Ireland’s Participation in the International Monetary Fund and the World Bank Annual Report 2019
Department of Finance | Ireland’s Participation in the IMF & WBG
‘The Department’s mission is to manage Government finances and play a central role in the achievement of the Government’s economic and social goals having regard to the Programme for Government. In this way we will play a leadership role in the improvement of the standards of living for all Irish citizens’. Statement of Strategy 2017-2020 Department of Finance
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Department of Finance | Ireland’s Participation in the IMF & WBG
CONTENTS
5. Foreword
7. Introduction
8. The International Monetary Fund in 2019
16. Joint EU-IMF Financial Assistance Programme for Ireland
19. The World Bank Group in 2019
30. Payments and Financial Activities in 2019
35. Appendix A: Further Information on the IMF
37. Appendix B: Further Information on the WBG
40. Appendix C: Ireland’s Voting Record in 2019
41. Appendix D: Ireland’s WBG Shareholding and Voting Power
42. Appendix E: Ireland’s Quota at the IMF
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Department of Finance | Ireland’s Participation in the IMF & WBG
Foreword
Please note: the contents of this Annual Report are concerned with Ireland’s participation in the IMF and the World Bank in 2019, prior to the emergence of the COVID-19 pandemic. As a result, the impacts of, and responses of the IMF and the World Bank to this crisis are not reflected in this report.
In accordance with Section 10 of the Bretton Woods Agreements (Amendment) Act, 1999, I am pleased to present to Daiĺ Éireann and Seanad Eireanń the Annual Report of Ireland's Participation in the International Monetary Fund and the World Bank for the year 2019.
2019 marked the seventy-fifth anniversary of the 1944 conference in Bretton Woods, New Hampshire that led to the creation of the International Bank for Reconstruction and Development (now the World Bank) and the International Monetary Fund (IMF). Both institutions remain the cornerstone of a multilateral system that has been severely challenged by the increasing insularity, protectionism and unilateralism of recent years. As ever, it is Ireland’s belief that collective action and improved global cooperation is vital in order to boost inclusive growth by modernising the trade system, reducing excess global imbalances and improving debt dynamics. Both the IMF, with its mandate to help ensure the stability of the global economic and financial system, and the World Bank, which is committed to reducing poverty and raising living standards across the globe, are essential in leading the concerted and coordinated international action required to meet these objectives.
Ireland has long recognised that cooperation, multilateralism and the primacy of rules-based engagement are fundamental to harmonious and productive international relations. These pillars must be present to ensure equity and give smaller nations voice and influence. Ireland’s support and commitment to these pillars remains constant and consequently, having formalised our membership of the Asian Infrastructure Investment Bank in October 2017, we underpinned this commitment by further progressing our membership of the African Development Bank during the last year.
In 2019, I had the pleasure of attending both the Spring Meetings and the Annual Meetings of the IMF and World Bank in Washington. These Meetings highlight the work and importance of these global institutions, and provide useful platforms to exchange ideas and experiences on economic, financial and development matters. In the course of these events I had the opportunity to participate directly in a number of these discussions, including the IMF Fiscal Forum session on public investment in people and infrastructure as well as a panel discussion on the political-economy of structural reforms.
At the Annual Meetings in October I was pleased to announce a number of significant actions by Ireland to assist developing economies. These included the launch of the Domestic Resource Mobilisation (DRM) initiative, a whole-of-government collaboration between the Department of Foreign Affairs and Trade, the Department of Finance and the Office of the Revenue Commissioners. Drawing on Ireland's internationally recognised expertise in tax administration, the DRM initiative will see Ireland partner with developing countries to help strengthen their own capacity.
I was also invited to address the Ministerial Conclave of the World Bank’s Human Capital Project (HCP) and confirmed Ireland’s membership of the HCP Network. There was considerable interest in Ireland’s record of investment in our citizens, on which much of our remarkable economic performance of recent decades has been predicated. It is heartening that our experiences will serve to encourage developing countries to achieve similarly transformative results by investing in their people.
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Department of Finance | Ireland’s Participation in the IMF & WBG
During the course of October’s Annual Meetings I also met with the new Managing Director of the IMF, Ms Kristalina Georgieva, who had just been appointed on 1 October. Her assessment of the global economy, published during the course of the Annual Meetings, was sombre, noting that the pace of global growth had slowed, weakened by the impact of adverse geopolitical developments and broadening trade tensions. At that time a subdued, uneven and precarious global recovery was expected in 2020. The Fund’s assessment of Ireland’s economic performance in 2019, in the form of the Article IV consultation, noted the strong broad- based growth of our economy and our improved public finances. However, while affirming the current strength of Ireland’s economy, the 2019 review also warned of the challenges from domestic capacity constraints and external downside risks, notably Brexit and the possible negative spillovers of a continued escalation of global protectionism and sudden changes in international corporate taxation which could adversely affect our economy and public finances. Of course contemporaneous economic forecasts have been overtaken by the then unforeseen and, as of yet, unquantified impact of the COVID-19 pandemic
With regards to resourcing, there were significant developments at both the IMF and the World Bank in 2019. Ireland firmly believes in the need for a strong, quota-based and adequately resourced IMF and, as such, we were disappointed that the Fund's 15th General Review of Quotas concluded with no agreement on a quota increase. However, we welcome the alternative package on IMF resources agreed at the 2019 Annual Meetings and will be keen to play our role by ratifying the doubling of the New Arrangements to Borrow at the earliest opportunity.
The conclusion of the Nineteenth Replenishment of the International Development Association (IDA19) with an agreement on a historic $82 billion financing package for the World Bank’s fund for the poorest economies and people of the world was certainly a welcome outcome. It also represents a significant achievement for Mr David Malpass in his first year as President of the World Bank Group. Ireland’s IDA19 pledge of a record €101.6 million over nine years is a tangible demonstration of our support for the World Bank and our belief in IDA’s ability to maximise its development impact. With its focus on climate change, gender, JET, fragility and conflict and violence, and governance and institutions, IDA’s priorities are closely aligned with the goals of A Better World, Ireland's international development policy. We hope that, with this record financing package, IDA can make significant progress in improving the lives and prospects of the 500 million people currently living in extreme poverty.
This Report summarises the major developments at the IMF and the World Bank over 2019 and outlines Ireland's participation as a member of both Institutions.
Paschal Donohoe T.D.
Minister for Finance and Public Expenditure and Reform
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Department of Finance | Ireland’s Participation in the IMF & WBG
Introduction
Please note: the contents of this Annual Report are concerned with Ireland’s participation in the IMF and the World Bank in 2019, prior to the emergence of the COVID-19 pandemic. As a result, the impacts of, and responses of the IMF and the World Bank to this crisis are not reflected in this report.
The International Monetary Fund (IMF/“the Fund”) and the World Bank were established in July 1944 at an international conference which was convened in the town of Bretton Woods, New Hampshire, USA. The conference was attended by representatives of 45 countries and its goal was to establish a framework for economic cooperation and development that would lead to a more stable and prosperous global economy. While this goal remains central to both institutions, their work is constantly evolving in response to new economic developments and challenges.
The IMF promotes international monetary cooperation and provides policy advice, technical assistance and loans to help countries build and maintain, or restore, strong economies. The mandate of the World Bank is to promote long-term economic development and poverty reduction by providing technical and financial support to help countries reform particular sectors or implement specific projects.
Ireland joined the IMF and the World Bank in 1957 as part of a process of deepening our engagement and integration with the global economy. The legislation governing Ireland’s membership of the institutions is the Bretton Woods Agreements Act, 1957, which has been amended on a number of occasions.
This Annual Report on Ireland's Participation in the International Monetary Fund and the World Bank, which covers the period from 1 January 2019 to 31 December 2019 has been prepared in accordance with Section 10 of the Bretton Woods Agreements (Amendment) Act, 1999. The report summarises the major developments at the IMF and the World Bank over the past year. It sets out the details of Ireland’s participation as a member, and reports on past and present goals and strategic actions which guide Ireland’s relationship with both institutions. Further details on the structures, working arrangements, resourcing and work of the IMF and the World Bank are set out at Appendices A and B of this report. It should be noted that the World Bank of today is in fact made up of five component organisations collectively known as the World Bank Group (WBG).
