Transcript

Singapore, September 17, 2006

Participants:

Abdoulaye DIOP, Minister of Finance of Sengal
John O. Benjamin, Minister of Finance for Sierra Leone
Amos Kimunya, Minister of Finance for Kenya
Kwadwo Baah-Wiredu, Minister of Finance of Ghana

Ms. Bhatt: Good morning everyone, and welcome to this press briefing of the African Finance Ministers. I am Gita Bhatt and I am with the IMF's External Relations Department. It is my pleasure to introduce our distinguished panel, starting to my immediate left, the Honorable Diop, Minister of Economy, Finance, and Planning for Senegal; to his left, the Honorable Kimunya, Minister of Finance from Kenya; and finally, to his left, the Honorable Benjamin, the Minister of Finance from Sierra Leone. We are awaiting Mr. Baah-Wiredu, the Minister of Finance from Ghana; he should be here shortly. We will begin with brief statements from each Minister and then we will open the floor to questions.

(Left to right) Mr. Diop, Mr. Kimonya, and Mr. Benjamin

Mr. Diop: (THROUGH INTERPRETER) Thank you very much. I should like to thank all of you for giving us the opportunity to speak to you to talk about problems that are of great importance to low-revenue countries. Among present problems, we can see the increase in oil prices which are particularly important to low-income countries, among which are low-income nonoil producing countries which is the case of Senegal, my own country. This increase in oil prices, as we all know, has very seriously affected us in the very fundamentals of our economies, has created tensions for other prices and slowed down growth in the context of tightening monetary policy which has led our governments to massively to intervene, that is to say for more than 5 percent of GDP in some cases, which is the case in Cape Verde, and that obviously further aggravates our budget deficits. All of this is added to a general worsening of the terms of trades which accentuates external deficits. In Senegal's case, we have an external deficit linked to oil price increases which is roughly equivalent to 2 percent of GDP. We also have seen an increase of $10 in oil prices leads to a drop in 1 percent of growth and 1 percent of (?) inflation for each $10 dollar increase in oil prices, which obviously further worsens our population standards of living which are evermore fragile. We also need to see that the efforts that have been made in terms of passing along the effects of increases in oil prices to consumer prices in the context of canceling multilateral debt and the HIPC Initiative with various forms of subsidies so as to avoid those repercussions, further worsening the overall living standards of populations which are already very fragile.

Everything we have been able to do really has only been able to somewhat mitigate the difficulties our populations are presently having, facing up to these increases in price and the consequent difficulties they have in making ends meet. Therefore, the IMF will need to propose pragmatic programs that will allow our countries to deal in the medium term with the difficulties that we see at present rather than to have quick fixes which only allow us to find very short-term solutions to some of the problems that we presently see.

In Senegal, we took the initiative of organizing a conference of nonoil-producing countries so as to try to see to what extent we could harmonize our efforts as we look for alternative solutions. Some of the alternative solutions that we found would include organizing, over and above interstate solidarity, mechanisms for fuel prices which we are presently trying to look for, and obviously the World Bank has a big role to play in helping our countries along that path. Another very current problem is the question of voting in the Bretton Woods institutions. As you all know, an agreement was very recently found within the IMF. This is an agreement which is satisfactory to the extent which over and above the increase in quotas of four countries, emerging economies in the short term, we will also find solutions to problems concerning a drop in our quotas overall and our participation in decisions made at the IMF and the World Bank. We were satisfied, therefore, overall with the proposal that was made and we voted in favor of with the commitment by the Managing Board to attempt to solve the remaining problems next year or the year after, doubling our basic voting rights which will allow us to participate much more clearly and responsibly in all the decisions that are made in the IMF and the World Bank. So, those, very rapidly, were the two issues that I wanted to cover and I will now leave the floor to my friend seated on my left.

Mr. Kimunya: I am very proud to be Kenyan and to be here really sharing about what has been happening within Africa. I just would like to open on one of the sensitive issues that has been attributed to Africa, the challenge of governance and corruption. Let me start by stating that from our own perspective in Kenya, from my colleagues in Africa, there is a strong commitment and growing commitment by the day from our own discussions and commitments by the various people in terms of strengthening governance in our respective countries, and in terms of fighting and eradicating corruption, because we believe it has some negative effects on development and in terms of redeeming our people from the problems they are having and taking them to prosperity. Having looked at the issue of commitment, I think the other issue I just wanted to bring in is we have a big challenge on the perception and I would like to look at the perception issue from three perspectives. One is the efforts that the countries are putting with specific examples which I can give from Kenya, the effects that are visible in terms as a result of those efforts, and the issue of the expectations.

