---------- Forwarded message ----------
Date: Fri, 21 Jul 2000 18:39:01 -0500
From: APIC <[log in to unmask]>
To: [log in to unmask]
Subject: Africa: G7 on Poverty Reduction

Africa: G7 on Poverty Reduction
Date distributed (ymd): 000721
Document reposted by APIC

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Region: Continent-Wide
Issue Areas: +economy/development+
Summary Contents:
Prior to the G7/G8 Summit this week, representatives of
the global South, including the Presidents of Algeria, Nigeria, and
South Africa, received "encouraging words" in a meeting with G8
leaders. Nigerian President Olusegun Obasanjo, chair of the G77
group of developing countries, noted: "They are starting to say the
right things. ... It is a question of how to translate these
encouraging words into concrete action."

G7 statements on the first day of the summit, however, failed to
announce any major new initiatives. Of the estimated $260 billion
in debt owed by the most indebted states to rich countries, last
year's summit promised to write up $100 billion. Of this, only an
estimated $11.9 billion had been written off by this month.

This posting contains excerpts from today's statements by the G7
Heads of State and Finance Ministers ['G8' also includes Russia;
but these statements are issued by the 'G7', not including Russia.]

+++++++++++++++++end profile++++++++++++++++++++++++++++++

Poverty Reduction and Economic Development

Report from G7 Finance Ministers to the Heads of State and
Government

Okinawa, 21 July, 2000

A. A Comprehensive Approach to Development

1. With the dramatic change in the world economy that has come as
a result of the rapid progress in globalization, it is vital that
the international community take action to ensure that developing
countries have the opportunity to benefit from the forces of
globalization and to play their role in the world economic system.
It is a key objective to take a forward-looking approach in a
strategic and intensive manner, in order to assist these countries
in their efforts to attain sustained poverty reduction and economic
development, and achieve the International Development Goal of a
reduction by one half of the proportion of people living in extreme
poverty by 2015.

2. Experience has shown the importance of sustainable growth as a
necessary condition for poverty reduction. All development partners
should focus on priorities that will bring about the robust growth
necessary to meet the 2015 goals. These priorities should include
achieving macroeconomic stability, encouraging private sector
development, promoting good governance, investing in social
development, accelerating trade liberalization, and strengthening
financial sectors.

3. While growth is crucial in the fight against poverty, greater
attention must be paid to a more equitable distribution of the
benefits of growth. To this end, the right social policies are
essential, including institution building, education and skills
development, and the improvement of health including through the
fight against infectious disease. These are the foundation for
poverty alleviation and greater social equity. Social investment
secures high returns over the longer term.

4. Combating global poverty requires a multi-dimensional approach.
To achieve this, poor countries need to produce their own
comprehensive Poverty Reduction Strategies, centered on the
International Development Goals. These strategies will provide a
vital link between social and economic policies needed to reduce
poverty and increase growth. They should emphasize transparency,
accountability, elimination of wasteful expenditure, and good
governance. These strategies should also be developed through
participatory processes involving civil society. The International
Financial Institutions (IFIs) and bilateral donors should assist
countries in developing and implementing these strategies,
including through technical assistance.

B. HIPC Debt Relief

5. For the heavily indebted poor countries (HIPCs), debt relief
through the enhanced HIPC Initiative is a crucial part of
establishing a virtuous circle of poverty reduction and economic
development. Last year in Cologne, we agreed to launch the
Initiative to deliver faster, broader, and deeper debt relief,
releasing funds for poverty reduction. We welcome the endorsement
of this initiative by the international community last autumn.

6. Since then, the implementation of the Initiative has begun.
[Nine] countries have reached decision points and are receiving
debt relief under the new framework which should total more than
US$15 billion in nominal terms (US$8.6 billion in net present
value)[12.5 billion US dollars]. Up to [eleven] further countries
could reach the decision points by the end of this year. Further
details on the progress of the enhanced HIPC Initiative are set out
in the attached annex.