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Department of Finance | Ireland’s Participation in the IMF & WBG
THE INTERNATIONAL MONETARY FUND IN 2019
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Department of Finance | Ireland’s Participation in the IMF & WBG
THE INTERNATIONAL MONETARY FUND IN 2019
Through its core activities of lending, policy advice and capacity development, the IMF continues to play a lead role in safeguarding financial stability and fostering international economic cooperation. Areas in focus in 2019 included:
Promoting the benefits of multilateralism in the context of escalating trade tensions, including research highlighting the negative direct and indirect impacts of trade disputes; Continuing the drive to enhance transparency and management of debt burdens, which are at unprecedented levels; Highlighting the risks of, and necessity for action on, climate change; Promoting gender and diversity in the economy and financial policies of members, and in their institutions; and Supporting the ongoing work of the Platform for Collaboration on Tax, a joint effort by the IMF, World Bank, OECD and the UN, which aims to better frame technical advice to developing countries as they seek more capacity support and greater influence in designing international tax rules.
Further information on the role and governance of the IMF is set out in Appendix A.
IMF Lending As member countries encounter balance of payments problems, the IMF makes financing available under specific programmes and conditions. These IMF programmes and associated loans help countries to continue paying for vital imports and undertaking external transactions while correcting the underlying economic problems in order to restore the conditions for sustainable economic growth. In 2019, the IMF’s overall stock of outstanding loans continued to decrease as the global economy moves on from the financial crisis and some countries make early repayments on their loans. In the aftermath of that crisis, IMF lending peaked at almost SDR 100 billion.1 At end-December 2019, outstanding loans totalled SDR 74 billion, of which SDR 67 billion was ‘regular’ IMF lending and SDR 7 billion was ‘concessional lending’ to low-income countries.
IMF Lending Activity - 2019
On 3 July 2019, the Fund approved a 39-month extended arrangement under the Extended Fund Facility (EFF) for Pakistan for an amount of approximately US$6 billion to support the authorities’ economic reform programme. The EFF-supported programme will help Pakistan to reduce economic vulnerabilities and generate sustainable and balanced growth. Another significant programme approved in 2019 was a US$4.2 billion EFF for Ecuador. The Flexible Credit Line arrangement to Mexico totalling US$61 billion, approved by the IMF Executive Board in November 2019, is the most significant arrangement in terms of quantity. This is a ‘precautionary facility’ with expectation of full or partial drawdown considered low.
1 The SDR serves as the unit of account of the IMF and some other international organisations. Its value is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. The value of the SDR is determined daily based on market exchange rates. | 9
Department of Finance | Ireland’s Participation in the IMF & WBG
Economic Surveillance The Fund monitors the economic and financial policies of its 189 member countries. This takes the form of bilateral surveillance – regular country missions to highlight risks to stability and advice on needed policy adjustments – and multilateral surveillance, via monitoring of global economic and financial developments as well as overseeing the international monetary system. Like every member, Ireland receives a bilateral mission every year from the Fund (Article IV consultation) for which a report is subsequently published. The IMF also carries out specialised detailed assessments of financial stability (‘Financial Stability Assessment Program’ or FSAP) of a number of systemically important countries every five years. The current list of ‘Systemically Important Financial Systems’ numbers 29, using an IMF Board-approved methodology. This approach and methodology is currently under review, for decision in 2020. Ireland is included in the current list of systemically important countries and Ireland’s next FSAP was expected to commence in late-2020.
Multilateral Surveillance The IMF produces a wide variety of research on, and is a global leader in the assessment of, major economic and financial issues. The Managing Director’s Global Policy Agenda provides an assessment of the global economy and sets the high-level priorities for the Fund each year. In her October 2019 Global Policy Agenda, Managing Director Kristalina Georgieva stressed that the outlook remains precarious, and downside risks, stemming primarily from a further broadening of trade tensions and rising financial vulnerabilities, cloud the horizon. In that context, the focus must be on reversing tariff increases and finding lasting solutions to trade disputes, including by removing domestic distortions and strengthening the multilateral trading system, particularly the World Trade Organisation (WTO).
The best-known publications of the Fund under its multilateral surveillance are the biannual so-called ‘Flagship documents’: The World Economic Outlook; The Fiscal Monitor; and The Global Financial Stability Report.
The World Economic Outlook (WEO) is published in April and October each year. In the October 2019 update, global growth was projected to pick up to 3.4 per cent in 2020, from 3.0 per cent in 2019. World growth continues to be underpinned primarily by the economic performance of a number of emerging markets, albeit less buoyant than earlier expected. Advanced economies were generally facing positive but slower growth, reflecting the drag from weaker momentum and overhanging factors such as demographic aging and lower productivity, among others. To strengthen resilience, policymakers were encouraged to continue to address financial vulnerabilities that pose risks to growth in the medium term. Making growth more inclusive, which is essential for securing better economic prospects for all, should remain an overarching goal.
The Fiscal Monitor (FM) published in October 2019 emphasised the environmental, fiscal, economic and administrative case for using carbon taxes, or similar pricing schemes such as emission trading systems, to implement climate mitigation strategies. It provided a quantitative framework for understanding their effects and trade-offs with other instruments and applied it to the largest advanced and emerging economies. At the international level, the report called for a carbon price floor arrangement among large emitters, designed flexibly to accommodate equity considerations and constraints on national policies.
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The Global Financial Stability Report (GFSR) published in October 2019 identified the current key vulnerabilities in the global financial system such as the rise in corporate debt burdens; increasing holdings of riskier and less liquid assets by institutional investors; and growing reliance on external borrowing by emerging and frontier market economies. The report proposed that policymakers mitigate these risks through stricter supervisory and macro-prudential oversight of firms; strengthened oversight and disclosure for institutional investors; and the implementation of prudent sovereign debt management practices and frameworks for emerging and frontier market economies.
Other notable IMF research in 2019 included an assessment of the political costs of reforms; an analysis of the role of national structural reforms in building resilience in the Euro Area; and staff research on climate disaster risks.
Capacity Development The IMF works with governments around the world to modernise their economic policies and institutions and to train their people. This helps to improve inclusive growth. In the fiscal year ending 30 June 2019, the IMF provided US$303 million of technical advice, policy-oriented training and peer learning. A significant portion of this work is funded by bilateral donors under the auspices of sovereign commitments in foreign aid budgets. The Fund has a range of regional training centres to enhance its ability to deliver training to a wide range of institutions and staff. Staff from Irish authorities have participated in several Technical Assistance missions, including on financial stability in Caribbean countries in our IMF Constituency. The Irish authorities are continuously assessing how to broaden Ireland’s contribution to this important work.
Policy Issues
15th Review of Quota An IMF member’s shareholding at the Fund is referred to as its ‘quota’. Ireland’s quota share is SDR 3,449.9 million and our voting share at the IMF is 0.71 per cent. Quota is central to both funding and governance at the IMF.
In 2019, discussions on the 15th Review of Quotas continued. The aim of the Review was two-fold: (i) to ensure that the quota shares of members better reflect their economic standing in the global economy; and (ii) that the total volume of funds available to the IMF is sufficient to respond to many scenarios of crisis needs by members. However, it became evident in April 2019 that it would not be possible to secure the required support for a quota increase under the 15th Review. In October 2019, the IMF Executive Board notified the Board of Governors that they would not be in a position to make a recommendation on the conclusion of the 15th Review by the given deadline of the 2019 Annual Meetings.
At the Annual Meetings, the Managing Director obtained endorsement from IMFC members2 and non-IMFC G20 members for the key elements of a package on IMF resources and governance reform. In the absence of increased quota contributions, the main components of the resources package would be a doubling of the
2 The International Monetary Fund Committee (IMFC) has 24 members who are central bank governors, ministers, or others of comparable rank and who are usually drawn from the governors of the Fund’s 189 member countries. Membership of the IMFC is determined by a member’s quota, with the size and the composition of the IMFC mirroring that of the IMF Executive Board. Ireland is not a member of the IMFC.
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Department of Finance | Ireland’s Participation in the IMF & WBG
New Arrangements to Borrow (NAB)3 and the extension of the 2016 Bilateral Borrowing Agreements (BBA)4 by one year. NAB participants met in Washington, D.C. on 19 October 2019 and expressed their support for the proposed doubling of NAB credit arrangements and the establishment of a new NAB period from 2021 to 2025. Discussions on a new round of BBAs will take place in 2020, with a view to maintaining the Fund’s current overall resource envelope with broad creditor participation.
Election of New Managing Director, Kristalina Georgieva The IMF Executive Board selected Kristalina Georgieva as the new IMF Managing Director, the twelfth since the Fund’s inception in 1944, for a 5-year term starting on 1 October 2019. Ms. Georgieva, a national of Bulgaria, had been the Chief Executive Officer of the World Bank since January 2017. From 1 February 2019 to 8 April 2019, she was the Interim President for the World Bank Group. Previously, she served in the European Commission, first as Commissioner for International Cooperation, Humanitarian Aid and Crisis Response, then as Vice President for Budget and Human Resources. Ms. Georgieva has a Ph.D. in Economic Science and an M.A. in Political Economy and Sociology from the University of National and World Economy in Bulgaria, where she also taught from 1977 to 1991.