Now, from the efforts I believe, and I think we are working toward that, the long-term solution to the issue of corruption and governance will have to depend on broad-based initiatives in recreating the structures, the institutions that will help not just fight now but sustain the fight against corruption into the long term. The effects of it are already visible within the continent and in some of our countries. In terms of economic growth, Africa is growing and we have seen that growth is higher than the average for the world, especially in the last 10 years, and certainly in the last 2 or 3 years there is better growth and the projection in the future is that we will continue growing despite all the other natural calamities and problems and pressure on oil and everything else that my colleagues have talked about.

Revenue collections is again one huge indicator in terms of the fight against corruption. We have seen again our countries collecting more. Kenya, specifically talking about it, we are collecting up to 21 percent of GDP as revenue, stock revenues, which is that more people are paying their taxes than in the past, and then the openness of society in terms of creating democratic societies and open systems that help check and reports on corruption and governance issues. However, there are problems with expectations and I think that is where we are failing in terms of we are probably are not talking much about it and we are being perceived to be corrupt, because people expect body counts, people expect more people in jail, and not looking at exactly what are the other indicators we could be looking at to see African countries are making progress. I believe this. So, in terms of our opening up, we are creating vibrant oppositions that are being seen to be talking that is challenging the governments and we are probably listening a lot to the civil society, to their oppositions, and for failing to see what the African governments are doing in terms of fighting on corruption.

Lastly, just looking at the issue of the challenge and the reality is really fighting corruption and embedding systems of governance is a long-term issue. I think we probably are looking at it from a very impatient perspective. There are behavioral issues that need to be sorted out. People need to change their attitudes. There are some cultural issues that need to be sorted out. There are some technical issues that need to be sorted, legal frameworks that need to be put in place to ensure that people are not only just seemed to be corrupt but are taken through due process and the innocents are sorted out from the guilty, and then what happens to avoid a recurrence. And just to mention here that we believe Africa has come a long way and I do not believe that there is any country in the world that will come and say, yes, we have found a solution to fighting corruption. We are still having major scandals, even in very developed countries. Whether you call them fraud or we call them financial failures, the Enrons of this world and all that, those are all issues to show that there is nowhere in this world that is immune from the evil of corruption and poor governance. I think for us we are happy, and we would like to see the Fund and the Bank and the others really coming on and helping, especially within a continent, in moving forward the governance agenda.

Specifically, just looking at Kenya, just quick statistics. We have seen our economy growing, especially in the last four years of this current administration, from 0.6 percent growth in GDP in 2002 moving on close to 3 percent and then 4.9, and 5.8 last year, and projections are we should be 6 percent this year. Revenue is growing from just about $2 billion three years back to close to $4 billion in terms of revenue collections which we are projecting this year. All these are indications that the economy is moving. We are getting more income and growth, because of the efforts we are putting in fighting corruption. We have a very vibrant media, a very vibrant civil society, a democratic and open society in operation, creating all the checks and balances. Perhaps Kenya comes out like--because there is so much talking, everyone believes there is so much corruption because there is so much talking going on in terms of each and every little scandal being brought out because of the systems we are putting in place and the encouragement you are giving to the people. Let us talk about it because that is the only way we are going to eliminate it.

Mr. Benjamin: I am Minister of Finance from Sierra Leone. We are just coming from war, a post-conflict country, and we have seen the benefits now and the need for us to have good governance and to put in place structures so as to avoid corruption in our society, because we went into war because of bad management and corruption, and for 11 years we have seen destruction. We have also seen the role of the Fund in taking us out of a destructive situation and putting us on the path to move toward development. We are getting to the end of the road for us to reach HIPC completion point and we hope that, with the support of the Fund and the Bank, we would by end of this year achieve debt relief and we are looking up to it.

Indeed, we are also continuing to look up to the Fund for their support so as to enable us to achieve our MDGs. In that case, we want them to have an effective engagement with us in building our capacity, and in building our capacity we are looking at structures that we have to put in place. In my ministry, what we have done is put in place a public financial management system. We are reforming our accounting process so that we become accountable and our system is transparent to our people. We are also looking at governance reforms. In that case, what are we doing? We now have a multiparty democracy functioning. Our President is serving his second and last term he is now going to contest again. That shows respect for our constitution which says you only serve two terms. We now have a couple of political parties all aligned, waiting for the election next year. A date has been fixed and in July next year we are going to go into a multiparty democracy.

