Contributions from
the Column
Facts and trends

IMF/World Bank postpone debt relief

Prospects for tsunami regions

Controversy over UN reform

ODA: security measures expanded

Sudan: donors need common policy

No growth for German ODA ratio

Middle East role for Wolfensohn

GTZ director stays in office

UNDP report criticises Arab regimes


05/2005 		 

[ Spring meetings ]

Debt relief decision postponed
till G8 summit

This year’s spring meetings of the International Monetary Fund (IMF) and the World Bank were overshadowed by the management change scheduled at the Bank later this month. It has been said that outgoing president James Wolfensohn values his successor Paul Wolfowitz above all for his closeness to the Bush administration’s purse. But no one knows better than Paul Wolfowitz, deputy Secretary of Defence, that Washington’s massive military spending leaves little leeway for American expenditure on poverty matters. Unanimously, the old and the new presidents affirmed that the fight against poverty will remain the Bank’s principle task in the future. Beyond that statement, however, Wolfowitz did not elaborate on future policy.

At the spring meeting, Wolfensohn once again appealed to the advanced countries to keep their financial promises. Nonetheless, donors could not agree on the 100 percent debt relief for the poorest countries, mooted some months ago. Gordon Brown, Britain’s Chancellor of the Exchequer, said that measurable pledges are to be expected at the G8 summit meeting in Scotland in July. But contrary to prior discussions, the latest G7 communiqué only deals with the debts of the poorest countries with the World Bank and the African Development Bank. These debts amount to roughly 20 billion dollars; the German share is around ten percent. The communiqé does not further mention the sum owed to the IMF (which, according to experts, amounts to eight billion dollars). The US government has obviously asserted its position in this regard. Accordingly, the dispute over selling IMF gold reserves to finance debt write-offs is also fading into the background.

How to finance a waiver of debts owed to the World Bank was not explained in Washington either. A one hundred percent debt relief without counter-funding would dry up the Bank, says Heidemarie Wieczorek-Zeul, German Development Minister. The World Bank finances new loans from the funds that are flowing back in. Hans Eichel, German Finance Minister, says that each country has to decide individually how much debt it considers reasonable. Eichel spoke in favour of only making allowances for the group of highly indebted poor countries (HIPC) listed in the Cologne debt relief initiative. Wieczorek-Zeul, on the other hand, thinks it makes sense to involve more countries.

G7 ministers also discussed to what extent poor countries should receive more financial assistance. Opinions on financial commitments do not only vary among donors but even within the German government. After the G7 conference in Washington, Eichel made it clear that he finds it unrealistic to use budget funds to increase Germany’s aid quota from currently 0.28 percent of the gross domestic product to 0.7 percent by 2015. According to him, there is no cabinet decision on the matter yet. However, Germany’s UN ambassador Gunter Pleuger had stated the government would stick to such a plan in New York early last month. Wieczorek-Zeul is in favour of this target. According to her, it is as binding for Germany as for all other advanced countries.

Chancellor Brown emphasised that the world community has never been in such agreement as in Washington, that new funding is necessary to finance the fight against worldwide poverty. According to Eichel, Germany supports the proposal for an immunisation campaign in Africa with capital market pre-financing (International Finance Facility). However, this could only be the case if counter-funding is secured, for example through a kerosene or airline ticket tax. According to Eichel, it is possible to introduce such measures within six months: “It is only a question of political will.” However, there would have to be a Europe-wide agreement, he said, because measures would otherwise distort competition.

James Wolfensohn worked out that if poverty is to be halved by 2015, the aid for Africa, in particular, would have to be doubled. In his farewell speech to the Development Committee of the World Bank and IMF, Wolfensohn outlined a five-point action programme:
– First, the developing countries have to put more effort into devising and implementing their own poverty reduction strategies.
– Second, they have to create a better investment climate.
– Third, with the donors’ support, they should establish social services such as education and health care.
– Fourth, international trade must be liberalised further, whereby the poorest countries would have to receive additional support and advice.
– Fifth, it all comes down to increasing the volume and effectiveness of development aid.
The World Bank is in the process of modifying its conditionality policy. In future, the Bank will only set the medium-term framework for the borrower countries to fill with their own concepts for reform. The Bank will provide additional funds, especially in the field of environment and climate change. On their part, the developing countries must incorporate the effects of climate change into their politics. But of course, the Ministers of Finance, who sang the praises of budget consolidation in Washington, have the last say. Whether the G-8 heads of government prove to be more generous at a summit in Scotland, of all places, remains doubtful.

Roland Bunzenthal