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Ottawa, October 9, 1995
1995-081
Notes for an address by the Minister of Finance of Canada, Paul Martin, to the Development Committee
Washington, D.C.
October 9, 1995
Delivered text is official version
Let me first take the opportunity to underline our appreciation for the legacy of good work left by Lewis Preston. Mr. Preston was instrumental in initiating key changes in the Bank that have set the stage for our current efforts at institutional reform. I am sure that the solid accomplishments of the World Bank under Mr. Preston's leadership will help President Wolfensohn in his efforts to chart a strong course for the Bank in the future.
Halifax Follow-up
At last spring's Development Committee meeting, I spoke about preparations for the G-7 Summit and our plans to review the role of the international financial institutions. I am encouraged to report that over the past few months we have had a very constructive sharing of ideas with our partners on institutional review.
It is important to underline the widespread support shown at Halifax for the work of the Bretton Woods institutions. The institutions have already begun to introduce changes that are starting to have an impact. Improvements in the transparency and accountability of the institutions, a more integrated approach to providing development assistance and efforts to work more closely together on key issues, are some of the critical steps that are being taken.
At the same time, we would all agree that there is still considerable room for improvement. The world today is substantially different than it was 50 years ago when the Bretton Woods institutions were created. The institutions must be better equipped to respond more flexibly to the changing global economy and to the diversity of their clients needs.
The paper provided as background for today's meeting, "Follow up to the Social Summit on Poverty Reduction at the Bretton Woods Institutions" captures well many of the key concerns expressed at Halifax. While I will discuss this issue in more detail below, let me just stress up front that the persistence of extreme poverty is unacceptable to us all and an overriding priority must be to improve the plight of the world's poor. Poverty reduction must be at the core of the operations of the multilateral institutions, whether they are providing support for the private sector, the environment or economic reforms.
Efficiency and Effectiveness
It should be emphasized first that the ongoing review of the multilateral development banks is of keen interest to Canada and the countries in the constituency that Canada represents. There is a recognition that the continuing efficient and effective operations of these institutions is critical in an increasingly interrelated global economy. Canadians have traditionally been strong supporters of multilateralism and believe that a fair and equitable multilateral system benefits us all.
Yesterday, in the Interim Committee I addressed some of the key areas for institutional reform in the IMF - - the need to: strengthen surveillance, improve responsiveness to financial crises and ensure sufficient liquidity to respond to emergency situations. I was also pleased to note the consensus which exists to expand the scope of the Fund's emergency assistance for countries in post-conflict situations.
Let me turn now to key issues of importance to Canada for the World Bank and the regional development banks.
Canadians have come to realize that in fiscally tight times we must all learn to do more with less. When resources are constrained, the government must place priority only on what it can do best. The rest should be left for those who can do better, whether the private sector or non-governmental organizations (NGOs).
Canada has taken a number of decisive actions to promote fiscal consolidation over the past year, and to put our public finances on a more sustainable footing. A number of developing countries who have acted similarly have recorded a strong growth performance. The multilateral institutions must also learn to operate better under current fiscal constraints if they are to more effectively respond to the needs of their clients. It is clear that funds from shareholders are not unlimited and steps must be taken to use scarce resources more efficiently. There are four key areas where I believe room for improvement exists.
- First, the multilateral banks must take further steps to consolidate their budgets and to streamline their operations. In this respect, I would like to commend the World Bank for the recent measures introduced to significantly reduce its administrative budget this year and next. Where warranted, I believe that this should be used as a model for similar streamlining in the regional development banks.
- Second, the growing diversity of the recipient countries requires an increasingly differentiated response from the multilateral banks. For those countries with growing access to private capital flows, greater attention should be paid to providing support in the areas of policy advice and technical assistance. Wherever possible, the market should be the dominant source of funding, especially for infrastructure projects. Scarce concessional resources should be targeted to the poorest countries, particularly those in Sub-Saharan Africa.
- Third, resource allocation must be more efficient. The inefficient allocation of funds undermines the ability of donors and recipients alike to make progress in poverty reduction. We can no longer afford to waste resources on expenditures that are unproductive when the needs of the poor are so great. Effective financing of development is incompatible with excessive military expenditures that displace social sector spending. Multilateral institutions must directly tie their lending programs to recipient country commitment to reduce unproductive expenditures.