In her first speech as Managing Director, Ms Georgieva outlined her policy priorities to secure stronger and more resilient growth:
Use monetary policy wisely and enhance financial stability; Deploy fiscal tools to meet current challenges; Implement structural reforms for future growth; and Embrace international cooperation, particularly in relation to climate change.
3 Under the New Arrangements to Borrow (NAB), a number of member countries and institutions stand ready to lend additional resources to the IMF. The NAB constitutes a second line of defence and operates as a credit arrangement between the IMF and a group of members and institutions to provide supplementary resources to the IMF when these are needed to forestall or cope with an impairment of the international monetary system. The NAB will effectively act as a temporary measure in lieu of a quota increase, to ensure adequacy of IMF resources in the period beyond 2020. 4 Bilateral Borrowing Agreements serve as a third line of defence after quotas and the NAB. Since the onset of the global financing crisis, the IMF has entered into several rounds of bilateral borrowing agreements to ensure that it could meet the financing needs of its members. In 2016, in view of continued uncertainty in the global economy, the membership committed to maintain access to bilateral borrowing, under a revised borrowing framework, with an initial term through the end of 2019 which has now been extended for a further year with the consent of creditor. 12 |
Department of Finance | Ireland’s Participation in the IMF & WBG
IRELAND’S PARTICIPATION IN THE INTERNATIONAL MONETARY FUND IN 2019
Quota/Voting Power Ireland’s quota or shareholding at the IMF stood at SDR 3,449.9 million at end-2019 and our voting share is 0.71 per cent.
Annual and Spring Meetings 2019
Minister for Finance Paschal Donohoe, T.D., gives IMF Managing Director Kristalina Georgieva a limited-edition commemorative coin at the 2019 Annual Meetings
Together with the World Bank Group (WBG), the IMF holds Spring (April) and Annual (October) Meetings every year. The Minister for Finance Paschal Donohoe, T.D., headed the Irish delegation to the Spring Meetings in Washington, D.C. from 12 to 14 April 2019. Philip Lane, then the Governor of the Central Bank of Ireland, also attended. The Minister for Finance again led Ireland’s delegation to the Annual Meetings (also held in Washington, D.C.) from 18 to 20 October 2019 and was accompanied by Ciarán Cannon, T.D., Minister of State for the Diaspora and International Development and Gabriel Makhlouf, Governor of the Central Bank of Ireland. The Minister took part in several panel sessions at the Meetings, including the IMF Fiscal Forum in April and a discussion on the political-economy of structural reforms in October. On both occasions, officials from the Department of Finance and the Central Bank participated in a range of meetings, representing Ireland’s views and discussing key issues and global developments.
As well as national, EU and global economic and financial issues, the IMF uses it’s convening power and advocacy role to increase attention on macro-critical issues of concern to the broader membership. Key themes covered at the 2019 Spring and Annual Meetings included the rise of corporate market power and its macroeconomic effects; drivers of bilateral trade and spillovers from tariffs; the impact of ‘lower for longer’ interest rates; and climate change issues.
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Department of Finance | Ireland’s Participation in the IMF & WBG
Constituency Office The current 189 country membership of the IMF is represented at the Executive Board by 24 Constituency Offices, each headed by an Executive Director. There are seven single-country Executive Directors5 and seventeen multi-country constituencies. Ireland is a member of the Canada-Ireland-Caribbean Constituency. The constituency has a full-time Canadian Executive Director (ED) and a full-time Irish Alternate Executive Director (AED), Anne Marie McKiernan. The Constituency Office is assisted by a small number of Advisors and administrative staff based in Washington D.C., including one Irish Advisor - Paul Mooney, appointed in January 2019. Both the Irish AED and the Advisor were nominated by the Minister for Finance in his capacity as Ireland’s Governor of the IMF. Minister for Finance Paschal Donohoe, T.D., pictured with AED Anne Marie McKiernan The ED and AED, together with the Advisors, represent the interests and Advisor Paul Mooney at the 2019 Annual Meetings of the 12-country Constituency at the Board. This involves dealing bilaterally with all the country authorities; ensuring that bilateral surveillance meets the standards and expectations of IMF policy advice; reviewing and updating Fund policy advice in a wide range of areas; and overseeing the governance of the IMF. The Irish AED and Advisor are responsible for ensuring that all issues of relevance to Ireland are managed appropriately, between the Irish authorities, IMF staff and management.
Ireland’s Article IV Review 2019 The IMF’s standard surveillance tool is the Article IV Review, so-called because it is required by Article IV of the Fund's Articles of Agreement. Ireland is normally examined on a standard 12-month cycle. Ireland’s review for 2019 took place from 29 April to 10 May.
During the 2019 consultations, an IMF team travelled to Dublin and met with the Minister for Finance, the Central Bank Governor, relevant officials from government departments and the Central Bank, and a broad range of public and private sector bodies in Ireland. IMF staff prepared a report which was then discussed and approved by the Executive Board in June 2019. The published report provided an assessment of the Irish economy, noting that:
It continued to expand strongly, benefitting from higher net exports by multinational enterprises and robust domestic demand; Accelerating wage growth reflected tight labour market conditions, and inflation had started to pick up; Crisis legacies had diminished but some vulnerabilities persisted; The outlook remained broadly positive, provided Brexit proceeded in an orderly manner; However, the economy was operating near full capacity, and an accelerating cyclical momentum could re-ignite a boom-bust dynamic; and A no-deal Brexit represented the key downside risk, while escalation in global protectionism and sudden changes in corporate tax planning of multinational enterprises in Ireland could adversely affect the economy and public finances.
During the Board discussion, Executive Directors welcomed Ireland’s strong, broad-based growth, bringing unemployment down to historical lows and strengthening public and private balance sheets. Directors noted
5 China, France, Germany, Japan, Saudi Arabia, the United Kingdom and the United States. 14 |
Department of Finance | Ireland’s Participation in the IMF & WBG
that while the outlook remained favourable, there were challenges from domestic capacity constraints and external downside risks, notably a no-deal Brexit, escalation of global protectionism, and adapting to ongoing international tax changes. Against this background, Directors encouraged the authorities to strengthen fiscal buffers, address key structural bottlenecks to growth, and continue to prepare for Brexit.
Commenting on the publication of the Article IV report, Minister for Finance Paschal Donohoe, T.D., stated:
“I welcome today’s publication by the IMF which affirms the continued strong performance of the Irish economy. This annual report provides important insights into the challenges and opportunities we face and allows us to utilise the IMF’s extensive expertise to inform policymaking. While healthy economic growth continues, it is clear that there are significant challenges ahead. Brexit, whatever form it takes, will impose significant costs on the Irish economy. Trade tensions and international corporate tax changes could also have adverse effects. Thankfully we are facing these challenges from a position of strength. With these risks in mind, the Government will continue to implement prudent budgetary policy, building resilience against external shocks, while avoiding domestic overheating of the economy.”
The next Article IV review was scheduled to take place in April/May of 2020, but has been deferred in the context of the Covid19 pandemic.
New Arrangements to Borrow (NAB) Following the failure to agree an increase of quota under the 15th General Review of Quotas and, in order to ensure that its current level of resources are sufficient to deal with any future crises, the IMF proposed to double the New Arrangements to Borrow (NAB) facility. The NAB provides the main supplement to quota subscriptions as a source of IMF resources. It is a credit arrangement between the IMF and a group of members and institutions to provide supplementary resources to the IMF when these are needed to forestall or cope with an impairment of the international monetary system. The NAB will effectively act as a temporary measure in lieu of a quota increase to ensure adequacy of IMF resources in the period beyond 2020.
In 2010, Ireland agreed in principle to participate in the NAB. However, upon our entering into a programme, the IMF confirmed that Ireland’s arrangement as part of the NAB would not be called upon. Accordingly, Ireland never formally adhered to the NAB. Ireland is therefore considered an “inactive” participant as the credit arrangement has not yet become effective.
On completion of the proposals in respect of the revised NAB, and subject to enactment of the required legislation, Ireland is expected to fully participate in the doubling of the arrangement. Our participation would involve a credit facility to the IMF provided through the Central Bank of Ireland. If the facility was activated, the Central Bank could be asked, with advance notice, to finance part of specific IMF loans from its balance sheet. Ireland's participation in the NAB would require legislation and the necessary procedures would need to be completed in 2020.
