Amendments Nos. 2, 5 and 7 are related to amendment No. 1 and it is suggested that they be taken together by agreement. Is that agreed? Agreed.
Bretton Woods Agreements (Amendment) Bill, 1998: Committee Stage.
SECTION 1.
I move amendment No. 1:
In page 3, to delete lines 34 to 37.
This is the definition section and because I have tabled a series of amendments which seek to take out all references to ESAF in the Bill and ensure that the Minister does not make contributions to ESAF, it is appropriate that the references in the definition section should also be removed. If we were debating it in a different order, this would be consequential to what we intend doing in the other sections.
I noticed in The Examiner this morning that the Taoiseach is reported as saying in a conversation with the envoy on third world debt that he and the Government now support the position where third world debt should be forgiven on a widespread basis. That position seems to me to run totally counter to what we are doing here this morning. I would like a policy clarification before we start.
There is no difference in what the Taoiseach said this morning and what I said on Second Stage of the Bretton Woods Agreements (Amendment) Bill, 1998. The Taoiseach met with the envoy yesterday and pointed out that the Irish Government is committed to sustained debt relief. I note also that the bishop concerned does not take what I term the fundamentalist position regarding the cancellation of debt. He takes a more realistic position. The Taoiseach stated that the Irish Government has been looking for sustained debt relief for some time. People who come from the fundamentalist position want an absolute cancellation of all this debt, which is not the Irish Government's position. Neither is it the position of people who would not be of the same political view as myself such as Chancellor Schröder of Germany or the envoy that I met with. I did not see any reports in The Examiner that would suggest otherwise.
I thank the Minister for the clarification. There are many aspects of this Bill that we accept and approve of and with which we have no difficulty. We welcome its introduction, but the whole approach to the EASF programme is to apply a penal monetarist regime at an macro-economic level to countries which want to avail of the programme. It has not been working very well in the first instance and there are fundamental objections to the EASF programmes. To continue supporting EASF programmes runs counter to what the Taoiseach said yesterday and to what the Minister is saying this morning. I am not in the fundamentalist position. We are all living in the real world but there is a big difference between the fundamentalist position and the position being advocated by the IMF when they are running EASF programmes. They are designed in Washington and imposed on states that are overburdened and who are not in much of a position to negotiate anyway. The rigour of the macro-economic regime being prescribed frequently leads to a situation where there is no money left in national budgets for social programmes such as health and education. As a consequence, the resources of countries are used to redeem debt and they can only then avail of the benefits of EASF if they put this very rigorous regime in place. Also there seems to be no democratic input into the decision making on the budgetary policies which would trigger EASF relief.
All our briefing and private reading would suggest that these are not very good programmes and are not really working. At Second Stage I pointed out that there was both an external and internal audit of the effectiveness of the programmes, on both of which they did not come out very well. I advocated when speaking at a Trócaire function that a proposal put forward by an English-based academic on third world debt should be adopted. Rather than the fundamentalist position or the position adopted by IMF to trigger the IMF programmes, the proposal is that a certain amount of the disposable income of the debtor nation should be set aside for health and education programmes and that there should be fundamentals such as infant mortality prevention programmes, immunisation programmes for common diseases and universal education to at least 12 years of age. Before this country becomes liable to repay, this quantum of own resources should be set aside for their fundamental social programmes and it is only after that that they should be required to pay. That is a much better and more humane approach. On that general principle the very poor countries would be forgiven their debt completely because once they set aside funds for fundamental social programmes there is nothing left.
Excuse me, Deputy Noonan, I would like to ask Deputy Dennehy to take over the chair for a few minutes. Is that agreed? Agreed.
A league of debtor countries could be drawn up and every country below a certain point would be forgiven their debt completely simply because they did not have any resources. To ask a debtor country in the Third World where there are very high infant mortality rates, widespread incidence of death in the adult population from diseases which are treatable and curable in any western democracy at very low cost, and not set aside money for the programmes such as health and education is putting a huge burden on these countries. That is the fundamental problem with the EASF programme. To trigger the EASF relief, the budgetary regime imposed on the debtor state by the IMF is so severe that their children die. They cannot fund their schools. While on paper we sort out a nation macro-economically, it is at a frightful price.
We have gone through the rigours of retrenchment in the middle to late eighties and we were talking about cutbacks in hospitals and not having money for schools and so on, but it was not a life and death matter, not in the way it is in the Third World. I would ask the Minister to adopt this approach. I know it is outside the scope of the Bill and I know he cannot move an amendment to bring about what I suggest today. It is well documented and his advisers will be aware of it. A third way being proposed is that money should be set aside in domestic budgets for the fundamental social programmes and only after that a nation would be required to accept the IMF discipline before they could avail of relief programmes. That is the way forward.
Maybe the academic programme to which I have referred needs to be refined further but the principle is very sound and I would like the Minister's views on it. It is not the fundamentalist position and certainly not the position being advocated in the Bill. It is a kind of via media which allows the best of both worlds for those of us who believe in the final analysis that the budget and the finances of countries need to be straightened out before there are long-term possibilities of relief. At the same time it allows for spending programmes to continue when these are fundamental to the lives of citizens in Third World countries. That is the fundamental argument and that is why we have tabled these amendments to remove all references to ESAF. It is not that we are objecting to the ESAF programmes since EASF is actually putting extra money into Third World countries where it works for the relief of debt. Our problem is with the rigour of the programmes which are required by IMF before they will give ESAF relief. The case is made as far as I am concerned but I would like a response.
I do not intend to repeat the Second Stage debate but a few points need to be made because there is a need for a response which we did not get at Second Stage. The argument is very well put by Deputy Noonan. Nobody objects to the principle of structural reform or to conditionality in debt concellation. Money should not be ploughed into countries or economies which simply cannot use it properly or where it is being wasted. What we are objecting to is the nature of the conditionality that the IMF routinely imposes on countries which simply do not have the security net that would be appropriate.
There is a particular onus on the Minister which he did not discharge in his reply at Second Stage to explain why he is turning on its head stated Government policy and why he is directly contradicting his own party policy and disagreeing with virtually all of his Government colleagues who spoke at Second Stage. I read with interest the statement issued by the Minister and his colleague, the Minister for Foreign Affairs, last September outlining principles underlying Irish policy towards Third World debt which I understand was agreed with most of the NGOs acting out of this country. They are very fine principles and they set out very coherently, cogently and very persuasively a critique of EASF which it is difficulty to argue with and various principles and things which would have to be done before we could see our way, in my view, to contributing towards EASF.
The Minister talked about the need to take human and economic development into account, the need for greater transparency and ownership and the need to consider the social impact of policies and so on, and he can read as well I can. There is an onus on the Minister to explain to us just what progress has been made in relation to these issues in the six months or so since that statement was produced. If he cannot show what progress has been made in relation to these principles and, convincingly, at this stage what progress has been made as regards the two reviews carried out, the internal and external reviews, then his case necessarily falls. I would like to hear from the Minister his analysis of the progress that has been made in giving reality to the principles set out by himself and his colleague and for that matter, the two reviews carried out by the IMF, internal and external reviews.
