The sixtieth meeting of the Development Committee was held in Washington, D.C., on September 27, 1999, under the chairmanship of Tarrin Nimmanahaeminda, Minister of Finance of Thailand.
Debt initiative, enhanced poverty focus
Ministers expressed their appreciation to the Bank and the IMF for the transparent and participatory manner in which they conducted the 1999 Heavily Indebted Poor Countries (HIPC) Initiative review. They welcomed the important role played by civil society in the development of proposals designed to make the debt relief under the HIPC Initiative deeper, broader, and faster.
Ministers endorsed—subject to the availability of funding—the enhancements to the HIPC Initiative framework for countries pursuing sound policies and committed to reform. In this context, they expressed support for a lowering of the debt sustainability thresholds to provide a greater safety cushion and increased prospects for a permanent exit from unsustainable debt, the provision of faster debt relief through interim assistance, the introduction of floating completion points that would shift the focus of assessment toward positive achievements and outcomes rather than the length of the track record, and the resulting increase in the number of countries expected to be eligible for debt relief.
Ministers also endorsed the proposed framework for strengthening the link between debt relief and poverty reduction while recognizing that debt relief alone would be insufficient to achieve this goal. In this context, they welcomed the proposed Poverty Reduction Strategy Papers, to be prepared by national authorities in close collaboration with Bank and IMF staff. They stressed that the Poverty Paper should be in place by the decision point; they recognized, however, that on a transitional basis the decision point could be reached without agreement on a Poverty Paper, but in all cases demonstrable progress in implementing a poverty-reduction strategy would be required by the completion point.
Ministers also welcomed and endorsed the proposals developed by the Bank and the IMF to extend the same approach to enhancing the poverty focus of all International Development Association (IDA)- and Enhanced Structural Adjustment Facility (ESAF)-supported programs and to strengthen collaboration between the two institutions. The Committee emphasized that the strategies set out in the new Poverty Papers should be country driven; be developed transparently with broad participation of elected institutions, stakeholders—including civil society, key donors, and regional development banks; and have a clear link with the agreed international development goals—principles that are embedded in the Comprehensive Development Framework. They stressed in particular the need to develop macroeconomic, structural, and social policies that will contribute to long-term poverty reduction and the need to develop measurable intermediate and outcome indicators to monitor progress. Ministers stressed the crucial role good governance plays in HIPC implementation in establishing a framework that discourages corruption and provides more effective monitoring and quality control over fiscal expenditures. Ministers called on the Bank and the IMF, in accordance with their respective mandates and expertise, to give all possible assistance to countries in bringing together the necessary social, structural, and macroeconomic policies required in developing poverty-reduction strategies, recognizing the countries’ capacity constraints. The Poverty Papers would provide the basis for all IDA and IMF lending to low-income countries. Ministers also encouraged regional development banks and donors to use the Poverty Papers to guide their support.
Ministers welcomed the proposed reform of the ESAF aimed at giving greater prominence to the goal of supporting countries’ poverty-reduction efforts and the proposed renaming of the facility as the Poverty Reduction and Growth Facility. Recognizing that the new approach will involve substantial changes in Bank and IMF operations to combat poverty and the need to tailor the approach to individual country circumstances and to learn quickly from experience in early cases, the Committee strongly welcomed the commitments of the World Bank President and IMF Managing Director to its effective implementation. Ministers looked forward to receiving reports on progress achieved.
Ministers reaffirmed the importance of implementing the enhanced HIPC Initiative framework in accordance with the principles that have guided the initiative since its inception, including additionality of debt relief, the maintenance of the financial integrity of multilateral financial institutions, and the importance of burden sharing on a fair and equitable basis, including of the costs to multilateral institutions. They agreed financing of debt relief should not compromise the financing made available through concessional windows such as IDA. Ministers expressed appreciation for the many contributions to the HIPC Initiative made thus far and for the efforts made by multilateral development institutions to provide funding for the initiative from their own resources. Ministers recognized that most of these institutions will need bilateral support on an urgent basis in order to meet the additional costs resulting from the proposed enhanced framework and to enable them to implement the initiative rapidly. The Committee welcomes the agreement on the financing of the IMF’s participation in the HIPC Initiative and continued concessional lending by the IMF for growth and poverty reduction in low-income member countries.
Ministers also welcomed agreement on the elements of a financing plan for multilateral development banks that respect the above principles. This will permit the enhanced HIPC framework to be launched and the delivery of debt relief to begin for those countries requiring retroactive relief and those expected to reach their decision points over the near term. They asked the World Bank to work actively and closely with the whole group of donors and other multilateral development banks to ensure that financing is mobilized to fully fund HIPC debt relief over the longer term.