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Department of Finance | Ireland’s Participation in the IMF & WBG
JOINT EU-IMF FINANCIAL ASSISTANCE
PROGRAMME FOR IRELAND
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Department of Finance | Ireland’s Participation in the IMF & WBG
Joint EU-IMF Financial Assistance Programme for Ireland
Background On 28 November 2010, the Irish Government agreed to a programme of financial support for Ireland: (i) from the European Union through the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM); (ii) through bilateral loans from the UK, Sweden and Denmark; and (iii) from the IMF, on the basis of specified programme conditions.
The overall EU-IMF programme of financial support for Ireland amounted to €85 billion. Of this amount, €17.5 billion was provided from Ireland’s own resources, with the remaining €67.5 billion provided by European Union sources and by the IMF. This external funding was provided subject to compliance with the conditionality set out in the programme documents.
IMF Support The IMF provided a three-year Extended Fund Facility (EFF) arrangement for Ireland. The Fund arrangement amounted to SDR 19.5 billion or approximately €22.5 billion. The final drawdown of IMF funds under the programme was completed subsequent to the approval of the twelfth and final review in December 2013.
In the period December 2014 to March 2015, Ireland’s National Treasury Management Agency (NTMA) repaid early SDR 15.7 billion (just over €18 billion) of IMF programme-related loans. This represented 81 per cent of Ireland’s original IMF loan. On 20 December 2017, the NTMA completed the early repayment of the full outstanding IMF loan facility and the bilateral loans from Sweden and Denmark.
With the IMF, Swedish and Danish loans now fully repaid, the remaining programme-related debt is as follows:
European Financial Stabilisation Mechanism (EFSM): €22.5 billion European Financial Stability Facility (EFSF): €18.4 billion UK bilateral loan: £3.2 billion (c. €4 billion)
Post-Programme Monitoring As is normal IMF policy, post-programme monitoring (PPM) has applied to Ireland following our exit from the EU-IMF financial assistance programme in 2013. PPM is a long standing feature of IMF assistance programmes. The purpose of PPM, as stated by the IMF, is:
“To ensure the continued viability of a country's economic framework and provide early warning of policies that could jeopardize the country's external viability and, hence, its capacity to repay the IMF. Should it become necessary, IMF staff will advise on policy actions to correct macroeconomic imbalances.”
PPM typically takes place twice yearly, once as part of the annual Article IV mission cycle and once as part of a joint EU-IMF mission. As Ireland’s remaining programme-related IMF loans were repaid early and in full in December 2017, the Fund is no longer required to undertake PPM missions to Ireland. However, as a condition of the waiver by the remaining programme lenders of their rights to mandatory proportionate early | 17
Department of Finance | Ireland’s Participation in the IMF & WBG repayment, Ireland requested that the IMF continue to make ‘Staff visits’ up until the end of the originally envisaged PPM period (December 2021).
IMF Staff visits following end of PPM Following the early repayment of programme-related IMF loans, the IMF no longer undertakes PPM missions to Ireland. However, it was agreed that the IMF participate in the winter Post Programme Surveillance (PPS) reviews of the European Commission (EC) and the European Central Bank (ECB).
As such, IMF officials attended meetings during the twelfth PPS review of the EC and ECB, which took place from 19 to 21 November 2019. While the IMF did not prepare a PPM report or assessment paper at the conclusion of the review, their participation involved discussions of recent economic and policy developments; an examination of Ireland’s macroeconomic conditions at the time of the visit; an assessment of Ireland’s debt sustainability; as well as some initial meetings in advance of their annual Article IV visits. Ireland’s PPS Report for Autumn 2019 is broadly positive, with the EC noting that Irish economic growth is expected to continue in the short term and that the domestic economy remains robust.
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THE WORLD BANK IN 2019
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Department of Finance | Ireland’s Participation in the IMF & WBG
THE WORLD BANK IN 2019
Organisation and Objectives The World Bank Group (WBG) is made up of the following 5 institutions which share a common commitment to reduce poverty, increase shared prosperity, and promote sustainable growth and development:
The International Bank for Reconstruction and Development (IBRD), which gives long-term development loans; The International Development Association (IDA), which provides concessional financing to the poorest countries; The Multilateral Investment Guarantee Agency (MIGA), which provides companies operating in developing countries with risk insurance; The International Finance Corporation (IFC), which invests in the private sector in developing countries; and The International Centre for Settlement of Investment Disputes (ICSID), which facilitates the settlement of investment disputes between foreign investors and host states.
Further information on these institutions is set out in Appendix B.
The WBG’s activities are directed towards the achievement of strategic ‘Twin Goals’ by 2030:
(i) End extreme poverty by decreasing the percentage of people living on less than US$1.90 a day to no more than 3 per cent; and (ii) Promote shared prosperity by fostering the income growth of the bottom 40 per cent for every country.
Fiscal Year 2019 For the fiscal year ending 30 June 2019, the WBG committed in the order of US$59.5 billion in loans, grants, equity investments and guarantees to its members and private businesses:
IBRD commitments totalled US$23.2 billion; IDA commitments totalled US$21.9 billion; IFC provided US$19.1 billion in financing, of which US$10.2 billion was sourced from investment partners; and MIGA issued US$5.5 billion in risk and credit enhancement guarantees underpinning various investments.
Agreement on IDA19 Every 3 years donors meet to replenish the resources of the International Development Association (IDA), the World Bank’s fund for the poorest countries with least access to funding. IDA provides financial support through grants or loans on concessional terms and is largely funded by grant contributions from donors. IDA’s focus on reaching the poorest of the poor is very much in line with Ireland’s whole-of-government international development policy. As an institution of the WBG, IDA combines global expertise with an exclusive focus on reducing poverty and boosting prosperity in the world’s poorest countries.
Since 1960, IDA has provided more than US$391 billion for investments in 113 countries. It runs over 800 projects totalling almost US$80 billion across the globe. As a snapshot of its impact, between 2011 and 2019,
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Department of Finance | Ireland’s Participation in the IMF & WBG
IDA has provided 769 million people with essential health services, immunised 330 million children and trained or recruited 14 million teachers.
The most recent replenishment of IDA’s resources, IDA19, was finalised in December 2019. IDA19 resulted in a record replenishment of US$82 billion which will be used to finance projects over a 3-year period from 1 July 1 2020 to 30 June 2023. This historic financing package represents a 3 per cent increase in real terms compared to IDA18 and includes more than US$53 billion for Africa. The successful replenishment of IDA was supported by contributions from 52 governments with additional countries also expected to pledge. Ireland committed almost €102 million to the IDA19 replenishment, to be paid over nine years from 2021. This represents an increase of nearly 13 per cent on the €90 million Ireland pledged to IDA18.
Seventy-four countries, including low-income countries, small states, and island economies, are eligible to benefit from this replenishment package. The funding will allow IDA to reinforce its support to job creation and economic transformation, good governance and accountable institutions. It will also help countries deal with the challenges posed by climate change, gender inequality, and situations of fragility, conflict, and violence, including in the Sahel, the Lake Chad region, and the Horn of Africa. To promote greater equity and economic growth, IDA will also tackle broader development challenges, such as enhancing debt sustainability and transparency; harnessing and adapting to transformative digital payment technology; promoting inclusion of those living with disabilities; strengthening the rule of law; and investing in human capital.
Implementation of WBG Capital Package Negotiations on increasing the WBG’s financial capacity and aligning shareholding successfully concluded at the 2018 Spring Meetings, with the support of WBG Governors. The agreed financial package included a US$13 billion paid-in capital increase, consisting of US$7.5 billion for IBRD and US$5.5 billion for IFC. This increase will see the WBG increase its annual lending capacity to $100 billion by 2030.
The agreed Capital Package supports a broad range of reforms and policy commitments by the WBG guided by the four key priorities set out in Forward Look – A Vision for the World Bank Group in 2030:
(i) Stay engaged with all clients; (ii) Lead on the Global Public Goods agenda, including crisis management, climate change and addressing gender gaps; (iii) Mobilise capital and create markets; and (iv) Continually improve effectiveness and the internal operational model.
Ireland fully supported the WBG Capital Package and the associated drive to increase efficiencies at the Bank to enable it to respond to the ambition of the Sustainable Development Goals. In 2018, Ireland made the necessary preparations to contribute to the WBG capital increase through a legislative amendment to the International Finance Corporation Act, 1958 which governs Ireland’s engagement with IFC. Ireland’s contributions to the IBRD capital increase commenced in 2019 and the final steps to subscribe to the IFC capital increase are expected to be completed in 2020. Ireland’s subscription to the IBRD will cost the Exchequer €22.3 million over 5 years, with payments of approximately €5 million per annum from 2019 and, in the case of IFC, €11.7 million to be paid over 3 years from 2020.