Before that, what we have done is also decentralize power. We now have district councils. We are devolving functions from the line ministry down to the councils so as to speed up this delivery of service to our people, because what took us into war was bad governance. Most of the people were kept out of the reach of services that would enable them to develop. As a country coming from conflict, we are really hard-hit with these high oil prices, which has become a permanent shock. For us, it upsets all our fiscal space and creates inflation, which we had managed to control, and all walks of life are affected. We cannot afford to provide safety nets for even our people. So, we pass on the direct effects of increase from time to time. This year alone, we have seen an increase in pump prices three times, which means our people cannot even afford the basic things like kerosene that they would need for cooking in their homes. What does that mean? It really means that we are going backward again. For a country coming from conflict, we need a lot of support. If people cannot afford kerosene, what they are going to do is destroy the environment. They are now using coal and wood for cooking purposes and that is not good not just for our country, but for the rest of the world because it is destroying the environment. So, we believe that we need further attention so that it is not just a question of debt relief; it is a question of making special provision for a post-conflict country so that we can be empowered to achieve our MDGs.

On the issue of voice and quota, yes, our constituency supports the decision taken. You have to recognize the achievement by these emerging countries. We lend our voice to that. At the same time, we also have concern about protecting our basic votes and quota, and this had been guaranteed; within the next year or two at most, that will be address. For us, this is also a challenge, because we have seen the need for you to restructure your programs, for you to be on a path of growth, for you to develop your economy. When you do so, you are recognized and rewarded. For us, this a challenge. I will stop at this point and wait for your questions.

Question: I have two questions, one for Mr. Benjamin. What is the holdup for debt relief? You said you hoped to have it done by the end of year, but what are the reasons why it has not happened just yet? The second was for everybody else. Your positions on the IMF reform of the voting package, is this something which you think goes far enough to give voting weight or are you hopeful that it will go far enough to give voting weight and improvements to your countries?

Mr. Benjamin: On the question of debt relief, the Fund has a process that you go through. We currently have a program that is being monitored by them and we have a PRSP program that takes a period. We are now on our last PRSP program and the last mission has just completed their exercise. They are coming back and they have to prepare a report and that goes to the Board, hopefully, in November, December and the issue will be taken. These are some of the concerns that were raised. We, coming from conflict, do not need to go through all of these processes like a normal company would need, because our infrastructure is gone. But we have to follow guidelines stated by them. It is good for us because it is directing us in the process, but we would have rather preferred immediate help.

Mr. Kimunya: In terms of the IMF reforms, yes, I think we welcome all the reforms that are taking place but, like my colleagues have said, when you look at the issue of the voice of Africa vis-à-vis the reforms that are taking place, African countries, the whole 53 countries represent about 30 percent of the membership of the Fund and the membership of the Bank. In terms of their voice and their representation, you are basically talking slightly above 2 percent, which has been watered down from the initial 11.3 percent. So, you have this huge membership that represents also the real needs why the Fund and the Bank were created, the fight against poverty, but in terms of actual voice, in terms of determining how that is done is less than 2 percent, just about 2 percent. So, there are still some issues that need to be done and to see the reform focusing more on how you synchronize the work of the Fund, the work of the Bank in terms of the real need for which it was created, the fight against poverty. For that, you really need people who actually have a bigger voice in determining how the issues are being taken care of. And that is not just in the Board; this takes also care in terms of the staff, in terms of having more African members of staff to really look at the issues of Africa and bring the issue of Africa and the poverty in Africa on the table in a language, in a manner that only the wearer of the shoe, who knows where it pinches, can be able to talk about.

Mr. Diop: (THROUGH INTERPRETER) I would also say how pleased I am with the agreement that has been reached regarding the reforms and the quota for representation. I think it is a good decision and certainly we endorse this as an African country. I think that adopting this reform is the first step on the way to creating more representation for us and giving us more voice, more voice to the African countries and also the low-income countries. I think they are far more concerned with the activities of the IMF and the World Bank than other countries, and so this is a good step. I also think that the reform as proposed in two stages, that is the first stage which will then look at all the quotas and distribution of representation and then moving on to a redistribution and to again double the voice and the quota that Africa has, and we support this move to be able to protect, of course, the low-income countries and their representation and their quota. I think the scheduling and the programming of all of this is a major priority and certainly it will be very important for the future.