Ministers also welcomed the agreement by the Paris Club to increase its debt relief under the enhanced framework by providing increased debt reduction in net-present-value terms of up to 90 percent, or more if needed, on commercial loans as well as additional relief on official development assistance claims—up to full cancellation—on a bilateral basis.
Ministers welcomed the continuing progress in the implementation of the initiative, noting that, to date, 14 countries have been considered under the initiative—with 4 brought to their completion points. The Committee urged the speedy implementation of the enhanced initiative so that as many countries as possible qualify for assistance under the initiative by end-2000.
Ministers reviewed a report from the World Bank that reflected ongoing discussions by the Bank’s Executive Board and management on options to maintain and support the International Bank for Reconstruction and Development’s (IBRD’s) financial capacity. The Committee agreed with the report’s finding that the Bank’s finances remain sound. Ministers also recognized that the Bank’s financial capacity may limit its ability to respond to future demands, especially when there was a deterioration in the global financial environment. Ministers requested management and the Executive Board to continue their examination of the level of financial capacity needed to preserve the IBRD’s financial integrity while permitting it to help meet, within its mandate, the development needs of borrowing member countries. Ministers requested that the Bank report regularly to the Committee on these issues.
International trade agenda
The Committee noted that effective development and trade policy have become increasingly intertwined. They emphasized the importance of trade to development, poverty alleviation, and sustained global economic recovery. Ministers also emphasized that the next round of trade negotiations needed to deliver early and substantial benefits for developing and transition countries, in particular for the least developed countries. This would require improved market access and further reducing barriers to trade. They stressed that if developing and transition countries are to use the international trading system effectively to promote growth and reduce poverty, they will need to become active partners in the next round of trade negotiations. Ministers welcomed the commitment of the new Director-General of the World Trade Organization (WTO), Mike Moore, to achieve this goal and urged the World Bank, the IMF, the WTO, the United Nations Conference on Trade and Development, and other agencies to help developing and transition countries build their capacity to participate in further rounds of negotiations. The Committee called on the World Bank, the IMF, and the WTO to cooperate with other parties in developing effective programs of capacity building for trade, including through the Integrated Framework for Trade-Related Technical Assistance for the Least Developed Countries. The Bank, in particular, could provide financial and technical support to improve trade-related infrastructure and institutions, helping to build capacity in domestic institutions involved in trade policy and negotiations, and undertaking research on trade barriers to developing countries’ exports.
International financial architecture
Ministers welcomed the role the World Bank Group is playing to help strengthen the global financial architecture to reduce the risk and severity of financial crises and to reduce the vulnerability of developing countries to crises when they occur. The Committee stressed that at the country level the Bank’s primary focus, given the objective of preventing crises, should be on assisting developing countries to strengthen their domestic financial markets and their integration with the global financial system. This should be done through helping countries overcome structural and social sources of vulnerability and build the needed policy and institutional capacity. Given the breadth and complexity of the agenda, ministers encouraged the Bank and the IMF to focus on their areas of comparative strength while developing partnerships with other international institutions. Ministers welcomed progress in the joint Bank-IMF program of financial sector assessments and the Bank’s program of Social and Structural Reviews. They also welcomed the proposed enhanced collaboration with the IMF in assisting interested countries to assess their progress in implementing a range of international norms and good practices, with due consideration to differing country conditions. The Committee encouraged the Bank to continue to bring developing country experience and perspectives to the international debate. In this context, they noted the establishment of a global forum on corporate governance, launched in collaboration with the Organization for Economic Cooperation and Development, and the Bank’s supportive role for work on insolvency, accounting, and auditing.
Ministers welcomed the Bank’s help to developing countries on social issues, as well as its report on managing the social dimensions of crises and good practices in social policies. They encouraged the Bank to continue to develop this work and draw on it in supporting countries’ poverty-reduction efforts. The Bank should accumulate and disseminate knowledge of good practices to help guide countries seeking to create institutions and implement policies that will forestall and mitigate the social costs of economic shocks and protect the most vulnerable.
Ministers welcomed the steps being taken to strengthen the work of the Development and Interim Committees, both to better reflect the enhanced level of cooperation between the Bank and the IMF and to reduce duplication in the committees’ agendas. They encouraged the Bank and the IMF to continue to review experience in this area.
The Committee’s next meeting is scheduled for April 17,2000, in Washington, D.C.