EVENT: The 2004 Spring Meetings of the World Bank and IMF were held on April 24, 2004.
SIGNIFICANCE: The Spring Meetings offer senior political leaders from the World Bank and the IMF’s member countries a valuable opportunity to discuss the key development policy issues confronting the two institutions. As in past years, the bulk of the substantive agenda are discussed at the meeting of the Development Committee, which is the joint ministerial committee of the IMF and World Bank.
ANALYSIS: The 2004 Spring Meetings of the World Bank and IMF began on April 24, 2004 in Washington, with most of the substantive agenda discussed at the meeting of the Development Committee (DC), the joint ministerial committee of the IMF and the World Bank. Two issues dominated discussions in the DC. They were:
- progress towards achieving the Millennium Development Goals (MDGs), with a special focus on financing (see INTERNATIONAL: Development goals show signs of wear – August 28, 2003); and
- long-term debt sustainability in low-income countries.
Global Monitoring Report. DC member governments at the 2002 Annual Meetings requested a framework to monitor the MDGs and at the 2003 Annual Meetings approved an action plan to this end. Developing countries have since been assessed on their economic and financial policies; public sector governance; social sector policies; and environmental policies. Conversely, donor countries are evaluated on policies related to macroeconomic management; trade; aid including debt relief order application; and support for global public goods (eg global health and environmental initiatives). This year’s Spring Meetings presented with the 2004 Global Monitoring Report (GMR), the first in what is expected to be an annual series of progress reports, with two main points:
- On current trends, most of the MDGs will not be met. The GMR focuses on the shortcomings of industrialised countries, arguing that they have not sustained strong and stable global economic growth; ensured the successful conclusion of the Doha Round; or increased the volume and quality of development aid.
- While policies in developing countries have generally improved, performance has varied widely. The GMR suggests three areas for priority attention: creating an enabling environment conducive to private sector development; public sector capacity building for better governance; and increasing the level of investment in infrastructure and social service delivery.
The GMR proposed a three-part agenda to accelerate economic reforms, improve the delivery of social services and hasten the implementation of the Monterrey Consensus (matching good performance in developing countries with greater donor assistance) (see INTERNATIONAL: Market principles endorsed – March 25, 2002).
Debt sustainability. Discussion on this item focused on two main issues:
- HIPC. The Highly Indebted Poor Country (HIPC) initiative has been the subject of intense criticism and debate almost since its inception, but the newest challenge facing HIPC creditors is the increasing likelihood that countries scheduled to graduate from the HIPC process will be in need of additional debt relief (or ‘topping up’) (see INTERNATIONAL: HIPC debate divides G7 – April 21, 2004).
Until now, HIPCs asking for topping up (in most cases due to exogenous shocks that have caused a decline in their overall debt situations) have had their topping up approved when they are deemed to have completed the necessary reforms to reach their HIPC completion points. However, Belgium, Germany, Japan and the United States have asked donors to consider separating the two decisions as other HIPCs come forward for graduation. The World Bank and IMF Boards will consider this proposal in the coming weeks. Should this come to pass, countries needing topping up could, in principle, reach their HIPC completion points but then be denied topping up. This opens the possibility to countries graduating from the HIPC process with unsustainable debt burdens.
- Assessment. The World Bank and IMF in February considered a new operational framework for assessing debt sustainability in low-income countries (see INTERNATIONAL: Bank and Fund address HIPC shortcomings – February 25, 2004). The proposed framework attempted to draw a strong link between debt sustainability and the quality of governance in a particular country, while also pushing creditors to reconsider the thresholds used to determine debt sustainability. A major implication of the proposed framework was that donors should provide more grants (rather than loans) to low-income countries in order to achieve the MDGs. While this is in keeping with World Bank estimates of additional annual aid necessary to reach the MDGs, it could put major donors in a difficult position. Some donors are continuing to increase their development assistance (eg the United Kingdom and Canada), but slow growth in much of the G7 has put pressure on aid budgets.
Haiti. Beyond the formal agenda, a key issue that dominated the meetings on the margins is continuing donor efforts to arrive at a consolidated international response to Haiti. With Washington’s increased involvement, donor attention has refocused on the poorest country in the Americas. Along with the World Bank, several donors (including the United States, France, the EU, Canada and various international financial institutions) are currently working with the interim Haitian government to launch an ‘Interim Cooperation Framework Identification Exercise’ in May to define the country’s national development priorities for the coming two years. A key point of contention is whether the World Bank should designate Haiti a ‘post-conflict country’. Such designation would make Haiti eligible (pending the clearance of arrears to the World Bank and IMF) for concessional lending from the World Bank, yielding some 100 million dollars in additional development finance.
CONCLUSION: This year’s IMF-World Bank Spring Meetings featured themes from previous meetings while also exploring several new issues. The Global Monitoring Report builds on previous meetings by providing the first report on the quality of policy initiatives and reforms in both industrialised and developing countries. Discussions on HIPC and the new framework for debt sustainability, while unlikely to reach conclusions, will succeed in keeping public attention on the level of donor resources necessary to achieve the Millennium Development Goals.