Question: Now, there is a school of thought in Africa that, in fact, when it comes to voting formulas which seem to have created a flap here, you as African Ministers of Finance, in fact you had two choices: get the deal or get the deal. In other words, you did not have much room to maneuver or get something which is substantially very, very effective and serves the interest of the continent. For instance, even when you look at the actual gains that are on the table, you are talking, first of all, about reforms which are going to affect four countries which do not have anything to do with the African continent. Then we are talking about the future, recalculating the formula of voting rights. We are also looking at something in the future, not anything which is on the table as of now. I would like to find out whether it is true, this perception, that in fact you did not have any alternative exit in these negotiations.

Mr. Kimunya: Well, I am not sure we did not have any exit. It is really not a take-it-or-leave-it situation. It is a matter of us putting in our voice and saying, yes, we would like to have more representation. I believe we have come one step forward in terms of saying we are starting from this percentage. We are not opposed to the four, who deserve to have their increase in votes. We are not opposed to them; it is their right. They deserve it. All we are saying is that, as we are moving to that, let us also look at the unique situation of the African countries and see how do we protect their voting power as a bigger bloc. Their economies may not have been improving at the same pace as others. There are some historical problems and some structural problems, but how do we ring-fence their voting rights so that eventually they do not get eroded to a point where people feel that it is irrelevant being in the Fund, to a point where people say our vote is so little, why are we participating in this Fund after all. I think that is what we are looking at, and there is some movement in that direction. So, we believe that so long as we continue getting engaged and so long as the rest of the world starts looking at a critical 30 percent of membership that does not have a voice, and so long as there is still the intention to continue looking at it, then we are making progress. I do not believe that we are between a rock and a hard place, no. We are moving forward.

Mr. Diop: (THROUGH INTERPRETER) Very briefly, I would like to say that we cannot look at this just exclusively from Africa's point of view. This question of the quotas or the degree of representation for China, Mexico, Korea, and Turkey does not have anything to do with Africa, as you said, but I think as Africans we cannot be opposed to this move, to this reform. We should not give the impression that we are against these countries that indeed deserve this reform currently. This is a basic representation and we should see more representation for them, obviously, in view of their weight, their clout in the world economy. So, we cannot come up with an agreement where the resolution has been adopted beforehand. The amendment should introduce basic representation rights so that later, in the future, we can then add our weight to the vote. I think this is important. The essential point is that our voting power should not be eroded by a resolution. If it is eroded because of these four countries, then I think increasing their representation is one step forward, but it is important to see in this proposal that the Board of Governors should look to this for the future as well.

Mr. Benjamin: Let me also add my voice to my colleagues. I think one thing that we should all remember is that our voting strength before now was about 11 percent. When you are in an institution, you go by the rules. The rules at that time, which is based on certain variables like your GDP, your reserves, has seen that voting right reduced to under 3 percent. I think this year is an achievement for Africa, because we have not (?) up to that. We have got the Board to accept the fact that there are other variables apart from GDP and reserves, because the rule of the Fund is focused on we who need the services of the Fund. So, this is how we have got the Board to accept that this ad hoc variation of voting rights has to come to a stop until basic votes are increased. Also, we had a choice. The two Latin American constituencies voted against it, because they did not have confidence that the Board will address our concerns about basic rights. We do and we have got that in the form of a firm commitment that, within a period of two years, until that is done, no more, no more ad hoc increases will happen, and this is an agreement that is firm, and for us in Africa this a big achievement. So, I think it is a challenge to us. In addition to that, even our officials here, our constituency offices are strengthening. We are now going to be allowed to have more staff and that is an achievement. I think we should not overlook those things.

Question: I have two questions. The first question is the oil price rise problem. This is an issue that I understand you African Ministers did discuss extensively in your meetings and there was an insight in the fact that both the oil importers and exporters were lamenting as to the impact of these price rises to their economies. Could you please give us an insight as to what solutions you came up with specifically for oil-importing countries with the Fund and the Bank.

