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International Monetary Fund
Published Date:
April 2005
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    © 2005 The International Bank for Reconstruction and Development / The World Bank

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    Contents

    Foreward

    The Global Monitoring Report 2005 is the second in a series of annual reports assessing progress on the policy agenda for achieving the Millennium Development Goals (MDGs) and related outcomes. It is prepared jointly by the staff of the World Bank and the International Monetary Fund (IMF), in close collaboration with partner agencies. This report comes at an important time, when the international development community is taking stock of implementation of the Millennium Declaration in the five years since its adoption and discussing how progress toward the MDGs can be accelerated. We hope that the analysis presented in this report will make a useful contribution to those efforts.

    The report’s central message is clear: without early and tangible action to accelerate progress, the MDGs will be seriously jeopardized—especially in Sub-Saharan Africa, which at current trends will fall short of all the goals. At stake are prospects not only for hundreds of millions of people to escape poverty, disease, and illiteracy, but also for long-term peace and security—objectives intimately linked to development. During 2005 the international community must seize the opportunities presented by increased global attention on development to build momentum for the MDGs. Special focus must be given to accelerating progress in Sub-Saharan Africa.

    How to generate momentum? This report sets out an agenda spanning the responsibilities of all key actors. Developing countries must take the lead in articulating and implementing development strategies that aim higher. They should build on recent progress on reforms by deepening improvements in policies and governance to achieve stronger economic growth and scale up human development and related key services. The recent pickup in growth in many developing countries, including several Sub-Saharan countries, demonstrates the payoff to reforms.

    Developed countries must step up implementation of the commitments they made as part of the Monterrey Consensus. They should substantially increase the volume of development aid and improve its delivery to facilitate more effective use by recipients. And they should show leadership on trade policy reforms that open markets to developing country exports and that give greater coherence to developed country policies in terms of their impact on development. Progress on both aid and trade is crucial—and the need for action urgent.

    International financial institutions should strengthen and sharpen their support for this agenda. A priority for us is to strengthen our support for country-led poverty reduction strategies in low-income countries and sharpen our focus on development results. We also need to continue to adapt our approaches and instruments to the evolving and varying needs of middle-income countries. Geared to the needs of both low- and middle-income countries, international financial institutions should also do more and better on global and regional public goods.

    With just 10 years until 2015, achieving the MDGs seems daunting, especially in Sub-Saharan Africa. But rapid progress is possible if there is sufficient commitment to reform and support from development partners, within the framework of the enhanced global partnerships envisaged at Monterrey.

    James D. Wolfensohn

    President

    World Bank

    Rodrigo de Rato

    Managing Director

    International Monetary Fund

    Acknowledgments

    This report has been prepared jointly by the staff of the World Bank and the International Monetary Fund. In preparing the report, staff have collaborated closely with partner institutions—other multilateral development banks, the United Nations, World Trade Organization, Organization for Economic Cooperation and Development and its Development Assistance Committee, and the European Commission. The cooperation and support of staff of these institutions are gratefully acknowledged.

    Zia Qureshi was the lead author and manager of the report. The work was carried out under the general guidance of Shengman Zhang, Managing Director, World Bank. The core team included Barbara Bruns, Punam Chuhan, Poonam Gupta, Bernard Hoekman, Marcelo Olarreaga, Joanne Salop, and Lada Strelkova (World Bank) and Andrew Berg, Peter Fallon, Elliott Harris, and Carlos Leite (IMF).

    A number of other staff made contributions. They included the following from the World Bank: Dina Abu-Ghaida, Olusoji Adeyi, Christine Allison, Jorge Araujo, Gilles Bauche, Rosemary Bellew, Rene Bonnel, Eduard Bos, Donald Bundy, Paul Collier, Edgardo Campos, Jose De Luna Martinez, William Dorotinsky, Poul Engberg-Pedersen, Antonio Estache, Qiu Fang, Manuel Felix, Ariel Fiszbein, Lucia Fort, Paul Gertler, Alison Gillies, Bee Ean Gooi, Pablo Gottret, Laura Gregory, Engilbert Gudmundsson, Christopher Hall, Mary Hallward-Driemeier, Jonathan Halpern, Kirk Hamilton, Amy Heyman, Barbry Keller, Steve Knack, Aart Kraay, Inna Kushnarova, Ranjit Lamech, Victoria Levin, Magnus Lindelow, Susan McAdams, Caralee McLiesh, Raymond Muhula, Mohua Mukherjee, Alessandro Nicita, Eustache Ouayoro, Sulekha Patel, Long Quach, Claudio Raddatz, Gary Reid, Viorica Revutchi, Klas Ringskog, Maria Rivero-Fuentes, George Schieber, Susan Sebastian, Shekhar Shah, Nicola Smithers, Ahmet Soylemezoglu, Abigail Spring, Mark Sundberg, Eric Swanson, Marilou Uy, Dominique Van Der Mensbrugghe, Linda Van Gelder, Christel Vermeersch, Marco Vujicic, Dana Weist, Jerome Wolgin, and Alan Wright.

