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Dáil Éireann debate -
Thursday, 28 Jan 1999

Vol. 499 No. 2

Bretton Woods Agreements (Amendment) Bill, 1998: Second Stage.

I move: "That the Bill be now read a Second Time."

On 16 September 1998 the Minister for Foreign Affairs and I announced a major package of debt relief measures in favour of heavily indebted poor countries. Our motivation was simple. In our view the time had long passed when it was appropriate for Ireland merely to call for debt relief as it had done for the previous decade. We felt we should move beyond exhortation, high sounding words and rhetoric and actually do something to alleviate the crushing burden of debt on the poorest countries. The debt package announced then is the primary reason for the introduction of the Bretton Woods Agreements (Amendment) Bill. The Bill also deals with Ireland's participation in the BIS facility for Brazil and the adoption by Ireland of the Fourth Amendment of the Articles of Agreement of the International Monetary Fund. For the purpose of my speech, I will deal with the debt issue first and then provide a succinct summary of the other main provisions in the Bill.

The heavy external debt burden of many developing countries has been an issue of growing international concern in recent years. The servicing and repayment of such debt diverts valuable resources from the provision of social services and hinders the economic and social development of many developing countries, including the African priority countries of the Irish aid programme. Debt owed to multilateral financial institutions accounts for an important portion of total indebtedness, particularly in the heavily indebted poor countries or HIPCs. There is widespread acceptance that farreaching and co-ordinated action is needed to tackle the debt problems, whether bilateral or multilateral, of the most severely affected countries.

Ireland has long been an advocate of a multilateral response to the debt crisis in the developing world, in parallel to initiatives by individual countries, and successive Ministers for Finance have strongly advanced this policy at the IMF and World Bank over the past decade. The international pressure for action on debt culminated in the launch of the joint IMF/World Bank heavily indebted poor countries HIPC initiative in 1996 as the first debt relief scheme seriously to address the problem of Third World debt. The initiative is aimed at HIPCs who have demonstrated, through a track record of good economic management and reform, that they are capable of achieving debt sustainability in the medium term. It commits the international financial institutions to take additional action to reduce the debt burden on HIPC countries where existing mechan isms are likely to be ineffective. The fundamental objective of the initiative is to ensure, for those countries with a track record of adjustment and reform, a robust exit from debt indebtedness and the achievement of debt sustainability.

Both the World Bank and the IMF have established the means for delivering their share of HIPC assistance. The World Bank's participation in the initiative takes place primarily through the HIPC debt initiative trust fund, which provides relief on debt owed to the International Development Association, either through the purchase and subsequent cancellation of outstanding IDA credits or through servicing of a portion of the beneficiary country's IDA debt. The IMF's participation in the initiative is through the [ESAF] HIPC Trust and takes the form of special grants that are deposited in an escrow account to cover debt-service payments to the IMF under an agreed schedule.

In relation to debt relief, section 4 of the Bill will enable me, or the Central Bank on my behalf, to take the necessary actions to make the payments authorised by the Government under the debt relief package announced by myself and the Minister for Foreign Affairs on 16 September 1998. The package will amount to £31.5 million over 12 years, of which £17 million will be disbursed in 1999. It consists essentially of the following three elements: debt relief of £11 million is being provided to the World Bank's HIPC debt initiative trust fund; £4 million goes to the IMF's [ESAF] HIPC Trust; and £7 million is being provided to the IMF to provide interest subsidies under the Enhanced Structural Adjustment Facility Trust. Ireland has also committed some £20 million to the twelfth replenishment of IDA, the World Bank's soft loan window. I will be returning to the Oireachtas with legislation to effect this contribution later in the year.

It is now time for Ireland to move on from its advocacy role in relation to debt relief and to become a direct contributor to the joint IMF/World Bank debt initiative. It is important that Ireland, particularly in view of our recent economic success, should join with our European Union and IMF partners in providing finance to assist Third World countries achieve debt sustainability. The debt relief provisions in the Bill should therefore be seen as another important dimension to Ireland's overseas development efforts. Ireland needs to back-up our bilateral aid programme with initiatives in the multilateral area as well. A contribution by Ireland at this juncture will enhance our moral authority to call for increased efforts by the international community, including the multilateral institutions, to reduce the burden of debt on Third World countries to the greatest extent possible.

While the package is a significant step forward in Ireland's evolving position on debt and overseas development it is, however, a first step and we look forward to making further progress in partnership with interested parties over the next few years. In this connection Deputies will be aware that the Government has adopted a series of guidelines on future Irish policy in regard to Third World debt. These guidelines are as follows. Debt relief should become an integral part of Ireland's overall overseas development aid strategy, reinforcing the existing emphasis on the fundamental goal of poverty alleviation as well as environmental sustainability and gender equality – I note with satisfaction that the President of the World Bank has also made clear that debt relief must be firmly situated in the bank's poverty reduction strategy. Ireland will continue to emphasise the need for definitions of debt sustainability to take human, as well as economic, development into account.

We will press for increased flexibility in the implementation of the HIPC initiative in particular with a view to its speedier implementation and its application to as wide a range of the heavily indebted countries as possible. We will continue to encourage the IMF to take full account of the social impact of its policies at the design and implementation phases of its macroeconomic and structural adjustment programmes. We will strongly encourage the international community, including bilateral creditors, to take a generous and flexible approach to the heavily indebted poor countries. Ireland will continue to press for deeper debt relief, so as to ease the debt burden that is imposing enormous constraints on many developing countries. We will continue to advocate a greater degree of consultation and involvement by civil society in the developing countries in the planning, design and implementation phases of IMF/World Bank programmes.

We will continue to call on the IMF to maximise the use of its own resources by, for instance, the sale of its gold reserves, to fund a deeper and wider response to the debt problems of Third World countries – in recent discussions on funding HIPC and ESAF, Ireland took a strong position in favour of the sale of gold. As Minister for Finance, I will press for greater transparency in the workings of the Bretton Woods institutions. Both the Minister for Foreign Affairs and I will emphasise the importance of continued consultation with the NGO community on issues of concern in relation to debt and development.

Ireland's commitment to multilateral co-operation is well founded and widely respected. The Oireachtas has over the years been supportive of deepening Ireland's involvement in the international financial institutions. In addition to approving Ireland's membership of the original Bretton Woods institutions, it subsequently approved Ireland's membership of the International Finance Corporation and the Multilateral Investment Guarantee Agency and, more recently, endorsed Ireland's membership of the European Bank for Reconstruction and Development.

The Oireachtas has also, on numerous occasions, overwhelmingly approved various replenishments of the International Development Association – the soft-loan arm of the World Bank. As I said, I hope to introduce legislation in the coming session to confirm Ireland's proposed contribution of £20 million to the 12th replenishment of the association.

Ireland's participation in international institutions is predicated on working co-operatively within the institutions, while remaining strongly focused on our legitimate national and international objectives. Most actors in the Irish economic and social success story fully acknowledge the importance of consultation, inclusion and participation as a critical enabling mechanism in our consensual approach to economic and social development.