The second question is about economic growth which you have talked about. The fact is that African economies are growing for the first time in so many decades, but there is concern that so much focus is being put on nominal economic growth when there is a lot of disparity and this growth is not impacting on the lives of the poor. In Kenya, for example, as our Minister said, we have had very robust growth over the past four years, but the level of poverty remains at 56 percent. How long will we wait for this growth to impact on the poverty level in our countries? Two, this has something to do with economic policy. There is criticism that IMF recommendations and conditionalities tend to tilt the economies toward a certain direction that does not look at equity or distribution of growth, but just balancing the economies and economic growth per se.

Mr. Diop: (THROUGH INTERPRETER) It is true that the rise in oil prices is not only within the IMF and the World Bank, but also in the African fora as well. To date, most of the countries that import oil have absorbed the high cost of the oil factor, but this is thanks mainly to international reserves and also partly thanks to reserves that have been drawn from exports to other countries. We have been able to absorb the oil shock, but this cannot go on forever, as is well-known. So, the problem of oil prices is a structural problem and it requires a long-term solution. That is what we have been discussing with the IMF because, as I said earlier, we need to establish a program, a pragmatic program, that will also take into account the specific circumstances of each country. The objective is not a question of balancing the accounts, in my opinion. All of our economies in the future will have to absorb such shocks and not just have a one-off absorption of such oil shocks. We will have to allow our economies to develop further. I think that is all I have to say on that particular issue.

Mr. Kimunya: I believe it is a fact that the African economies are growing upwards of 5 percent, on average. There is more growth to the oil-producing countries and some selected countries that are doing well in their economies. By and large, Kenya is currently growing at 5.8 percent. The obvious mismatch between economic growth as seen in the numbers and the levels of poverty is a timing problem. What countries are doing, and this is true for Kenya as for other African countries, is translating the gains of growth into investments into the pro-poor programs. For example, in Kenya, since 2003, there are 7.6 million children who are being fully funded by the government in their free primary education. There are huge investments in infrastructure development. There are huge investments in health. There are huge investments basically in uplifting the livelihood of the people. Now, that investment does not bear fruit overnight. Much of the economy is growing because of the private sector getting a better conducive environment in which they are able to drive and make profits and pay higher taxes, which is statistically correct and true.

(Left to right) Mr. Diop, Mr. Kimonya, and Mr. Benjamin

In terms of the investments in social programs to uplift the people from poverty takes a longer time to mature. The children have to go to school and pass their exams and then eventually get into the labor force. The farmers have to partake of the new knowledge and the new investments and grow crops and take them to the market. I think roads are to be done for the farmers to get their produce from their farms to the markets and get better prices. Those investments, I think we are having an expectation gap. The economies are growing but the full impact on poverty will not be seen at least not in the first five years. It will actually go further on. But as governments spend more money now in terms of issues that are tied to a reduction in poverty, in better health, in better education, there is obviously some relief in terms of the burden the poor have been having and have been paying for themselves. I believe that is where we are getting and the results should be visible pretty soon.

Mr. Benjamin: From Sierra Leone, we take a look at our social services in terms of education and health. As my brother from Kenya said, we have built schools in places where there were no schools, so we are seeing the effect. We are addressing poverty directly. As I said, inter alia, even our governance system, we are changing it, we are reforming it. Now we have local councils that were put in place so that service delivery is fast-tracked. In that process, also, the community has a challenge to address their own needs and also move out of the poverty trap. What the government is doing, we are putting roads where there are no roads. For instance, this year, in our budget, we are trying to address urban electrification and water supply so that you do not have to come to the cities for services. You will be in your village and the services will reach you so that when you are there you have electricity, you have water supply, you can sell your goods, and you will have access to the market. That is addressing poverty. We have to be realistic. Even in developed countries, there are certain people who are called out to remain poor because they are not making efforts. What the government does is make available an enabling environment for people to move out of poverty. We are now doing free primary education. What more can you do as a poor country?

On oil prices, I mean, yes, the emphasis was on African countries exporting oil, but they have their own challenges and we have to be realistic. They have their own concerns that has to be addressed. At the same time, they are also stretching out; I mean, they give concessional prices to fellow African countries, but that is not enough. What we are saying is what role can the Fund play. They had made provision for certain funds to be available for this type of shocks, but the process to assess those funds are long. We have brought this to the attention and they are going to look at it; they will address it. At the same time, we have also called attention of the Fund to the huge profits that oil companies are making. The oil companies are not in Africa; they are in the developed countries. What are they doing with those huge profits which they do not need and that we badly need in Africa? So, we asked those questions and I think the answers lie in your hands in the developed countries. They will provide it and they will help us.