    Other contributors from the IMF included David Andrews, Jean Clément, Sanjeev Gupta, Michael Hadjimichael, Peter Heller, Simon Johnson, Godfrey Kalinga, Ritha Khemani, Hans Peter Lankes, Brad McDonald, Wayne Mitchell, Catherine Pattillo, Arvind Subramanian, and Chris Wu.

    Guidance received from the Executive Directors of the Bank and the Fund during discussions of the draft report is gratefully acknowledged. The report has also benefited from many useful comments and suggestions received from Bank and Fund management and staff in the course of the preparation and review of the report. The World Bank’s Office of the Publisher managed the editorial, design, production, and printing of the book. In particular, Susan Graham, Paul Holtz, and Monika Lynde deserve special mention for their skill and professionalism in editing and producing this book on a very tight schedule.

    Abbreviations and Acronyms

    ACP

    African, Caribbean, and Pacific

    ACT

    Artemisinin combination treatment

    AfDB

    African Development Bank

    AGOA

    African Growth and Opportunity Acceleration Act

    AIDS

    Acquired immune deficiency syndrome

    APRM

    African Peer Review Mechanism

    ADB

    Asian Development Bank

    ASEAN

    Association of South-East Asian Nations

    BEEP

    Business Environment and Enterprise Performance Survey

    CAS

    Country assistance strategy

    CPIA

    Country policy and institutional assessment

    DAC

    Development Assistance Committee (OECD)

    DANIDA

    Danish International Development Agency

    DFID

    U.K. Department for International Development

    DIME

    Development Impact Evaluation (World Bank)

    DOTS

    Directly observed treatment strategy

    EBRD

    European Bank for Reconstruction and Development

    ECLAC

    United Nations Economic Commission for Latin America

    EFA

    Education For All

    EFF

    Extended Fund Facility (IMF)

    EPA

    Economic Partnership Agreement

    EU

    European Union

    FDI

    Foreign direct investment

    FSAP

    Financial Sector Assessment Program (IMF)

    FSO

    Fund for Special Operations (Inter-American Development Bank)

    FTI

    Fast Track Initiative (Education For All)

    GAO

    U.S. General Accounting Office

    GATS

    General Agreement on Trade in Services

    GAVI

    Global Alliance for Vaccination and Immunization

    GFATM

    Global Fund to Fight AIDS, Tuberculosis, and Malaria

    GNI

    Gross national income

    HIPC

    Heavily indebted poor country

    HIV

    Human immunodeficiency virus

    IBRD

    International Bank for Reconstruction and Development (World Bank)

    ICRG

    International Country Risk Guide

    IDA

    International Development Association (World Bank)

    IDB

    Inter-American Development Bank

    IEO

    Independent Evaluation Office (IMF)

    IFC

    International Finance Corporation (World Bank)

    IFF

    International Finance Facility

    IFFIm

    International Finance Facility for Immunization

    IFI

    International financial institution

    IMF

    International Monetary Fund

    LDC

    Least developed country

    LICUS

    Low-income countries under stress

    MAP

    Multi-country AIDS Program (World Bank)

    MCA

    Millennium Challenge Account

    MDB

    Multilateral development bank

    MDG

    Millennium Development Goal

    MFN

    Most favored nation

    MIF

    Multilateral Investment Fund (Inter-American Development Bank)

    MIGA

    Multilateral Investment Guarantee Agency (World Bank)

    MTEF

    Medium-term expenditure framework

    NAFTA

    North American Free Trade Agreement

    NEPAD

    New Partnership for Africa’s Development

    NGO

    Nongovernmental organization

    NLF

    New Lending Framework (Inter-American Development Bank)

    ODA

    Official development assistance

    OECD

    Organisation for Economic Co-operation and Development

    OED

    Operations Evaluation Department (World Bank)

    OLS

    Ordinary least squares

    OTRI

    Overall trade restrictiveness index

    OVE

    Office of Evaluation and Oversight (Inter-American Development Bank)

