Strategies for Financing Development #33 (Page
Total Page:16
File Type:pdf, Size:1020Kb
STRATEGIES FOR FINANCING DEVELOPMENT The Newsletter of the HIPC CBP and the FPC CBP N INSTITU ICA TE R F F O A R T F S I E N A W N C T I N A E L M & E E G C A O N N A O M M C I Issue 33, 4th Quarter 2007 HIPC Debt Analysis & Strategy HIPC Ministers on Debt Sustainability, MDG Finance and Capacity Building 2 CEMLA Regional Domestic Debt Strategy Workshop 4 MEFMI Region Experience of the DSF 5 Pôle Dette Workshop Combines CBP and DSF 6 Increasing Aid Effectiveness Through Budget Support 7 HIPC Progress and Debt Sustainability Status 8 HIPC Recent and Forthcoming Activities 10 Debt Relief Technical Questions 16 Foreign Private Capital Flows FPC CBP Activities Update 12 Building an Awareness Strategy 13 Technical Exchanges with the Private Sector 14 Disseminating Results to the Private Sector 15 HIPC MINISTERS ON D MDG FINANCE AND he 14th meeting of Finance Ministers of Heavily Indebted T Poor Countries (HIPCs) was held in Washington on 19 October 2007. The meeting was co-sponsored by the HIPC Capacity-Building Programme, the Commonwealth Secretariat and the Organisation Internationale de la Francophonie. The meeting was held under the joint chairmanship of H. E. Ali M. Lamine ZEINE, Minister of Finance and Economy of NIGER; H.E. Kwadwo Press conference with H.E. Kwadwo BAAH WIREDU, Minister of Finance and Economic Planning of BAAH WIREDU, Minister of Finance GHANA, H. E. Ali M. Lamine ZEINE, Minister of Finance and Economy of NIGER and DRI Director and Economic Planning of GHANA; and Matthew MARTIN. H.E. Maria dos Santos TEBUS TORRES, Deputy Prime Minister and HIPC Debt Relief Long-Term Debt Sustainability Minister of Planning and Finance of Ministers indicated once again that stronger SAO TOME AND PRINCIPE. efforts should be made to accelerate progress Ministers reiterated that they are determined to Representatives of 29 HIPCs took part, to decision and completion points for remaining maintain their debt sustainability by maximising and made important recommendations HIPCs. As delays appear to be due to problems the concessionality of their new financing, and to improve debt relief delivery, assure maintaining an IMF track record, they urged the its effectiveness in promoting development. To long-term debt sustainability, finance international community to link HIPC progress this end, they also undertook to implement all the Millennium Development Goals much more closely to PRSPs rather than the legal and institutional reforms necessary, (MDGs), and continue to build their PRGFs. They also urged equitable treatment on and to conduct all the underlying analysis debt management capacity. progress, in particular moving countries rapidly necessary, to ensure the adoption of their own from EPCAs to PRGFs. borrowing ceilings and criteria for judging whether to accept offers of financing, in Improving Debt Relief Mechanisms Ministers also noted that there has been little parliamentary discussions of their budgets. progress on increasing creditor participation in Multilateral Debt Relief Initiative HIPC, and the continuing proliferation of However, they stressed that the attainment of Ministers congratulated the international lawsuits by rogue creditors and third parties. the MDGs while maintaining debt sustainability community on implementing the Multilateral Ministers welcomed once more the legal will depend crucially on a dramatic increase in Debt Relief Initiative (MDRI), and mobilising most technical assistance provided by Advocates for grants and concessional loans during the next of the financing needed for the relief: International Development (A4ID) and the 2-3 years, and their widespread extension to • Emphasised their concern that the funding Commonwealth Secretariat, as well as the financing sectors such as infrastructure which of IADB participation in the Initiative would proposed support by the AfDB, the proposed are essential for growth. This is particularly true considerably reduce concessional funding in publication by the BWIs of “scorecards” of for Latin America. Latin America, and therefore urged donors participation, and the reinforcement of the IDA to begin negotiations immediately on a Commercial Debt Reduction Facility. Ministers noted a rapid increase in offers of substantial replenishment of the FSO, as poor quality less concessional tied export credit well as to provide higher levels of aid for Nevertheless, they urged the international loans by some OECD governments, and urged poverty reduction in Latin America. community to go beyond such assistance by: the international community to reach an early • Indicated that it would be desirable to • Ensuring that the IFIs can provide relief even agreement on “responsible lending” for all low- extend the