Ms. Bhatt: I would like to welcome Honorable Baah-Wiredu, Minister of Finance of Ghana. I am so glad you could join us, even though we are nearing the end, but we will take some questions.

Question: What kind of step up in aid flows are you seeking from the World Bank and the IMF so as to meet the Millennium Development Goals? Is there a number on that for the African countries? My second question would be, if I were to ask you to identify at least one issue on which you would like to secure something substantive from tomorrow's World Bank's Development Committee meeting, what it would be.

Mr. Baah-Wiredu: Sorry for being involved in other issues. The issue concerning what numbers we are looking at, basically country-by-country requirements, available resources, and then the gap that has to be filled. If you take Ghana, for example, in education, the total education budget for the next ten years for which we want to achieve the MDGs comes to about $15 billion and the available resources that we have been able to identify is about 12, so there is a gap of $3 billion that we will be talking about. But as my brother from Sierra Leone indicated, the resources that have been identified, the 12 billion that I am talking about, the problem is the delivery time. One candidate that has shown they can deliver on time as fast as possible is the U.K. They are giving about a hundred million pounds toward the education program we set ourselves. Obviously, country by country there are differences. If you pick the issue of infrastructure, which is very, very dear to the heart of the Ghana, it has come to about $6 billion and really we will not be able to get all those resources from the IMF and the World Bank, but really they are going to help. There is this issue of a free rider problem, for which all of us must come together to appreciate, that to break from the cycle of poverty you need a bigger injection than what we have now. If you take the multilateral debt relief, for example, Ghana is receiving about $4 billion. The IMF wanted (?), which is front-loaded. The World Bank wanted $3 billion which is for over 40 years. This year Ghana is receiving 24 million. The African Development Bank is $485 million over 50 years, and this year we are receiving $6 million. So, you can see that these are inflows that are coming over a period of time. So, when we talk about the MDRI, it is not the huge sum of money that is readily available to break the cycle. You need extra funding to get things done. That is where we are on this issue.

One of the issues that we can all agree on is obviously the issue of infrastructure, roads and bridges, freeways and posts, electricity, energy sector, both hydro, gas and oil, we need discuss that, and the ICT and water resources. So, these are fundamental items that we must provide for the private sector to operate and operate well, both domestic the private sector and the external private sector that we are all seeking.

Mr. Kimunya: I think for the Development Committee meeting, as the African group we sent in our memoranda which is very comprehensive and we may not be able to cover all the issues here. One of the issues that we want to see is a refocus back of the Bank into tackling the issues of development and the issues of poverty vis-à-vis the overpreoccupation with the issue on corruption and governance, which seemed to have dominated the first part, first half of the year. So, we believe that there is a concurrence moving in that direction in terms of refocusing the Bank and in really addressing the bigger issues of putting more infrastructure, putting more investments in the reduction of poverty. I am looking at the issue of Africa specifically that we cannot have preconditions and cross conditionalities coming in before we put in the issues of development, because you need to develop the people for them to really appreciate the issues of governance and you need to retackle that poverty without looking at things from another theoretical angle that, by fighting governance, development comes. It is usually the other way around. Development brings in acceptance of governance and not the other way around.

Mr. Benjamin: On the question of priority, when you are looking at it from the point of Sierra Leone that is just coming from war, it becomes so difficult because everything is a priority to you. The infrastructure is gone, the school systems have been interrupted, you have to build schools, you have to build hospitals, and homes have all been destroyed. We have this problem of fighting sickness, like malaria. I mean, yes, it is appreciated. We need it, but let it be meaningful and let it be timely. When you look at the case of Sierra Leone, we are coming from war. We badly need shelter. What we are getting to fight malaria is mosquito nets. Yes, but how do we use the nets when you do not even have a home, when you do not have a bed to put the net over? These are some of the things that we think should be addressed. Let our institutions be used that have been set up so that we identify our needs and to make provisions that we can use to address those needs. If we address our shelter program, you then have an environment where you can make good use of the mosquito nets that are provided to give you a better health environment.