    PAHO

    Pan-American Health Organization

    PARIS21

    Partnership in Statistics for Development in the 21st Century

    PEFA

    Public Expenditure and Financial Accountability program

    PEPFAR

    U.S. President’s Emergency Plan for AIDS Relief

    PETS

    Public Expenditure Tracking Survey (World Bank)

    PRGF

    Poverty Reduction and Growth Facility (IMF)

    PRS

    Poverty Reduction Strategy

    PRSC

    Poverty Reduction Support Credit (World Bank)

    PRSP

    Poverty Reduction Strategy Paper

    PSIA

    Poverty and Social Impact Analysis (IMF)

    QAG

    Quality Assurance Group (World Bank)

    ROSC

    Report on the Observance of Standards and Codes

    SDR

    Special Drawing Right (IMF)

    SPA

    Strategic Partnership for Africa

    SWAp

    Sectorwide approach

    TRAINS

    Trade Analysis and Information System (UNCTAD)

    UN

    United Nations

    UNAIDS

    Joint United Nations Programme on HIV/AIDS

    UNCTAD

    United Nations Conference on Trade and Development

    UNDP

    United Nations Development Programme

    UNECA

    United Nations Economic Commission for Africa

    UNESCO

    United Nations Educational, Scientific, and Cultural Organization

    UNICEF

    United Nations Children’s Fund

    VAT

    Value added tax

    WHO

    World Health Organization

    WP-EFF

    Working Party on Aid Effectiveness and Donor Practices

    WTO

    World Trade Organization

    Executive Summary

    Bold actions are urgently needed if the development vision that world leaders laid out in remarkable unison at the turn of the century is to be realized. The Millennium Development Goals (MDGs) and the Monterrey Consensus have created a powerful global compact for development. The MDGs set clear targets for eradicating poverty and related human deprivations. The Monterrey Consensus stresses the mutual accountability of developing and developed countries in achieving these goals. But the continued credibility of this compact hinges on expediting its implementation. Nearly five years have passed since the Millennium Declaration was adopted, and current stocktaking of progress during that time has focused global attention on the need to scale up action—making 2005 a crucial year to build momentum for the MDGs.

    Without faster progress, the MDGs will be seriously jeopardized—especially in Sub-Saharan Africa, which is off track on all the goals. At stake are prospects not only for hundreds of millions of people to escape poverty, disease, and illiteracy, but also prospects for long-term global security and peace—objectives intimately linked to development. Behind cold statistics on the MDGs are real people, and lack of progress has immediate and tragic consequences. Every week in the developing world, 200,000 children under five die of disease and 10,000 women die giving birth. In Sub-Saharan Africa alone, 2 million people will die of AIDS this year. And as many as 115 million children in developing countries are not in school. The need to scale up and speed up action is thus urgent, and the opportunities presented by the year 2005 must be seized.

    To be sure, there has been progress. Developing countries have continued to improve their policies and governance, which has contributed to an encouraging acceleration in their economic growth. Even Sub-Saharan Africa may be turning the corner, with several countries in the region showing notable progress in reforming policies and reviving growth. Developed countries have increased aid and introduced actions to make it more effective. Some initial steps have also been taken toward trade policy reform. But, overall, progress has been slower than envisaged, uneven across policy areas and countries, and far short of what is needed to achieve the MDGs.

    With just a decade to go until 2015, achieving the MDGs seems daunting, especially in Sub-Saharan Africa. But rapid progress is possible—if there is sufficient commitment to reform and sufficient support from development partners. Better-performing developing countries provide reasons for hope for others. Even in many lagging countries, including in Sub-Saharan Africa, advances are being made and the ground is being laid for better performance. What is needed is to quicken and broaden this progress, based on the framework of the enhanced global partnership envisaged at Monterrey.

    How to generate momentum and broaden progress? Developing countries must take the lead in articulating and implementing strategies that aim higher—to rise above current trends and substantially accelerate progress. Deeper improvements are needed in policies and governance, to expedite economic growth and scale up human development and related key services. Developed countries must also step up implementation of their part of the development compact. They must provide more and better aid but also show leadership on trade policy reform that would open markets for developing country exports and give greater coherence to their policies in terms of their impact on development.

    A Five-Point Agenda

    To build the momentum needed to achieve the MDGs, this report proposes a five-point agenda of accelerated and concerted actions by developing and developed countries—based on the Monterrey framework of mutual accountability. Within this agenda, special focus must be given to accelerating progress in Sub-Saharan Africa, the region that is furthest from the development goals but that has recently demonstrated a capacity for improvement in economic performance—capacity that must be fostered through further domestic reform and stronger support from development partners.

