The leaders of the G8 economies—Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States—reiterated the June G8 finance ministers’ proposal for 100 percent cancellation of debt owed to the IMF, World Bank, and African Development Bank by participants in the Heavily Indebted Poor Countries (HIPC) Initiative. The effort has won widespread plaudits, but many important details and much of the logistics remain to be worked out. De Rato said he looked forward to “detailed discussions by the IMF Executive Board in the weeks ahead.” At the request of the Executive Board, IMF staff are preparing for its consideration a paper analysing the proposal and how it might be implemented. The paper will examine the various policy, legal, and financial aspects of the proposal, including its implications for the IMF’s role in low-income countries.
Among the specific issues to be looked at are the “uniformity of treatment” of member countries required by the IMF’s founding Articles of Agreement and the implications of the proposal in that context. While “uniformity of treatment” does not mean identical treatment for all members, it does require any differentiation to be based on criteria relevant to the Fund’s objectives in the context being considered. In addition, the staff paper is expected to consider what will be needed to ensure the good governance and transparency that the G8 proposal calls for in the countries benefiting from the debt forgiveness, and to weigh the potential implications for IMF resources and assistance to its poorer member countries. The IMF’s Executive Board is expected to discuss the staff paper in late July. Further work and additional Board discussions will be scheduled, as needed, in advance of the Annual Meeting of the IMF’s Board of Governors in late September.
Aid and trade
The G8 leaders also committed themselves to boosting their total official development assistance by $50 billion—and specifically aid to Africa by $25 billion—by 2010. Anticipating skeptics who might point to previous ambitious commitments, which went unrealized, the G8 leaders took the unprecedented step of personally signing the communique.
De Rato welcomed the G8’s aid commitments, but cautioned that additional assistance will bear its expected fruits only if it is “associated with sound macroeconomic policies, transparent and accountable government procedures, strong institutions, and well-prioritized expenditures.” In a press briefing before the Gleneagles Summit, the IMF’s Mark Plant (Policy Development and Review Department) also reiterated the IMF’s view that “substantially more aid is needed if we are to fight poverty effectively.” For the IMF and other institutions, the priority will be to continue to search for ways to deliver more aid “more efficiently, more effectively, both in a microeconomic sense and in a macroeconomic sense,” Plant said. But less debt and more aid will not translate, in and of themselves, to higher growth and declining poverty. Trade remains an essential piece of the puzzle, and one where progress is needed urgently in the lead-up to a crucial December ministerial meeting of the WTO in Hong Kong SAR. The G8 and its emerging market economy partners pledged to intensify their work on an outline WTO accord— an outline that would then lay the basis, it is hoped, for a final accord in the Doha Round in 2006. De Rato shared this sense of urgency, underscoring that it is “in all of our interests” to use the next six months well.
The G8 reached their wide-ranging agreements in Scotland undeterred by concurrent terrorist attacks in London. De Rato commended their resolve, noting that “The message of the Gleneagles Summit stands in answer to the terrorist attacks in London on July 7.” He also conveyed to the victims and to their families condolences on behalf of himself and all of his IMF colleagues.
For the full text of Rodrigo de Rato’s statement at the G8 Summit and the transcript of a press briefing on issues related to aid, trade, and debt relief to the poorest countries, please see the IMF’s website (http://www.imf.org).