Aid & IFF

Aid & IFF

This web site is not being updated - use Jubilee Debt Campaign instead

Although increasing aid is not part of the debt campaigns objectives the JDC web Group has included information on aid because it addresses the same poverty reduction goals.

	For the UN conferrence on Finance for development the EU and USA announced extra $12bn aid see UN FFD
	Gordon Brown has launched an International Finance Fund initiative -below
	To look at the data on aid for poor countries (and compare to debt data) see Debt Data

International Finance Fund

For the text of the press release -IFF

It seems that Gordon Brown has recognised the intransigence of certain members of the G8 on further debt reduction. And if he can’t go over the hill he will just go round it! So last year he championed increased aid worth $12bn through the UN Finance for Development Conference. As reported in JDC Web Group briefs and web site $12bn (assuming it materialises) is actually worth a lot more than the HIPC program has delivered so far in terms of annual budgets. But even this increase in aid, from around $50bn worldwide to $62bn (only about 25% of which goes to poor countries) is not enough to meet the World Bank (and Jubilee Plus) estimates that $100bn of aid is needed to achieve the MDGs.

That’s the scenario for Gordon’s latest initiative. It’s quite simple in principle even if it’s dynamite politically. The fund would borrow money on the international market in the short term (to 2015) to be paid back in the long term from committed aid from the richest countries. It would not be on the balance sheet for the poor countries. This would not be poor country debt, it would be rich country debt, so secure, low interest etc.

It may not be debt reduction, but it is far better than nothing at all (which is the prospect for HIPC), could actually deliver far more short term investment than debt cancellation and would not simply be a future burden on poor countries. BUT, nothing comes without risk. From say 2015 when the aid funds are being used to pay back the bonds, there would be less aid flowing to the remaining poor countries. In effect, if the initiative doesn’t yield growth, poverty reduction and the other MDG goals –perhaps because of conflicts, corruption or politics, not to mention liberalisation and commodity prices, then there will be far less aid funding to try again.

In effect it’s a gamble, invest 30 years worth of aid up front and hope and pray that it works. This time! Let’s hope its works!

For much more information on the fund see the press release below - there is a link to a full document at the end.

Treasury Press Release

09/03

23 January 2003

Doubling Aid to Halve Poverty

A proposal for an International Finance Facility which could double the amount of development aid provided by the richest countries to the poorest was published today by Chancellor Gordon Brown and International Development Secretary Clare Short.

The Facility is designed to provide additional financing to help meet the internationally agreed Millennium Development Goals so that by 2015 every child is in education, infant mortality is reduced by two thirds and maternal mortality by three quarters, and poverty is halved.

The founding principle of the new International Finance Facility (IFF) is long-term, but conditional, funding guaranteed to the poorest countries by the richest countries. On the basis of these long-term donor commitments, the Facility would leverage in additional money from the international capital markets. It would seek to raise the amount of development aid from just over $50 billion a year today, to $100 billion per year in the years to 2015.

The Facility will ensure not only additional money, but also value for money. It will do this by providing, for the first time, a predictable and stable flow of aid, allowing developing countries to plan long-term investment effectively and efficiently.

It would thus build on existing agreements, between developed and developing countries, with each country:

	pursuing anti-corruption, pro-stability policies and agreeing the necessary transparency in economic and corporate policies to achieve this;
	committing to the Doha development agenda – a sequenced opening up of markets to global trade;
	improving the environment for investment and private sector-led growth; and
	as part of country-owned poverty reduction strategies, agreeing clear and costed plans for building education, health and economic capacity.

Chancellor Gordon Brown said:

“The IFF will provide developing countries that reform with the means to invest in schools and healthcare, roads and legal systems, helping to create the environment businesses need as well as create the conditions that will enable countries to participate in, and benefit from, global trade. And as families in those countries are lifted out of poverty, new and dynamic markets will be created.”

Clare Short said:

"The Facility could double the aid currently available, which would provide sufficient investment to enable every country committed to reform to make progress towards the Millennium Development Goals. This would help create a more just and safer world."

Notes for Editors

The details of the UK proposal are set out in “International Finance Facility” published today and available from HMT and DFID website and public enquiry units.

The proposal is for an International Finance Facility to bridge the gap between the resources that have already been pledged and what is needed to meet the Millennium Development Goals by 2015.

The Millennium Development Goals (MDGs) were agreed at the UN Millennium Assembly in 2000 by individual countries, the UN, IMF, the World Bank and OECD. They are to:

	eradicate extreme poverty and hunger by halving, between 1990 and 2015, the proportion of people whose income is less than one dollar a day and the proportion of people who suffer from hunger;
	achieve universal primary education, by ensuring that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling;
	promote gender equality and empower women by eliminating gender disparity in primary and secondary education, preferably by 2005, and to all levels of education no later than 2015;
	reduce by two thirds, between 1990 and 2015, the under-five mortality rate;
	improve maternal health by reducing by three quarters, between 1990 and 2015, the maternal mortality ratio;
	combat HIV/AIDS, malaria and other diseases; and
	ensure environmental sustainability, including by halving by 2015 the proportion of people without sustainable access to safe drinking water (sanitation) and by 2020 to have achieved a significant improvement in the lives of at least 100 million slum dwellers.

The World Bank and the United Nations estimate that an additional $50 billion in aid from the international community will be needed each year if the Millennium Development Goals (MDGs) are to be achieved by 2015.

The IFF would build on long-term donor commitments to raise the additional money needed to meet the MDGs, comprising a series of pledges for a flow of annual payments to the IFF. On the basis of these commitments, the IFF would leverage up immediate resources for aid by issuing bonds in the international capital markets. Additional aid could then be disbursed to developing countries in the form of grants, debt relief and, possibly, highly concessional loans

Aid flows would provide predictability by funding 4 – 5 year disbursement programmes to poor countries through existing bilateral and multilateral mechanisms.

There would be necessary safeguards for donors comprising:

	one or two high-level financing conditions as a basis for the pledges by donors to the Facility; and
	more detailed conditionality, based on clear development criteria, that governs the disbursement programmes funded by the IFF.

The IFF would provide a predictable and stable flow of aid to be deployed as a co-ordinated programme of investment to meet the MDGs.

The IFF proposal offers a number of advantages:

	it is focussed on the financing necessary to help achieve the internationally agreed Millennium Development Goals;
	it is founded on developed countries’ long-term commitments to those countries that are striving towards achieving the goals;
	it bridges the gap by leveraging these long-term commitments, enabling the 0.7 per cent target to be met sooner and allowing a substantial increase in aid when it will have the most impact on achieving the targets by 2015;
	it will also allow a critical mass of aid to be linked up as a co-ordinated programme of sustained investment across health, education and other anti-poverty programmes;
	by crystallising long-term commitments from donors it can provide a predictable and stable flow of aid over the medium term to countries that remain committed to achieving the goals, thereby helping provide a catalyst for increased private investment;
	its structure encourages donor pooling and co-ordination, improving the effectiveness of aid. By bringing together donor flows and diversifying risk it is able to secure value for money; and
	it is based on a tried and tested principle for raising development finance.

The document is available on this website and the DFID website.

Media enquiries should be addressed to HM Treasury press office on 020 7270 5238 or public enquiries to Public Enquiry Unit on 020 7270 4558.

Press Notices index January to June 2003

Jubilee Web Group - last updated 26 Januar 2003