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Joint Session—IMFC and Development Committee
April 29, 2001
1. The Members of the Development Committee and the International Monetary and Financial Committee (IMFC) met jointly on April 29, 2001, to review ongoing efforts by the World Bank and the International Monetary Fund (IMF) to strengthen growth and fight poverty. We renew our commitment to address these issues and to assist countries in their efforts to achieve the International Development Goals. This special meeting symbolizes our full support for the strengthened cooperation between the Bank and the IMF, which is reflected as well by many other items on the separate agendas of the IMFC and Development Committee. In this meeting we focused our attention on progress in strengthening this partnership in fighting poverty and strengthening growth in the world's poorest countries.
2. Many of the issues we discussed apply with special force to the problems of Africa. Following the joint visit to the region by the heads of our two institutions last February, they reported on the strong commitment among African leaders to make changes that will allow the continent to attack the roots of poverty and to improve the lives of their people on a lasting basis. The African leaders stressed the importance of tackling major problems that are addressed in our Committees' agendas: conflict and weak governance; building a strong human resource base, including education and the attack on HIV/AIDS and other communicable diseases; and the need to position Africa to benefit from globalization. We recognize that strong action by African leaders to face their own responsibilities needs to be complemented by strong support from the international community to achieve the international development goals and we are prepared to work to provide that support.
3. A great deal of progress has been made since the Prague Annual Meetings to implement the Poverty Reduction Strategy Paper (PRSP) approach and the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. We are encouraged by the seriousness of purpose and ownership with which countries have engaged in the process and by the willingness of development partners to support the approach. While we are also encouraged by the prospect that many countries will complete their first full PRSP in 2001, we urge the Bank and the Fund, other multilateral institutions and bilateral donors, to help these countries to fully develop, implement and monitor their poverty reduction strategies. We appreciate that the process will evolve in light of experience, and that success can only be measured in terms of poverty reduction achieved over time.
4. We welcome the substantial progress made in implementing the enhanced HIPC Initiative, with twenty-two countries having reached their decision points. This is expected to result in debt service relief (including original and enhanced HIPC assistance) amounting to $34 billion. Taken together with traditional debt relief mechanisms and additional bilateral debt forgiveness, a total of $53 billion will be provided to these countries. The combined debt relief is expected to reduce the external indebtedness of these countries by almost two-thirds (in NPV terms), bringing it to levels below the average for all developing countries. These countries have started to receive cash-flow debt relief, helping them to increase expenditures for poverty reduction. We encourage these HIPCs to continue their efforts to reach their completion points, and for those countries that have not yet qualified for assistance, to undertake the policies required to reach their decision points and begin to benefit from HIPC relief. We emphasized the importance for countries to demonstrate strong commitment to reform programs and reaffirmed the possibility, on a case by case basis, for flexibility on track record requirements where such conditions are in place. While recognizing the special needs of particular developing and low-income transition country creditors, we also urge that all donors and creditors participate in HIPC relief and meet their commitments of financial support.
5. Putting effective public expenditure management systems in place is a major objective to ensure that budgetary savings from HIPC relief, as well as from domestic resources and external assistance, are used effectively for poverty-reduction purposes. We support the ongoing efforts by the Bank, the IMF and donors to help countries strengthen these systems and see PRGF reviews and PRSP progress reports as opportunities to report on country-specific progress. We urge countries preparing PRSPs to increase their efforts to improve expenditure management and monitoring; we encourage donors and creditors to support these efforts and to increasingly harmonize their delivery of aid in ways that strengthen countries' planning and budgetary systems.
6. We are encouraged that the World Bank is developing improved methods to help countries assess the social impact of policies, as well as its own policy recommendations, and that the IMF will contribute to this exercise in its areas of expertise and draw on and integrate the social impact analyses of others into its macroeconomic policy advice. We urge the Bank and the Fund to implement these steps at the country level as soon as possible. We welcome ongoing efforts by the Bank and Fund to streamline, focus and prioritize conditionality on the basis of country-owned strategies to promote poverty reduction and growth. We also welcome the work underway to distinguish the relative roles of the IMF's Poverty Reduction and Growth Facility (PRGF) and the Bank's Poverty Reduction Support Credit (PRSC).
7. We reiterate our commitment to the enhanced HIPC Initiative as a means for achieving a lasting exit from unsustainable debt for eligible countries. The enhanced HIPC framework recognized the ongoing vulnerabilities of HIPCs and thus set the amount of debt relief at the Decision Point at a significantly deeper level than under the original framework. This is further supported by a number of bilateral creditors having agreed to one hundred percent ODA debt reduction. We stressed that debt management needs to be strengthened. We agreed that at the completion point there should be a thorough analysis and discussion of the prospects for long-term debt sustainability. More broadly, we agreed on the importance of regular monitoring by HIPCs of their debt situation, with the support of the Bank and IMF, including beyond the completion point. In exceptional circumstances, when exogenous factors cause fundamental changes in a country's circumstances, we reaffirm that within the HIPC framework the option exists, at the completion point, to consider additional debt relief.
8. Debt sustainability can only be achieved and maintained if the underlying causes of the debt problem are addressed. As with the broader fight against poverty, this requires a two-pillar strategy. First, poor countries must take charge of their own future and create opportunities for equitable and sustainable growth and poverty reduction by improving their performance with respect to macroeconomic management (including prudent borrowing), outward-oriented reforms supportive of private sector development, governance, and social policies (especially education and health). Second, the international community needs to provide strong support, not only through existing commitments for debt relief but through increased aid and expanded opportunities for trade. We reiterated that HIPC debt relief should be additional to official development assistance, which should be provided on appropriately concessional or grant terms.
9. We strongly reaffirm the importance of greater access for developing countries to world markets, and particularly call upon countries to open their markets further to the exports of the poorest countries. In this context, we welcome the recent initiatives taken by a number of countries. Furthermore, the industrial countries have a major role to play by following policies that ensure sustainable, non-inflationary growth for the world economy. Such concerted actions by both rich and poor countries are needed to achieve the International Development Goals.
10. Conflict remains a major obstacle to improving the lives of millions, especially in Africa. Helping countries resolve conflicts and reestablish the basis for economic and social progress is a critical priority for the international community. Large protracted arrears pose special challenges for several conflict-affected countries. As many of these countries are poor and heavily indebted, we welcome the work done by the Bank and Fund to further enhance their capacity to assist them, including through debt relief. We welcome the IMF's efforts to put its emergency post-conflict assistance on concessional terms. We agree on the importance of maintaining a strong focus on performance, including transparency in military spending to ensure that debt relief is used to reduce poverty and is not diverted to military spending. We agree that the enhanced HIPC Initiative framework has sufficient flexibility to accommodate the special circumstances of post-conflict HIPCs, including with regard to the length of the track record if significant progress has been made towards macroeconomic stability, governance, capacity building, and monitoring. More broadly, post-conflict countries in the process of recovery will also require substantial technical and capacity building assistance. We agree there is scope for such increased Bank and Fund assistance to support rebuilding in these countries, and we call on both institutions to work in close collaboration with the United Nations System in these efforts so as to ensure full use of the specialized skills that these agencies possess.
IMF EXTERNAL RELATIONS DEPARTMENT