The sixty-second meeting of the Development Committee was held in Prague, on September 25, under its new Chair, Yashwant Sinha, Finance Minister of India. The Committee expressed its great appreciation to Tarrin Nimmanahaeminda, Minister of Finance of Thailand, for his valuable leadership and guidance to the Committee as its Chair during the past two years. James Wolfensohn, President of the World Bank; Horst Köhler, Managing Director of the IMF; and Carlos Saito, Chair of the Group of Twenty-Four, addressed the plenary session. Observers from a number of international and regional organizations also attended.
The ministers’ discussions took place against the background of continuing public debate about the benefits and risks of globalization. Ministers stressed that the more integrated global economy and technological gains brought about by globalization should be a great source for economic and social progress, equity, and stability, but that these results are not inevitable. Ministers recognized their important responsibility to help ensure that globalization works for the benefit of all, and not just the few, and reemphasized their commitment to strengthening the Bank, the IMF, and other multilateral institutions as valuable allies in this effort whose ultimate objective is global poverty reduction, in particular halving the proportion in extreme poverty by the year 2015.
Poverty reduction, global public goods
In considering the role the Bank might play in global public goods in areas within its mandate, ministers noted four key criteria for Bank involvement: clear value added to the Bank’s development objectives; Bank action to catalyze other resources and partnerships; a significant comparative advantage for the Bank; and an emerging international consensus that global action is required. They endorsed four areas for Bank involvement, in cooperation with relevant international organizations: facilitating international movement of goods, services, and factors of production; fostering broad inclusion in the benefits of globalization and mitigating major economic and social problems, such as the transmission of disease and the consequences of conflict; preserving and protecting the environment; and creating and sharing knowledge relevant to development.
Ministers warmly endorsed the greatly expanded efforts being made by the Bank, the United Nations, and other international, national, and private partners to combat communicable diseases, such as HIV/AIDS, malaria, and tuberculosis. Ministers noted the progress made since the April meeting of the Committee and were encouraged that the international consensus that AIDS and other widespread diseases created severe development problems was being turned into strengthened action.
Ministers noted the Bank’s valuable role, in partnership with the IMF and other international agencies, in strengthening the international financial architecture. This includes helping to develop appropriate standards and codes, taking account of the developing country perspective in areas important to financial resilience and integration into the global financial system, and assisting countries to strengthen their related institutions and policies. Ministers also pointed to the importance for all nations of increased national and international efforts to combat cross-border financial abuse, such as money laundering. They urged the Bank to expand its program of technical and advisory support as a significant contribution to greater participation by developing countries in a more open and equitable world trading system. They reiterated both the promise and the challenge of communications technology to promote equitable growth and welcomed initiatives by the Bank to help provide greater access, in partnership with others, for poor countries and communities to the knowledge and information opportunities of the digital age.
Ministers recognized the need to explore further opportunities for securing appropriate financing for carefully selected priority global and regional programs with substantial impact on poverty reduction. This would require innovative use of World Bank lending and, in some cases, grant facilities, taking into account alternative sources of such funds and financial implications for the Bank, as well as of new forms of collaboration with international, bilateral, philanthropic, and private partners. They stressed that global public goods investments that benefited all countries should attract new resources.
The Committee looked forward to receiving, at its next meeting, a report on progress made in further delineating priority global public goods investment areas for the Bank, as well as on the division of labor between development partners and the development of appropriate financing arrangements.
Bank support for country development
Recognizing that working with individual countries remains the backbone of the Bank’s business, ministers welcomed this initial opportunity for a broad review of the World Bank Group’s role and instruments in support of member countries’ development, taking into account the role of the IMF and other institutions.
Ministers emphasized that the Bank must tailor its support to reflect widely differing country situations.To help ensure that country programs are well grounded, ministers urged the Bank to continue to strengthen its country diagnostic and other economic and sector work. They stressed the need to focus on relevance to the country concerned and on opportunities for greater synergy with the work of the country and other development partners. Ministers noted that this analytic work, along with capacity building, took on added importance in light of the use of programmatic adjustment lending in support of borrowers’ social and structural reforms and the vision for Bank and IMF roles and partnership set out in the September 5, 2000 Joint Statement by the President [of the World Bank] and the Managing Director [of the IMF].
