LATEST INITIATIVES ON DEBT RELIEF AND FINANCING THE MDGs

1
LATEST INITIATIVES ON DEBT RELIEF AND FINANCING
THE MDGs

• Matthew Martin, DRI
• HIPC CBP IRWS 3
• London, 30 March 2005

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DEBT RELIEF

• UK Initiative launched in September 2004
• UK to pay its share of debt service of
  post-completion point HIPCs other well-managed
  IDA-only countries (10) between now and 2015,
  for AfDB and IDA
• UK to support use of IMF gold reserves to relieve
  IMF debt service during 2005-2015
• Possibility to extend to other MDBs but with,
  were necessary or appropriate, contributions on
  their part
• (see CBP listserve and website for more details)
• Canada, Germany and Ireland support. Strong
  prospects that EU will support at G8
• Strong endorsement by Commission for Africa (Can,
  Fra, SA, UK) and HIPC Finance Ministers
• US alternative proposal involves HIPCs paying for
  their own relief

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NEW FINANCING OF MDGs

• Major initiatives include aid 0.7 of GNP, IFF,
  Landau report on new financing and Make Poverty
  History
• Pledges of aid at 0.7 of GNP
• Belgium, France, Spain, UK have all pledged
  target dates for 0.7 - strong push for EU to do
  likewise
• Canada has pledged major increase in aid to
  Africa
• US way behind but at least increasing aid
  (quality ?)
• International Financing Facility
• Issues bonds to fund grants for LICs, to
  frontload dramatic increase in aid (overcomes UK
  government accounting rules)
• To be allocated to existing institutions not a
  new structure
• France, Germany, Italy, Spain, Sweden all
  endorsed and most are participating in pilot for
  GAVI in 2005
• On other hand, Canada, Japan and US have said
  cannot do for accounting reasons though Canada
  happy for others to do
• UK intends to go further, reaching 0.7 by 2009
  instead of 2015 as a result of IFF. Will increase
  DFID budget to reach 0.7 by 2015 excluding any
  repayment of bonds

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NEW FINANCING SOURCES (1)

• Landau report (France with new ideas to finance
  MDGs
• Subsequently endorsed by Germany, Spain, Chile,
  Brazil
• These include
• FDI/remittances/private sector funds
• Aid increases including IFF
• New international taxes especially
• Tobin tax on financial transactions
• Tax on use of fossil fuels in line with Kyoto and
  EU
• Tax on airline tickets (the most popular EU and
  UK agreed)
• International lotteries to mobilise development
  finance
• Special Drawing Rights reallocations
• IMF has power to authorise creation of new
  liquidity without inflationary risk (way behind
  GDP growth since 1980s)
• Then can be reallocated to developing countries
  to boost reserves and protect against shocks
• G8 meeting endorsed especially tax on airline
  tickets

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NEW FINANCING SOURCES (2)

• UK Commission for Africa also major new ideas
• Sceptical at beginning but
• genuinely consulted Africa governments and
  civil societies
• included other G8 and China to try to ensure
  consensus major impact on Canada, France
• Especially
• Grant-based anti-shocks facility. Should
• Disburse much more rapidly than CFF/FLEX/PRGF/IDA
  or bilateral contingency allowances
• Take decisions independent of BWIs ie be as
  non-conditional as possible could be
  administered by RDBs
• Coordinate closely with IFIs and EU and UN and
  bilaterals to ensure technical input to decision
  on shock
• Make sure all decisions coordinated, led by
  country, on which source of anti-shock financing
  it prefers.

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NEW FINANCING SOURCES (3)

• All DAC donors to announce timetables for
  reaching 0.7
• Increase aid by 50 over next 3 years and then
  review Africas capacity to absorb, then increase
  by 100.
• Strong endorsement of increased aid vital to
  overcome Dutch Disease - also, on aid dependence,
  look at per capita because low GDP distorts
  Korea, Europe, Botswana received 2-3 times per
  capita as African LICs, were major development
  successes
• Major increase in quality of aid, including
  higher allocations to infrastructure and growth
• Debt relief beyond HIPCs to African LICs (eg
  Kenya, Nigeria)
• Best conclusion of Commission for Africa
• Not to know is bad. Not to wish to know is
  worse (Igbo proverb). So we should all be as
  ambitious as possible, and as determined to learn
  from other regions as possible.
• OECD knows the answers to the problems but has
  not been prepared to provide the money changing
  now
• But also dont forget Latin America still LICs
  necessity for LA to campaign on that basis.

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NEW FINANCING SOURCES (4)

• Make Poverty History Campaign (www.makepovertyhist
  ory.org)
• Three key pledges
• Cancel the Debt 100 for indebted low-income
  countries as necessary to finance the MDGs
• Double the Aid to US50 billion a year
• Fair Trade restructure world trade system in
  favour of developing countries abolish
  agricultural subsidies, liberalise OECD markets
  without insisting on premature liberalisation of
  developing countries, encourage fair trade
  systems to help the poor worldwide
• Worldwide by major NGOs G8 campaign July

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THE CONTEXT

• All of these suggestions amount to peanuts
  arachides compared to OECD spend on ice cream
  (200bn a year)
• If we carry on as we are doing, Africa will reach
  the MDGs by 2150, low-income Latin America
  likewise
• Developing countries need to lead President
  Mkapa No matter how long a log stays in the
  water, it will never become a crocodile. Applies
  to donors, DRI, ROs - if we do not listen to
  member states and civil societies
• The moment you think that what you do belongs to
  you, you have lost the way. Nobody has an
  empire. Each CBP country and region made major
  advances, but vital we share lessons in phase 4
  to benefit all. Ubuntu I am what I am because
  of who we all are.
• Make Poverty History Nelson Mandela In this
  new century, billions of people in the worlds
  poorest countries remain in chains, in the prison
  of poverty. We have to do whatever is necessary
  to set them free. The CBP has to make sure in
  phase 4 that development finance sets them free
  and we look forward to you telling us how. Need
  to ensure strong voice at Spring Meetings by
  Ministers.