Our European Union partners and fellow members at the IMF aspire to equitable treatment for the low and middle income countries in economic, social, trade and development matters. We all share with them the imperative of finding an exit from the crushing burden of debt, war oppression, hunger and famine.

The needs of developing countries include adequate levels of external financing, fair patterns of participation in the world economy, a strong private sector, good governance, a strong civil society, strengthened patterns of expenditure on basic needs and debt relief. These are interrelated themes that are all part of Irish development co-operation policy. They are all themes currently under negotiation in a new Lomé framework. They are why, in my view, Ireland must contribute to HIPC and to an ESAF framework already placing much greater emphasis on social needs, as African leaders acknowledge.

My colleague, Deputy O'Donnell, was in Mozambique last week and heard at first hand of the need for urgent debt relief through HIPC. Ireland must now play its part in the response of the international community to the debt needs of highly indebted poor countries in Africa and elsewhere.

In this connection, and in the context of ESAF, it is instructive to note the recent resolution adopted in the UN General Assembly on "Enhancing international co-operation towards a durable solution to the external debt problem of developing countries". The resolution provides a very thorough summary of the views of the developing countries on the HIPC's debt initiative, ESAF, the elimination of poverty and related matters. Of particular relevance is the resolution's call for bilateral donors to finalise their arrangements for contributing to the World Bank's HIPC debt initiative trust and the IMF's [ESAF] HIPC trust. The resolution also calls for strong support for the continuation of ESAF operations and underlines the urgency of securing ESAF's funding and sustenance.

It is generally recognised that debt cancellation is only one of the many problems facing these countries. The IMF, with justification, points out that unconditional debt relief is not the right tool for promoting the ultimate goal of sustainable development and poverty reduction. These goals are best attained by providing debt relief in a process, such as that provided by the debt initiative, which encourages the adopting of appropriate policies by the recipient country designed to stimulate private sector led growth and focuses on an improvement in social expenditures.

The members of the IMF and the World Bank see conditionality as an integral part of this process. The goal is to ensure that the debt relief provided is used effectively, particularly through promoting health and education expenditures. The IMF fears that unconditional debt cancellation risks debt relief being used for purposes not related to growth and development. The Government is open to pursuing a rational debate on this important issue. Ireland will be in a stronger position to pursue the debt cancellation issue more rigorously, once we have established our credibility by bearing our fair proportion of the costs of the ESAF and HIPC initiatives.

I note the strong similarity between the debt relief package announced by Chancellor Schroder of Germany on 21 January 1999 and that previously announced by Ireland. The Cologne initiative is aimed at intensifying and accelerating the joint IMF/World Bank HIPC initiative to speed up the debt relief process, so that all countries entitled to take part can ascertain the extent and date of their debt relief by 2000. It includes a call for cancellation of commercial debt and debt connected with official development aid. We fully support these proposals and note the German Chancellor's commitment to contributing to ESAF and the World Bank's HIPC debt initiative trust fund.

The ESAF is the principal means by which the IMF provides financial support, in the form of highly concessional loans, to low income member countries facing protracted balance of payments problems. ESAF resources are made available to eligible members in the context of a three year structural adjustment programme.

In 1994 the Government decided to contribute to ESAF. Subsequently, in 1996, the Minister for Finance decided to defer Ireland's contribution, pending a satisfactory operational implementation of the debt initiative and against a background of criticism of the severity of the accompanying adjustment programmes.

In response to concerns about the social impacts of ESAF programmes, an independent panel of experts, appointed by the IMF, recently conducted an external evaluation of the facility. Their report endorsed the fundamental view that the structural reforms of the type supported by ESAF generally have positive effects on growth and income distribution in low income countries. In a similar vein, the African governors of the IMF and the World Bank have reiterated their support for the ESAF, indicating that it has been very useful in supporting the adjustment programmes of low income countries.

The external evaluation, together with a review of ten years of ESAF operations prepared by staff of the IMF, also provided valuable insights on how to make the facility more effective in supporting macroeconomic and structural reform in low income countries. Consequently, in the light of these evaluations, the IMF's executive board has endorsed proposals that are now being implemented to ameliorate adverse impacts of ESAF operations in a number of areas. These include the social impact of adjustment, improved IMF collaboration with the World Bank, promoting ownership of the programmes, increasing the level of consultation and participation of civil society and advancing reform across all sectors. Actions in these and other areas are intended to refocus ESAF to provide more effective support for economic reform in all low income countries. We will continue to encourage the IMF to advance these proposals in the planning, design and implementation of ESAF programmes. In view of the progress made under the HIPC initiative and the lessons learnt from the ESAF evaluation, I consider that it is now appropriate for Ireland to honour its proposed contribution to ESAF.

Given the scale of the development challenges facing the Bretton Woods institutions, it is not surprising that all regions of the world have not received, at all times, the attention they deserved. It is understandable that, in recent times, a major effort should have been made to deal with the Asian financial crises, the crisis and institutional and political challenges facing Russia, and, latterly, the crisis of confidence in Brazil.

It is unfortunate that the birth of the debt initiative in 1996 should have been followed by a crisis in the international financial system. The focus of attention of the world's political, economic and financial community had necessarily to be directed to mitigating the effects of the financial crisis in the countries concerned and to stop contagion effects in neighbouring countries and regions. I am pleased that Ireland for the first time has joined with its EU partners to play an active part in this process through the BIS Facility for Brazil. It is also the first time that all 15 EU member states have stepped in to participate as a union to assist a country experiencing a crisis.

All the recent developments have tended to deflect attention from the other crisis, the development and poverty resolution needs of the continent of Africa. I am glad to see that this issue is now taking centre stage on the international agenda.

I am pleased to work side by side with the Bretton Woods institutions in their efforts to bring about order and progress in the world monetary, financial and economic systems as the critical underpinning for community growth, social solidarity and economic development among the nations of the world. Their role is critical and the world would certainly be worse off without them. Clearly both the IMF and the World Bank are not without fault and no commentator can stand uncritically over all the actions they have taken over the years. While recognising that reform is necessary, I favour planned evolutionary change rather than forced, coercive and revolutionary change that is based on ideological approaches alone.

The Bill goes beyond the question of Third World debt. It includes provisions in section 8 to deal with Ireland's participation in the IMF arranged financial package for Brazil. It also deals in sections 2 and 3 with the acceptance by Ireland of the one-time equity allocation of special drawing rights to members of the IMF. Specifically the Bill will enable me to take the necessary actions to guarantee the Central Bank against any losses it might incur under the Bank for International Settlements' Facility in favour of Banco Central do Brazil – Ireland's participation in the facility will cover the capital element of US$50 million equivalent to IR£34.3 million and associated interest; and provide for the adoption by Ireland of the proposed fourth amendment of the Articles of Agreement of the IMF – this will enable the Central Bank to accept the one time allocation of special drawings rights agreed by the IMF at the annual meetings of the Fund and the World Bank in Hong Kong in 1997.

As part of the overall US$41.5 billion international financial support package for Brazil, the Bank for International Settlements, BIS, has agreed a US$14.5 billion credit facility in favour of Banco Central do Brazil. All member states of the European Union, in recognition of the growing international financial and economic importance of the Union, are participating in the facility. The credit facility will work through the extension of a credit line by the Bank for International Settlements to Banco Central do Brazil.

