billion. IFC combined strong innovation with effective resource mobilization, providing $10.5 billion in investments from its own account, and mobilizing an additional $4 billion through new initiatives in global trade, infrastructure, microfinance, and bank capitalization. We stressed the importance of incorporating appropriate lessons from the crisis into the WBG’s future work. We support the WBG’s efforts to tackle long term development challenges in line with its comparative advantage, including investing in infrastructure development, support for private sector led growth and employment, climate change, food security, fragile states, and governance reform, including the Stolen Assets Recovery initiative. We welcomed the ongoing work on a post-crisis strategy for the WBG and look forward to reviewing it at our next meeting. We called on the WBG to work with the regional development banks to assess their respective roles and methods of collaboration.
4. We welcomed the timely and effective efforts of the IMF. Member countries are delivering on promises to triple the IMF’s resources. We welcomed the new SDR allocation, the more-than-doubling of the IMF’s medium term concessional lending capacity to $17 billion, the reform of IMF facilities for low-income countries (LICs), and streamlining of IMF structural conditionality. We supported the joint efforts by the Fund and the Bank to increase the flexibility of the Debt Sustainability Framework and the Financial Sector Assessment Program.
5. We encouraged the WBG to make full use of its existing resources, and are pleased the WBG is on track to provide over $100 billion in IBRD financing over three years. We welcomed the progress in examining measures to improve the WBG’s financial capacity and sustainability. We committed to ensure that the WBG has sufficient resources to meet future development challenges, and asked for an updated review, including on the WBG’s general capital increase needs, to be completed by Spring 2010 for decision. The review should also address all possible contingent approaches as well as keep in mind the infusion of capital that would come from a special capital increase for voice reform. In considering the potential general capital increase needs of the IFC, the review should also examine the use of hybrid capital.
6. Core spending on health, education, social safety nets, infrastructure, and agriculture in LICs needs to be protected, while maintaining debt sustainability. In these circumstances, we committed to ensure that IDA has the concessional resources it needs. We committed to explore the benefits of a new crisis response mechanism in IDA to protect LICs from crises, to be considered as part of the IDA 15 Mid-term Review. We called on the Bank to develop a multilateral trust fund to support the Food Security Initiative for LICs in coordination with other relevant multilateral institutions and initiatives. We also asked the WBG to review further ways to make more resources, including IBRD enclave lending, available to LICs.
7. We committed to pursue governance and operational effectiveness reform in conjunction with voting reform to ensure that the World Bank is relevant, effective, and legitimate. We stressed the importance of moving towards equitable voting power in the World Bank over time through the adoption of a dynamic formula which primarily reflects countries’ evolving economic weight and the World Bank’s development mission, and that generates in the next shareholding review a significant increase of at least 3% of voting power for developing and transition countries, in addition to the 1.46% increase under the first phase of this important adjustment, to the benefit of under-represented countries. While recognizing that over-represented countries will make a contribution, it will be important to protect the voting power of the smallest poor countries. We recommitted to reaching agreement by the 2010 Spring Meetings.
8. Continuing improvements in the corporate governance, accountability and operational effectiveness of the WBG are essential for confronting the development challenges of the 21st century. We welcomed progress to date and asked for a report for our next meeting on progress and proposals for advancing these reforms.
9. The Committee expressed its appreciation to the Government of the Republic of Turkey for hosting the Annual Meetings. It thanked Mr. Agustin Carstens, Secretary of Finance of Mexico, for his valuable leadership and guidance as Chairman of the Committee during the past three years, and welcomed his successor, Mr. Ahmed bin Mohammed Al Khalifa, Minister of Finance of Bahrain.
10. The Committee’s next meeting is scheduled for April 25, 2010 in Washington, DC.
Operational Highlights and Key Financial Indicators of the IMF for Fiscal Year 2009
The flow of IMF disbursements (purchases) was larger than the flow of repayments (repurchases) in FY2009. However, between FY2005 and FY2008, the opposite was the case. FY2009 saw a large increase in purchases and a small decrease in repurchases.
|(millions of SDRs)|
|Total repurchases and repayments||3,324||2,301|
|Note: Numbers may not add due to rounding.|
The IMF’s outstanding credit increased significantly from FY2008 to FY2009, primarily due to increases in purchases (use by members) of Stand-By Arrangements.
|(millions of SDRs)|
|Supplemental Reserve Facility||–||–|
|Compensatory and Contingency Financing Facility||38||33|
|Systemic Transformation Facility||–||–|
|Subtotal, General Resources Account||5,896||20,426|
|Note: Numbers may not add due to rounding.|
Please see the IMF 2009 Annual Report for detailed data regarding the policies and finances of the IMF. All data referenced in this annex can be found in the appendices of the IMF 2009 Annual Report.