Policy Issues
Human Capital Project At the 2018 Annual Meetings, Governors endorsed the World Bank’s new ‘Human Capital Project’ (HCP) which focuses on helping countries to prioritise more and better investments in people, in recognition of how | 21
Department of Finance | Ireland’s Participation in the IMF & WBG investment in human capital is critical for people and economies to thrive in a rapidly changing world. The HCP team developed a new Human Capital Index, the first index to link human capital outcomes to productivity and income levels. The HCP team also scaled up research and measurement to assist policymakers in the design of more effective, context-specific solutions and has been supporting countries in tackling the most significant barriers to human capital growth.
The Human Capital Index measures the amount of human capital that a child born today can expect to attain by age 18. It conveys the productivity of the next generation of workers to a benchmark of complete education and full health and is constructed for 157 countries. Ireland’s 2018 HCI score was 0.81 (with 1.0 being the highest possible score), ranking the country sixth globally and second highest in the EU. A revised and updated index is expected in 2020.
Ireland joined the HCP Network in 2019. To mark the occasion, Minister for Finance Paschal Donohoe, T.D., presented the Irish experience at the Network’s Conclave of Finance Ministers at the Annual Meetings in October 2019. The World Bank is also working on a case study of Ireland’s human capital transformation to identify lessons for other countries on investments in education and health.
Source: https://www.worldbank.org
Election of New President, David Malpass David Malpass was selected as the thirteenth President of the WBG by its Board of Executive Directors on 5 April 2019. His 5-year term began on 9 April 2019.
Mr. Malpass previously served in the U.S. Treasury as Under Secretary for International Affairs for the United States and earlier as the Deputy Assistant Secretary of the Treasury for Developing Nations and the Deputy Assistant Secretary of State for Latin American Economic Affairs. Prior to joining the U.S. Treasury, Mr. Malpass was an international economist and founder of a macroeconomics research firm based in New York City.
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IRELAND’S PARTICIPATION IN THE WORLD
BANK IN 2019
Constituency Office The organisations that make up the World Bank Group (WBG) are effectively owned by the governments of member nations which have the ultimate decision-making power within these organisations on all matters including policy, financial and membership issues. Member countries govern the WBG through the Boards of Governors and the Boards of Executive Directors. Each Executive Director heads up a Constituency of member countries. Ireland is a member of the Canadian-led, Canada-Ireland-Caribbean Constituency.
In addition to the ED and AED, the Constituency has a team of Advisors, two of whom are Irish - Aidan Carrigan is the Senior Advisor from the Department of Finance, and Sarah Hunt is the Advisor from the Department of Foreign Affairs and Trade. These appointments, for a 3-year term, are made by the ED of the Constituency on nomination by the Minister for Finance.
In addition to their contribution to the effective governance of the WBG, the Irish Advisors have specific responsibilities for highlighting Ireland’s positions on WBG policies and projects; promoting Irish initiatives within the Bank; and helping to communicate the work of the WBG within Ireland. They liaise closely with the Irish authorities, in particular the Department of Finance, the Department of Foreign Affairs and Trade, the Central Bank of Ireland and Enterprise Ireland.
Visits and Engagements The Minister for Finance Paschal Donohoe, T.D., attended the Spring and Annual Meetings in Washington, D.C., in April and October 2019 respectively. In April, he met with the Bank’s new Managing Director for Operations, Axel von Trotsenburg, and a number of other Vice Presidents. The meetings focused on Ireland’s longstanding support for the role of multilateral institutions like the WBG, as well as the implementation of the capital increase. At the October Annual Meetings, Minister Donohoe again met with members of the Bank’s senior management and, together with Minister of State Ciarán Cannon, T.D., launched Ireland’s new strategy for Domestic Resource Mobilisation alongside senior management from the WBG and the IMF.
Minister for Finance Paschal Donohoe, T.D., meeting with Axel von Trotsenburg, M.D. for Operations at the World Bank at the 2019 Annual Meetings
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A Business Opportunities Seminar with Multilateral Development Banks (MDBs) was hosted by Enterprise Ireland at Eastpoint Business Park in October 2019. The event was opened by Michael D’Arcy, T.D., Minister of State with Special Responsibility for Financial Services and Insurance, who highlighted the opportunities for Irish companies to work with the WBG and other MDBs in the developing world. Officials from the WBG attended the seminar to present an overview of the WBG’s Corporate Procurement and offer insights on how Irish companies can best Minister of State Michael D’Arcy, T.D., opening the Enterprise Ireland IFI Business Opportunities Seminar engage with the Bank in the context of its new procurement framework.
In November 2019, a high-level consultation took place between Irish authorities and officials from the IFC, led by Karin Finkelston, the IFC’s Vice President of Partnerships, Communication, and Outreach. The consultation was organised and led by officials from the Department of Finance, the Department of Foreign Affairs and Trade and the IFC with participation from the Department of Agriculture, Food and the Marine, Sustainable Nation Ireland and the Ireland Strategic Investment Fund. The consultation aimed at deepening the understanding of respective development priorities; reviewing the current partnership under a forward- looking approach; and exploring opportunities to further strengthen and expand collaboration in select priority areas. It also explored ways to enhance cooperation between the IFC and the Irish private sector.
WBG Bond Launches In May 2019, the World Bank listed an IBRD 10-year Global Sustainable Development Bond on the Irish Stock Exchange (Euronext Dublin). The bond issue raised €1.5 billion from international institutional investors to finance the IBRD’s sustainable development activities and engage investors with the Sustainable Development Goals. This was followed later in the year by the IFC listing its first Canadian dollar green bond on Euronext Dublin and the Luxembourg stock exchange. The proceeds of the 5-year green bond will finance IFC investments in green projects, including renewable energy, green buildings, sustainable forestry, and energy efficiency. This was the first time that the IBRD and the IFC have listed bonds on Dublin’s stock exchange and signals the WBG’s support for Ireland’s sustainable finance agenda in the context of Ireland for Finance, Ireland’s international finance strategy.
Doing Business Report The Doing Business Report is a flagship publication of the WBG which presents quantitative indicators on the ease of doing business across 190 economies from Afghanistan to Zimbabwe. While the report is mainly used to support the development of conducive environments for business in the developing world, it also covers high income countries such as Ireland. In Doing Business 2020, Ireland achieved an ‘ease of doing business’ ranking of twenty-fourth out of 190 economies. Ireland ranked fifth in the Euro Area and ninth in the EU overall. Of particular note is the fact that Ireland retained its ranking of fourth for 'paying taxes' which remains the highest rating of any EU economy for this indicator.
Subnational Doing Business Study Subnational Doing Business takes a similar approach to the broader Doing Business study but does so at the level of cities and regions, ranking locations within a single country for ease of doing business. Building on Ireland’s existing engagement with the Doing Business Report, a Subnational Doing Business study of Ireland commenced in 2018. It formed part of the larger Doing Business in the European Union 2020 series of reports covering 24 cities in Greece, Ireland and Italy. The study was prepared at the request of, and funded by, the European
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Commission (DG REGIO), and carried out by the World Bank’s Subnational Doing Business team, in collaboration with national and local government partners. The main objective of these studies is to measure the implementation of national regulation at the local level, to rank each location, and recommend reforms to improve performance in each of the indicator areas. The Irish study encompassed five cities: Dublin, Cork, Galway, Limerick and Waterford. The Subnational Doing Business in Ireland report was launched at an
Jakob Kopperud, World Bank Special event hosted by the Department of Finance in Dublin in November Representative to the UK and Ireland, speaking at 2019. The report found that no single city dominated in all five the launch of the Subnational Doing Business in indicator areas measured. Instead, the differences in performance Ireland report in November 2019. provide policy makers with an opportunity to identify examples of good practice that other Irish cities can adopt to allow businesses to operate more effectively. Significantly, the study suggests that Ireland’s standing on the global Doing Business Report rankings can further improve through peer learning among Irish cities and adopting domestic good practices.
Ireland’s Contributions to World Bank Trust Funds Ireland contributes to a number of targeted World Bank Trust Funds.
Global Fund for AIDS, TB and Malaria (GFATM): The GFATM is an international financing institution which invests its resources to fight AIDS, tuberculosis (TB) and malaria. It channels almost 90 per cent of total international financing for TB eradication; 60 per cent for the elimination of malaria; and 22 per cent to combat AIDS. It also funds the strengthening of health systems, as inadequate health systems are one of the main obstacles to scaling up interventions to secure better health outcomes in relation to HIV, TB and malaria. Ireland currently holds an Alternate Board seat on behalf of the Point 7 constituency and will hold the full Board seat for the period from May 2021 to May 2023. In fulfilment of its pledge to increase funding by over 50 per cent during the period 2019 to 2021, the Department of Foreign Affairs and Trade (DFAT) contributed €16 million to the GFATM in 2019 (up from €10 million for the previous three years).