Although Deputy Noonan says he is not coming from the fundamentalist position, what his amendment proposes comes from that position. The amendments tabled in his name, and that of Deputy McDowell, would remove all references to ESAF in the Bill. I remind Deputies that one of the substantive provisions in the Bill, which has already been approved by the Dáil on Second Stage, is the contribution to ESAF. If we accept these amendments, we would remove all references to ESAF in the Bill and, therefore, the Government would not be in a position to contribute to it, and that is the fundamentalist position - that there should be no contribution to ESAF. I accept Deputy Noonan does not philosophically come from the fundamentalist position but his amendment will remove all references to ESAF and, consequently, it would not be possible for the Government to contribute to ESAF.
It is important to understand what ESAF is. It was established in 1987 by the IMF to address the macroeconomic and structural policies faced by low income countries. On Second Stage I referred to the review which has been carried out by ESAF and the concerns this and the previous Administration have expressed about IMF policies and matters relating thereto. Many changes have taken place.
What Members propose and the manner in which they, including Members of my party, have been briefed on has been one sided. They propose we make no contribution to ESAF, stand aloof and preach and pontificate on these matters without contributing any money to do something about them. That is not a tenable position as far as I am concerned. That is what some people would like us to do - people who I have no doubt hold very genuine positions. I do not question their bona fides in terms of the positions they take. People with a different political philosophy, and the Deputy’s is very different to mine, do not go along with their position either.
We have expressed the Irish principles, which will guide us in the future. When I announced this package last September with the Minister of State at the Department of Foreign Affairs I said in the press release that we would introduce this Bill and would make contributions to ESAF. In 1998 I decided this was the way we would go and this Bill is a result of the principles we outlined. It is time we stopped preaching about the matter and put up our money.
ESAF offers loans with very low interest rates and for longer terms than the typical IMF market related arrangements. The principal objectives are to promote balance of payments for viability and foster sustainable long-term growth. ESAF loans are repaid in ten equal semi-annual instalments beginning five and a half years and ending ten years after the date of each disbursement. The interest on ESAF loans is 0.5 per cent per year.
Ireland's entire contribution to the facility will go towards the provision of an interest subsidy. If other contributors adopted the approach of the Opposition, as put forward in these amendments, the HIPCs would be obliged to avail of the other less attractive IMF facilities. By contrast charges for standby arrangements are linked to the IMF's SDR market determined interest rate and repayments are made between three and a quarter to five years of each drawing. The extended fund facility is an IMF financing facility which supports medium term programmes that seek to overcome balance of payments difficulties stemming from macroeconomic imbalances and structural problems. The repayment terms are ten years with a four and a half year grace period and the interest rate, adjusted weekly, is about 3.8 per cent per annum.
The ESAF loans are disbursed semi-annually as against quarterly for regular IMF standby arrangements, initially, upon approval of an annual arrangement and, subsequently, on an observance of performance criteria and after completion of a mid-term review. Now that the IMF is more concerned about reviewing its policies and, in particular, addressing many of the concerns Deputies have raised, Ireland will gain more leverage and influence by participating rather than by abstaining in the facility.
Why are we contributing to ESAF? ESAF is the IMF confessional facility for poor countries with balance of payments difficulties. Our contribution goes via an interest subsidy to alleviating the cost of debt service of these countries. Structural adjustment is necessary if these countries are to improve their position. IMF is remedying any early deficiencies in its programmes through improved ownership, involvement of civil society, improved co-operation with the World Bank and other donors. It is now to our advantage, having preached for these improvements, to recognise them and to honour that pledge. All our EU partners, and most of the rest of the donor community, have already contributed.
I would like to make a few points on section 4. Given our history we recognise why people feel very strongly about this matter and the problems faced by some Third World countries which have severe difficulties in terms of the provision of health, food and education for their populations. That appreciation is based on our experience in the last century when we had a famine and our more recent history in the past decade when we had a very high national debt. We would all agree that had we had to pay debts to foreign institutions during the famine in the 1840s, it would have led to much starvation which would have been drastic.
Our national debt, which was in the region of £30 billion in recent times, is almost the equivalent of £30,000 per household. Looking at that objectively, it is a phenomenal level of debt on any household. We were better able to manage ourselves because of a good democratic Government and were able to work our way out of that serious debt, notwithstanding the fact we were paying approximately £2 billion per annum to service our debts, which we continue to do. Through economic prosperity and investment in health and education, we have been able to prosper as an economy.
Due to the large number of overseas workers, NGOs and religious orders working overseas, this matter has been brought to the attention of Members. Those of us on this and the foreign affairs committee have been extensively lobbied on this issue over recent weeks in advance of Committee Stage of this Bill.
I was pleased the Minister said on Second Stage that the IMF must take account of local conditions. The IMF, in its ivory tower in Washington, is far removed from the reality of what is happening in these countries. I would like the Minister to communicate his views directly to the IMF. On Second Stage the Minister said that what was critical in this debate was the degree of funding which would be provided by the donors. Equally critical is the ability of the countries to repay the debt and that should also be taken into account. I would like to see greater consultation with the IMF and the countries receiving funds on the conditions, with perhaps greater negotiation at local level. I suggest to the Minister that there should be a moratorium on any payments by the Government under this section to the ESAF fund. We should wait possibly 18 months, and the commencement date for this section should be deferred for that period. At least it can be reported back to the Dáil before the Exchequer makes any payments.
Reviews of the social impact of ESAF are being carried out at present which are not expected to be published until early spring 2000. I agree with Deputy Fleming that a case should be made for a moratorium until these studies are published to see all the concerns that were raised by a reply from the Minister for Foreign Affairs on 21 January regarding ESAF. The Government still has some concerns. Is there any possibility of putting that moratorium in place as a safeguard to allay genuine fears? Those people have an extensive lobby but they still have genuine concerns.
I have no doubts about the bona fides but I do not agree with everything they are lobbying for. It is the same with other groups who lobby me; I do not necessarily agree with everything they are lobbying for. I do not take the fundamental position that we must wait for perfection in this matter, and I am not prepared to wait for further reports from other review groups. I have spelt out the Government's position and intend to make a contribution when the Bill is passed. Deputies say they do not take a fundamentalist position but what they are proposing is a fundamentalist position that I do not necessarily agree with. There is agreement, though there may be a fundamental difference from people who fundamentally oppose the structural adjustment process. There are people who regard it as a very bad thing and who come from a very strong position on the issue. I do not agree with that. What we have put forward as guiding principles for Irish payments in this area have been welcomed by a wide variety of groups. I intend to proceed with it.
The Minister is putting forward debating points rather than substance. He is well aware of how the Bill is structured, and he knows our view is that we would like changes in how the IMF deals with the debt problems of the Third World. Because we are not in a position to move amendments to the articles of agreement which the Government wants to amend the Bretton Woods Agreements, all we can do is deal with the Bill in front of us. We are doing so in a way that I hope pressures the Minister to carry our case to the IMF. Of course we are not being precise in the mechanisms we are using, as only the Minister can operate at IMF level. We can operate only with what is in front of us, and the only way we can lever the Minister to carry out Fianna Fáil policy as promulgated in the last election manifesto and the wishes of this House is to oppose the sections of the Bill.
That is our point. We think if this Bill goes through that that is the end of the matter as far as the Minister is concerned, and that at subsequent IMF meetings he will simply continue in agreement with the procedures being adopted. I am not of the fundamentalist school when I say that I do not believe all Third World debt should, as a matter of principle, be written off. There are differences in Third World countries that should be reflected in the approach. If one adopts the economics of the Irish Famine and puts a macro-economic and structural regime in place that results in children dying because there is no money left domestically for the social programmes necessary to keep them alive, that is evil and fundamentally wrong. Ireland should not be a signatory to it. I agree that in the medium to long-term any country aiming at self sufficiency in resources whose structures and macro-economics are out of line must restructure; of course they must. However, the patient can be killed by administering the cure too severely. That is our fear regarding the way the IMF is acting before Third World countries are deemed eligible for ESAF funds. At the end of the day the amount being dedicated to ESAF is very small and, as the Minister rightly pointed out, it is going as an interest subsidy.