    Anchor Actions to Achieve the MDGs in Country-Led Development Strategies

    • For coherence and effectiveness, the scaling up of development efforts at the country level must be guided by country-owned and -led poverty reduction strategies (PRSs) or equivalent national development strategies. Framed against a long-term development vision, these strategies should set medium-term targets—tailored to country circumstances—for progress toward the MDGs and related development outcomes. And they should define clear national plans and priorities for achieving those targets, linking policy agendas to medium-term fiscal frameworks. Donors should use these strategies as the basis for aligning and harmonizing assistance.

    Improve the Environment for Stronger, Private Sector–Led Economic Growth

    • Promotion of economic growth must be at the center of the strategy to achieve the MDGs. Sub-Saharan Africa needs to almost double its growth rate, to an annual average of about 7 percent over the next decade.

    • Progress in macroeconomic management should be deepened, with a focus on fiscal management and the structure of public spending—to create more fiscal space for priority expenditures while ensuring fiscal sustainability.

    • Improving the enabling climate for private activity—by removing regulatory and institutional constraints and strengthening infrastructure—is key. An important area of reform in many countries is the strengthening of property rights and the rule of law, including legal and judicial reform. Countries should use the improved diagnostics and metrics of the private business environment now available (such as the World Bank’s Doing Business Indicators and Investment Climate Surveys) to guide action and monitor progress. Spending on infrastructure, for both investment and operation and maintenance, needs to rise in all regions but must double in Sub-Saharan Africa—from about 4.7 percent of GDP in recent years to more than 9 percent over the next decade—as gaps in infrastructure are especially severe in that region. Across countries, the pace of the increase in investment will depend on institutional capacity and macroeconomic conditions.

    • Overarching this agenda is the need to improve governance—upgrading public sector management, controlling corruption—as doing so is crucial to both the private sector’s business environment and the public sector’s development interventions. The New Partnership for Africa’s Development and its African Peer Review Mechanism are promising African-led initiatives with a focus on strengthening institutions. Member countries should take advantage of the impetus they provide to develop and implement national capacity building strategies, which donors should support. Developed countries can also help curb corruption by demanding high standards from their companies active in developing countries, including by giving high-level political endorsement to the Extractive Industries Transparency Initiative.

    Scale Up Human Development Services

    • The human development MDGs require a major scaling up of education and health services—primary education, basic health care and control of major diseases such as HIV/AIDS, and women’s access to education and health care—and of water and sanitation infrastructure, which is closely linked to health outcomes. Again, the shortfalls are most serious, and the need to scale up most urgent, in Sub-Saharan Africa.

    • Critical to effective scaling up are: rapidly increasing the supply of skilled service providers (health workers, teachers); providing increased, flexible, and predictable financing for these recurrent cost-intensive services; and managing the service delivery chain to ensure that money produces results.

    • To strengthen the Education for All Fast Track Initiative, partners should make monitorable, public, long-term commitments to significant annual increases in funding for primary education. Still larger additional resources are needed to achieve the health MDGs. It is important to ensure that global programs organized around specific health interventions are aligned with recipient countries’ priorities and support—rather than undermine—the coherence of their health sector strategies and systems.

    Dismantle Barriers to Trade

    • The international community must aim for an ambitious outcome to the Doha Round that fully realizes its development promise, including in particular a major reform of agricultural trade policies in developed countries. The round should be completed by 2006.

    • “Aid for trade” should be scaled up substantially to help poor countries address behind-the-border constraints to their trade capacity, including through investments in critical trade-related infrastructure.

    Substantially Increase the Level and Effectiveness of Aid

    • Official development assistance (ODA) must at least double in the next five years to support the MDGs, particularly in low-income countries and Sub-Saharan Africa, with the pace of the increase aligned with recipients’ absorptive capacity. To signal that needed resources will be forthcoming, 2005 is an opportune time for donors to raise their initial post-Monterrey commitments and extend them over a longer time horizon—2010 or beyond. Also, exploration should continue on the merits and feasibility of innovative financing mechanisms to complement increased aid flows and commitments.

    • Equally important is improving the quality of aid, with faster progress on alignment and harmonization, and delivery modalities that increase aid flexibility and predictability. Firm implementation of the Paris Declaration on Aid Effectiveness is central to this agenda.

    • Closure should be reached in 2005 on current proposals for additional debt relief for poor countries with heavy debt burdens that are pursuing credible reforms. Any additional debt relief should not cut into the provision of needed new financing—which for these countries should be primarily in the form of grants—and should not undermine the financial viability of international financial institutions.

