House of Commons Issue No. 16 Minutes of Proceedings and Evidence of the Standing Committee on Foreign and International Trade
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House of Commons Issue No. 16

Minutes of Proceedings and Evidence of the Standing Committee on Foreign and International Trade

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[English translation]
C'est maintenant au tour des membres du Comit‚ de poser des questions. Je r‚itŠre aux t‚moins ce que j'ai dit au commencement. Si vous avez une r‚ponse … donner … une question qui a ‚t‚ adress‚e … quelqu'un d'autre, n'h‚sitez pas … me le signaler et je vais vous donner la parole.

Monsieur Par‚.

M. Par‚: Je suis heureux de participer … cette table ronde qui sera s–rement instructive, bien qu'il sera sans doute difficile de cerner des r‚sultats concrets.

Ž entendre les intervenants et … la lecture des ‚v‚nements mondiaux, il m'apparaŒt que les institutions financiŠres internationales, parce qu'elles ont ‚t‚ jusqu'… un certain point initi‚es et contr“l‚es par le G-7, ont poursuivi des objectifs plut“t confus. Finalement, elles ont fait davantage la promotion des pays riches que le d‚veloppement des pays pauvres.

D'autre part, dans l'introduction … son document, M. Helleiner affirme, et je pense qu'il a totalement raison, que la paix mondiale d‚pend de la s‚curit‚ ‚conomique et sociale … l'‚chelle plan‚taire. Donc, il m'apparaŒt ‚vident que les institutions financiŠres internationales, compte tenu de leur fonctionnement actuel, sont incapables d'assurer le d‚veloppement social et ‚conomique … l'‚chelle plan‚taire.

Mes questions sont beaucoup plus de l'ordre du pourquoi que de l'ordre du comment. Je ne suis d'aucune fa‡on sp‚cialiste dans ce domaine-l…, mais il y a quelques questions qui me viennent … l'esprit.

La Banque mondiale, avec ses prˆts conditionnels, et le Fonds mon‚taire international, avec ses programmes d'ajustement structurel, en contrôlant directement les budgets des pays en voie de d‚veloppement, ne constituent-ils pas une sorte de nouveau colonialisme?

DeuxiŠmement, la dette des pays en voie de d‚veloppement continue de s'accentuer. Des renseignements nous permettent d'affirmer que les pays du Sud retourneraient 50 milliards de dollars de plus aux pays riches qu'ils ne re‡oivent en aide. On affirme mˆme que les pays pauvres seraient oblig‚s d'utiliser de nouveaux prˆts pour payer les int‚rêts des anciens prêts. Si cela est fond‚, et je pr‚sume que vous ˆtes en mesure de me dire si c'est le cas ou non, j'aimerais le savoir.

TroisiŠmement, comment pourrait-on faire pour que le Canada et ses repr‚sentants … ces institutions-l… nous informent des critŠres qui les guident pour prendre les d‚cisions quand vient le temps, entre autres, d'appliquer des programmes d'ajustement structurel? Ž qui les repr‚sentants du Canada rendent-ils des comptes? Quelle place font-ils aux droits de la personne, au d‚veloppement social et au d‚veloppement durable en g‚n‚ral?

[Traduction en français]
The Chairman: Professor Helleiner, perhaps you'd like to lead off on that one.

Prof. Helleiner: Those are three very large questions.

The conditionality of the International Monetary Fund and the World Bank has indeed been described in the reputable financial press, that is to say the Financial Times of London, as the new imperialism. That's a phrase employed in an article last year.

Last week I attended a meeting in Abidjan, C“te d'Ivoire of the caucus of developing countries in the IMF and the World Bank. I am their research coordinator, among other things. At this meeting they discussed a paper written by a Tanzanian--a former adviser to the president and an eminent academic on leave at an American university, where he is now teaching--in which he argued that the conditions frequently imposed by the World Bank are in many dimensions technically inappropriate.


In other dimensions they are politically controversial and intrude upon domestic sovereignty. In other respects--and perhaps this is also a political matter--they have taken insufficient care with the social and human consequences attendant upon the implementation of the recommendations they offer.

But above all--and it was the sense of the entire meeting that this was correct--the complaint was that although the aid donors and the World Bank are continually speaking of the importance of national ownership of programs, in actual fact this is hypocrisy. In actual fact the policy framework papers prepared jointly by the IMF and the World Bank, upon which the programs in low-income countries are based, are drawn up in Washington and are given to the weaker-member governments on a take-it-or-leave-it basis.