Global Partnership for Education (GPE): The GPE brings together governments, multilateral organisations, non-governmental organisations, civil society and the private sector to strengthen education and learning for children in developing countries. The GPE works with almost 70 countries to dramatically increase the number of children who are in school and learning. By supporting national governments to develop and implement evidence-based education sector plans, the GPE has significantly increased primary and lower-secondary enrolment and completion rates in partner countries. Since 2003, the GPE has provided grants totalling US$5.3 billion, including US$2.4 billion to partner countries affected by fragility and conflict. DFAT contributed €7.5 million to the GPE in 2019, the second tranche of a €25 million pledge for 2018-2020.
Least Developed Countries Fund (LDCF): The LDCF was established to assist Least Developed Countries (LDCs) to carry out preparation and implementation of effective national adaptation plans and programmes to address the impacts of climate change. The LDCF is the only financial instrument under the United Nations Framework Convention on Climate Change (UNFCCC) specifically targeted at supporting LDCs. The Fund has 3 strategic objectives:
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(i) Promote innovation and technology transfer for climate change adaptation to reduce vulnerability and increase resilience; (ii) Mainstream climate change adaptation and resilience for systemic impact; and (iii) Foster enabling conditions for effective and integrated climate change adaptation.
The LDCF falls under the Global Environmental Facility (GEF), but the World Bank operates as Trustee to the entire financial operations of the GEF, including the LDCF. Ireland has been a strong supporter of the LDCF since at least 2011, consistent with our approach to prioritise the needs of LDCs in international climate action. In 2015, the Irish Government made a commitment to increase contributions to the LDCF. Since then, DFAT has provided €1 million to the Fund each year. In 2019, DFAT further increased its allocation, providing a total of €3 million to the LDCF.
Ethiopia Social Accountability Programme (ESAP) Phase 3 Multi-Donor Trust: The objectives of the ESAP Trust Fund is to support strengthening the social accountability system and mechanisms for enhanced service delivery in Ethiopia. The third phase of the programme will expand the benefits of social accountability to a growing number of citizens by increasing the coverage from 223 woredas (districts) to 500 woredas (50 per cent of the woredas in the country). The programme will continue to support the demand for better services by improving awareness and the voice of the citizen, helping communities articulate their demands and facilitating a constructive dialogue with service providers. In complement, ESAP Phase 3 is expected to strengthen government’s responsiveness to citizens’ demands by mainstreaming social accountability approaches within regular government processes, including the budget cycle, and by working more closely with the local governments, councils and sector ministries. Finally, the programme fosters a civil society role and will encourage that lessons from experience inform policy decisions.
ESAP Phase 3 will achieve its objectives by:
o Expanding the uptake of social accountability tools; o Supporting the strengthening and embedding of social accountability tools and approaches at federal and subnational level; and o Ensuring effective and efficient project management, coordination and knowledge management.
DFAT contributed €1 million to ESAP Phase 3 in 2019.
Productive Safety Net Programme (PSNP): The PSNP is an important government-led initiative that addresses recurring humanitarian need and extreme poverty in Ethiopia. The programme provides cash and/or food transfers to 7.9 million chronically food insecure people every year, as well as a smaller livelihoods component that supports income generation and behavioural change communication activities related to health and nutrition. The PSNP is supported by 10 development partners, including the WBG as the largest donor. All partners pool financing in support of the programme. DFAT works closely with the WBG on programme oversight and through the Donor Coordination Team which facilitates dialogue between development partners and government, as well as providing technical assistance for programme implementation. In 2019, DFAT provided €270,000 to the WBG to support the PSNP Donor Coordination Team. In addition, DFAT contributed €10 million to the PSNP pooled fund directly through the Ethiopian Ministry of Finance.
Lao PDR Competitiveness and Trade Project Multi Donor Trust Fund: The Lao PDR Competitiveness and Trade Project aims to improve the environment for private sector-led economic growth in line 26 |
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with the Government of Lao’s Eighth National Socio-Economic Development Plan. The project development objectives are to:
o Simplify business regulations; o Facilitate trade; and o Improve firm-level competitiveness.
The project supports the Government’s broader reform agenda across multiple ministries. There is a particular focus on improving the trade environment and the business start-up and operating environment. In 2019, DFAT provided €160,000 to the Trust Fund.
The Partnership for Support to the Implementation of Uganda’s National Development Plan II Multi-Donor Trust Fund: This Trust Fund is a key instrument for donor coordination and aid effectiveness in the Republic of Uganda. The objectives of the Trust Fund are to support the Republic of Uganda's ministries, departments and agencies to implement the country’s development strategy to support growth and sustainable exit from aid and to support development of the third National Development Plan in 2019. DFAT contributed €75,000 towards the Trust Fund in 2019.
Consultative Group on International Agricultural Research (CGIAR): The Government of Ireland and the CGIAR share a similar mission, which is to reduce hunger and enable poor people, especially women, to increase their agricultural productivity and resilience, as well as their share in economic growth while conserving natural resources in the face of climate change and other threats. CGIAR research centres work in close collaboration with hundreds of partner organisations, including national and regional research institutes, civil society organisations, academia, and the private sector. The new CGIAR governance reform agenda is getting underway but the CGIAR System will continue to operate with the World Bank as the Trustee of the CGIAR Trust Fund, which was established in December 2010. In 2019, DFAT contributed €3 million to CGIAR research programmes and centres.
Blue Economy in the Caribbean: Aligned with Ireland’s Strategy for Partnership with Small Island Developing States, DFAT provided funding for a number of roadmaps, studies and assessments to be carried by the WBG in selected countries in the Eastern Caribbean. This work will contribute to the WBG’s pipeline of operations on the Caribbean blue economy and will be delivered by December 2020. The work includes:
o Developing a Blue Economy Roadmap for the region and specific countries in the Eastern Caribbean; o Undertaking a study of economy of waste management and marine pollution prevention with a view to identifying opportunities in the circular economy for the region and specific countries in the Eastern Caribbean; o Developing a national assessment of institutional arrangements, regulatory frameworks, and public expenditure reviews for land-based solid waste management to address marine pollution in Antigua and Barbuda; and o Providing a comprehensive assessment of the state of land-based solid waste facilities and developing a national action plan for Antigua and Barbuda.
In 2019, DFAT committed €594,000 to the Blue Economy in the Caribbean project through an Externally Financed Output agreement.
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International Finance Corporation (IFC) Facility for Investment Climate Advisory Services (FIAS): The FIAS advises developing countries on how to improve their business environments to increase private sector activity and encourage inward and domestic investment. In the fiscal year ending 30 June 2019, FIAS-supported programmes contributed to 31 investment climate reforms in 18 client countries. The FIAS targets members of the International Development Association (IDA), fragile and conflict-affected states and countries in Sub-Saharan Africa. In 2019, DFAT provided €600,000 to the FIAS.
International Finance Corporation (IFC) Conflict-Affected States in Africa (CASA) Initiative: The CASA Initiative aims to encourage the development of private enterprise in conflict-affected states. It takes into account the particular obstacles faced by the private sector in fragile and post-conflict countries. In 2019, DFAT continued to engage with the CASA Initiative on a no cost extension basis.
Adaptation Fund (AF): Ireland, through the Department of Communications, Climate Action and Environment, made a contribution of €300,000 to the AF in 2019, building on Ireland’s contributions of €300,000 in both 2017 and 2018. This contribution is in line with Ireland’s commitment to reach €175 million provided in international climate finance by 2020. Ireland has already overachieved on this commitment, with financial support for international climate action totalling €197 million between 2016 and 2018.
The AF finances projects and programmes that help vulnerable communities in developing countries adapt to climate change. Initiatives are based on country needs, views and priorities. The AF is financed in part by government and private donors, and also from a 2 per cent share of proceeds of Certified Emission Reductions (CERs) issued under Kyoto Protocol mechanisms. It is particularly popular with smaller developing country parties, who are represented on its Board and who see the size and scale of the projects funded by the AF as being appropriate to their immediate adaptation needs.
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Global Environment Facility (GEF) The GEF, a fund for international cooperation, was established in 1991. It is jointly administered by the United Nations (UN) and the World Bank, with the latter being the GEF Trustee. The GEF provides financing to developing countries for the incremental costs of projects that produce global environmental benefits in the areas of climate change, international waters, chemicals and waste, land degradation and biodiversity. The GEF serves as the financial mechanism for many multilateral environmental agreements, including the UN Framework Convention on Climate Change (UNFCCC) and the Minamata Convention on Mercury. The GEF also provides support for the Montreal Protocol on Substances that Deplete the Ozone Layer and for activities concerning management of chemicals and relating to international waters.