If one takes the difference in approach by the World Bank and the IMF to develop countries, one will see our point. I have no problem with the way the World Bank programmes are implemented and administered because they have a developmental approach. However, there is a degree of remote macro-economic, monetarist administration coming from Washington in IMF programmes, and it is absolutely crucifying some countries. One can see from the reviews we have mentioned that in some cases the rigour of the IMF macro-economic restructuring has held up payments and programmes. Rather than working to ease the burden of certain countries, it has worked in the opposite direction.
Our fear is that once this Bill goes through that it is the end of the matter as far as the Minister is concerned. The Fianna Fáil policy will have been changed from its election position to what is now being proposed in the Bill, and the Minister will no longer use his influence to get fundamental changes made in the IMF. We believe that the only lever the Minister has is the fact that Ireland is the only EU country which does not contribute to the ESAF programmes, and that while we stand off and say these are bad programmes and we do not like the way they are administered, we have some moral authority and constitute a major irritant to those nations that contribute. That level of moral authority and leverage might persuade the IMF and contributing countries to seek change, but as soon as we pay money——
Deputy Noonan is taking the Skibbereen Eagle position.
That may be the Minister's view of Ireland, but it is not mine. We have great authority in terms of the Third World from our history, as Deputy Fleming said, and from modern programmes. What was done by religious orders in the past is now being done by young Irish lay people who are motivated by idealistic reasons. We have great authority in the Third World and some authority in Europe, and it is a Dublin Opinion to describe us as the Skibbereen Eagle. If that is the attitude we should opt out of everything that is of international concern, from the United Nations to Kosovo and back to the Third World. It indicates the Minister’s position. He does not believe that this is important but that we are a cork bobbing in the international ocean and that it does not matter what Ireland does anyway. The Minister is prepared to march this through on the basis of having superior forces and has now put what I believe to be his opinion on the record. We are like the Skibbereen Eagle keeping an eye on the Czar of Russia when we should have manners and not interfere with our betters, the World Bank, the IMF and people in Washington. In that event, the Minister has no moral authority to argue the case he is arguing.
The Minister suggested that there really was no alternative to this measure and that this was the most efficient and economic way of making a contribution towards the cancellation of Third World debt. That is completely untrue because the explanatory memo which accompanies the Bill clearly points to a far more effective and straightforward method, namely the provision of direct bilateral assistance. The Minister is providing £9.5 million towards bilateral debt relief for Mozambique and Tanzania which is not in any way conditioned in the manner in which the IMF usually imposes conditions. To suggest there is no alternative simply does not stand up to scrutiny.
I have a fundamental difficulty with what I understand to be the Minister's position. In the run up to the last general election, the Fianna Fáil Party stated that pending reform of the IMF, payment would be withheld. The Minister appears to be suggesting that these reforms are being called for by well meaning NGOs operating out of this country. This is far from the truth. An internal and an external review have been carried out, the latter having been carried out by independent experts. Both arrived at exactly the same conclusions. The conclusions were those arrived at by Fianna Fáil prior to the last general election and are largely the same as the principles set out in the statement made by the Ministers for Finance and Foreign Affairs only six months ago. If the Minister is actually committed to those principles, there is an onus on him to show what progress has been made in relation to them in the six months since they were enunciated or indeed before that. I do not think he has succeeded in doing that.
The Minister stated that some of us are coming from a fundamentalist position. If by that he means that I, for example, would prefer to provide direct aid for debt cancellation rather than give it to an international fund over which we have no control and which imposes damaging conditions, I would agree that I am coming from a fundamentalist position. I suspect the Minister largely agrees with what is usually the IMF template, namely to privatise, liberalise and deregulate - usually in one big bang, irrespective of the consequences. I do not agree with that; I believe there is a better way to proceed and, given our history, I believe there is an onus on us to go the better way. In so far as ESAF is one of the international instruments used to facilitate the cancellation of debt, there is an onus on us to ensure that the kind of principles set out by the Minister which, strictly speaking, form Government policy, are adhered to. I do not see any evidence of that. I would like the hear the Minister's response on that point.
The Minister stated that we have been briefed by the Debt and Development Coalition. I have read the external evaluation and many of the same points are made in it by international experts. It is not good enough for the Minister to suggest these views are being advanced by a small minority of well meaning people. There are genuine reasons for believing there is something fundamentally wrong with the ESAF programme.
Is the Minister happy with the review which has been carried out? I would consider myself to be a fundamentalist when it comes to people being deprived of social, health and education facilities which were in existence prior to many of the ESAF programmes coming into operation. I have received first hand information from friends working in Africa. They tell me that since the ESAF programmes have come into effect, the situation of ordinary people has considerably worsened.
There has been an ongoing review in regard to ESAF. I referred on Second Stage to the changes which have been made. The Irish Government has outlined its position on a number of occasions and held off on contributing to ESAF for a number of years, pending the outcome of the review. That was the position outlined in the Fianna Fáil manifesto prior to the general election and that is the position I continue to hold.
Copies of the Second Stage Dáil debates on this issue have been sent from my office to the office of the executive director of the IMF. We have also asked the IMF and the World Bank to take the views of NGOs into account. Less that 0.5 per cent of our overseas development aid budget goes to ESAF. Over the next 12 years, a total of £7 million will be paid to it. We contribute relatively directly to a number of the countries which come under the umbrella of structural and economic adjustment.
That is the point.
I have listened to this debate on Second Stage and have heard the views of the Debt and Development Coalition. Ireland is hardly the only country in Europe which does not take these matters into account. We are hardly the only people in Europe with a social conscience and hardly the only people entitled to debate this matter or to hold out on the contribution of £7 million over the next 12 years. That will hardly make an extraordinary difference. We have put our views on ESAF on record over a number of years, reviews have been carried out and we have criticised particular IMF policies. Our criticisms have been taken on board and it is time we started to contribute rather than continue preaching. That is my position. If that is a fundamentalist position, I am happy to be associated with it. I do not believe that preaching and pontificating on this issue is the way forward. We are now prepared to put our money where our mouths are.
I asked the Minister a question. How are the principles which he set out being met?
The reviews carried out have taken on board a number of the concerns voiced by people in Ireland and elsewhere. Other countries are prepared to contribute to the ESAF. I cannot understand how withholding our contribution to ESAF, which would assist these heavily indebted countries by alleviating the interest they would be obliged to pay, could be helpful. I take on board the Deputy's comments in regard to problems which have occurred in these countries. It was mentioned that Ireland underwent some economic adjustment in the late 1980s and that people were adversely affected by that, yet the end result was good for Ireland. Deputy Noonan pointed out that we are far better off here even at our worst times than these other countries.
I cannot understand why people are so opposed to contributing to a measure which would alleviate the problems being experienced in these countries. The concerns expressed have been taken on board and the institutions concerned have made considerable adjustments in recent years. Reviews are ongoing and I am sure there will be more sustained debt relief in the next year or two. We must honour our international obligations and proceed on that basis.