Ireland has agreed to participate in the package in the amount of US$50 million, £34.3 million, acting through the Central Bank. The funding is not being provided up front. The credit facility is structured in such a way that, in the event of any default by Brazil, a substitution agreement, which forms part of the facility, will be invoked under which the BIS could call on the Central Bank to pay in full or in part its proportionate share of the package up to US$50 million. The Central Bank would also be liable for any interest payments outstanding. The Minister will, in turn, provide the Central Bank with a guarantee in respect of any losses that may be incurred by it under the terms of the substitution agreement.

The Minister does not have power to provide a guarantee to the Central Bank under existing legislation, so it is now proposed to include the necessary authority in this Bill to enable him to do so. The detailed terms and conditions which will apply under the guarantee itself will be worked out later, in consultation with the bank, in accordance with standard procedures.

The special drawing right, or SDR, is an international reserve asset created by the IMF following the first amendment of the Articles of Agreement in 1969. Its value as a reserve asset derives, essentially, from the commitments of participants to hold and accept SDRs and to honour various obligations connected with its proper functioning as a reserve asset. It is a purely official asset that can only be held and used by member country participants in the SDR department, by the IMF, and by official entities prescribed as "other holders" of SDRs by the IMF.

Some IMF members have not received any SDRs, or have only participated in some of the earlier allocations, depending on when they joined the IMF. To ensure that all members receive an equitable share of cumulative SDR allocations, the Board of Governors adopted a resolution on 23 September 1997 approving a proposal for a fourth amendment to the articles which would remedy the current unequal holdings of this useful asset. The proposed amendment would not affect the IMF's existing power to make a general rather than a selective allocation of SDRs based on a finding of a long-term global need to supplement reserves as and when such a need arises.

The Bill will provide for the adoption by Ireland of the proposed fourth amendment of the Articles of Agreement of the IMF, which concerns a one-time allocation of special drawing rights, SDRs, the reserve currency of the IMF, to members of the fund. The relevant provisions to enable the Central Bank to accept the SDRs on behalf of Ireland following the approval of the Oireachtas are incorporated in the Bill. Ireland's holdings of SDRs are counted as part of its official external reserves. The net effect of the one time allocation means that Ireland's external reserves will increase by 67 million SDRs, or £64 million.

A number of aggregation limits are also being inserted in the Bill to deal with possible future contributions to the World Bank and IMF with regard to contributions in respect of debt relief and economic and social reform. Given the emphasis now being placed by the European Union and the international community in general to resolving the debt problems of the heavily indebted poor countries, further efforts may be made internationally to provide additional debt relief to support specific countries. I would like to be in a position to respond speedily and flexibly to any further such initiatives in the future. For this reason, I propose to include aggregation clauses in the Bill to permit further contributions to these instruments without the need for legislation.

The entire debt relief package is designed to make an initial Irish contribution to the alleviation of the burden on HIPC countries. I am satisfied that the package offers a pragmatic way forward to alleviate the crippling debt overhang which has acted as a constraint on the development of the HIPC countries. It is also appropriate that Ireland should show its solidarity with Brazil in the financial difficulties from which it is suffering at present. We hope that the international support which Brazil is receiving will enable it to undertake the reforms necessary to underpin its future economic development. The amendment of the IMF Articles of Agreement to enable the selective allocation of SDRs is also worthy of the support of the House. I, therefore, recommend the Bill for the approval of the House.

It is beyond debate that in civilised democracies Governments have an obligation to help and lift out of poverty those who are disadvantaged in society. To argue against that would be out of the question and all the western democracies have strong social programmes to ensure that persons in need have their needs attended to, either materially or in terms of programmes, and that schemes are also put in place to enable them move with the mainstream of society.

It is also true that if one was to argue the case, one would say that Governments have an obligation because they must cherish all the children of the nation equally. Since everybody shares a common citizenship everybody in Ireland and in any of the western democracies is entitled to a fair proportion of the national resources. A similar argument could be made with regard to the disadvantaged in Third World countries. The justification is not that we have obligations towards citizens, because they are not our citizens, but that we share a common humanity.

Increasingly, in the second half of the 20th century the concept of obligations arising because we share a common humanity has come into mainstream thinking.

The debate is completed on that, and very few people would argue against the proposition that countries like Ireland that are doing quite well have an obligation to underdeveloped countries and the disadvantaged and poor of the Third World because we share a common humanity and it is an obligation rather than an exercise in international charity that we should fulfil those obligations to our overseas development programmes.

In that context it is an advance in policy that the Government would decide to bring in measures which would allow it to contribute to the reduction of debt and make that part of the development programme which, up to now, manifested itself more in terms of direct aid at times of need or in money for development in Third World countries. Our attitude towards underdeveloped countries in our programmes in recent years, which I support, has been typified by a proverb of Chinese origin to the effect that if a man is given a fish he is fed for a day but if he is taught how to fish he is fed for life. The developmental approach in that has informed the attitude of Irish overseas development aid, and we can cite projects in different parts of the world, particularly in Africa, which are designed not only to give aid for the moment, for the week, for the year of the crisis, but to position people so that they can lift themselves out of their difficult situation and become self-sufficient and look after their own needs. In that respect, where the bur den of debt is the major inhibiting factor preventing self-sufficiency and preventing countries reaching that critical point where they can have self-sustaining programmes, it is very important that we should mark this advance in policy.

The purpose of the Bill is to make the payments authorised by the Government under the debt relief package announced by the Ministers for Finance and Foreign Affairs on 16 September 1998. The total package is £31.5 million over 12 years, £17 million of which is being paid up front in 1999.

I agree with the initiatives in general terms, and I agree with some specific initiatives. However, following consideration and extensive briefing from people who are particularly well informed about Third World debt, that is, the Debt and Development Coalition of Ireland which has been in correspondence with every Deputy in this House, I have serious reservations about the Government's decision to fund the Enhanced Structural Adjustment Facility. Because of the Government's decision to fund ESAF, I cannot support this Bill in its entirety.

One of the key burdens in developing countries now is the burden of debt. That is directly related to the lack of social programmes in many countries. In Tanzania, for example, 40 per cent of people die before their 35th birthday, and Tanzania spends six times as much on debt payments as it does on health. In Zambia, servicing external debt accounts for five times the expenditure on education. In Ethiopia, more than 100,000 children die annually from easily preventable diseases, yet debt repayments are four times the amount spent on health. When the burden of debt is so onerous, agencies such as the IMF have to be very careful when taking measures to reconstruct the economies and budgetary accounts of such countries that the medicine is not too strong for the patient, that in trying to correct the problems in the economy they do not make the poor poorer so that more children die, more children drop out of education, life expectancy does not increase and sometimes diminishes. The ESAF programmes have all those faults. I ask the Minister to reconsider.

Any series of measures imposed by the IMF which diverts resources away from investment and human development, from infrastructure and into debt servicing, can sacrifice people in that country. It also sacrifices future national development. It also frequently raises social tensions and fuels conflict, and that has been evident through the 1990s.