MDRI to cover the Asian where rogue creditors do not allow income (not just post-HIPC) countries, which Development Bank, Caribbean participation to reach necessary thresholds goes beyond concessionality to take account of Development Bank and other sub-regional • Establishing a small fund to relieve debts effectiveness and value for money in producing institutions. owed between severely indebted and low- development results, to avoid expensive or poor • Reiterated their concern about the use of income countries, which cannot afford to quality lending. performance-based formulas (rather than provide debt relief to one another financing needs for the MDGs) in allocating • Intensifying efforts to convince Iraq, Libya Ministers urged that low-income countries funds to decide how much of the debt relief and new EU members to participate should themselves be given voice to express would be genuinely additional, and urged • Agreeing codes of conduct for creditors not their views on what is the level of debt which is regional development banks to tailor their to sell debts on secondary markets, and for sustainable, by having a major input of views performance formulas more closely to international lawyers not to represent into MDB resource allocation assessments of regional priorities and other donors to litigants in such cases. their policies, and by doing the initial supply funds more on the basis of MDG calculations of debt sustainability for themselves needs and outcomes. rather than leaving them to the BWIs. 2 EBT SUSTAINABILITY, D CAPACITY-BUILDING Ministers strongly urged that the Bretton Woods Aid Effectiveness However, Ministers expressed strong concerns Institutions should set clearer guidelines for Ministers reiterated their determination to meet about these initiatives, as follows: domestic debt and private sector external debt, all the aid effectiveness targets assigned to • the DSF analysis needs to to avoid these types of debt provoking renewed them under the Paris Declaration, especially - be led by country technical officials, and debt crises. They underlined that they are those relating to managing for results. They approved by their policymakers, rather committed to avoiding excessive domestic urged donors (whether individually or than constructed largely by the BWIs. borrowing which could destabilise domestic collectively) to be more ambitious in the build-up - include much more analysis of financing financial markets, and to assisting the private to the Accra High-Level Forum in 2008, which options including benchmarks for sector to minimise its borrowing costs and risks. will review progress on the Paris Declaration. domestic debt, the impact of improving they have already conducted such analysis and They urged them to adopt effectiveness targets aid effectiveness, private sector debt, would be happy to input strongly into such to untie aid, reduce conditionality, transform contingent liabilities and sub-national discussions. technical assistance into genuine capacity- debt, to make it more useful for HIPC building support, and increase budget support debt management. Ministers urged the IMF to publish transparent and anti-shock financing. - start from a baseline of the genuine level guidelines on how the results of debt of creditor participation in HIPC. sustainability analysis are used to set borrowing While noting that the survey on the Paris • the MTDS support needs to be made fully limits and minimum concessionality levels in IMF Declaration had promoted a much deeper relevant to HIPC needs by: programmes, and to demonstrate more dialogue on aid effectiveness, they regretted - emphasising risks related to debt flexibility in allowing countries to borrow at grant that (as stated by the OECD) the survey had sustainability, aid volatility and poor elements between 35% and 50% if this is considerably overstated progress. They urged effectiveness, and to exogenous shocks, essential to financing the MDGs. the OECD to tighten the definitions for the 2008 rather than to interest and exchange rates survey and ensure more developing country - choosing financing sources and Financing the Millennium leadership of findings. instruments which maximise development Development Goals progress Ministers underlined their determination to - analysing of restructuring existing Aid Quantity design their own aid strategies to encourage domestic debt and of the potential effects Ministers expressed disappointment that the maximum alignment by donors, and to hold of domestic debt policy on financial international community is not delivering on the donors and creditors accountable for markets promises made in 2005 to increase aid flows. compliance with these strategies. They also - identifying pathways for gradually They noted that many countries have seen little