Honouring international obligations is all very well but if that results in actions which are wrong or evil, we may have to rethink them. I do not know what the Minister is afraid of. I urge him to take real action, not merely to put his faith in reviews.
I am also a little concerned that the Minister is taking an arm's length view of this. He has not yet mentioned the real problems of the Third World, which are health and the high death rate among children due to the inaction of the developed world. We tend to talk about what other countries in Europe are doing but perhaps it is incumbent on us to show leadership in this regard. We should not be afraid to take a principled stand.
Like the Chairman, I know people who work in the Third World and they are extremely worried about what is happening. The Minister should address the real issue which is the fact that children are dying because of the problems with ESAF. We cannot compare the situation in Ireland at any time this century with what is happening in some countries in Africa. We seek a moratorium, at the minimum. That would send a signal to the IMF and show leadership in Europe. It is an extremely serious situation. The amount of money is small but the principle is important.
A stand should be taken now. We should hold off at least until these reviews are completed. That would add weight to the protestations the Minister is making by sending paper to Washington. Let us send a signal by holding off. That might make people take notice.
The Minister's fundamental defence appears to be that no matter how little we do, at least we will be participating in the ESAF programmes and these programmes are of some benefit to the countries where they are applied. The attitude is that Ireland would be contributing a small amount to beneficial programmes.
However, on Second Stage I outlined the conclusions of the external review which examined the ESAF programmes. It criticised the IMF for failing to take the social impact into account in designing the programmes. The review referred to a series of countries. In Malawi, huge price rises resulted in the halving of the real wages of agricultural workers, a group already living in poverty. Throughout Africa the bulk of the population is rural and is involved, to one degree or other, in marginal agricultural activities.
In the Côte d'Ivoire urban 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 emergence of rural food markets when maize marketing was privatised. This destroyed the livelihood of 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 portrayed as the major success story of the IMF, growth was restored and the economy stabilised but the benefits were to the urban community which is only 10 per cent of the population; 90 per cent of Uganda’s population is rural.
The Minister's argument is that what we are doing is small and insignificant in terms of international relief, that Deputies are making much ado about nothing and that we should simply pay our money and get on with it because these programmes are beneficial. However, the external review says they are not beneficial and that the manner in which the restructuring and the macro-economic policies were applied, according to the IMF mantra of privatisation, liberalisation and deregulation, was either too severe, was carried out in an incorrect sequence or did not take into account the fundamental difficulties of the economies being addressed. This is not NGO propaganda or a case of the Opposition trying to score points off the Government. This information comes from the external review.
It is hard to stand over programmes when the external objective review of those programmes in a series of countries, where the intention was to do good, finds that they yielded bad results. We are asking the Minister to use his influence at the IMF to secure fundamental changes in the manner in which ESAF programmes are applied. The very remoteness of the school of economics which is the dominant influence on the IMF in Washington from the countries whose problems are being addressed is one of the major problems.
Apart from the issues of health, education, food, income and so forth, there is another issue. The remoteness of those who are applying the cure is destroying civil society in some underdeveloped countries. As a result there is no real democracy. The standard of living - if that is not too strong a description - of poor people is being diminished further by programmes emanating from so far away. They do not connect with the people. That is the problem and the Minister should address it.
He should also address the fundamental point made by Deputy McDowell. How does what the Minister is advocating today square with the principles set out by his colleague, the Minister for Foreign Affairs, in terms of Third World debt and aid to underdeveloped countries?
Could somebody explain how we are expected to make our case with credibility in the IMF and the World Bank if we have not contributed? How are we to go there and demand fundamental reform of ESAF when we will not contribute to it? In order to have any credibility we must make our contribution.
This is not the final position. We continue to press for greater reforms of these international institutions. Many have taken place. Many of the concerns of the Deputies, NGOs and other bodies have been taken into account in recent years and there are continuing reforms. It is reasonable to suggest that we should now make our contribution, having held off making it until the reforms were in place. However, the attitude appears to be "we will not do anything more about this; it is acceptable to every other country in the world but not to us". That is not a tenable position and no Irish Government could defend it.
It is easy for Deputies and NGOs to talk about the terrible things that are happening in these countries. I can equally point to parts of my constituency where people are extremely poor and where certain things are happening which should not in a modern society like Ireland. However, these things continue to happen.
With regard to African countries, there is an ongoing war between Eritrea and Ethiopia. This is a major high tech war and US$300 million is being expended on it. These problems in Africa should also be addressed.
Who is supplying them with the high tech weapons?
I am sure they are not making them themselves. These issues should also be addressed. Deputy Noonan, a sensible Deputy, claims he is not speaking from the fundamentalist position——
Play the ball, not the man. We are aware of the Minister's footballing tradition.
——yet he comes to the Committee and makes a case which is based on the fundamentalist position that we should not contribute to ESAF. Deputy Stanton's position is the same. He does not want us to contribute to ESAF until there are further reports and reform. There have been major reforms in these institutions——
There are no reforms, that is the point.
In my view, there have been.
This report is less than one year old.
It is time for the Irish Government to make its small contribution, which represents less than 0.5 per cent of our ODA budget.
The Committee appears to be going around in circles. It is time to put the amendment.
I do not accept that these reforms have taken place. The external review is less than one year old - it was produced last March. We need to see a good deal more evidence that the IMF has taken these proposed reforms on board, which I do not think it has. I would like the Minister to show me the evidence, which I do not believe is adequate.
The Minister has let the cat out of the bag - he has made it quite clear what he wants to contribute. He wants to contribute so that he can have chummier conversations around the table on his annual visit to Washington and his officials will feel more comfortable in dealing with their colleagues over there. I do not think that is a good enough reason. There is a fundamental contradiction in what the Minister is saying. He is saying that we have to get in so that we can have reform but also that our voice will not really matter when we get in there. We cannot have it both ways.
The Minister is not coming to this with entirely clean hands. I want to be upfront about this. He and his Department have imposed cash limits on our overseas development aid budget for the next two years. They have abandoned - not formally, but in practice - the target which the Government set itself of 0.4——
The Deputy should stick to the amendment.
The amendment is fairly broad. What we are deciding here is whether this is an appropriate use of the limited resources we are committing to overseas development aid. That is the fundamental question we have to decide today. Why has the figure of £7 million been chosen? Where does it come from? I believe there is a better way of doing it and that the reason we are doing it this way is simply to conform. Would the Minister and his party apply the same sort of thinking to the rest of our foreign policy? Splendid isolation, in terms of neutrality, does not seem to cause Fianna Fáil any difficulty in relation to——
The Deputy can take that up with the Committee on Foreign Affairs.
The Minister seems to be making much of the fact that it is important to conform with what everybody else is doing. I do not think it is. If we have a limited overseas development aid budget we need to decide how best to spend it. Why was the figure of £7 million chosen? What progress has been made on the principles since last September or since the publication of the external review ten months ago? I do not accept the basic argument that reform has been made.
I understand that the figure of £7 million was worked out in 1994. It related to our economic performance and wealth. I said earlier in this debate, particularly on Second Stage, that reforms and ongoing reviews are taking place. We could discuss this all day - we have discussed it on Second Stage and today - but my position and that of Deputy McDowell are totally opposite and there is no point in trying to find agreement.
Not for the first time.
If the Minister had taken over the country in bad times we would have all suffered.
Amendment put.
The Select Committee divided: Tá, 6; Níl, 8.
Tá
- D’Arcy, Michael.
- Dukes, Alan.