I am disappointed the Government is persisting with its proposals to fund ESAF. The decision does not fit with the debt policy principles which the Government has announced. Recent reviews of ESAF have been highly critical. I will return to these criticisms later. The IMF has not addressed the issue of the necessary reforms needed in the operation of this facility both in terms of its ownership and transparency and its content. We had been the only EU member state which had decided not to participate in ESAF funding, and any leverage we have in influencing the manner in which ESAF programmes are applied by the IMF will be gone as a result of the Minister's decision today. The Government of which I was a member decided not to contribute to ESAF in response to widespread oppos- ition around Ireland to such a contribution. The Debt and Development Coalition has been lobbying Deputies and is opposed to it. It is not good practice to run with the views of any particular lobby group, but on this occasion the coalition of people involved in the lobby group seem to be the only body of people in Ireland with any in-depth knowledge of the problems of debt in Third World countries outside of the Department of Foreign Affairs and the Department of Finance. Certainly the hands-on experience of these groups, particularly in Africa, has to be taken into account, and their opposition is quite weighty. They object to the negative social impact of ESAF. The IMF aims to reduce deficits and not poverty. Human need is not a priority in the approach of ESAF programmes. There is also a strong argument that the programmes imposed by ESAF undermine democracy, that they are designed in IMF headquarters in Washington and imposed in selected countries, and that the elected parliaments and the wider civil society in these countries are bypassed. This is undemocratic but it is also imprudent because frequently the rigour of the programmes undermines the democratically elected representatives.

One significant factor about the ESAF programmes is that they are so onerous and so inappropriate that, according to the briefing I have received, three-quarters of the programmes break down. It is hard to justify funding programmes which have such a track record. The Minister should think again before he proceeds.

ESAF was introduced as a response to the debt crisis but it has failed abysmally to tackle the problem. In the countries following ESAF programmes, debt has doubled between 1985 and 1995. Therefore, on the face of it ESAF as a programme does not work.

I am not saying that many countries do not need to take a hard look at the way they manage their affairs. Countries spend a great deal of money on armaments and making war on each other which would be better spent on social programmes. There are countries which spend money on ridiculous flagship projects which inflate the ego and sometimes add to the stature of particular leaders but do nothing for the real needs of the people. I am not one who says that corrective financial and fiscal action does not need to be taken. However, the manner in which it is being done under the ESAF programmes is too rigorous in its application and too remote in its initiation. Frequently the programmes have no democratic support in the countries in which they are applied and, in fact, often wreck the democratic structures there.

The Government has argued that we should now contribute to ESAF and the Minister has repeated some of the points, but the connection which the IMF has made between the HIPC programmes and the ESAF programmes is particularly unfortunate. Eligibility for HIPC is linked to a six year track record on ESAF and, given the high breakdown rate of the ESAF programmes, I believe this IMF initiative is hindering debt relief. Again, on the basis of the brief I have been given, debt relief for Tanzania is being held up because of problems with ESAF. Relief for Nicaragua, one of the lowest income, heaviest indebted countries in the world, was also being held up because of problems with ESAF before Hurricane Mitch struck. The IMF refuses to provide the resources to cover its contribution to HIPC. It is calling for donations from countries, including Ireland, to cover the cost. I want the Minister to confirm that he will be urging the IMF to use more of its own resources in the implementation of its programmes.

There have been reviews of ESAF and the Minister has referred to them, particularly the external review. The internal review focused on progress towards achieving macro economic targets. The results were disappointing for the IMF. Targets to reduce budget deficits or raise government revenue were not reached. There was no real overall change in inflation levels and economic growth rates remained lower than the average for developing countries. In the light of the poor results for the individual economies of the countries to which the programmes were applied and in the light of the high breakdown levels, it seems a little stubborn of the IMF to continue insisting that these programmes are effective when clearly they are not.

The external review looked at two areas of great concern – social impact and the democracy or ownership of the programmes. It took a case study approach covering Uganda, Zambia, Zimbabwe, Mali, Cote d'Ivoire, Bolivia, Vietnam and Bangladesh. The review criticised the IMF for failing to take the social impact into account in designing ESAF programmes. It also criticised the fund for mistakes in the design of their programmes and the mistakes were listed on a country by country basis. According to the brief to which I referred, in Malawi, huge price rises resulted in halving the real wages of agricultural workers – a group already living in poverty. In Cote d'Ivoire, urban informal sector workers faced huge losses as devaluation squeezed consumers' incomes. In Zambia, the wrong sequencing of reform led to a credit crunch in the private sector and delayed the emergence of rural food markets when maize marketing was privatised. This destroyed the livelihood of the maize producers in remote areas. In Zimbabwe, mistakes in the order in which policies were introduced led to reductions in per capita expenditure on health and education. In Uganda, which is put forward as a success story by the IMF, growth was restored and the economy stabilised but the benefits of growth were mainly in urban areas – 90 per of Ugandans live in rural areas.

This external review seriously calls into question the effectiveness of ESAF programmes at a time when the Irish Government is deciding to reverse the decision made by the Rainbow Coalition Government in 1996 and fund the ESAF programmes. The external review recommended that the IMF should work with the World Bank in identifying in advance which groups may lose out through ESAF programmes. It stated that this would provide a basis for monitoring the impact of ESAF and also for putting safety nets in place. However, there is no sign that these recommendations are being taken on board.

On the ownership or democracy issue, the external review is highly critical of the manner in which the IMF operates in borrowing countries. In particular, the report is critical of the inflexibility in negotiation. Standard programme drafts are imported from Washington and one fills in the spaces for individual countries. It is not enough to develop the economies of Third World countries. Democracy is a fragile flower and it must be encouraged also. Economic reconstruction programmes which undermine democracy are short-sighted in concept and doomed to failure if they undermine the better sectors of society who are committed to the development of the country. There is an insensitivity to domestic and political constraints; the IMF does not have a good image in many of these countries.

I know we can argue that wilful waste makes woeful want. If one wants to build cathedrals in the jungle and dual carriageways to airports which never attract traffic and if one wants to carry on in an imperial style in countries where so many people live below the poverty line and where children die of hunger, nobody can stand over that. However, there must be an attempt at balance. Simply by throwing in their hand the policy makers in the Departments of Finance and Foreign Affairs are not helping. Frankly, if the Minister dropped his ESAF proposals in this Bill and proceeded with the rest of the Bill, he would have far more credibility the next time he goes to Washington and argues the case at the IMF. There is far more moral force in refusing to join the club because of the failure of the ESAF programme and arguing for its reform or substitution than the course adopted by the Minister.

The IMF has given some response to the two reviews to which I referred. First, the general design of programmes has been changed but this seems to be more apparent than real. Work has also started with the World Bank in identifying the social groups likely to lose out when ESAF programmes are applied. This is being done by a number of pilot studies in five or six countries. Any reform or change of direction is welcome in respect of programmes which quite clearly are not working. However, the change is not radical enough and certainly does not justify the Govern ment's change of decision to go ahead and fund the programmes.

While there are many good provisions in the Bill which I welcome and while I approve of the fact that the Government will now dedicate funds directly to debt reduction as part of its package of development programmes, the question of ESAF must be looked at again. Ireland will lose its independent voice as a result of this Bill. It will not be possible to make the case against, the next time the Minister has discussions at IMF level in Washington.

