In a day-long meeting on July 26 sponsored by the U.S. Executive Directors of the IMF and the World Bank—Karin Lissakers and Jan Piercy, respectively—senior IMF, World Bank, and U.S. officials, and representatives of leading nongovernmental organizations convened for a “nuts and bolts” discussion on debt relief. The conference’s goal, noted Piercy, was to lay out a framework that would ensure that debt relief achieved its intended effect—namely, strong and durable growth and poverty reduction.
Opening the discussion, U.S. Treasury Secretary Lawrence Summers outlined an urgent agenda for changing the way the world approaches debt relief for the heavily indebted poor countries (HIPCs). The United States, he said, viewed three steps as critical imperatives: reassessing the proper scale of relief, finding appropriate financing, and revamping the way the international financial institutions approach poverty reduction and sustainable development and how their assistance is targeted. He underscored that debt relief was not an end in itself but a means to create successful development. The process could work, he said, only if national policies and institutions were right and if the right kind of support were available from the international community.
According to Summers, IMF and World Bank support for the poorest countries must feature a more integrated approach to adjustment that puts growth, poverty reduction, and good governance at the center of program design and strengthens the protection of core social priorities. A new mechanism must also be developed to ensure that the benefits of debt relief flow into increased national efforts to combat poverty, invest in people, and address AIDs and environmental degradation. In addition, a more explicit recognition was needed of the importance of transparent policymaking, good governance, and effective anticorruption efforts and of the need for a greater emphasis on building national ownership of policies and programs, with concrete steps to broaden participation and understanding. Finally, he stressed that the IMF’s Enhanced Structural Adjustment Facility (ESAF) must be transformed, and the capacity of the IMF and the World Bank to support the poverty reduction and long-term growth must be strengthened.
These are ambitious goals, Summers acknowledged, but it is important to seize the momentum from the Cologne summit (see IMF Survey, July 5, page 209) and accelerate and integrate debt-relief efforts into a single package for consideration at the September Annual Meetings of the IMF and the World Bank. He also pointed to the crucial balance that must be struck between international and national interests as the debt-relief initiative moves forward. Three questions would be key—namely:
• how to target support for social objectives while enhancing national ownership and participation;
• how to accelerate the flow of debt relief within the HIPC Initiative while also strengthening the link between relief and lasting poverty reduction; and
• how to design effective economic adjustment policies while also protecting and advancing core social priorities.
The right answer may differ from country to country, Summers observed, but it is critical to take advantage of this historic opportunity for positive change and reach broad international agreement between now and September on an enhanced framework for debt relief and poverty reduction.