- Deenihan, Jimmy.
- McDowell, Derek.
- Noonan, Michael.
- Stanton, David G.
Níl
- Ahern, Michael.
- Dennehy, John.
- Ellis, John.
- Fleming, Seán.
- Foley, Denis.
- Lawlor, Liam.
- McCreevy, Charlie.
- O’Keeffe, Batt.
SECTION 2.
Question proposed: "That section 2 stand part of the Bill."
Section 2 states "Acceptance by the Government of the proposed amendment is hereby approved." Will the Minister comment? I presume the proposed amendment is what is reflected in the Schedule.
Yes.
Effectively, this is about the——
The special drawing rights.
Is that what is laid out in the Schedule?
This section provides for the acceptance of the proposed fourth amendment to the articles of agreement of the International Monetary Fund but prior approval of the Oireachtas is necessary to allow the Minister to consent to a change in an international treaty.
The proposed amendment refers to the decision by the board of governors of the IMF on 23 September 1997 to amend the articles of agreement of the International Monetary Fund by adopting Resolution No. 52-4 - special one-time allocation of SDRs - proposed fourth amendment of the Articles. This ensures that all members receive an equitable share of cumulative SDR allocations. The provisions relating to special drawing rights are covered in section 3.
The effect of the special one-time allocation of SDRs is to increase the level of SDRs from 21.4 billion to 42.8 billion. Ireland's holding of SDRs will increase from 87.3 million to 154 million, a 43 per cent increase. The net effect of the one-time allocation means that Ireland's external reserves will increase by SDR 67 million or £64 million.
If the Minister has a separate speaking note on the two Schedules, Schedule and Schedule M, will he read them for the record?
The Schedule details the entitlement to special drawing rights of countries which became participants in the Special Drawing Rights Department after 19 September 1997. It also provides the base for calculation of the amount of their entitlement.
The allocation to be made under this amendment is referred to as an equity allocation which is designed to bring all members of the fund up to 29.32 per cent of their quota or subscription in the fund. It differs from allocations of SDRs based on the determination by the fund of a long-term global need to supplement reserve assets under the existing Article XV of the fund agreement.
Section 1 of the Bretton Woods Agreements (Amendment) Act, 1977, under Article XV of the fund agreement part of Irish law provides as follows: section 1 relates to the authority to allocate special drawing rights. To meet the need, as and when it arises for a supplement to existing reserve assets, the fund is authorised to allocate special drawing rights to members who are participants in a Special Drawing Rights Department. This power of the fund was, however, circumscribed by Article XVIII, section 1(a) of the fund agreement which provides that, in all its decisions with respect of the allocation and cancellation of special drawing rights, the fund seeks to meet the long-term global need, as and when it arises, to supplement existing reserve assets in such manner as to promote the attainment of its purposes, and will avoid economic stagnation and deflation as well as excess demand and inflation in the world.
Does the Minister have a note for section 3(a) of Schedule M about the changes in the Federal Republic of Yugoslavia, the Serbia/Montenegro situation and the fact that the former Yugoslavia is broken into so many independent states?
This section makes a special provision for the amount of special drawing rights which the Federal Republic of Yugoslavia - Serbia/Montenegro - would receive subject to it succeeding to the membership of the fund.
Question put and agreed to.
Section 3 agreed to.
SECTION 4.
I move amendment No. 2:
In page 4, lines 33 to 36, to delete subsection (1).
Amendment put and declared lost.
Amendment No. 6 is consequential on amendment No. 3 and amendment No. 11 is related. We will take amendments Nos. 3, 6 and 11 together by agreement.
I move amendment No. 3:
In page 4, between lines 36 and 37, to insert the following subsection:
"(2) The Minister may make a payment or payments in respect of the HIPC Trust, the aggregate amount of which payment or payments shall not exceed £10,000,000.".
Section 4 allows the Minister to make payments to the ESAF trust and HIPC debt initiative trust fund. Section 6 allows the Minister to authorise the Central Bank to make payments on behalf of the Government to the HIPC trust. No provision is contained in the Bill to allow the Minister to make the payment direct to the HIPC trust. It is important to remedy this deficiency. Amendment No. 3 will allow the Minister to make a payment or payments to the ESAF HIPC trusts subject to an aggregate limit of £10 million. While I have no immediate intention of making such a payment in the foreseeable future, an enabling provision would allow the Government to decide to deepen its financial contributions to multilateral debt relief. The current discussion at the G7 in relation to debt relief might give rise to a need for Ireland to participate further in multilateral debt relief efforts. Amendment No. 6 is merely consequential on amendment No. 3, which allows the Minister to make the payment or payments to the HIPC trust.
Deputy McDowell's amendment is also concerned with the trust. The amendment proposes the deletion of the aggregate clause in respect of the ESAF HIPC trusts. I cannot accept this amendment for much the same reasons; I reject any notion that aggregate clauses are inappropriate. While this is the first time that mechanism is being used, and it is innovative only to that extent, it is a pragmatic measure and is inserted with a view to making sensible and efficient use of parliamentary time.
As I explained in my reply on Second Stage, a number of Deputies raised concerns about the inclusion of a number of aggregate clauses. The suggestion was that such mechanisms were a ruse to bypass the House. This is a misinterpretation that I wish to correct. Such aggregate clauses are frequently used as a control mechanism under various legislative codes to ensure the relevant Minister must come before the Oireachtas for specific approval to move beyond certain specified expenditure levels. They are intended to provide a degree of flexibility with the consent of the Oireachtas, but, equally, to limit this flexibility. They are, therefore, a move in the direction of, rather than away from, Oireachtas accountability. Such provisions should not be misconstrued as efforts to prevent the Oireachtas from availing of other mechanisms to review the activities of the Bretton Woods institution on a regular basis.
The Minister is correct that amendment No. 11 is related to the other amendments dealing with accountability. I accept in principle what the Minister said and that it is not appropriate that he or his colleagues should have to come back in circumstances such as this to seek authorisation of the Oireachtas every time a payment is required if the principle has already been established by the Oireachtas. There is a difficulty in practice with the HIPC trust and the matter relating to the ESAF trust. This is probably the first time in almost 20 years that we, in the Oireachtas, have discussed Ireland's participation in the IMF. This is not exclusively the Minister's fault. We do not take time to review our operations in international bodies such as the IMF as often as we should. That is in contrast to the regular interest taken by committees in the bilateral element of our overseas development budget and the way that money is spent.
All of us agree, having looked at these issues over past months, that there is a need for greater accountability and debate. In a sense the reason these amendments have been tabled is at least partly to ensure that happens before a further contribution is made. I accept the principle of what the Minster said and do not intend to press the amendment because I have tabled more appropriate amendments on accountability, which can be used to debate the issue.
Amendment No. 4 deals with section 4(2) and is related to amendment No. 3.
We must deal with amendments Nos. 3 and 6 first.
Section 4 allows the Minister to perform certain functions with the permission of the Government. My amendment seeks to make the Minister's actions conditional on the Houses of the Oireachtas rather than the Government. The Minister's amendment states that the Minister may carry out certain acts of his own volition but he is still subject to Government decision. How does that fit in the section? "The Minister may make payments." Is that governed by "as the Government decides" or is he introducing a stand alone amendment that is not governed by that condition?
We will deal with the Deputy's amendment next and I will come back to it. Does the Deputy also want the words "as the Government decides" inserted in section 4(2)?