Ministers welcomed the Bank’s overall approach for low-income countries and its proposals for achieving greater coherence among various program documents and instruments, including basing Country Assistance Strategies on poverty-reduction strategy papers. Ministers welcomed the discussion of a poverty-reduction support credit that would support poverty-reduction strategies of governments and complement the IMF’s PRGF [Poverty Reduction and Growth Facility]. They suggested that in its further definition of the instrument, the Bank should also address the nature of the analytic work needed to underpin it, such as public expenditure reviews and poverty and fiduciary assessments. They also requested the Bank and the IMF to review the modalities for their cooperation in implementing both the Bank’s support credit and the IMF’s PRGF. Ministers stressed the importance of effective Bank-IMF coordination, given the significant role the institutions play in support of poverty reduction in low-income countries.
Ministers reaffirmed the very important continuing role of the World Bank Group in helping to reduce poverty in middle-income countries, home to so many of the world’s poor.
Ministers welcomed the progress achieved in implementing the HIPC [Heavily Indebted Poor Countries] Initiative and urged that all appropriate steps be taken to further strengthen the process. They noted that the enhancements endorsed at their meeting last year are resulting in “deeper, broader, and faster” debt relief to eligible countries undertaking the economic and social reforms needed to reduce poverty. They noted in particular that to date, 10 countries have reached their decision points under the enhanced framework, and work is being accelerated within that framework to try to reach the goal of bringing 20 countries to this point by the end of the year. This is expected to result in combined debt-service relief (including original and enhanced HIPC assistance) amounting to well over $30 billion. Taken together with traditional debt-relief mechanisms, a total of about $50 billion will be provided to these countries.
Ministers also welcomed the increased efforts to improve implementation of the initiative. They asked that the Bank and the IMF continue to work with other creditors and eligible countries to ensure that the modifications to the original HIPC framework (reflected in the enhanced initiative endorsed a year ago), such as the provision of interim assistance beginning at the decision point and adoption of a floating completion point, provide the much-needed support to qualifying countries on a timely basis. Ministers expressed support for the strengthened partnership between the two institutions in implementing the initiative and for their commitment to move forward as expeditiously as possible. It was recognized, however, that the pace of implementation would also be determined by country factors. Ministers supported maintaining a flexible approach with respect to track record requirements. They endorsed the extension of the “sunset clause” until end-2002 to allow additional countries, particularly those emerging from conflict, to participate in the initiative. Ministers also reiterated that within the existing HIPC framework the option exists, at the completion point, to reconsider the amount of debt relief for countries seriously affected by exceptional adverse shocks.
Ministers stressed the importance of fully financing the enhanced HIPC Initiative without compromising concessional facilities such as IDA [International Development Association]. They urged all donors to meet their commitments of financial support and welcomed the arrangements in place to accomplish this objective. While recognizing the special needs of particular developing and low-income transition country creditors, ministers also urged all creditors to participate in the debt-relief framework.
Poverty reduction strategy papers
Ministers reviewed progress with respect to the poverty reduction strategy approach, endorsed at their September 1999 meeting, as a way to strengthen the link between poverty reduction, HIPC debt relief, and Bank and IMF concessional lending. They noted the growing momentum in the adoption of the approach and the positive response to it on the part of countries and development partners. Ministers recognized the challenges countries faced due, among other things, to limited data and institutional capacity but urged movement from interim to full poverty reduction strategy papers on a timely basis. While strongly reiterating the core principle of country ownership, ministers called on the Bank, the IMF, and other agencies to provide appropriate technical support for countries’ strategy preparation efforts.
Ministers took this opportunity to express, on behalf of all member governments, their appreciation to IMF and Bank staff for their continued hard work and high level of dedicated service for the goals of the Bretton Woods institutions.They also expressed their deep gratitude for the warm hospitality and support provided by the Czech authorities and the people of the Czech Republic.
The Committee’s next meeting is scheduled for April 30, 2001 in Washington, D.C.