7. We encourage those HIPCs that have not done so to embark quickly
on the process by beginning to develop Poverty Reduction
Strategies, in close cooperation with the World Bank and the IMF,
and thus benefit from debt reduction. We will work together to
ensure that as many countries as possible reach their decision
point, in line with the targets set in Cologne, giving due
consideration to the progress of economic reforms and the need to
link debt relief to poverty reduction. In this respect, we are
concerned by the fact that a number of HIPCs are currently involved
in military conflicts, which prevent poverty reduction and delay
debt relief. We call upon these countries to end their involvement
in conflicts and to embark quickly upon the HIPC process. In that
eventuality, we stand ready to strengthen our efforts to help them
prepare and come forward for debt relief.

8. We encourage the World Bank and the IMF to continue to make
efforts toward speedy and effective implementation of the
Initiative. In this regard, we welcome the establishment in April
of the new Joint Implementation Committee by the World Bank and the
IMF, and urge the Committee to effectively facilitate the
implementation of the HIPC Initiative and provide regular
information on the status of individual countries.

9. We note the progress made in securing the required financing of
the IFIs for effective implementation of the enhanced HIPC
Initiative. We encourage effective and timely participation of all
multilateral and bilateral creditors, including non Paris Club
members. Resources for the IMF and World Bank's share of the costs
of debt relief have been identified and substantial contributions
to the financing needs of other IFIs have been pledged. We urge
MDBs' active engagement in the Initiative through the maximum use
of internal resources. We welcome the recent progress made in
putting together financing that will promote debt relief for HIPC
countries in Latin America and Africa.

10.We reaffirm our commitment to make available as quickly as
possible the resources we have pledged. In this context, we
recognize the importance of fair burden sharing among creditors. We
encourage new contributions by bilateral donors to the HIPC Trust
Fund.

11.We reaffirm our commitment to bilateral debt reduction within
the HIPC framework. In this respect, we have now committed
ourselves to grant 100% debt forgiveness reduction on our
commercial claims eligible for treatment in the framework of the
Paris Club. We welcome the announcement made by some other
countries that they too will provide 100% debt relief forgiveness,
and we urge other creditors to follow suit.

C. Going beyond Debt Relief

12. Official Development Assistance will continue to be crucial to
support and encourage efforts for poverty reduction and economic
development by poor countries. In this context, we welcome the
recent reversal in the trend of declining aid levels. In order to
ensure that those countries to which the Initiative is applied do
not face again excessive debt burden, we have committed ourselves
to extend ODA mostly in the form of grants for these countries.

13. Experience shows that economic assistance to countries with
sound management raises growth and improves social conditions.
Donors can play their part by directing aid more effectively to
those poor countries that are serious about tackling economic
reforms and poverty reduction. Donors should also improve the
effectiveness of their support by coordinating their aid better in
support of well-considered and recipient-led programs, and
simplifying, and where feasible harmonizing, aid procedures.

14. In order to ensure responsible lending practices, it is vital
that donors reaffirm their commitment to discourage unproductive
expenditure. In this context, we call upon the OECD to review
through its export credit group strengthened measures toward
ensuring that export credit support to HIPCs and other low income
developing countries is not used for unproductive purposes. The
result of this review should be published and could include the
review of the relevant existing national rules and regulations. We
encourage the OECD to complete this work as soon as possible. In
addition, we welcome efforts by the IFIs and other donors to
encourage poor countries to pursue sound debt management policies
to ensure the productive use of resources.

15. Global public goods such as environment and health deserve
priority attention and require strong involvement of the IFIs, in
particular the World Bank and the regional development banks, and
also by bilateral donors. To be effective, the involvement of the
international community in global public goods should be built on
the principles of comparative advantage and priority-setting.

