Dáil Éireann debate -
Thursday, 11 Feb 1993

Vol. 425 No. 8

Written Answers. - Third World Debt.

Robert Molloy

Question:

28 Mr. Molloy asked the Minister for Finance the proposals, if any, the Government intends to bring forward at EC, IMF and World Bank level in respect of the Third World debt problem in view of his address to the World Bank in Washington DC in September, 1992 where he said that, while structural reforms are essential for long term improvement, they sometimes impose in the shorter term undue hardship on the poorest members of society, and this should be acknowledged in the drawing up of programmes of reform and appropriate measures included to mitigate as far as possible any such hardship; and if he will give details of the particular policies he had in mind when he referred to appropriate measures.

Minister for Finance (Mr. B. Ahern)

The burden of debt carried by many Third World countries remains an issue for the world community. There has been progress on the implementation of the debt strategy, but it remains a huge problem for some low-income countries. The problem needs to be tackled at global level. The role which the Government can play is to support the efforts being made by the international financial institutions to resolve the problem. We are doing this, in so far as we can, through our membership of the World Bank and the International Monetary Fund. Within the European Community, the Government, through the Minister for Foreign Affairs, has also given our support to measures under STABEX, the Community fund set up under the Lomé Conventions, which involve the forgiveness of debts of the African, Caribbean and Pacific (ACP) countries who have signed the Convention.

As Minister for Finance, I am Governor for Ireland of the World Bank Group and the International Monetary Fund. I should say that the measures which the IMF and World Bank have developed for dealing with the Third World debt crisis have, in recent years, become increasingly effective. The activities of the Paris Club of official creditors have also helped considerably to ease the debt burden of developing countries.

Structural reform primarily involves measures to restore order to public finances and the balance of payments. Experience shows that such reform tends, in relative terms, to have the greatest adverse impact on the most vulnerable sections of society. Because of this, the World Bank, in all the adjustment operations which it has assisted in recent years, has taken particular care to ensure that these vulnerable groups are protected. With the rest of the international community, the IMF is continuing to find ways, commensurate with its mandate as a monetary institution, to contribute to reducing poverty in the developing world.

The World Bank has formulated a two-part strategy for reducing poverty. The first is to promote broad-based growth, make efficient use of the poor's most abundant asset which is labour. The second is to provide the poor with access to basic social services. The bank is vigorously pursuing this strategy by placing poverty reduction at the centre of its policy dialogue with developing countries and in its overall assistance strategies for these countries. The detailed implementation of the strategy would include:

—designing the phasing of programmes to accommodate the needs of the poor;

—giving priority to relative price changes in favour of the poor early in the reform process;

—securing adequate resources for the provision of basic social services aimed at the poor;

—designing social safety nets into economic reform programmes.

I support these ongoing measures.

My representative on the executive board of the bank has played a leading role in the evolution of the bank's poverty strategy and will continue to do so in relation to its implementation and refinement in the light of experience.

Finally, the Deputy is no doubt aware of the agreement reached in December last on the Tenth Replenishment of IDA, the soft-loan arm of the World Bank which lends only to the poorest countries on very concessional terms. That replenishment will maintain the real value of IDA-9 and thus help to buttress the bank's overall strategy for combating poverty.