Mr. Diop: (THROUGH INTERPRETER) Very briefly, just a couple of minutes, I think one of the objectives for our African countries is to avoid a loss of competitiveness and to increase our growth, because when we talk about alleviating poverty and considering all of this, we cannot do this without growth. We need growth. To have growth, we have to maintain our competitiveness. We require more financing, we need more revenue. I think alleviating the debt is not enough. It does cover certain countries, but it is not enough. Although it is generalized, we require complementary finance, public as well as private, to fund certain degrees of development, certain types of development, already quoted by Ghana. Again, I feel that, yes, we do need revenue. We have to maintain growth and we must alleviate poverty and continue with our Millennium Development Goals.

Question: A question, I guess, for countries that have been through or are close to big debt relief exercises, there have been some concerns expressed about China taking the opportunity to start lending more extensively in Africa. Is that something that any of you are involved in as borrowers? Do you think there is any threat to the long-term debt sustainability situation?

Mr. Baah-Wiredu: Well, I think I will pick that one. Debt sustainability, what is the numerator and what is the denominator? The denominator basically is your export earnings. So, if you are trading, activities are also blocked by the fall or the inconclusiveness of the meetings of the WTO, then there is a problem. We need to tackle that issue. Then the other one is that there is a document that has been prepared by the World Bank on the free rider problem. It gives the terms and conditions under which loans are given, the concessional ones and the nonconcessional ones. It is a balanced act. We need to help each other so that nations of this nature can get the concessionary loans as much as possible. Even under the IDA, there are other terms, for example the (?) window of which nations can borrow under appropriate terms and conditions. But, as I indicated, delays are really unnecessary and we need to work on in such a way that things can be done right. So, I believe that we need to appreciate that. Fortunately, in this particular document, the World Bank and other institutions are prepared to come together so that all lenders or creditors will also be using the same format so that the appropriate terms and conditions can be involved. Whether we like it or not, nations must help each other. If we see any weaknesses in the terms under which loans are being given or facilities are being offered, then we all help each other to at least reduce the burden. So, we do not have to make anything extraordinary from trading with each other. After all, developed countries have been trading with countries that have been mentioned and they continuously deal with them. So, if there is any support that we need to get, we have to get that one, but it should be under the appropriate framework. For example, Ghana has worked under the poverty reduction growth facility and we are moving on to their policy support instrument of the IMF, the World Bank. We will work within that context. We should make sure that if it is energy construction of a dam, over a period of 20 years we are talking about that one, we should make sure that we get appropriate resources and the appropriate size.

Mr. Kimunya: I know Kenya is not on the MDRI or the HIPC program, partly because we have always paid our debts and GDP threshold was about the cut-off point. But in terms of looking at trading with China, more credit from China, I see this as an opportunity for the countries, especially in Africa, who traditionally look West and are now looking toward East. There is a 1.3 billion inflation in China. You cannot ignore that for trading purposes for the future. Their resources are available, and with ease in terms and quality of the loans. Starting from our own example, from my experience in Kenya, the kind of package we are receiving from China comes in with more effectiveness, almost 0 percent in technical assistance. It is all tangible, infrastructure is tangible cash flowing in, whereas most of the traditional assistance in the past has been, you know, more toward technical assistance than tangible goods. In terms of debt sustainability, you (?) sustained debt in the future when you can pay them with tangible goods that you have received rather than with technical assistance, which you cannot plow back into using to pay for the loans.

Mr. Benjamin: From our own perspective, I think China's intervention should be looked at as complementary, the aid that we are getting from our traditional development partners. We have been receiving support from China a long, long time ago, so it is not only now. For me, in fact we went to China to discuss some loans that they want to give to our country, and this is something that we believe is coming in at the right time and is also an additionality that we are requesting. If we have aid coming from Britain, Britain has been very supportive, and coming from Norway or Australia, we will take it. If they are not there and China is trading with us, I think that is a big relief to the other countries that are not looking in our direction.