Yes. Everything the Minister of the day does is in accordance with "as the Government decides", but the Minister's amendment seems to suggest something a Minister could do of his own volition and it should be governed by the condition "as the Government decides".
I take the point and will introduce an appropriate amendment on Report Stage. I thank the Deputy for bringing this to my attention. It is a logical follow on.
Amendment agreed to.
Amendment No. 8 is related to amendment No. 4 and both may be taken together by agreement.
I move amendment No. 4:
In page 4, subsection (2), line 39, to delete "as the Government decides" and substitute "as decided by both Houses of the Oireachtas".
It is net point. The section is drafted on the basis that the Minister may carry out certain functions or perform certain acts "as the Government decides". It would be more appropriate if the Minister could act "as decided by both Houses of the Oireachtas" because it would mean that the Minister, acting on a Government decision, would be obliged to table a motion before the Houses, in a negative or positive form, as is customary under other legislation. That is more in accordance with the practice in other legislation rather than simply having the Minister act on a Government decision without reference to the Houses of the Oireachtas.
I will accept an amendment on Report Stage, couched in the manner with which we are familiar, such that the Minister would table a motion before the Houses and if it were negatived within a certain period, the order would be made rather than tabling an affirmative motion, which would automatically trigger a debate. The negative formula is sufficient, it is bad practice not to refer to the Houses of the Oireachtas.
I acknowledge the Deputy's comments but a more fundamental point is involved. The executive power of the State is exercised by, or on the authority of, the Government. The substitution of "as decided by both Houses of the Oireachtas" for "as the Government decides", as suggested by Deputy Noonan in this subsection would be tantamount to making this part of the Bill redundant. I am asking the Oireachtas for its approval to make further payments in respect of the HIPC debt initiative trust fund subject to an aggregate limit of £20 million under subsection (5) of this section. The Deputy's amendment may be based on a concern about the inclusion of a number of aggregation clauses in the Bill and that such mechanisms are a ruse to bypass the House. As I said in reply to the earlier amendment, this is a misinterpretation as such aggregated clauses are frequently used as a control mechanism under various legislative codes so as to ensure the relevant Minister must come before the Oireachtas for specific approval to move beyond certain specified expenditure levels. They are intended to provide a degree of flexibility with the consent of the Oireachtas but equally to limit this flexibility.
There are, therefore, moves in the direction, of rather than away from, Oireachtas accountability. Such provisions should not be misconstrued as efforts to prevent the Oireachtas from availing of other mechanisms to review the activities of the Bill if it is used on a regular basis. It is proposed in section 9 to provide for an annual report, with which I will deal later, in response to an amendment put down by Deputy McDowell. I have basically put down the same amendment, with some technical changes. That proposed new section will provide one such mechanism to allow the Oireachtas to review annually all these particular payments.
As regards Deputy Noonan's amendment, I will bring forward on Report Stage the form "as the Government decides". I want to keep the same definition here. It is not a fundamental breach of parliamentary accountability to give a certain amount of flexibility to the Minister through the aggregation limits of the amount I am specifying. In a later amendment I provide for an annual report to the Oireachtas which will give Deputies an opportunity to discuss these matters. As Deputy McDowell said, the last debate on the Bretton Woods' institutions was in 1978, which is the length of my political lifetime. This is the first opportunity we will have to discuss it. I agree that is not satisfactory, although I am sure some committees have debated these matters.
I thank the Minister for the points he raised. I agree the amendment I drafted would cut wider than the intent of the amendment and, therefore, is not an appropriate vehicle to deliver what I am seeking. However, I ask him to consider a new subsection (6) along the traditional line, which would state that any decision taken by the Minister under this section would be notified to the Oireachtas by whatever formulation. It is not necessary for the purposes of accountability that the affirmative form of the motion would be required. It would be sufficient if it was placed before the Houses of the Oireachtas and was not annulled. The annual report is fine in its own way but can anyone tell me when an annual report on any subject was discussed in the House? The public think it is a great idea, yet we are inside dissecting annual reports; they are lodged in the Library and that is the end of the matter. It is a long time since any report was discussed in the House.
I will consider the Deputy's proposal for a negative motion on Report Stage.
I put forward an amendment which requires a statement to be placed before the Houses of the Oireachtas. I will not delay the committee as I think we are at one on this. We are trying to provide for a means of accountability which would refer to the two trust funds we are discussing. Obviously there is a particular difficulty with the ESAF fund. The Minister has, in effect, said that we need to argue for further reform. In as much as he may want to make future contributions it would be appropriate that he or his successors should come before the committee or the House to explain why such further contributions are being made. Perhaps the negative regulation to which the Minister referred is the way to do it. There must be some means of providing for debate if the committee or the Houses consider it appropriate.
I will bring forward the appropriate amendment on Report Stage to reflect what Deputies have said.
Amendment, by leave, withdrawn.
I move amendment No. 5:
In page 5, subsection (3), to delete lines 1 to 3.
Amendment put and declared lost.
I move amendment No. 6:
In page 5, subsection (3), line 1, after "Trust" to insert "and the HIPC Trust".
Amendment agreed to.
I move amendment No. 7:
In page 5, lines 7 to 9, to delete subsection (4).
Amendment put and declared lost.
Amendment No. 8 not moved.
Amendment No. 10 is an alternative to amendment No. 9 and both may be discussed together. Is that agreed? Agreed.
I move amendment No. 9:
In page 5, between lines 12 and 13, to insert the following subsection:
"(6) The Minister shall, as soon as may be after the expiration of every financial year, prepare and lay before each House of the Oireachtas a statement setting out with respect to the ESAF Trust and of the HIPC Debt Initiative Trust Fund full particulars of any payments made in that year.".
This amendment requires the Minister, at the end of each financial year, to make a statement of whatever moneys have been paid to either the HIPC trust or the ESAF fund. It is another mechanism intended to provide for accountability.
My amendment has the same intention; to provide a reporting mechanism for any moneys paid to ESAF or HIPC. It is just a different formulation of words.
I see no reason for these amendments which propose an annual reporting mechanism specifically as regards payments under section 4 in respect of multilateral debt relief. Such payments are covered under subsection (2)(a) of the proposed new section 9 in amendment No. 15 which I will put down. This provides for an annual report to the Oireachtas as regards Ireland's participation in the bank and the fund. The provision for an annual report encapsulates both Deputies' amendments.
That is right in principle. A great deal depends on when the annual report is produced. The Minister knows it is not unusual for annual reports of particular bodies to appear six months or even up to 18 months afterwards. If we are talking about payments out, the report needs to be contemporaneous.
I accept the Deputy's point about annual reports, it can be a long time before they are produced. Perhaps we could draft the amendment to ensure the annual report must be laid before the House within a calendar year of the previous annual report. We will discuss that when we come to amendment No. 15.
In the annual report there will be wider issues than simply the payment of moneys to ESAF or HIPC. My amendment proposes that effectively, in January of the subsequent year, the Minister would make a statement. This would be an immediate statement of how much had been paid to HIPC and ESAF and the House would be notified. The annual report, by its nature, will deal with wider issues, will take longer to compile and may not be published quickly.
Perhaps I can make a further amendment to amendment No. 15 on Report Stage to cater for Deputy Noonan's suggestion. It would be a good idea to have a set month each year for an annual report on these payments. I can see this principle being extended to other areas and every year we would have an opportunity to debate these issues.
Is the Minister suggesting that it might read "as soon as may be after the end of the year but before 1 April"?
