Dáil Éireann debate -
Tuesday, 14 Nov 2000

Vol. 525 No. 5

Written Answers. - IMF Programmes.

John Gormley

Question:

181 Mr. Gormley asked the Minister for Foreign Affairs the way in which the Government proposes to monitor and influence the IMF's pro gramme in low-income countries, now called poverty reduction and growth facilities; and if he will make a statement on the matter. [25743/00]

Minister for Foreign Affairs (Mr. Cowen)

To reflect a strengthened emphasis on poverty reduction, the International Monetary Fund's – IMF – concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility (PRGF) in November 1999 and given new terms of reference. The earlier ESAF had been criticised by Ireland and others for the stringent conditionality under which it operated and for its insufficient focus on poverty reduction. Several of the points made by Ireland in its national submission on the review of ESAF were incorporated into the new instrument with the subsequent adoption by the IMF of the PRGF.

The PRGF now governs the fund's lending to low-income countries. A total of 80 low income countries are eligible for PRGF assistance. Eligibility is based, inter alia, on a country's per capita income, currently pegged at US$895. Subject to a number of macroeconomic conditions, an eligible country may borrow up to a maximum of 140% of its IMF quota under a three-year arrangement. In exceptional circumstances, this limit may be increased to a maximum of 185%. Loans under the PRGF carry an annual interest rate of 0.5%. Repayments commence five-and-a-half years after the initial disbursement. The loan is repaid over a term of four and a half years.

PRGF-supported programmes reflect current development thinking in that they are firmly situated within country-owned poverty reduction strategies adopted in a participatory process involving all stakeholders including civil society and other partners. PRGF operates in conjunction with the World Bank's poverty reduction strategy paper approach, PRSP. The intention is to ensure that each country programme supported by the fund's PRGF is consistent with a comprehensive framework for macroeconomic, structural, and social policies to promote growth and reduce poverty. Ireland believes that the fund's new framework represents a significant advance on ESAF in view of its enhanced focus on poverty reduction.

Ireland welcomes the joint statement issued by the IMF and the World Bank in September 2000. The statement,inter alia, says that the two institutions share the same broad objective: helping to improve the quality of life and reduce poverty through sustainable and equitable growth. The statement also helped to clarify the respective roles of the IMF and the World Bank and stressed that they should work in a complementary fashion. A strengthened partnership between the bank and the fund within the context of a shared poverty reduction objective should facilitate a holistic approach to development in which economic and social concerns are carefully balanced.

The Department has a number of different channels through which it can form an objective assessment of the performance of the PRGF, particularly in least developed countries. The active involvement of our missions in donor wide co-ordination related to PRSPs allows Ireland Aid to monitor and, wherever possible, to influence World Bank and IMF programmes. In addition, I welcome contributions from the Irish NGO Community many of whom also have a presence on the ground in these countries. The Department of Finance's representatives at both the IMF and the World Bank in Washington enable Ireland to monitor progress and to influence the direction of policy. There is close co-ordination between the Departments of Finance and Foreign Affairs on the policy issues.