My party will be voting against the Bill even though we approve of a great deal in it, because we do not approve of the principles which underpin the decision on ESAF. We will vote against the Bill on Second Stage and seek to amend the Bill on Committee Stage.

I move amendment No. 1:

To delete all words after "That" and substitute the following:

"Dáil Éireann declines to give the Bill a second reading on the ground that, while urgent measures need to be taken to address debt relief, the Enhanced Structural Adjustment Facility (ESAF) cannot be supported on its present form and on the ground that the Bill's proposal to fund ESAF is a direct contradiction of Fianna Fáil's pre-election commitment to continue to withhold funds from ESAF pending reform of the International Monetary Fund."

My party will also oppose the Bill on Second Stage, largely, though not entirely, because of the ESAF content. Like Deputy Noonan and the Minister, I welcome the broadening of our definition of Third World aid, which has taken place relatively gradually in the past ten or 15 years. We have moved some distance from the "black babies" collections of the 1960s and earlier when money was provided, in Ireland's case, to largely religious based missionaries for the relief of poverty.

The contribution of Irish NGOs such as Trócaire, Concern and GOAL in looking to assist sustainable development in the Third World is something of which we are all conscious and which I compliment without hesitation. What is striking about Irish society is that even in the 1980s, 1970s and before, when we were not as flush as we are now, when the Exchequer was not as abundant, Irish people had, and still have, a singular commitment to assisting people who are dramatically less well off.

I agree with Deputy Noonan and the thrust of the Minister's speech that this is not just a moral responsibility and that we are not just making ourselves feel better because we give a few pennies, pounds or euros. It is also about political responsibility and duty. We have a responsibility to assist countries in sub-Saharan Africa which are not just poorer, but dramatically poorer than us.

When my party entered Government in 1992 in coalition with the Minister's party, our percentage of ODA had been decreasing gradually throughout the 1980s. I do not want to make a big deal of that because, as the Minister knows, we had to cut back on many social services during a difficult readjustment period of our own in the late 1980s. We made a specific and deliberate choice at that stage that we would, by conscious and measured moves in the following ten years look to advancing towards the UN target of 0.7 per cent of GNP. The record over the four or five years we spent in Government speaks for itself – we went from 0.2 per cent in 1993 to 0.31 per cent in 1997.

The Minister knows this was largely supported by Fianna Fáil, with whom we were in Government for some of that time. Prior to the 1997 general election, the then leader of Fianna Fáil, the Taoiseach, gave a specific commitment that during the period up to 2002 the current Government would increase Ireland's contribution in ODA to 0.45 per cent of GNP. A move in this direction was made in the 1998 budget. This is relevant to the Bill as we are now talking about a different situation. Last autumn the Government changed its policy in a move which seems to have been deliberately orchestrated within the Department of Finance rather than the Department of Foreign Affairs.

It appears the Department of Finance decided that with improved economic growth, to measure our contribution purely in terms of the percentage of GNP would involve a cash increase of a variety which it regarded as unaffordable, or at least undesirable. This ignores the simple, persuasive logic of the UN target in the first place. The UN target is specifically intended to measure our contribution of ODA and that of other countries against our capacity to afford it. Surely it makes perfect sense that at a time when we can clearly afford to make a greater contribution we should do so.

It is not just a matter of flinging money at the problem. In 1994, when the Minister of State, Deputy Tom Kitt, was in the Department of Foreign Affairs, we produced a plan which was intended to set out in clear terms how money would be spent as we increased our percentage contribution over the years. There has been a growing consensus in Ireland, among the NGOs, but shared by the Department of Foreign Affairs, on the way we should spend money – a consensus that we should target money in a particular way towards sustainable development but towards projects in the health and education areas which help people to help themselves, as Deputy Noonan said earlier.

It is also true that over 20 years or more, Ireland has sought to aid six, seven and now eight countries, mostly in sub-Saharan Africa where projects have become bedded down and relationships with indigenous Governments have improved. Sadly, it is also true that some of the donee countries, for example, Zambia, Tanzania and Mozambique, have during the period of our aid become less well off than they previously were.

I do not understand this shift. We know what happened quite shamefully – I do not want to be too rhetorical about it, but it was shameful – in the Estimates last year. When the Estimates were published, they showed under some headings, for example, disaster relief, a specific drop in Ireland's contribution. When one takes into account the wages content of Ireland's contribution to the Third World, a significant drop was provided for in last year's Estimate. The Minister of State, Deputy O'Donnell, subsequently found herself a fig leaf and looked for cash limits and contributions to be spread over the next three years.

However, the bald reality is that none the less, over the next three years if those commitments are met – and it is a big if – Ireland's contribution as a percentage of our GNP will be reduced from the current figure of just over 0.33 per cent to perhaps as low as 0.22 per cent or 0.23 per cent, depending on economic growth in the meantime. That is a policy for which the Government has no mandate and for which there is no logical or reasonable explanation whatsoever.

As the Minister knows only too well, there was a £750 million budget surplus last year, or rather higher than that if one discounts some of the figures. It was a large surplus by any standards and the Minister has budgeted for a similar surplus this year. Nobody could conceivably argue that it would have any impact on the economy if we were to plan for substantially increasing our level of contribution to ODA by £40 or £50 million. I am convinced, as I am sure most in this House are, that such a use of the surplus moneys available to us would have the endorsement and support of the people. It is bewildering that there has been a shift to cash limits rather than the "pay according to our means" approach that previously dominated.

I make these points about the overseas development aid budget because the choices we are making here today must be put in that context. It is appropriate that we should make some contribution towards debt relief and encourage others to make progress in cancelling debt but I am opposed to the ESAF programme for various reasons, many of which have been set out already by Deputy Noonan. I will repeat some but not all of those.

It is worth recalling that in 1996 the then Minister, Deputy Quinn, my party leader, was asked to approve a subscription to ESAF and declined to do so for a number of specified reasons I can deal with later. It is also interesting to note that prior to the 1997 general election, Oxfam carried out a survey of political parties and inquired as to their attitude towards ESAF. The Fianna Fáil response was that it would continue to withhold funds from ESAF pending reform of the IMF which they believed was very important as a pol icy issue. The response from the Progressive Democrats, and I do not want to be snide about this, is a little difficult to decipher but it at least said that the biggest problem so far as IMF policies are concerned is that it is very commercially orientated and some of the countries involved will never be able to meet some of the criteria laid down, at least not in the foreseeable future. By any standards the two Government parties, and certainly Fianna Fáil, gave unequivocal commitments before the 1997 budget that they would continue to withhold funding from ESAF pending compliance with certain conditions which they specified, though not in great detail. The Minister did not allude to that commitment in his contribution today and we can only guess whether he considers that the conditions Fianna Fáil had in mind at the time have been met.