Something like that. Perhaps it would read "in the first quarter of the year" or "before 31 March of the following calendar year".
On the basis of that commitment, I will withdraw my amendment.
Amendment, by leave, withdrawn.
Amendment No. 10 not moved.
Section 4, as amended, agreed to.
SECTION 5.
Question proposed: "That section 5 stand part of the Bill."
Section 5 states that payments will be made out of the Central Fund. That reinforces the need for information to be put before the House because such payments will not be the subject of an Estimates debate.
That is correct.
If the Houses of the Oireachtas have no recourse to debating these payments, since they will not be the subject of an Estimates debate, it is important that information is made available.
That is a valid point. Payments will be made out of the Central Fund, therefore they will not be subject to the Estimates procedure. That reinforces the point the Deputy made earlier about the reporting mechanism.
That adds weight to the suggestion of a Report Stage amendment. Will the Minister consider that on Report Stage?
Yes.
Is there any reason payments will be made out of the Central Fund?
I did not ask why things were put through the Central Fund when I was in Opposition but I did as soon as I became Minister for Finance. Judicial salaries, for example, are paid out of the Central Fund.
What about sacking the judges or not paying them?
There are other provisions for sacking judges. Under the Constitution, there must be a majority of the Dáil to do so. The purpose is not to have such payments subject to discretions. They must be non-discretionary and they must be paid. That is the purpose of paying them out of the Central Fund.
Why did the Minister choose to make these particular payments payable out of the Central Fund? Why can they not come out of normal Government revenue?
The Bretton Woods Agreements Acts cover international agreements.
Are IMF contributions paid out of the Central Fund?
Yes. The first Act was in 1957. When there is legislative authority in the Act, it is appropriate to make such payments out of the Central Fund in this international area.
Question put and agreed to.
SECTION 6.
Amendment No. 11 not moved.
Question proposed: "That section 6 stand part of the Bill."
The type of formulation the Minister is introducing reminds me of the provisions in legislation for IDA Ireland, Enterprise Ireland or SFADCo where the Minister can, from time to time, allow the agency to pay money up to a particular ceiling. What is the reporting procedure under those Acts?
I presume the Deputy wants to know what I authorise the Central Bank to pay up to a certain limit and what is the mechanism for reporting back to the Minister.
Sometimes a one section Bill is introduced in the House to increase the level of grant aid provided to IDA Ireland because it has reached its limit. However, I do not recall if there was a mechanism for the Minister to report back to the House.
I do not recall any reporting mechanism. I will investigate that before Report Stage.
This is analogous, although not absolutely the same.
It would also be covered under the annual report.
Question put and agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill."
Perhaps the Minister could explain section 7(2).
Section 7(2) repeals section 3 of the Bretton Woods Agreements (Amendment) Act, 1977. That section allowed for the construction of references as a result of a previous amendment to the articles of agreement to the IMF which was attached as a Schedule to the Bretton Woods Agreements (Amendment) Act, 1977. If the Deputy can decipher that, he is better than I am.
That is what I thought it was.
I am told it updates the 1977 legislation as a reference.
Question put and agreed to.
SECTION 8.
Amendment No. 12 is consequential on amendment No. 13. Amendment No. 14 is an alternative to amendment No. 13. Amendments Nos. 12 to 14, inclusive, may be discussed together.
I move amendment No. 12:
In page 6, subsection (10)(b), line 42, to delete "and".
Amendments Nos. 12 and 13 are concerned with a report to the Houses of the Oireachtas in respect of the BIS facility. I support amendment No. 14 tabled by Deputy McDowell. The only difference in the wording relates to the substitution of the phrase "an account of any means" for "details" in Deputy McDowell's formulation. The intention is to provide an account to the Houses of the Oireachtas of any means rather than to specify minutiae and details of those means. My intention is to honour the intent of what the Deputy seeks to achieve.
I accept what the Minister says about the detail of the amendment but I want to explore the section further. I expressed concern on Second Stage about setting a precedent. The Minister did not respond to that in his reply other than to confirm that he saw it as a precedent.
This is the first time we are contributing, as part of an EU effort, to a fund which is intended to deal with the problems of Brazil. When the IMF proposal was first put together last October or November the circumstances in Brazil were dramatically different from what they are now. The primary purpose of the IMF at the time was to sustain the policy of maintaining the value of the Brazilian real relative to the dollar. However, that policy has since collapsed in tatters in as much as the real was first devalued and then floated and is now worth a good deal less than it was then.
I am no more an expert than the Minister on the Brazilian economy, but it is appropriate to have a discussion for two reasons. First, it is held by those who are critical of IMF type interventions that the intervention in Brazil was typical of all that is wrong with the IMF. It picked on a particular policy which happened to suit US interests at the time and which has now collapsed. Second, this will be a precedent and we may be asked to contribute towards an IMF fund for Russia, for example, in three or four months time or sooner.
We need to know something about the mechanism by which these decisions are made within the EU. How did the EU decide that it wanted to make this type of contribution? Was it an ECOFIN decision? How is the Minister accountable for how this money is spent? If I understood the Minister's comments correctly, we are being asked to make this contribution or to give this guarantee as a gesture of international solidarity without any knowledge of what is being done with the fund and without any means of contributing our views on how the fund should be used. That is not good enough, particularly if we consider that this is a precedent. I would be very interested to hear what the Minister has to say about it.
It is setting a precedent. The background would be as outlined by the Deputy. There was considerable worry in the international financial community about the emerging situation in Brazil. There are regular lunch time discussions at ECOFIN meetings during which international matters and problems in places such as Russia and south-east Asia are discussed. I cannot remember whether any of these items have been taken formally on the agenda outside lunch time discussions. They may have been but I cannot recall. There would have been occasional general discussion about the emerging situation in Brazil, but there was no specific debate or motion at ECOFIN about moving in this direction.
When the situation arose the Presidency of the Council, together with the Commission, would have been involved in negotiations. In the context of the euro starting on 1 January 1999 and because the EU was going to become a major player on the world scene, it was thought appropriate it would contribute to the IMF bail out of the Brazilian economy. As the Deputy correctly pointed out, when that specific initiative was announced by the IMF, the situation in Brazil was bad but it has considerably worsened in the interim. This has not been discussed subsequently at an ECOFIN meeting.
This will be Ireland's contribution as a member of the EU and it is important for us to contribute. This section is a guarantee by the Government of the amount of money being put forward by the Central Bank. The question has occurred to me why it is necessary for the Government to guarantee its own Central Bank because such matters revert to Government in any event. This is the procedure being put in place and is a precedent for the EU and for Ireland. We are now part of the larger club and must be seen to play our part. The world economy is so intertwined that a hiccup in any part has repercussions all over. The new euro grouping regards itself as the second most important economic bloc, after the United States and before Japan. I hope I am not being offensive to Japan, but most Europeans now regard themselves as the number two bloc.
Which Commissioner is responsible?
Commissioner de Silguy would be the person with responsibility in this area and deals with ECOFIN meetings. International economic disturbances would come under his remit more than any other.
Is the reporting mechanism in Europe more to ECOFIN rather than to the General Affairs Council?
I would have to check that. We regularly make reports to ECOFIN of developments in economic matters, but there is always an overlap with the General Affairs Council on which Foreign Ministers are represented. The overlap in a wide variety of areas often causes resentment between both groupings. ECOFIN is the council which primarily deals with this matter, with an overview from the General Affairs Council.