|Member||Date of arrangement||Expiration date||Amount approved||Undrawn balance|
|(millions of SDRs)|
|Angola||November 23, 2009||February 22, 2012||858,900||629,860|
|Armenia||March 6, 2009||July 5, 2011||533,600||231,660|
|Belarus||January 12, 2009||April 11, 2010||2,269,517||437,929|
|Bosnia and Herzegovina||July 8, 2009||June 30, 2012||1,014,600||831,970|
|Costa Rica||April 11, 2009||July 10, 2010||492,300||492,300|
|Dominican||November 9, 2009||March 8, 2012||1,094,500||894,500|
|El Salvador||January 16, 2009||March 31, 2010||513,900||513,900|
|Gabon||May 7, 2007||May 6, 2010||77,150||77,150|
|Georgia||September 15, 2008||June 14, 2011||747,100||364,600|
|Guatemala||April 22, 2009||October 21, 2010||630,600||630,600|
|Hungary||November 6, 2008||October 5, 2010||10,537,500||2,900,500|
|Iceland||November 19, 2008||May 31, 2011||1,400,000||735,000|
|Latvia||December 23, 2008||March 22, 2011||1,521,626||807,834|
|Maldives||December 4, 2009||December 3, 2012||49,200||45,100|
|Mongolia||April 1, 2009||October 1, 2010||153,300||45,990|
|Pakistan||November 24, 2008||December 30, 2010||7,235,900||3,066,565|
|Romania||May 4, 2009||May 3, 2011||11,443,000||5,355,000|
|Serbia||January 16, 2009||April 15, 2011||2,619,120||1,597,975|
|Sri Lanka||July 24, 2009||March 23, 2011||1,653,600||1,240,200|
|Ukraine||November 5, 2008||November 4, 2010||11,000,000||4,000,000|
|Seychelles||December 23, 2009||December 22, 2012||19,800||18,920|
|Flexible Credit Line|
|Colombia||May 11, 2009||May 10, 2010||6,966,000||6,966,000|
|Mexico||April 17, 2009||April 16, 2010||31,528,000||31,528,000|
|Poland||May 6, 2009||May 5, 2010||13,690,000||13,690,000|
|Poverty Reduction and Growth Facility|
|Afghanistan||June 26, 2006||March 31, 2010||81,000||11,300|
|Burkina Faso||April 23, 2007||April 22, 2010||48,160||1,004|
|Burundi||July 7, 2008||July 6, 2011||46,200||26,400|
|Central African Republic||December 22, 2006||June 30, 2010||69,620||8,670|
|Comoros||September 21, 2009||September 20, 2012||13,573||9,345|
|Congo, Democratic Republic of the||December 11, 2009||December 10, 2012||346,450||296,957|
|Congo, Republic of the||December 8, 2008||December 7, 2011||8,460||4,834|
|Côte d’Ivoire||March 27, 2009||March 26, 2012||373,980||178,860|
|Djibouti||September 17, 2008||September 16, 2011||12,720||7,380|
|Gambia, The||February 21, 2007||February 20, 2010||20,215||1,995|
|Ghana||July 15, 2009||July 14, 2012||387,450||319,800|
|Grenada||April 17, 2006||April 16, 2010||16,380||1,680|
|Guinea||December 21, 2007||December 20, 2010||69,615||45,135|
|Haiti||November 20, 2006||January 31, 2010||114,660||7,610|
|Liberia||March 14, 2008||March 13, 2011||239,020||13,320|
|Mali||May 28, 2008||May 27, 2011||27,990||8,000|
|Nicaragua||October 5, 2007||October 4, 2010||78,000||23,900|
|Niger||June 2, 2008||June 1, 2011||23,030||13,160|
|São Tomé and Principe||March 2, 2009||March 1, 2012||2,590||2,220|
|Sierra Leone||May 10, 2006||May 9, 2010||51,880||19,185|
|Tajikistan||April 21, 2009||April 20, 2012||78,300||52,200|
|Togo||April 21, 2008||April 20, 2011||84,410||26,400|
|Zambia||June 4, 2008||June 3, 2011||220,095||55,185|
|Exogenous Shocks Facility|
|Ethiopia||August 26, 2009||October 25, 2010||153,755||80,220|
|Kyrgyz Republic||December 10, 2008||June 9, 2010||66,600||33,300|
|Maldives||December 4, 2009||December 3, 2011||8,200||7,175|
|Mozambique||June 30, 2009||June 29, 2010||113,600||14,200|
|Senegal||December 19, 2008||June 18, 2010||121,350||32,360|
|Tanzania||May 29, 2009||May 28, 2010||218,790||19,890|
Numbers may not add due to rounding.
Operational Highlights and Key Financial Indicators for the World Bank Group in Fiscal Year 2009
Operational highlights and key financial indicators for World Bank Group associations are summarized in the following tables. IBRD lending commitments to member countries were $32.9 billion in FY2009, up $19.4 billion from $13.5 billion in FY2008. The large increase is due to the large resource mobilization that the organization undertook in the wake of the global financial crisis. IDA lending increased by $2.8 billion to $14 billion for 176 projects in FY2009. The IFC committed $10.5 billion in FY2009, a decrease of $0.9 billion from FY2008 commitments. MIGA issued guarantees worth $1.4 billion in FY2009, a decrease of 33 per cent from FY2008. MIGA attributes the decrease to a decline in investment due to the financial crisis.
|(millions of US dollars)|
|Number of projects||99||126|
|Principal repayments including prepayments||12,610||10,217|
|Net disbursements (losses)||(2,120)||8,347|
|Equity-to-loans ratio (per cent)||38||35|
|Sources: The World Bank Group Annual Report (2009) and IRBD financial statements (2009).|
|(millions of US dollars)|
|Number of projects||199||176|
Includes a HIPC grant of $45.5 million for Côte d’Ivoire.