It is instructive to examine the conditions and principles set out by the Minister and his colleague, the Minister for Foreign Affairs, last September which the Minister outlined in his contribution today. Some of them bear some examination. The first principle the Minister set out was that Ireland would emphasise the need for definitions of debt sustainability to take human as well as economic development into account. This is one of the major problems with ESAF in that the programmes implemented under ESAF are determined by macroeconomic criteria. The IMF comes in and examines budget deficits, trade balance and, to some extent, the debt burden of a country and implements a programme accordingly. It does not examine the nature of the economy generally. There is much evidence that it has not implemented programmes particular to the needs of individual countries.

The external review to which Deputy Noonan referred examines case studies in fascinating detail and outlines the specific mistakes that were made in dealing with economies which at best can be termed economies in transition and, at worst, economies where there is neither a free nor controlled market. In any case it is clear that in determining whether an ESAF programme will come into place and debt relief provided, using the simple macroeconomic criteria the IMF is inclined to use has not been effective.

Both Ministers emphasised that the IMF should take into account the social impact of its policies but the reality is that in the majority of cases there is little evidence that the IMF has done that. That is highlighted in both the external and internal reviews and, to some extent, in the responses to both those reviews. We need only look at Mozambique, one of the donee countries with which we have a particular relationship. I know the Minister of State, Deputy O'Donnell, visited Mozambique last week and I would be interested to hear her reflections on her visit. In Mozambique, the IMF required – and this is a fairly standard requirement – that the state should divest itself of ownership of most of the industry in the country. A predictable result of that was that between 50,000 and 100,000 jobs were lost at a time when private industry was not interested in taking up the slack and not capable of providing jobs for those people. The reality is that when one is dealing with countries such as Mozambique, which is ravaged by a war carried on and financed by a much wealthier and bigger neighbour and which has made a painful transition from colonialism through a measure of the command economy, one cannot simply impose the neo-liberal economic model, which seems to be so beloved of the economists who work in the IMF, and develop overnight an entrepreneurship with people capable of taking up the slack which inevitably arises when the rules previously in vogue are dismantled. There are predictable consequences from eliminating export taxes and privatising existing companies, for example, and a safety net has to be provided which in most cases has not been provided. That must be done in a way that is sustainable and that ameliorates the predictable negative social impact of those policies.

I read some press reports last week that Uganda is being held up as the good boy of the class, the ideal case in terms of a country that has benefited from an ESAF programme. I read this morning the external evaluation of the ESAF programme in Uganda and while it is true that there have been some positive impacts, there have also been unintended negative impacts that inevitably contribute to destabilising the country both economically and politically. In Uganda, for example, there has been a disproportionate benefit to the small urban areas of the country where incomes are up by approximately 60 per cent. On the other hand, in the remaining 90 per cent of the country which is rural, incomes over that period increased by approximately 4 per cent. In a country which is largely rural, that is causing a destabilisation which inevitably will have political effects. We cannot ignore those political effects because countries like Uganda have a limited democratic tradition. Sometimes perfectly good governments, by objective or European standards, hold on by their fingertips. Undermining civil society in this way and causing disproportionate benefit and disadvantage to individual parts of society inevitably has an effect which makes it difficult for those governments to cope.

The issue of ownership is well illustrated by the case of Uganda. There is a strong feeling in countries that have had ESAF programmes that these are being imposed by an alien orthodoxy from abroad. The IMF's image in the Third World is far more negative than that of the World Bank or individual donor countries, and the reason for this is simple. It is the social consequences of many of the programmes but it is also the way in which they go about it. There seems to be a profound feeling that the democratic processes, such as they are in many of these countries, are being completely bypassed and that economists, financiers or bankers arrive in from Washington, deal with the ministry of foreign affairs in a local hotel and come up with a plan with which parliamen tarians and individuals who will be responsible for implementing the programme have no sense of identification or ownership.

I know efforts have been made to improve consultation in advance of putting programmes in place but the reality is that they have not succeeded. Even in those few cases where it has been attempted in a serious way the IMF has not successfully managed to do the job.

With reference to the conditions set out by the two Ministers last September and negotiated with some of the NGOs in Ireland, the Minister for Finance pledged to continue to call on the IMF to maximise the use of its own resources. There is a growing view that the IMF should use its own resources. There is also a view that it should dispose of its considerable stocks of gold which are estimated to be worth £40 billion. It is surprising that the IMF is only prepared to do this in particular circumstances. It seems to be willing to contemplate it in the case of Russia and, perhaps, Brazil but not in the case of ESAF or HIPC countries.

That tells us something about the IMF which we probably always suspected. It has responsibility for maintaining the international economic order – we have an interest in that so I will not criticise it in that regard – but its interest in debt relief for Third World countries, much less in development for Third World countries, is a good deal less pronounced. There are people in the IMF who will happily admit that the IMF is not the appropriate body to be involved in this exercise and that we should look to the World Bank or other multilateral institutions to do the job. I am not convinced that the IMF is able to do the job effectively.

I was impressed by the initiative taken by Chancellor Schröder in Cologne a few weeks ago. I read about it in the syndicated article which appeared under his name in the Financial Times last week. There is a clear shift in German policy which is important, given that Germany is a major contributor country. The Chancellor speaks in the article about the need to apply the HIPC initiative to countries that observe the principles of the welfare state and the rule of law and which are carrying out reform programmes in collaboration with the World Bank and the IMF. He speaks about structural and social reforms in, for example, developing primary health care and an efficient education system as well the necessary micro and macro economic adjustments. In exceptional cases, he says, the powers should consider total cancellation of commercial credits and loans.

The article uses tentative language and contains a degree of conditionality. It is, perhaps, right that it should. However, the initiative being taken by Chancellor Schröder, for which he will find a good deal of support, is positive and sets out a way to progress things. We need to take account of the social side of the problem and to encourage banks and other commercial lenders to cancel debt. More importantly, we must consider conditionality above and beyond economic conditionality.

This country has taken the view in the last 15 years that we should take account of the rule of law in many of these countries and that we cannot simply discount the human rights record of countries when we consider providing them with aid. That is the correct policy. Sometimes aid can have the perverse effect of sustaining in power governments which oppress their people. That is an unintended effect of aid which we should do everything possible to avoid. Linkage with the rule of law, political reform, reform of civil society and respect for human rights is a good policy which I support. I also agree that we should seek structural reform of economies as well but we must do so in a way that is sensitive to its social cost.

This is the first time the European Union has asked Ireland to contribute to an EU initiative of this type. The proposal is that we should extend or guarantee a line of credit for $50 million or 40 million euro which will come into play in the event of Brazil defaulting on its agreement with the IMF. I understood, before Christmas, that the IMF package was largely intended to sustain the value of the real. The currency has since been devalued and subsequently allowed to float with the usual consequences.

An objective observer of conditions in Brazil prior to devaluation would have taken the view that this was likely to happen. It would not be difficult to be cynical about the motivation of US creditors and, to some extent, of the IMF in providing this facility and seeking to shore up the real at its then value. However, the real has been substantially devalued so the purpose of the IMF plan has been removed.

I am anxious to hear the Minister's explanation of why we are proceeding with this facility. The circumstances have changed so what is its purpose? Are we still seeking to maintain the real at a particular exchange rate? Are we trying to give comfort to the Brazilian Government or are we simply sending a signal lest the contagion spread, as perhaps it might, to China or the Far East that IMF assistance will be given to maintain the value of currencies or to stem the contagion of international financial crises?

