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Africa policy: Europe on the wrong track
World Investment Report 2005
Aid pledges for Africa to be monitored
Information summit to discuss control of internet
UN convention against corruption
Disappointing OECD guidelines
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A new definition for the wealth of nations
Trade: disruptive chicken wings
IMF and World Bank endorse debt relief
Development and security: more cooperation needed
11/2005
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[ Annual meetings ]
IMF and World Bank endorse debt relief
The shareholders of the World Bank and the International Monetary Fund have agreed to cancel all multilateral debts owed by up to 38 poor countries. At the jointly held annual meetings of the two Washington-based institutions in late September, the committees responsible approved a plan proposed by the G8 at Gleneagles in summer. According to the decision, 18 countries indebted with the IMF, the World Bank subsidiary IDA and the African Development Bank to the total tune of $ 40 billion will initially have their debt cancelled. Later, the group of countries to benefit is to increase by up to 20, with total debt relief finally amounting to $ 56 billion. The decision on debt relief must yet be formally approved by the executive boards of the financial institutions.
Before the meetings in Washington, the G8 countries assured World Bank president Paul Wolfowitz that they would cover IDA losses resulting from debt relief according to their shares. IDA is the World Bank subsidiary that issues grants and low-interest loans to the poorest countries. IDA will bear more than two thirds of the debt cancellation. Until recently, governments of some smaller advanced nations such as the Netherlands, Belgium and Sweden, had expressed scepticism towards the Gleneagles decision fearing the financial institutions might be weakened. The US administration, which for a long time balked at fully compensating the multilateral bodies for debt relief, assured the World Bank that it would secure the necessary funds in Congress.
Aid organisations and development pressure groups welcomed the Washington decision. Nonetheless, they also called it “insufficient”. In view of developing countries’ total debt of more than $ 2000 billion, Attac Germany spoke of “a mere drop in the ocean”. Erlassjahr.de, a German debt relief campaign group, pointed out the fact that IDA and the African Development Bank plan to reduce their future assistance to the countries benefiting from the programme by the very sums that the cancelled debt amounts to.
In Washington, a reform proposal by IMF Managing Director Rodrigo Rato was also discussed. On the one hand, the Spaniard called for the IMF to concentrate more on its core tasks such as preventing and overcoming financial crises. On the other hand, Rato does not want the IMF to completely withdraw from development issues. In its communiqué, the IMF Monetary and Financial Committee welcomed Rato’s suggestion and confirmed his view “that the IMF has a critical role in supporting low-income countries through policy advice, capacity building, and financial assistance.” Rato also supports restructuring voting power within the IMF in favour of African and Asian countries as the IMF’s legitimacy might otherwise suffer in those regions. (ell)
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