Mr. Diop: (THROUGH INTERPRETER) Let me just add that there is indeed great concern, there is great concern among rich countries who have seen poorer countries' debt levels and the concern was expressed if China was going to reconstitute the same indebtedness cycle through its activity. But with the HIPC Initiative and multilateral debt relief initiatives, all of this was linked to the condition of complementary forms of funding that would allow other activities to be financed. As we said, we need more revenue schemes to fund our economies and keep our growth on track. But there are other problems as well. There is the HIPC Initiative, the multilateral debt cancelling initiative, but funding was not made available after that as rich countries had pledged that they would. From that time forward, knowing that simple debt relief was not in and of itself going to maintain growth levels, it was clear that financing flows from China would be very welcome in poor countries, all the more so since this form of funding seems to be much more flexible, with less conditionality. It is quite clear then that most countries will follow that path. I think it is quite clear also that rich countries, to avoid African countries and poor countries in general do not simply build up once again their indebtedness cycle as it existed in the past, must respect the commitments that they have made. They are being implemented; thought has been given to this. Japan has made serious commitments, as has the U.K., France, and the United States. But this is happening far too slowly and sometimes the conditions are far too difficult and less flexible than we see offered by China. So, if you look at the nature of loans, most of our countries have IMF programs in place. They have made commitments not to take nonconcessional loans. I think there are much lower risks there you see in terms of default on financing.

Question: I would like to ask you with regard to financial injections, you have all discussed about it. What are the measures that you will take in order to turn financing to enterprise, microfinancing to enterprise and to turn it into trade?

Mr. Benjamin - During my previous intervention, I did mention that we are putting in place structures so that we have the capacity to absorb these financial injections. I mean, we talk of microcredits. We have set up community banks in a lot of our rural areas so that microfinance, which is going at very low interest, which is not attractive to the commercial banks, can still to be channeled through those outlets to reach those people. So, the structures are in place for those financial injections to reach the people at the rural level. In terms of a big injection that could be translated into infrastructure, we have also set up institutions for that, that will handle our roadwork and we have set up a procurement system which meets the World Bank's standards so that the money that you give is guaranteed, the disbursement is regulated and it is transparent, it is open, and we also account for those resources. So, I mean, those structures are all put in place. The institutions are there. But the funding is yet to come. So, as soon as they come, we are ready to absorb them.

Mr. Baah-Wiredu: Countries that have been ruled through constitutional means have the structures and institutions and their right policies updated on a daily basis, on a weekly basis and monthly basis to reflect the needs of the time. If you talk about the microfinance institutions, which are very important, because obviously you link that one up to remittances and banking their own bank. Ghana, under the MDRI, about $200 million is being used from the IMF allocation this year. 50 million dollars is going into the microfinancing throughout the whole country so that we support the private sector and the small- and medium-sized enterprises with loans and institutions that are going to operate them. We have about 121 rural banks in the country which are spread all over the country. Then we have some of the traditional banks like Barclays Bank operating what we call capital, small-sized capital for the (?) operators and that one is also going on. Then the millennium challenge account, which is a project by the American government for next five years, a portion is also going to microfinancing. Almost all the rural banks have also devoted sums of money for these operations. The credit union associations are also in that particular sector, though a substantial sum of money obviously has been going through the microfinancing scheme. We are taking lessons from Bangladesh, Malaysia and other countries that have operated microcredit schemes for very long time. Ethiopia is one of the countries Ghana obviously is trying to learn from.

Finally, the banks that I talked about, they are institutions which are already in place and the best thing is for all of us to make sure around and come back to trading within the subregion, within the country. For example, in Ghana, those in the agriculture sector, we are linking that one up to the school feeding program so that farmers can obviously benefit from their produce and will be bought at the right terms and stimulate the local economy.

Mr. Diop: (THROUGH INTERPRETER) I just would like to add something on the question of what measures need to be taken so as to have funding of companies and of trade; I think that was basically your question. There is one necessary precondition we all need practically to respect, which is that all of our economies have been liberalized and opened up. We have opened them up. We are also part of multilateral trade negotiations. We want to bring about fairer and more equitable world trading system, but there is one principle we have always to the forefront in Africa which is that we want to develop our countries, we want to develop Africa. We are trying to set up measures which will allow a private sector to emerge and to participate in African development. We want to have an international level business environment in our countries, and it is obviously important that we look at tax policy, the ways in which businesses can and may be set up, etc., etc., so look at all of the measures which have been taken over a longer or shorter period in all African countries so as to assimilate our macroeconomic framework conditions and to have the necessary conditions shared by all of us so as to allow our companies to flourish in the same conditions that you can see in Europe or other countries.

Question: Mr. Kimunya, how does the interest rate on the Chinese money compare with the IBRD loan rates? Just an idea.

Mr. Kimunya: Let me just say that different countries have different negotiations on their interest rates, but it is fairly comparable.

Ms. Bhatt: Thank you very much for coming, and thank you to the Ministers for participating.