In one instance he cited, the government with which he was associated submitted a major independent program sixty pages long for the use of the IMF and the World Bank as they prepared their policy framework paper. It was turned away very rapidly, essentially on the grounds that their papers for the board could not exceed fifteen pages, following which the IMF and the World Bank wrote their own.

This has become a source of deep tension, and to my mind it's totally unnecessary. It derives from the over-concentration of World Bank and IMF staff in Washington. It derives from the mission mentality, in which mission after mission is sent to small countries. One received forty-some in one year from the World Bank. There is not capacity on the ground for the technocrats and politicians to take in all this advice, but there is enormous deflection of energy to the receiving of IMF and World Bank missions.

They do not have time to read their reports. Typically, when they're offered the opportunity to have a study done, it's difficult not to say yes, of course, what's wrong with a study? No one then has time to read it, and the next time the next mission comes they ask why the recommendations in the study were not implemented. The next time the mission comes it's a condition on the next loan, and only then do they read it.

One estimated that 70% of the time of the senior technicians in the ministry of finance and the ministry of planning was devoted purely to transaction costs associated with IMF and World Bank activity. Others said the country that offered that number was actually a better-off country and their senior people spent rather more.

There is a major problem in the establishment of conditions and their association with ownership, and it's getting worse. The World Bank now is imposing what they call quality-at-entry provisions, in which they invite their staff to explore the degree of local political commitment and implementation capacity prior to their award of a loan. Well, that's like putting the fox in charge of the chicken coop. Those who were causing the difficulty with domestic ownership are now to ascertain whether ownership and commitment exists. This is quite bizarre and it's become a difficulty. Enough said.

The second issue relates to net transfers and the degree to which the interest and servicing costs of external debt are offsetting the benefits of the continuing financial flows.


It is true that for most of the last ten years the IMF has taken in more money from Africa than it has put out. It is also true that the International Bank for Reconstruction and Development now receives net transfers in. Currently, however, these are offset by the International Development Association, the soft-loan arm of the World Bank that continues to supply modest amounts.

The best projections are that the total net flow from the IMF and World Bank will be modestly positive for the poorest countries in the foreseeable future. But there are accumulating arrears, that is, payments that are not made because they cannot be made. There is considerable controversy about whether the time has now come for the international financial institutions to use their reserves, and in the case of the IMF, their gold, and to deal with this accumulating arrears by writing down some of the debt for such impossible cases as Liberia, Sudan, Somalia, Zaire and Zambia, for instance.

More important, perhaps, is that aid from bilateral sources is eight, nine, ten times as large as the net flows from the World Bank group, anyway. A great deal of the servicing now successfully undertaken by borrowers from the international financial institutions are financed directly by grants from Sweden, Holland and other countries that see that the provision of cash to allow them to service their debt to the IMF and the World Bank is currently the best form of aid. But those donors are becoming very annoyed at the opportunity cost, because they could be using that money for much more useful activities.

I think I've taken so much time that I'll leave the third question to somebody else, Mr. Chairman.

The Chairman: I'm trying to divide this into ten-minute sections, and we've gone over the ten minutes. If you could just be quite brief in your response, then we'd move on to the next question.

Mr. Boehm: I'll be very brief. The debt question, to put it into the G-7 context, has been discussed at numerous summits in the past. Indeed, it was discussed in Naples. Canada has long pushed for greater concessionality and better terms for the poorest of the poor. This, of course, means Africa, particularly, in our case, sub-Saharan Africa, where we've forgiven all of the debt.

In summitology, if we can say that, often the terms used in the Paris Club for debt forgiveness take on the name of the summit. So there are the Toronto terms and now we have the Naples terms.

At Naples, the leaders agreed that more could be done for the poorest. They agreed to a methodology for debt reduction. These so-called Naples terms allowed eligible countries to receive a 67% reduction, in many cases, on their full stock of debt when they next reschedule. This goes beyond the enhanced Toronto terms that developed out of the Toronto summit in 1988, and perhaps suggest that one could go further still. But it is an item that is on the agenda of G-7 discussions and has been consistently for the past few years.

The Chairman: Perhaps I'll turn it now over to Dr. Martin.

Mr. Martin: Thank you very much, Mr. Chairman.

Professor Kirton, you spoke about the four layers of institutions we have internationally and how there's a lot of overlap between them. I'd like to ask you what you feel Canada's role would be in reorganizing those institutions and streamlining them down.

Secondly, you spoke about the pattern of lending by the IFIs. They give their moneys primarily through larger projects and also through structural adjustment programs. What ways would you suggest that the lending pattern of the IFIs could be made more effective to address those who are the poorest of the poor and also to ensure that those moneys go into projects that are sustainable and have environmental considerations and such?

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