- Fourth, overlap and duplication among the multilateral development banks must be reduced. This was underlined at Halifax and is a key area of concern for the Multilateral Development Bank Task Force. In this respect, I look forward to the findings of the final report of the task force in April 1996. Savings could be realized through better co-operation in such areas as data collection and analysis as well through greater coherence in policy advice. The result will also have a positive impact on sustainable development.
Poverty Reduction
Let me underline again that poverty reduction remains one of our greatest challenges. Despite progress in reducing poverty over the past three decades, extreme poverty remains a persistent and unacceptable global problem. The focus on poverty reduction for this Development Committee meeting underlines that donors and recipients alike must work better together to create greater opportunities for the poor in the future.
I noted earlier several ways that improving the efficiency and effectiveness of the multilateral banks could help improve their efforts at poverty reduction. Multilateral banks will increasingly be accountable for the impact of their programmes on the poor. They will be required to listen better to the concerns of those affected by their projects, particularly the poorest members of society who too often remain marginalized in the consultation process. Lending is not sustainable in the longer term unless beneficiaries have a clear sense of ownership in their projects. The broad experience of NGOs in working with the civil society should be better utilized in undertaking consultations with those affected.
Private sector development and poverty reduction should not be seen as separate issues. Events over the past few years have shown that developed and developing countries alike are embracing market principles with renewed enthusiasm. There is growing acceptance of the important role the private sector can play in contributing to longer term sustainable development and poverty reduction. More innovative ways must be found to address both the private sector needs of the more developed as well as the least developed countries.
Multilateral Debt
Turning to the question of multilateral debt, Canada, and the countries in the constituency that Canada represents, recognize the difficulties some developing countries face in managing their multilateral debt and we support a comprehensive and co-ordinated approach to finding ways to reduce this burden. Resources must clearly be targeted to those countries with the greatest needs and who have shown a willingness to adopt the appropriate economic reforms.
Yesterday, in my notes to the Interim Committee, I noted that in terms of the role of the IMF, the continued financing for ESAF will be one important step in addressing the problem of multilateral debt. On the Bank side, the recent replenishment of the IDA-only Debt Reduction Facility is a positive development. But obviously more needs to be done and the Bretton Woods Institutions must work better together and with the regional development banks in a more co-operative and co-ordinated manner. I fully support the current proposal to have a more substantive discussion of multilateral debt at next April's meeting and look forward to a timely resolution of the issue.
The Role of IDA
I believe we all agree that IDA plays an indispensable role in helping to reduce poverty and in integrating the poorest countries into the global economy. IDA's multilateral approach to international assistance has benefits for donors and recipients alike, through the sharing of ideas and building consensus on addressing key development problems. This was endorsed by the G-7 at Halifax.
To ensure the continuing access of resources for the poorest countries, all countries should meet their current IDA obligations in a timely fashion. Every effort should be made to ensure that the eleventh negotiations of IDA come to a timely and productive resolution to ensure those in greatest need have sufficient access to continued funding. I would also like to stress the importance I attach to ensuring the continued access of small island economies to IDA resources, particularly for those small island economies experiencing extraordinary depletion of their sources of income and frequent disruption of their development due to natural disasters. Of course, attention to the quality of IDA lending should be front and centre in these negotiations to ensure the poor receive the best possible assistance.
New Leadership
I should emphasize how impressed I have been with the commitment and leadership of our new President in his early days at the Bank. In a rapidly evolving global economy, his task in guiding the World Bank into the future will not be an easy one. I have full confidence that Jim Wolfensohn is the right person to help bring the Bank into the 21 century and I can pledge the full support of Canada and the countries in the constituency that Canada represents, as he moves forward with his work.
I would also commend the President and the Chairman of the Development Committee, on the new measures introduced to improve the focus and relevance of the Development Committee. These changes should allow for a more frank and open dialogue among Ministers. I also appreciate the opportunity to discuss with the new President his early impressions of the Bank and to have an open exchange of views on the future direction of the Bank at a critical stage in its work.
Conclusion
Now, more than ever, effective international institutions are vital to our common objective of raising the living standards of the poor and promoting longer term sustainable development. Recent efforts at reform by the IMF and the multilateral development banks show a real commitment to improving the quality of their assistance. We must continue to build on the momentum of this work to ensure that this commitment is turned into positive action.
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| Last Updated: 2002-11-26 |
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