How is it being organised? Is it being done within the structures of CFSP? Is it part of the Union's foreign policy to provide assistance through IMF funded packages of this nature? This is a precedent. Where will it stop? Will we be asked in a few months to contribute towards relieving the indebtedness of Russia? The IMF is considering—

It could happen.

Of course it could.

It might not be a bad thing either.

If we are being asked to do that, we need to know why, within which framework the decision making is happening and what the conditionality is. We also need to know whether the European Union will undertake this type of project in future.

I wish to make some general remarks about the IMF. I do not doubt the need for a body such as the IMF. However, looking at some of its actions in the last two or three years, one could be forgiven for commenting that the Friedman template of the 1970s and 1980s is getting a little stale and that the IMF should wake up to that fact.

South-east Asia was the good boy of the class but ultimately it did not work for reasons related, for example, to the indebtedness of the banking sector. That should have been a reasonable area for the IMF to monitor but it chose not to do that. It contented itself with the usual slogans about freedom of international capital markets, trade and so forth and allowed those countries to achieve a level of indebtedness and credit extension in their banking sectors which any objective observer would have considered unsustainable. However, the IMF clearly did not regard that to be within its remit. Liberalisation, not regulation, was its watchword. One must wonder if that is a sufficient remit for the IMF. Perhaps it should acquire a few more strings to its bow.

The same applies to Russia, although I sympathise with anybody who might try to come to grips with what is happening there. I wonder about the IMF's current policy in Russia. It is contemplating making further loans to Russia to allow it to pay off its loans to the IMF. One must wonder about the good sense of that approach at a time when civil society and social provision in Russia are collapsing.

I do not want to be unduly critical. It is a good that Ireland is getting involved in assisting debt relief. I commend the measure taken by Ireland in providing bilateral assistance to Mozambique and Tanzania at a time when those countries clearly need it. That is the way forward. We should seek to provide assistance, including debt relief assistance, to countries with which we have developed a particular relationship rather than contributing to the IMF ESAF programmes.

The Minister argues that in order to encourage reform, we must become involved, attend the meetings in Washington and, by virtue of our financial contribution, advocate a certain course of action. Those of us who take the contrary view claim that until such time as there is reform we should not engage in such a process. Until there is reform, even for such relatively small amounts of money, especially in the context of this Government's approach to overseas development aid, there is a better way to use the money, through bilateral aid with those countries with which we have established a relationship.

My party will oppose the Bill on Second Stage. I encourage the Minister to think again about the ESAF contribution element. Fianna Fáil gave a worthy commitment before the 1997 general election and I see no reason it should abandon that commitment.

I wish to share time with Deputy Haughey.

Is that agreed? Agreed.

I welcome the Bretton Woods Agreements (Amendment) Bill and the opportunity to contribute. I welcome the debt relief package, originally announced by the Ministers for Finance and Foreign Affairs in September 1998. The package will amount to £31.5 million over 12 years, £17 million of which will be spent in 1999. Also, some £15 million is provided for multilateral debt relief, £9.5 million of which has been committed to Mozambique and Tanzania. The main concern is the £7 million being provided to the IMF under the Enhanced Structural Adjustment Facility. I am sure every Deputy has been briefed by the Debt and Development Coalition on its concerns about ESAF. It is concerned that as well as having the money included in the Bill there is also the question of further payments by the Minister for Finance to the IMF and the World Bank without the agreement of the Oireachtas. It is concerned that there may be no provision for accountability by the Minister to the Dáil and Seanad on policies pursued by Ireland with the IMF and the World Bank. Its point concerning harsh conditions requires an answer from the Minister. If low interest loans are made available to a developing country for education and health programmes and the local industry collapses, resulting in unemployment, these areas have to be considered. Is it necessary to impose these conditions? I do not believe they should be imposed. It is not the solution to include these conditions in legislation.

The Bill gives a guarantee to the Central Bank against any losses under the settlement with the Bank of Brazil. From my information about Brazil, the experts say it is inconceivable to ask Brazil to take out loans based on these conditions. It may well be that a new Bretton Woods Agreement will have to be drawn up to help many of the developing countries who have debt problems. It is difficult to envisage debt being used by powerful countries to make third countries even poorer. Will the Minister look at the harsh conditions laid down when funding is provided to ESAF?

The Bill allows the Minister for Finance to make further payments to the IMF. Will the Minister clarify the reason this is included in the Bill. One of the issues raised by the Debt and Development Coalition was the question of fair trade in coffee and bananas. It is very cruel treatment for those in developing countries to be told these goods should be produced, but because the tariffs are so high it is virtually impossible to secure outlets for those goods.

Another issue raised at the Foreign Affairs Committee was the giving of funding to countries which may be using it for arms provision and an arms struggle. This has been alleged by John O'Shea of GOAL in relation to the Government of Rwanda. He has said repeatedly that we should be very careful about funding for Rwanda. He said this should be investigated and that NGOs should be assisted in a more practical way rather than giving funding to a Government. The Debt and Development Coalition has asked why the £7 million could not be given to Irish Aid.

In the last Government I was a member of the development co-operation committee, a sub-committee of the Foreign Affairs Committee. It was our privilege to visit countries particularly Tanzania, where the Irish Aid programme has been successful. Those who work on the ground in areas such as Tanzania are keen that the NGOs would be supported. The NGOs there work with the local people in difficult circumstances where access to towns is very difficult because in some cases there are no roads. They have made a voluntary commitment to work there for many years. I hope, through the Departments of Finance and Foreign Affairs, that more focus will be given to the needs of NGOs. This is an important issue in terms of the way in which loans are given to developing countries.

Five years ago I observed elections in Lesotho where elections had not been held for 15 years. The Irish Aid programme is very effective in that country. Roads to the polling stations did not exist. The polling stations were in the open air. It is a tribute to the people living in those circumstances that they were prepared to fight for the right to vote and to form long queues for the purpose of voting when elections had been cancelled for up to 15 years. In Lesotho and other third countries, because of military takeovers or where dictators have cancelled elections, there is a great spirit to continue with the democratic process.

Like other Deputies I welcome the bilateral aid relief for Mozambique and Tanzania which has been most effective. It is an important element in helping developing countries. In the past many Ministers in Fianna Fáil Governments called for the once off cancellation of debt in certain circumstances. We have to look at situations where that could be done and I hope the Minister will do that. Just as there was a deferral in 1996 of the ESAF programme, this matter should be continually kept under review so that a new Bretton Woods Agreement would target funding to particular countries. I hope the Minister will take these matters on board when he is replying.

I welcome the opportunity to speak on this Bill because I am concerned about particular aspects of it. It is a Bill which gives effect to the major debt relief package announced by the Minister for Foreign Affairs and the Minister for Finance on 16 September 1998. As other speakers have mentioned, the Bill allows for £50 million in multilateral debt relief and £9.5 million in bilateral debt relief. It also involves the provision of £7 million for the Enhanced Structural Adjustment Facility of the IMF.