    Role of International Financial Institutions

    How should international financial institutions—multilateral development banks and the International Monetary Fund (IMF)—strengthen and sharpen their support for this agenda? This report emphasizes action in five areas, as outlined below. In each of these areas there has been progress, but there is a need to do more and pick up the pace. The priorities for action and monitoring progress are:

    • Support the deepening of the PRS framework in low-income countries, and the operationalization of the MDGs and alignment of assistance within that framework. For low-income countries under stress, support to building institutional capacities is especially important.

    • Continue to adapt approaches and instruments to better respond to the evolving and differentiated needs of middle-income countries, including further streamlining of conditionality and investment lending.

    • Ensure that the implications of dismantling trade barriers and increasing the scale and effectiveness of aid are adequately reflected in support for country capacity building, so that emerging opportunities can be fully utilized. International financial institutions should sharpen the strategic focus and improve the effectiveness of their support for global and regional public goods.

    • Strengthen partnerships and harmonize further by improving transparency, reducing red tape and enhancing the flexibility of assistance (through simplification and use of sectorwide approaches), and promoting the development and use of country systems—for procurement, financial management, and environmental assessment.

    • Strengthen the focus on results and accountability by supporting country efforts to manage for development results—strengthening public sector management and development statistics—and furthering progress within international financial institutions in enhancing the results orientation of their country strategies and quality assurance processes. Adopt a common framework for self-evaluation of multilateral development banks’ performance and results measurement, and adapt to IMF operations as much as possible.

    Millennium Development Goals (MDGs)

    Goals and Targets from the Millennium Declaration
    GOAL 1ERADICATE EXTREME POVERTY AND HUNGER
    TARGET 1Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day
    TARGET 2Halve, between 1990 and 2015, the proportion of people who suffer from hunger
    GOAL 2ACHIEVE UNIVERSAL PRIMARY EDUCATION
    TARGET 3Ensure that by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling
    GOAL 3PROMOTE GENDER EQUALITY AND EMPOWER WOMEN
    TARGET 4Eliminate gender disparity in primary and secondary education, preferably by 2005, and at all levels of education no later than 2015
    GOAL 4REDUCE CHILD MORTALITY
    TARGET 5Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate
    GOAL 5IMPROVE MATERNAL HEALTH
    TARGET 6Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio
    GOAL 6COMBAT HIV/AIDS, MALARIA, AND OTHER DISEASES
    TARGET 7Have halted by 2015 and begun to reverse the spread of HIV/AIDS
    TARGET 8Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases
    GOAL 7ENSURE ENVIRONMENTAL SUSTAINABILITY
    TARGET 9Integrate the principles of sustainable development into country policies and programs and reverse the loss of environmental resources
    TARGET 10Halve by 2015 the proportion of people without sustainable access to safe drinking water and basic sanitation
    TARGET 11Have achieved a significant improvement by 2020 in the lives of at least 100 million slum dwellers
    GOAL 8DEVELOP A GLOBAL PARTNERSHIP FOR DEVELOPMENT
    TARGET 12Develop further an open, rule-based, predictable, nondiscriminatory trading and financial system (including a commitment to good governance, development, and poverty reduction, nationally and internationally)
    TARGET 13Address the special needs of the least developed countries (including tariff- and quota-free access for exports of the least developed countries; enhanced debt relief for heavily indebted poor countries and cancellation of official bilateral debt; and more generous official development assistance for countries committed to reducing poverty)
    TARGET 14Address the special needs of landlocked countries and small island developing states (through the Programme of Action for the Sustainable Development of Small Island Developing States and the outcome of the 22nd special session of the General Assembly)
    TARGET 15Deal comprehensively with the debt problems of developing countries through national and international measures to make debt sustainable in the long term
    TARGET 16In cooperation with developing countries, develop and implement strategies for decent and productive work for youth
    TARGET 17In cooperation with pharmaceutical companies, provide access to affordable, essential drugs in developing countries
    TARGET 18In cooperation with the private sector, make available the benefits of new technologies, especially information and communication
    Note: The Millennium Development Goals and targets come from the Millennium Declaration signed by 189 countries, including 147 heads of state, in September 2000. The goals and targets are related and should be seen as a whole. They represent a partnership of countries determined, as the Declaration states, “to create an environment—at the national and global levels alike—which is conducive to development and the elimination of poverty.”Source: United Nations. 2000 (September 18). Millennium Declaration. A/RES/55/2. New York. United Nations. 2001 (September 6). Road Map towards the Implementation of the United Nations Millennium Declaration. Report of the Secretary General. New York.

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