World Bank and IMF roles debated at development finance summit

25 March 2002

The Fourth Preparatory Committee (PrepCom) meeting for the UN international Financing for Development (FfD) conference (to be held in March in Monterrey, Mexico) has just concluded in New York, with the endorsement of the so-called “Monterrey Consensus” document by all participants. This document “Confronting the Challenges of Financing for Development: A Global Response”, covers the issues acknowledged in the Zedillo report. These are: mobilizing domestic financial resources, foreign investment, trade, official development assistant (ODA), external debt and the international financial architecture. It is expected that the summit itself will make very few changes to the document.

Unusually, the World Bank and the IMF will play direct roles in this UN conference. The WB is participating at a senior level in all preparatory committee meetings and the IMF is participating at a number of different levels. Likewise, the heads of the Bretton Woods institutions and the WTO have been invited by the preparatory committee to be co-Chairs of the Heads of State Multi-stakeholder Roundtables in Monterrey. In a preliminary examination of the Monterrey Consensus, the Bretton Woods Project has identified twelve specific non-committal “leading actions” that concern the roles of the Fund and the Bank (see list below).

Commenting on the outcome of the PrepCom, co-chair H.E. ambassador Shamshad Ahmad said that Monterrey is not to be viewed as “a stand alone event, but the first building block in a long and continuing process.” The agreement allows NGOs and other stakeholders to lobby their governments to make substantial and concrete contributions to enhance global development finance. Another distinctive achievement of the Monterrey Consensus, which has been welcomed by many NGOs, is the inclusion, (in the ODA section) of the target of increasing developed countries aid budgets to 0.7% of GNP. This issue became one of the main obstacles for the realization of the agreement. In recent newspaper articles and reports coming from Northern and Southern NGOs, the US government had been criticized for its reluctance even to mention the 0.7% target in the draft conference declaration.

On the other hand, Martin Köhler and Robin Round from Campagna per la riforma della Banca Mondiale (Italy) have produced an “Assessment of the FfD Outcome Paper”. In this document they consider the FfD process a “failure.” Based on a comparison between the Monterrey Consensus and the Appeal from European NGOs issued by the European NGO Caucus during the PrepCom, they argue that four demands are not being addressed at all, three are addressed only partially and that only one has been met. “In its general attitude, it [the Monterrey Consensus document] is thoroughly based on the continuation of neoliberal economic policy prescriptions”, they conclude. Likewise, Pablo Gutman from WWF Macroeconomic Policy Office criticized the FfD document for its lack of any “single creative initiative”, any “single biding commitment” and any “single implementation timeframe.” He added that the message from the world bank and IMF was: “we are concerned, we are doing a good job, and inasmuch as we have bylaws and governing bodies, the FfD is no place to discuss our policies or institutional arrangements.” Areli Sandoval from Equipo Pueblo, has also pointed out that the World Bank, IMF and WTO representatives involved in the summit have contributed to the “resistance to address some of the more polemic aspects of the systemic issues, such as the means of decision-taking within the multilateral agencies”.

An independent Forum of NGOs on FfD, organized by Mexican networks, was announced on Thursday 17th January. The Foro Global will be held from the 14th to the 17th March and its specific objectives are:

  1. promoting Civil society participation in the summit;
  2. disseminating information to the media;
  3. contributing to the formation and construction of a global civil society that understands global economic governance debates in depth, and,
  4. to design strategies to monitor those points of the summit that are priority for civil society.

Laura Fraude, from the Mexican organising committee for the Forum said that the it will cover issues absent from the official conference, such as gender, environment, labour issues and social-economic rights.