Ireland traditionally played an important role as a neutral country in the promotion of peace, justice and basic human rights throughout the world, particularly in the Third World. That is a tradition of which we can be proud. We were never a colonial power and we have a strong missionary tradition. Irish nuns and priests went to all parts of the world to bring humanitarian relief to the poorest of the poor. Their work, and the work of the lay people involved in the various agencies, is largely understated and unrecognised. This debate raises the issue of whether there should be a moral element in Irish foreign policy or in foreign policy in general. I would be of the view that there should, and most Irish people would accept that.

One of the major problems in the Third World is the crippling world debt. In this regard I give my full support to the Jubilee 2000 signature campaign of the Debt and Development Coalition Ireland for the G7 countries to cancel the backlog of unpayable debt of the world's poorest countries by 2000. It is a laudable objective and I hope some progress will be made, even in debating that proposal.

This brings me to the section of the Bill which commits us to contributing to the IMF's debt relief agency, the Enhanced Structural Adjustment Facility. I would like to ask the Minister why this proposal is before us at this stage. Previous Governments have rejected this pending the reform of ESAF in its administration, the conditions attached and its negative impact on the people of the Third World countries involved. The Minister has accepted the need for reform of ESAF. He suggests that ownership issues, the role of civil society and social impact will be given greater consideration in the future design, planning and implementation stages of ESAF programmes. These are only proposed changes. I suggest that the provisions in relation to ESAF are worrying and a decision in this regard is premature.

Why does the Minister feel we must contribute to ESAF at this time? I would like a detailed reply to that question. It is not out of a sense of embarrassment in relation to other participating countries – we are capable of making our own decisions with regard to foreign policy when it comes to an issue like this. I would like a more satisfactory explanation as to why we are proposing to participate in ESAF at this time.

In return for loans, the country often has to put in place draconian economic policies. The Justice and Development Office of the Irish Missionary Union said in a recent statement:

These result in cuts in basic services, causing drops in primary school enrolment, and rising malnutrition, over-speedy removal of protective trade barriers leading to the collapse of local industry, privatisation and cuts in public employment which lead to thousands of workers losing their jobs with no alternative employment available. ESAF programmes undermine democracy. They are designed by the IMF and imposed on borrowing countries. Elected parliaments are totally by-passed and have no say in the economic and social policies to be implemented.

Is this the type of help which we want to give these countries? In the end it will hurt the poorest of the poor the most. That is not the type of help we should be giving.

In addition, the Bill gives the Minister the power to make further money available to the IMF and World Bank beyond that outlined already without the sanction of the Oireachtas. I would like to hear the Minister's view on that and his proposals for greater accountability in relation to this expenditure. There is also no provision in the Bill which would make the Minister accountable to the Oireachtas on policies pursued by Ireland within the IMF and the World Bank. In that regard I suggest that ongoing information should be given to the House about these matters. I accept that the Committee on Foreign Affairs is very active and would have a role to play in this area but we need to be clear as to the accountability mechanisms and information mechanisms put in place to inform Members of the House about the provisions of this Bill.

Other speakers have mentioned the role of overseas development assistance. There is no doubt that Irish relief agencies get stuck in in these developing countries, particularly where there is famine and civil war. There is no doubt that giving money directly to some of these agencies is the best way to ensure that the money gets to the poorest of the poor. Many of these relief agencies have first hand knowledge of the situation on the ground and they could play an enormous role in the development of Irish foreign policy. We could bring our experience there to the other international institutions in which we are involved.

I should not advocate that the money be given to overseas development assistance budgets. We have to contribute to debt relief but I am not sure the IMF is the forum to do that. I ask the Minister to look at this provision on Committee Stage and give a satisfactory explanation of these provisions.

I welcome the Minister's Second Stage speech. He outlined comprehensively the major role Ireland is playing on these issues. I welcome the objectives laid out. We have received many representations about ESAF from those directly involved and we owe them an explanation as to why this provision is being brought forward at this time.

The debate on this Bill shows the stupidity of the blanket rule of limiting interventions to 20 minutes. There are Members who could do with more time and who could usefully use it to debunk the silly soundbites in the rep resentations we have received about the Bill, some of which were trotted out again by Deputy Haughey. Let me give an example.

The representations we have received from the Irish Missionary Union, the Debt and Development Coalition and various religious orders are well done. They have a valid point of view to put, but they have perpetrated some howlers. It is stated that there is no provision for accountability from the Minister for Finance to the Oireachtas on policies pursued by Ireland within the IMF and World Bank. Ministers are accountable to the House for everything they do under legislation. If they do not volunteer an account, the House is entitled to demand it. If there is no accountability, it is because Members have not demanded it. It is not true that the process of legislation does not impose it.

There is concern that the Bill allows the Minister for Finance to make further payments to the IMF and World Bank beyond those detailed in the Bill without authorisation by the Oireachtas. It is disappointing that a Member should give credence to that statement. If Ministers do not have authority to do something specific, they cannot do it.

We were informed before Christmas – it is probably not politically correct to say this but somebody has to say it – that there was a conspiracy on the Government side to rush this Bill through without debate. On the appropriate day I would be as eloquent as anybody else in accusing the Government of a conspiracy but only where it is real. It demeans the case to make a point such as that.

We should reflect on the origins of the debt problem about which we have not heard much. They are complex. One of the main reasons for the chronic debt problem of underdeveloped countries is that some parts of the world started to develop earlier than others. This created a disjunction between the development process and trade and has meant that the world trade pattern has been skewed against a big section of the world's population, even countries which are potentially rich, well endowed and can feed themselves. The skewing of the trade pattern has created a major problem for them. They obtain only the most basic prices for their products and their avenues of development have been limited, not just for decades but for generations. They have yet to recover.

Another problem is that consistently, up to and including the last round of world trade talks, the developed world has done virtually nothing to skew the trade pattern in favour of developing countries. That is disappointing and there is little evidence that the problem will be dealt with in a fundamental way in the next round of world trade talks. If it is not dealt with, developing countries will continue to face a major debt problem.

They are not the only reasons for the debt problem. There are increasing expectations in relation to living standards. There is pressure on the Governments of developing countries, from within and without, to conform and to do the things that will help in the short-term to drive up living standards. We should know what is involved. The principal party in Government did things in 1977 which are still being mirrored in Government policies in developing countries. It created single-handedly an enormous debt problem for us between 1977 and 1981. In addition, there are adverse natural conditions, be they climatic or demographic, which leave many developing countries vulnerable to major episodes. Natural phenomena, for example volcanoes, occur frequently.

Many of the most heavily indebted countries have the most appallingly bad record of not just bad but stupid economic management and, in others, rampant, rife, large-scale corruption in Government. There is no point dodging the issue. There are countries which are submerged in debt with major problems in funding health and education programmes which are spending substantial proportions of GNP on arms. Some believe they have no option but to do this as they are under immediate threat from their neighbours but there are others which like to see themselves as a threat to their neighbours.

It is fashionable to kick the IMF but it has given bad advice. Deputy McDowell mentioned the 1970s template which is part of IMF culture but of less relevance now. IMF advice to newly independent states of central and eastern Europe was wrong. It was textbook advice to countries not in textbook situations which only made things worse.

Debate adjourned.
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