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Finance & Development is published quarterly in English, Arabic, Chinese, French, Russian, and Spanish by the International Monetary Fund. English edition ISSN 0015-1947

Laura Wallace


Asimina Caminis

Jeremy Clift


Camilla Andersen

Elisa Diehl

Christine Ebrahim-zadeh

Natalie Hairfield


Prakash Loungani


Luisa Menjivar


Lai Oy Louie


Lijun Li

Kelley E. McCollum


Kenneth S. Rogoff



Peter Allum

Francesco Caramazza

Adrienne Cheasty

Paula De Masi

Andrew Feltenstein

Paul Hilbers

Ashoka Mody

Mark Plant

Thomas Richardson

Jerald Schiff

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IN SEPTEMBER 2000, at the Millennium Summit, government leaders committed with great fanfare to meet a set of Millennium Development Goals (MDGs) by 2015. These are specific, quantitative targets for progress in fighting poverty and improving education, health, and the environment, the number one goal being to halve the 1990 incidence of extreme poverty. Just one year later, the world was shaken by 9/11, prompting many to argue that global security hinged partly on ending the misery of the world’s poor and disenfranchised. And meanwhile, the lack of progress in reducing poverty in parts of the world, especially sub-Saharan Africa, has been striking.

In this issue of F&D, we do a reality check on what is needed to reach the MDGs. The World Bank’s 2004 World Development Report indicates that the goal of halving poverty is likely to be met at the global level. But what does that mean on the country level? A World Bank study prepared for the September 2003 meeting of the IMF-World Bank Development Committee underscores the need for urgent action on the part of developing and developed countries. The study shows that, even for 18 low-income countries that already have good policies and governance, if policies and foreign aid flows remain unchanged, none will achieve all of the goals, and two (Burkina Faso and Ethiopia) won’t achieve any of them. However, if recipients improve policies, donors significantly boost aid and improve aid delivery, and market access is improved, the rewards will be immense. Three countries (Bolivia, Indonesia, and Vietnam) will meet all of the goals, all 18—which account for half the world’s poor and receive one-third of global aid flows—will meet the poverty goal, and almost all will achieve the educational goals, although progress on health will still be disappointing. As this and other articles in this issue of F&D show, the hurdles to reaching the MDGs are many, and the time to act is now.

* * * * *

In Straight Talk, Kenneth Rogoff suggests that the past decade of global disinflation may well be an unsung benefit of globalization—something that should give the antiglobalizers pause, particularly since lower inflation tends to help the poor the most. With F&D’s March 2004 issue, the column will be taken over by the IMF’s new Economic Counsellor and Research Department Director, Raghuram Rajan. Rogoff left the IMF in October to return to Harvard University where he is Professor of Economics and Director of the Center for International Development.

In People in Economics, we profile Peru’s Hernando de Soto—a charismatic populist who has won many converts among world leaders, ranging from Russia’s Vladimir Putin and Thailand’s Thaksin Shinawatra to Mexico’s Vicente Fox and Afghanistan’s Hamid Karzai. For de Soto, who expects to be working with 25 governments by the end of 2005, the key to defeating international terrorism and establishing capitalism in the developing world lies in enabling tens of millions of poor entrepreneurs across the developing world to become part of the system rather than excluded from it. Columbia University’s Professor Jagdish Bhagwati has told us that de Soto is “arguably the most interesting intellectual writing on development today.”

Also in this issue, we probe China’s increasing vilification as a spoiler in the global trade game. IMF research suggests that China may be getting a bum rap.

Laura Wallace


Finance & Development welcomes readers’ comments. Letters should not exceed 250 words and may be edited for length and clarity. Please address letters to the Editor-in-Chief, Finance & Development, International Monetary Fund, Washington, DC, 20431, USA or e-mail to

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December 2003 • Volume 40 • Number 4

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Cover and this page Denio Zara in Addis Ababa

Photography p.6: World Bank and Reuters/Ceerwan Aziz; p. 7: AFP Photo/Pornchai Kittiwongsakul; p 9: IMF photo unit; pp. 12 and 17: Denio Zara; p. 18: Padraic Hughes; p. 21: Corbis; p. 24: AFP/Corbis; p. 28: AFP Photo/Hoang Dinh Nam; p. 35: World Bank/Eric Miller: p. 36: AFP/Corbis; p. 47: Reuters/Corbis; Books: Michael Spilotro and Eugene Salazar

Illustrations pp. 40–41 and 42: Dale Glasgow.

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  • Falling Behind?
    • Introduction to a set of five articles exploring the MDGs
  • Getting There
    • How to accelerate MDG progress
    • Mark Baird and Sudhir Shetty
  • Avoiding Another Debt Trap
    • Why a sustainable borrowing strategy is needed
    • Christina Daseking and Julie Kozack
  • Absorbing Shocks
    • How to help cushion shocks for low-income countries
    • Nancy Happe, Mumtaz Hussain, and Laure Redifer
  • Using Fiscal Policy to Spur Growth
    • When reducing fiscal deficits makes sense for low-income countries
    • Emanuele Baldacci, Benedict Clements, and Sanjeev Gupta
  • Overcoming the Obstacles
    • What will it take to lift the world’s neediest out of poverty?
    • Hilde Johnson, Henry Northover, Luisa Diogo, and M. Saifur Rahman
  • Bridging the “Great Divide”
    • Poorly developed financial systems in the CIS-7 countries may jeopardize their sustained growth
    • Gianni De Nicoló, Sami Geadah, and Dmitriy Rozhkov
  • Beyond the Great Wall
    • Why some see China’s integration into the global trading system as a competitive threat but others, including global consumers, see it as a boon
    • Eswar Prasad and Thomas Rumbaugh


  • Letters to the Editor
  • In Brief
    • News from international agencies
  • People in Economics
    • Jeremy Clift interviews Hernando de Soto
  • Back to Basics
    • The Global War on Poverty: Who’s Winning?
    • Prakash Loungani
  • Picture This
    • The World’s Forests—Balancing Economic Demands and Conservation
  • Book Reviews
    • Selling China: Foreign Direct Investment During the Reform Era, Yasheng Huang
    • The Next Crisis? Direct and Equity Investment in Developing Countries, David Woodward
    • The Real Environmental Crisis: Why Poverty, Not Affluence, Is the Environment’s Number One Enemy, Jack Hollander
    • Plan B: Rescuing a Planet Under Stress and a Civilization in Trouble, Lester Brown
    • Portrait of the Poor: An Assets-Based Approach, Orazio Attanasio and Miguel Szekely (editors)
    • Governing the World’s Money, David M. Andrews, C. Randall Henning, and Louis W. Pauly (editors)
  • Straight Talk
    • Disinflation: An Unsung Benefit of Globalization?
    • Kenneth S. Rogoff
  • Country Focus
    • The Commonwealth of Independent States
  • Index
    • Index to the articles for 2003