D. Improved Trade and Investment Environment

16. In view of the close link between trade and investment growth
and economic growth, trade and investment will play a critical role
in promoting effective poverty reduction and sustainable economic
growth. We must find ways to give HIPC and other low-income
developing countries a stake in world trade and to improve access
for these countries to international markets. We should ensure that
the forthcoming WTO round actively promotes the interests of these
countries, so that they too can benefit from trade liberalization.
We should also promote regional cooperation among these countries
in accordance with WTO rules, which often represent a welcome first
step towards further integration in global economy. We call on the
relevant international organizations, particularly the WTO and the
World Bank, to strengthen their efforts to help build trade-related
capacity in the poorest countries. We should also support the
efforts of poor countries to create a welcoming environment for
productive investment.

E. Faster Integration into the Global Economy

17. In view of the rapid progress of globalization and the IT
revolution, it is important for developing countries including the
poorest to harness the benefits of new advances in IT and prevent
digital divide. It is crucial that the international community
emphasize capacity and institutional building including those
related to IT, such as investment in human capital.

18. In the longer term, there will be a need to ensure that all
developing countries have the ability to progress up the ladder of
development. In many countries, domestic savings and private
capital flows already play an important role in financing
development. Putting in place the conditions for increased levels
of stable forms of private financing and investment is key to
achieve sustainable development.

19.While many developing countries will continue to be reliant on
concessional aid flows for the foreseeable future, the IFIs should
give some consideration to ways for these countries to participate
in the global financial marketplace in the future. The objective
must be to provide a "roadmap" to support developing countries make
the journey from isolation to integration, growth and development.

ANNEX-The Heavily Indebted Poor Countries Initiative: Progress in
Implementation

1. The enhanced HIPC Initiative launched at Cologne last year is
aimed at providing faster, broader and deeper debt relief for the
HIPC countries and at ensuring that the benefits of debt relief are
used to reduce poverty. The link between debt relief, economic and
social policy reforms and poverty reduction in the HIPC process is
made through the development of comprehensive Poverty Reduction
Strategy Papers (PRSPs). PRSPs are developed by the HIPC country
itself, through a participatory process involving civil society and
with the support of the International Financial Institutions and
donors.

2. Nine countries (Benin, Bolivia, Burkina Faso, Honduras,
Mauritania, Mozambique, Senegal, Tanzania, and Uganda) have reached
their decision points under the enhanced initiative. For the nine
countries, debt relief has been agreed that will provide savings of
more than US$15 billion in nominal terms (US$8.6 billion in net
present value). This represents, on average, a reduction in
countries' stock of debt of about 45 per cent in addition to
traditional debt relief mechanisms. This figure will be further
increased by the reduction in Official Development Assistance (ODA)
debt which we agreed at Cologne and by the commitment we have now
made to grant 100 per cent debt forgiveness on eligible commercial
debt owed to us by HIPCs which achieve debt reduction under the
initiative.

3. Going forward, according to the latest IMF and World Bank
estimates, up to eleven further countries could reach decision
points before the end of this year (Cameroon, Chad, Cote d'lvoire,
Guinea, Guinea-Bissau, Guyana, Malawi, Mali, Nicaragua, Rwanda and
Zambia). This would bring total debt relief agreed under the HIPC
initiative of around US$35 billion in nominal terms (around US$20
billion in net present value). Again this amount will be increased
by the reduction in ODA debt and our commitment to grant 100 per
cent debt forgiveness on eligible commercial debt.

4. The decision point for these countries will depend on their
commitment to poverty reduction and economic growth, as
demonstrated by their progress in developing poverty reduction
strategies and their performance in relation to their IMF
programmes. Progress in implementing these commitments would
clearly be undermined by situations of armed conflict or
significant political unrest.