Source: The World Bank Group Annual Report (2009).
|(millions of US dollars)|
|Operating income (loss)||1,9381||(153)|
|Number of projects||372||477|
|Loan and equity investments, net||23,319||22,214|
As restated—World Bank Group Annual Report (2009).
Source: IFC Annual Report (2009) and IFC consolidated financial statements (2009).
|(millions of US dollars)|
|Administrative and other expenses||28.5||29.8|
|Statutory underwriting capacity||11,593||12,096|
|Fiscal-year guarantees issued||2,098||1,377|
|Number of new projects||23||20|
|Return on operating capital, before provisions (per cent)||7.3||3.2|
|Source: MIGA Annual Report (2009).|
|(millions of US dollars)|
|East Asia and Pacific||6,905||1,247||8,153|
|Europe and Central Asia||8,978||384||9,363|
|Latin America and the Caribbean||13,829||203||14,031|
|Middle East and North Africa||1,551||172||1,470|
|By Theme||Total Amount|
|Environmental and Natural Resources Management||5,085.4|
|Financial and Private Sector Development||9,694.8|
|Public Sector Governance||6,108.4|
|Rule of Law||15.8|
|Social Development, Gender and Inclusion||813.2|
|Social Protection and Risk Management||5,295.7|
|Trade and Integration||3,444.1|
|By Sector||Total Amount|
|Agriculture, Fishing, and Forestry||3,400.0|
|Energy and Mining||6,267.4|
|Health and Other Social Services||6,305.5|
|Industry and Trade||2,806.5|
|Information and Communication||329.2|
|Law and Justice and Public Administration||9,491.6|
|Water, Sanitation, and Flood Protection||4,364.9|
|Of which IBRD||32,910.8|
|Of which IDA||13,995.2|
Includes a HIPC grant of $45.5 million for Côte d’Ivoire.
Source: The World Bank Group Annual Report (2009).
|($ millions)||($ millions)||($ millions)|
|Central African Republic||3||21.0||3||21.0|
|Congo, Democratic Republic of the||3||354.0||3||354.0|
|Congo, Republic of the||2||20.0||2||20.0|
|($ millions)||($ millions)||($ millions)|
|East Asia and Pacific|
|Lao People’s Democratic Republic||1||25.0||1||25.0|
|Europe and Central Asia|
|Bosnia and Herzegovina||1||25.0||15.0||1||40.0|
|Macedonia, former Yugoslav Republic of||2||50.0||2||50.0|
|($ millions)||($ millions)||($ millions)|
|Latin America and the Caribbean|
|Middle East and North Africa|
Excludes a HIPC grant commitment of $45.5 million for Côte
d’Ivoire. Includes guarantees. Supplemental and additional
(except for projects scaled up through additional financing) are
not counted as separate lending operations, although they are included
in the amount.
Joint IBRD-IDA operations are counted only once, as IBRD operations.
A blank space equals zero.
Canadian Contributions to World Bank Group Trust Funds
December 31, 2009
|(millions of dollars)|
|1 Data from 2004–05 to 2007–08 is revised from last year’s reporting to reflect corrections in data entry for coding and vendor information.|
December 31, 2009
|(millions of dollars)|
|Pilot Program for Climate Resilience||85.0||–|
|Sudan Mullti-Donor Trust Fund||30.0||–|
|West Bank and Gaza—various||15.0||–|
|Private sector development—CARICOM||14.2||–|
|Education For All Fast Track Initiative||12.2||–|
December 31, 2009
|(millions of dollars)|
|Consultative Group on International Agricultural Research||118||17.9||15.8||–||151.7|
|Advance Market Commitment2||115||–||–||–||115|
|Global Fund to Fight AIDS, Tuberculosis and Malaria||528.4||43||117.2||100||788.6|
|Global Alliance for Vaccines and Immunization3||188||–||–||–||188|
|Global Environment Facility||345||56.6||49||41.9||492.5|
|2 The Advance Market Commitment aims to stimulate the development
and manufacture of affordable vaccines tailored to the needs of developing
3 CIDA has supported and continues to support immunization activities through other initiatives and investments.
World Bank Group Procurement From Canada
|By World Bank Fiscal Year (July 1 – June 30)||Amount|
|(millions of US dollars)|
|Source: World Bank, "Summary and Detailed Borrower Procurement Reports" (2009).|
World Bank Group Borrowing in Canada
On July 22, 2009, the Bank issued, via the Royal Bank of Canada, a C$121-million capped floating rate bond due October 31, 2012. This was the only issue in Canada since November 20, 2007, when the Bank issued a C$850-million 4.30% 5-year maturity global bond via TD Securities and HSBC.
 This figure has been revised upwards by $29.4 million to account for exchange rates.