In an unexpected move, former IMF managing director Michel Camdessus has been appointed by the UN General-Secretary as one of his especial envoys for the FfD process. Camdessus appointment has been severely criticized by many NGOs (see links below). “The UN“, commented David Ransom in a recent article for Debtchannel, is in danger of being “eaten for breakfast by the Bretton Woods institutions.” However, Camdessus’ role appear to be more of an ambassador than a decision-maker. Camdessus, alongside South African Finance Minister Trevor Manuel, role will be to “have discussions with political leaders at highest level, especially those responsible for finance, trade, development cooperation and foreign affairs, to asses their views on the goals for the conference and foster commitments to concrete outcomes”, according to an official UN statement.

For gender perspectives on the FfD agenda, read the statement by the Executive Director of the United Nations Development Fund for Women (UNIFEM).

DebtChannel and Eurodad are running an online discussion forum on FfD issues.

On Camdessus appointment: Asian NGOs | African NGOs

Extracts from the Monterrey Consensus, Confronting the Challenges of Financing for Development: A Global Response **

Selected non-committal “leading actions” relevant to the World Bank and IMF:

  1. There is a need for the international financial institutions (IFIs) to complement domestic efforts to increase their support for private foreign investment in infrastructure development and other priority areas, including projects to bridge the digital divide (page 4).
  2. Multilateral financial institutions could provide further assistance to mitigate the impact of excessive volatility of short-term capital flows (Page 5).
  3. IFIs are urged to continue to support projects that promote sub-regional and regional integration (page 6).
  4. Multilaterals are invited to coordinate their efforts and increase their resources to improve trade infrastructure, diversify export capacity, strengthen institutional development and enhance overall productivity and competitiveness (page 6).
  5. Multilateral assistance is also needed to mitigate the consequences of depressed export revenues of countries that still depend heavily on commodity exports. The signatory governments recognise the recent review of the IMF Compensatory Financing Facility and they will continue to assess its effectiveness (page 6).
  6. Multilateral and bilateral development institutions should strive to make Official Development Assistance (ODA) more effective. To this end, there is a need to:

    (i) Harmonize their operational procedures, so as to reduce transaction costs and make ODA disbursement more flexible (page 7).

    (ii) Support and enhance recent efforts and initiatives such as untying aid (page 7).

    (iii) Enhance the absorptive capacity and financial management of the recipient countries to utilize aid, including budget support mechanisms (page 8).

    (iv) Use development frameworks, including PRSPs, as vehicles for aid delivery upon request (page 8).

    (v) Enhance recipients’ ownership, including procurement of technical assistance programs and increase the effective use of local technical assistance resources (page 8).

    (vi) Improve ODA targeting to the poor (page 8).

  7. The signatory governments agree to study, in the appropriate fora, the results of the analysis requested from the Secretary-General on possible innovative sources of finance, noting the proposal to use SDR allocations for development purposes (page 8).
  8. Speedy, effective and full implementation of the enhanced Heavily Indebted Poor Countries (HIPC) Initiative, which should be fully financed through additional resources, is critical. Moreover, future reviews of debt sustainability should also bear in mind the impact of debt relief on progress towards the achievement of the development goals contained in the Millennium Declaration (page 9).
  9. The signatory governments stress the need for the IMF and the World Bank to consider any fundamental changes in countries’ debt sustainability caused by natural catastrophes, sever terms of trade shocks, or conflict, when making policy recommendations, including for debt relief as appropriate (page 9).
  10. The IFIs, in particular the IMF, need to continue to give high priority to the identification and prevention of potential crises. The Fund needs to further strengthen its surveillance activities, with particular attention to short-term capital flows and their impact. Moreover, the Fund should coordinate closely with relevant regional institutions, including the UN regional commissions (page 10).
  11. In providing policy advice and financial support, the IFIs should take into account social costs of adjustment programmes and these should be designed to minimize negative impact on the vulnerable segments of society (page 10).
  12. The IMF and the World Bank should continue to enhance participation of all developing countries in their decision-making (page 11).

** We are quoting from the “Draft text of the Monterrey Consensus agreed at informal consultations on 27 January 2002”

Vander Caceres, 08/02/02