Between 1994 and 2017, Ireland contributed over €30 million to the GEF:
IR£1.7 million (€2.16 million) over the 4-year period 1994 to 1997; IR£3.69 million (€4.69 million) over the 4-year period 1998 to 2001; €5.73 million over the 4-year period 2002 to 2005; €5.73 million over the 4-year period 2006 to 2009; €5.73 million over the 4-year period 2010 to 2013; and, €5.73 million over the 4-year period 2014 to 2017.
In 2018, the Government approved a new seventh round of funding to the GEF (GEF 7), totalling €5.73 million. The first contributions under this funding round were made in 2018 and 2019 (€1.42 million and €1.44 million respectively).
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EXCHEQUER PAYMENTS AND FINANCIAL ACTIVITIES
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Bretton Woods Institutions - 2019 Exchequer Payments and Receipts
Payments The following are the details of payments from the Central Fund to the Bretton Woods Institutions in 2019:
€ million Enabling Legislation IDA 16 Replenishment 6.48 Development Banks Act, 2005 IDA 17 Replenishment 10.71 Development Banks Act, 2005 IDA 18 Replenishment 9.27 Development Banks Act, 2005
Bretton Woods Agreements IBRD 2018 Capital Increase 4.51 Acts, 1957 -2012
Total 30.97
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Financial Activities of the Central Bank as agent of the Minister for Finance under the Bretton Woods Agreements Acts, 1957 – 2012
Under the Bretton Woods Agreements Acts, the Central Bank of Ireland (“the Central Bank”) is the fiscal agent for the Minister for Finance and, in this capacity, it is responsible for conducting financial transactions with the IMF. The transactions with the IMF are recorded in the Central Bank’s financial statements. The majority of IMF financial transactions are conducted through the IMF’s General Resource Account (GRA) and the Special Drawing Rights (SDR) Department.
IMF General Resources Account (GRA)6 The activities carried out during the period 1 January 2019 to 31 December 2019 are set out in Table 1. IMF Holdings of Ireland’s Own Currency of SDR equivalent were SDR 2,643.1 million at 31 December 2019, remaining unchanged from 31 December 2018.
Table 1 – IMF Holdings of Ireland’s Own Currency (SDR equivalent)
31 December 2019 31 December 2018
SDR 2,643,122,520 SDR 2,643,122,520
Special Drawing Rights (SDR) Account SDR holdings are recorded as an asset on the Central Bank’s balance sheet and net cumulative SDR allocations are recorded as a liability. The IMF pays interest to members when their SDR holdings are above their net cumulative SDR allocations; conversely, it levies a charge when members’ SDR holdings are less than their net cumulative SDR allocations. Ireland’s SDR holdings (of SDR 667.7 million on 31 December 2019) were less than the net cumulative SDR allocations (of SDR 775.4 million), so a net charge of SDR 1,210,452 was levied in 2019, as shown in Table 2.
Table 2 – SDR Holdings and Net Charge Levied (SDR)
Net Charge Levied in 2019 31 December 2019 31 December 2018 (charge less interest)
667,701,506 656,844,574 1,210,452
6 IMF members’ financial relations with the Fund are largely reflected in the General Resources Account (GRA). Members pay a subscription (quota) to the IMF, with 25% payable in SDRs or freely usable currency, and the remainder payable in the member’s own currency. 32 |
Department of Finance | Ireland’s Participation in the IMF & WBG
Remuneration Received During 2019 Ireland received remuneration of SDR 8,079,493 on its ‘Reserve Tranche Position (RTP)’ in 2019. The RTP is the difference between Ireland’s IMF quota in 2019 (SDR 3,449.9 million) and the IMF’s holdings of Ireland’s own currency, excluding holdings that reflect the use of IMF credit (SDR 2,643.1 million on 31 December 2019) – this amounted to SDR 806.8 million on 31 December 2019 which is shown in Table 3. The RTP remained unchanged from 2018.
Table 3 – Reserve Tranche Position at the IMF and Remuneration (SDR)
31 December 2019 31 December 2018 Remuneration Received in 2019
806,777,480 806,777,480 8,079,493
Voluntary Trading Arrangement (VTA) – First Transaction in 2019 Under the Articles of Agreement, IMF members regularly need to buy SDRs to replenish holdings which must be used to discharge obligations to the IMF as required. The SDR market functions primarily through voluntary SDR trading arrangements (VTAs).7 These take place bilaterally though a market in SDRs coordinated by the IMF SDR Department. Under these arrangements, the fiscal agent of IMF members volunteer to buy or sell SDRs as defined by their arrangement. Ireland has been a VTA member since its inception though suspended during our IMF programme. Recently, the SDR Department has been anxious to broaden the number of VTA transacting countries. Ireland signalled a willingness to participate fully in the VTA on 1 October 2019. The Central Bank subsequently undertook a small purchase of SDRs (SDR 4 million) for Euro on 17 October 2019 from the Comoros Islands.
7 In the event that there are not enough voluntary trades of SDRs, the Articles of Agreement provide for a designation mechanism to guarantee the liquidity of the SDR. | 33
Department of Finance | Ireland’s Participation in the IMF & WBG APPENDICES
APPENDICES
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Department of Finance | Ireland’s Participation in the IMF & WBG
APPENDIX A: Further information on the IMF
Role of the IMF The IMF is a cooperative intergovernmental institution and its stated objectives are to:
Provide a forum for cooperation on international monetary problems; Facilitate the growth of international trade, thus promoting job creation, economic growth, and poverty reduction; Promote exchange rate stability and an open system of international payments; and Lend countries foreign exchange when needed, on a temporary basis and under adequate safeguards, to help them address balance of payments problems.
Current IMF membership stands at a near-global 189 countries. On joining the IMF, each member country is assigned a quota, based broadly on its relative size in the world economy, which represents its subscription of capital to the IMF. Members' quotas, in addition to providing the IMF with the financial resources it needs to lend to members in financial difficulty, are a factor in determining members' representation on the Executive Board and their voting power in the IMF.
Governance Structure of the IMF The organisational chart on the next page shows the basic structure of the IMF. The Board of Governors, on which each member country has a representative (in Ireland’s case, the Minister for Finance), is the highest decision-making body of the IMF. The Governors meet formally once a year at the joint Annual Meetings of the IMF and World Bank. The Annual Meetings usually include two days of plenary sessions, during which Governors consult with one another and present their country's views on current issues in international economics and finance. During the Annual Meetings, the Board of Governors also makes decisions on how current international monetary issues should be addressed and approve corresponding Resolutions.
Decisions required of the Governors may be taken by written procedure but the greater part of the decision- making is entrusted by Governors to the Executive Board consisting of 24 Executive Directors (EDs) resident in Washington D.C. The Executive Board takes care of the day-to-day business of the IMF and meets several times a week. The Board is structured on a constituency basis, with most EDs representing a number of countries. The views of member countries are fed into the Board through the Constituency Offices.
The views of members are also made known to two committees at Ministerial level which meet twice a year (at the Spring and Annual Meetings) and which are also structured on a constituency basis - the International Monetary and Financial Committee (IMFC)8 and the Development Committee (DC)9, which is a joint committee of the IMF and the World Bank. The IMFC discusses matters of common concern affecting the international economy and also advises the Fund on the direction of its work. The DC advises the IMF and World Bank on issues related to economic development in emerging and developing countries. At the end of the Meetings, each Committee issues a joint communiqué summarising its views. The IMFC communiqué provides guidance for the IMF's work programme during the six months leading up to the next Spring or Annual Meetings.
8 The IMFC has 24 members who are central bank governors, ministers, or others of comparable rank and who are usually drawn from the governors of the Fund’s 189 member countries. Membership of the IMFC is determined by a member’s quota, with the size and the composition of the IMFC mirroring that of the IMF Executive Board. Ireland is not a member of the IMFC. 9 The DC has 25 members (usually Ministers of Finance or Development) who together represent the full membership of the IMF and World Bank. They are appointed by each of the countries, or groups of countries, represented on the Boards of Executive Directors of the Bank and Fund. Ireland is not a member of the DC. | 35
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Source: www.imf.org
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APPENDIX B: Further information on the World Bank
Role of the World Bank The World Bank is made up of five component organisations collectively known as the World Bank Group (WBG) as shown in the diagram below:
World Bank Group
International Centre International Bank for International Multilateral International Finance for Settlement of Reconstruction and Development Investment Guarantee Corporation (IFC) Investment Disputes Development (IBRD) Association (IDA) Agency (MIGA) (ICSID)
International Bank for Reconstruction and Development (IBRD) The IBRD was established in 1944 as the original institution of the WBG. The range of IBRD involvements in developing countries is extensive. Because of the diverse needs of its clients, the Bank customises its products to the particular requirements of each. The IBRD aims to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable and equitable development through loans, guarantees, risk management products, and analytical and advisory services.