5. There remain 20 HIPC countries. Of these:

- Four countries (Angola, Kenya, Vietnam and Yemen) are not
expected to meet the indebtedness thresholds for the higher,
enhanced HIPC debt reduction;

- Two countries have decided not to seek relief under the enhanced
initiative (Ghana, Lao PDR);

- Two countries with IMF programmes are in the process of
establishing the necessary track record. In the meantime, both
countries are receiving traditional debt relief (Paris Club Naples
Terms (67%)) in the context of their current IMF programme
(Madagascar and Sao Tome and Principe);

- Twelve countries have not at present agreed programmes under the
IMF's Poverty Reduction and Growth Facility, performance against
which is necessary for decision point (Burundi, Central African
Republic, Democratic Republic of Congo, Republic of Congo,
Ethiopia, Liberia, Myanmar, Niger, Sierra Leone, Somalia, Sudan and
Togo). The speed at which these countries can go forward to
decision point will vary greatly. A few are close to embarking on
the process. Ten countries are affected by conflict. Some are
experiencing political unrest and macro economic instability. In
such circumstances, many remain unable to commit to the HIPC
framework which is intended to ensure that the resources made
available through debt relief are used for poverty reduction within
a policy framework directed to economic growth.

****************************************************************

G7 Statement by Heads of State and Government
Okinawa, 21 July 2000

[Excerpts only: for full text see
http://www.g8hyushu-okinawa.go.jp/e/documents/g7state.html]

Progress of the Enhanced HIPC Initiative

17. The International Development Goal of cutting in half by 2015
the proportion of the world's population living in extreme poverty
is an ambitious one. It demands a strategy of economic growth
accompanied by the right social sector policies which can
contribute to a virtuous circle of poverty reduction and economic
development. Debt relief for Heavily Indebted Poor Countries
(HIPCs) is only one part of such a strategy, but it is a crucial
part.

18. Last year in Cologne, we agreed to launch the Enhanced HIPC
Initiative to deliver faster, broader and deeper debt relief,
releasing funds for poverty reduction. We welcome endorsement of
this initiative by the international community last autumn.

19. Since then, while further efforts are required, progress has
been made in implementing the Enhanced HIPC Initiative. ..[see  G7
Finance Ministers' report]

20. We welcome the efforts being made by HIPCs to develop
comprehensive and country-owned poverty reduction strategies
through a participatory process involving civil society. We
encourage those HIPCs that have not yet done so to embark quickly
on the process and thus fully benefit from the debt reduction. We
are concerned by the fact that a number of HIPCs are currently
affected by military conflicts which prevent poverty reduction and
delay debt relief. We call upon these countries to end their
involvement in conflicts and to embark quickly upon the HIPC
process. We agree to strengthen our efforts to help them prepare
and come forward for debt relief, by asking our Ministers to make
early contact with the countries in conflict to encourage them to
create the right conditions to participate in the HIPC Initiative.
We will work together to ensure that as many countries as possible
reach their Decision Points, in line with the targets set in
Cologne, giving due consideration to the progress of economic
reforms and the need to ensure that the benefits of debt relief are
targeted to assist the poor and most vulnerable.

21. In this regard, we welcome the establishment of the Joint
Implementation Committee (JIC) by the World Bank and the IMF, and
strongly urge both HIPCs and IFIs to accelerate their work toward
the implementation of the Initiative. IFIs should, along with other
donors, help HIPCs prepare PRSPs and assist their financial
resource management by providing technical assistance.

22. We reaffirmed our commitment to provide 100% debt reduction of
ODA claims, and newly commit to 100% debt reduction of eligible
commercial claims. We welcome the announcement made by some non-G7
countries that they too will provide 100% debt relief, and we urge
other donors to follow suit.

23. We note the progress made in securing the required financing of
the IFIs for effective implementation of the Enhanced HIPC
Initiative, and welcome pledges and the initial contributions
including those to the HIPC Trust Fund. We reaffirm our commitment
to make available as quickly as possible the resources we have
pledged. In this context, we recognise the importance of fair
burden sharing among creditors.

24. Given the enormous destructive effect of war and crisis, we
call upon the OECD to review strengthened measures, including a
review of national rules and regulations, toward ensuring that
export credits to HIPCs and other low income developing countries
are not used for non-productive purposes. We encourage the OECD to
complete this work and publish the results as soon as possible.

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