The capital increase for the IBRD, agreed as part of the 2018 WBG Capital Package, was approved by the Board of Governors in 2019. Ireland completed the subscription process in June 2019 and made the first capital increase payment in November. As of 31 December 2019, Ireland’s paid-in capital stood at US$60.2 million, maintaining our 0.34 per cent shareholding in the IBRD.
International Development Association (IDA) IDA was established in 1960 as the WBG’s agency for concessional financial assistance to the poorest of the world’s developing countries. It contributes to development by supporting projects that improve living standards and by promoting equitable access to the benefits of economic growth. IDA is the world’s largest source of concessional financial assistance to the developing world. It provides long-term loans at zero interest to the poorest countries to reduce poverty and improve quality of life. In recent years, IDA has offered interest-free loans to countries at risk of debt distress for terms of 20, 35 and 40 years.
IDA eligibility is based on an assessment of an individual country's per capita income (less than US$1,145 per annum for the fiscal year ending 30 June 2019). The amount of IDA assistance available to a country depends on certain performance factors which are assessed annually.
IDA is funded largely by contributions from the governments of its richer member countries. Additional funds come from the IBRD's and IFC’s income, and from borrowers' repayments of earlier IDA credits. Donors meet every three years to replenish IDA funds and review policies.
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Department of Finance | Ireland’s Participation in the IMF & WBG
Ireland joined IDA in 1960. The total value of Ireland’s IDA subscriptions and contributions as of 30 June 2019 was US$813.67 million.10 Our support for IDA is mainly in the form of contributions to periodic replenishments of IDA resources. As part of the most recent replenishment (IDA19), an extensive round of policy consultation with IDA management and representatives of donor governments and borrower countries took place over the course of 2019. The 'Special Themes' agreed for IDA19 closely align with the objectives of A Better World: Ireland’s Policy for International Development and also reflect Ireland's priorities in relation to Small Island States (Ireland’s Strategy for Partnership with Small Island Developing States) and Africa (Ireland's Strategy for Africa to 2025). Ireland pledged almost €102 million at the final IDA19 meeting in December 2019, to be paid over the course of nine years commencing in 2021.
International Finance Corporation (IFC) The IFC was established in 1956 to encourage private sector activity in developing countries. The IFC’s objective is to foster sustainable economic development in developing countries by financing private sector investment, mobilising private capital in local and international financial markets and providing advisory and risk mitigation services to business and governments. It is the largest multilateral financial institution investing in private enterprises in emerging markets, with activities in 103 countries. Ireland joined the IFC in 1958.
The capital increase for the IFC, agreed as part of the 2018 WBG Capital Package, has yet to be approved by the Board of Governors. As at 31 December 2019, Ireland’s subscription to the IFC’s capital totals US$1.29 million, all of which is paid-in.
Multilateral Investment Guarantee Agency (MIGA) The MIGA was established in April 1988 and provides non-commercial guarantees (insurance) for foreign direct investment in developing countries. It addresses concerns about the investment environment and perceptions of risk, which often inhibit investment, by providing political risk insurance. The MIGA’s guarantees offer investors protection against non-commercial risks such as expropriation, currency inconvertibility, breach of contract, war and civil disturbance. The MIGA also provides advisory services to help countries attract and retain foreign investment, mediates investment disputes to keep current investments intact and to remove possible obstacles to future investment, and disseminates information on investment opportunities to the international business community.
Ireland has been a member of the MIGA since its establishment in 1988 and ratified the MIGA Convention on 5 July 1989. Ireland’s shareholding on 30 June 2019 stood at 650 shares, representing total subscribed capital of US$7.0 million, US$1.3 million of which is classified as paid-in capital, with the remainder being subject to call.11
International Centre for the Settlement of Investment Disputes (ICSID) ICSID is an international institution sponsored by the World Bank and founded in 1966. It was designed to facilitate the settlement of investment disputes between foreign investors and host states. It encourages foreign investment by providing neutral international facilities for conciliation and arbitration of investment disputes, thereby helping foster an atmosphere of mutual confidence between states and foreign investors.
10 This figure for Ireland’s subscriptions and contributions, as at 30 June 2019, is taken from the IDA Financial Statements for FY2019 (p.67). The capital is based on Instruments of Commitment (IoCs) and the receipt of payments moves the values from receivables to cash. 11 Of the US$1.3 million paid-in capital, US$0.9 million was paid in cash, with the remainder lodged in the form of a promissory note at the time of the initial capital subscription. While this is recorded by MIGA as paid-in capital, events have been overtaken by the 1998 capital increase and in reality it is highly unlikely that any cash payment will have to be made on foot of the promissory note. 38 |
Department of Finance | Ireland’s Participation in the IMF & WBG
Many international agreements concerning investment refer to ICSID’s arbitration facilities. ICSID also conducts research and publishing activities in the areas of arbitration law and foreign investment law.
Ireland signed the Convention establishing ICSID in 1966 and ratified it in 1980 with the passing of the Arbitration Act, 1980. The Minister for Finance, as Governor of the WBG for Ireland, is an ex-officio member of the Administrative Council of ICSID. There is no direct subscription or contribution to ICSID whose expenses are met from IBRD resources. ICSID maintains a Panel of Conciliators and a Panel of Arbitrators to service proceedings under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Ireland, as a member of ICSID, designates four persons to each Panel.
As of 12 April 2019, 163 States were signatories to the ICSID Convention. Of these, 154 States are ICSID Contracting States by virtue of their having deposited instruments of ratification, acceptance or approval of the ICSID Convention.
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Department of Finance | Ireland’s Participation in the IMF & WBG
APPENDIX C: Ireland’s Voting Record in 2019
International Monetary Fund - Board of Governors
Date Resolution Ireland’s Vote Forthcoming Annual Meetings of the Board of Governors 29 July 2019 – Proposed Dates for the 2022 and 2023 Annual Approve Meetings in Washington, D.C. Amendment of Section 14(c) of the By-Laws to eliminate 4 September 2019 Approve the age limit for the Managing Director of the IMF Review of Remuneration of Executive Directors and their 5 September 2019 Approve Alternates Financial Statements, Accountants’ Report and 18 October 2019 Approve Administrative Budget
World Bank Group - Boards of Governors
Date Resolution Institution Ireland’s Vote
Transfer from Surplus to Replenish the Trust 22 July 2019 IBRD Approve Fund for Gaza and the West Bank Forthcoming Annual Meetings of the Board of 29 July 2019 Governors – Proposed Dates for the 2022 and IBRD Approve 2023 Annual Meetings in Washington, D.C. Review of Remuneration of Executive Directors 5 September 2019 IBRD Approve and their Alternates Amendment to the IFC Articles of Agreement to 18 September 2019 increase the voting threshold for approval of IFC Approve future capital increases Transfer from Surplus to Fund the IBRD Fund 19 September 2019 IBRD Approve for Innovative Global Public Goods Solutions
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Department of Finance | Ireland’s Participation in the IMF & WBG
APPENDIX D: Ireland’s Shareholding and Voting Power in IBRD, IDA, IFC and MIGA
Ireland’s Capital Subscription as at 30 June 2019
IBRD IDA IFC MIGA
(US$ millions) Total Capital subscription 939.4 – – 7.033 Amount paid in and 55.3 813.67 1.29 1.335 committed Uncalled Portion 884.1 – – 5.698
Subscription share (%) 0.34 N/A 0.05 0.37
Voting power (%) 0.35 0.37 0.08 0.40
NOTES: Figures are from the 2019 financial statements and annual reports for the IBRD, IDA, IFC and MIGA respectively. IDA figure represents Ireland’s cumulative contributions.
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Department of Finance | Ireland’s Participation in the IMF & WBG
APPENDIX E: Ireland’s Quota at the IMF
Quota Quota share subscription (%) (SDRs millions) Pre-2008 Quota 0.385 838.4 Post 2008 Reform Quota (i.e. Pre 0.528 1,257.60 2010 Quota Reform)
Post-2010 Quota Reform 0.723 3,449.90
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Department of Finance | Ireland’s Participation in the IMF & WBG
Government Buildings, T: 353 1 676 7571 Upper Merrion Street, F: 353 1 678 9936 Dublin 2, www.finance.gov.ie D02 R583 | 43
Ireland.