Was it at ECOFIN that this contribution was agreed in Europe?
We were contacted by telephone by the Presidency which said it was decided Europe would move in this direction. On behalf of the Government, I expressed no objection to the European contribution. The EU involvement in the BIS facility was initiated by the Austrian Presidency under the First Pillar of the European Union acting through the ECOFIN Council and not under the aegis of the Common Foreign and Security Policy.
Ironically, the form of participation is intergovernmental rather than institutionally or European Union based. Each member state accepts full responsibility for its own participation in the facility, although each is conscious that its involvement was initiated by the Presidency to show European Union solidarity with an external country experiencing economic difficulty. Participation in the facility by EU member states is justified on the basis that it is essential confidence be restored in the Brazilian economy without delay.
I hope the Minister understands my difficulty. We have debated at length contributions of less than £20 million in total to the ESAF or HIPC fund. This facility, if drawn on, or guarantee, if ever called in, is $50 million. If truth be told, we do not have a blind notion for what purpose it will be used. We know it exists as a gesture of international solidarity towards Brazil to maintain the international financial firmament but beyond that, we do not have a clue. We can have lengthy debates about accountability, yet if this money is called in, it would dwarf the rest of the money we are spending, and we do not know what it is for. I do not expect the Minister to suddenly develop an expertise about the Brazilian economy, but it would be useful if we had some briefing note in advance of Report Stage as to how this money will be used and the mechanisms for accountability. I am especially concerned about it because this will happen again and it is setting a precedent.
I gather Deputies have my notes in this regard which set out what each country will contribute to the Brazilian crisis.
I am not trying to score points. What I am really concerned about is what is it for. I would have understood what purpose it served four or five months ago, which was to maintain the value of the real, a policy of which many people internationally would have been very critical, but I do not understand what purpose it serves now. It seems to be a war chest for the IMF to use for whatever purpose it wishes. It seems to have agreed on £25 billion worth of tax increases and cuts in spending in Brazil which will have enormous consequences there. In a sense, we are giving carte blanche and guaranteed money to the IMF to enforce whatever policies it wishes to impose with scant accountability to anyone.
I will supply the Deputy with the latest up to date position on the Brazilian crisis and the notes regarding the total contribution from all the countries and the EU contribution. The international rescue package for Brazil will be US$41.5 billion which indicates the amount being made available to the Brazilian authorities. I will get an updated note on what the experts think of the Brazilian situation and ensure the Deputy has it before next week.
It is remarkable the international community can come up with an astonishing amount of money - $41 billion - either by way of direct loans or guarantees, to assist a country considered important in terms of the financial firmament, yet we seem able to come up with only a small fraction of that to help most of the Third World in terms of cancellation of debt. I am not being critical of the Government in saying that.
It was felt in the IMF that the money might never be drawn down and existed as a type of buffer. We will get the up to date position on the Brazilian crisis because the situation has changed considerably since——
My understanding is the money is being drawn down.
To the IMF, but whether it all ends up with the Brazilian authorities, I do not know. I will get more details.
I believe more than half has been drawn down.
The economic crisis in Brazil has worsened since the original amount was decided upon. Of that there is little doubt.
I was under the impression this was principally a European Union initiative to which we were all contributing, and I would have thought it would have come under the remit of the General Affairs Council. I thank the Minister for his explanation that it is not an EU initiative. Although it was commenced by the Austrian Presidency, it is an initiative for which responsibility rests on each individual member state. Consequently, it was processed through ECOFIN rather than through the General Affairs Council. It was not even raised at an ECOFIN meeting but arranged by a series of phone calls from the Presidency looking for the assent of member states to agree to the initiative. Did the Minister check at the time what legislative authority he had to agree? If so, what was it, or is he relying on retrospective legislation?
When I was asked by the Austrian Presidency, I was aware that it would be a contribution from the Central Bank. The bank contacted the Department post haste and said it wanted a guarantee in legislation. I have used the opportunity of the Bretton Woods Agreements Bill to give this guarantee. Otherwise, a separate Bill would have been necessary because the bank was anxious to have a legislative backing for the guarantee.
That was not my question. I understand the guarantee.
The guarantee is the purpose of the legislation.
I understand that, but what legislation gave the Minister authority to agree when he received the telephone call?
I agreed on the basis that I would bring forward a legislative provision. It was subject to legislation.
So nothing has been drawn down from the Central Bank because legislation has not yet been enacted?
The purpose of this legislation is to guarantee the payment of the Central Bank. It is within the remit of the bank to make these contributions. However, it wanted a guarantee from the Government that if, for example, there was a default, it would get the money from the Exchequer. It is all the State's money so one could say we are going around in a circle. However, it had to be done in that way.
The Austrian Presidency commenced the initiative. Did the Presidency or the Commission ring the Department of Finance?
No. The telephone call from Mr. Edlinger was directly to me. However, it had been signalled to me in the previous two days that the Austrian Presidency would be ringing its European colleagues about this agreement. It was signalled through the official channels from the Commission that this initiative was being undertaken. The Austrian President at the time, Mr. Edlinger, formally rang me and other European colleagues.
Did the Minister ring the Governor of the Central Bank to bring it on board or was it contacted separately?
We were aware before the Austrian President rang me of the way it would be done. The Central Bank would also have been aware. It did not come as a surprise. It was not the case that Mr. Edlinger decided one day off the top of his head to ring a few friends and ask them to contribute a few bob to the Brazilian crisis. It was well flagged in advance.
It was not the same as the telephone calls we receive from constituents.
It was not the same at all.
Amendment agreed to.
I move amendment No. 13:
In page 6, subsection (10)(c), line 44, to delete "year." and substitute the following:
"year, and
(d) an account of any means employed by the Central Bank, singly or in conjunction with other participating Central Banks under the Substitution Agreement, in order to recover any sums paid by the Central Bank under the Substitution Agreement.".
Amendment agreed to.
Amendment No. 14 cannot be moved and it is alternative to amendment No. 13.
Amendment No. 14 not moved.
Section 8, as amended, agreed to.
NEW SECTIONS.
Amendment No. 16 is an alternative to amendment No. 15 and both may be discussed together. Is that agreed? Agreed.
I move amendment No. 15:
In page 7, before section 9, to insert the following new section:
"9.-(1) As soon as may be after the end of each year, the Minister shall prepare and lay before each House of the Oireachtas a report (which shall be known as and in this section is referred to as an 'annual report') in relation to Ireland's participation in the Bank and the Fund.
(2) An annual report shall, inter alia, include-
(a) particulars of any payments made under the Bretton Woods Agreements Acts, 1957 to 1999;
(b) particulars of any policy positions taken by Ireland at the Bank and the Fund;
(c) an account of the activities of the Central Bank in exercise of its functions as agent of the Minister under the Bretton Woods Agreements Acts, 1957 to 1999.".
Amendment No. 15 provides for an annual report to the Houses of the Oireachtas in relation to Ireland's participation in the IMF and the World Bank. There is no direct mechanism to allow Oireachtas debate of policies pursued by Ireland within the IMF and the World Bank. Following representations from many Deputies during the Second Stage debate, it is appropriate to introduce a mechanism which would allow the Oireachtas the opportunity to review regularly Ireland's participation in the World Bank and the fund.
The amendment reflects the main elements of the amendment tabled by Deputy McDowell and it is identical of terms of the intent of the Deputy's amendment. The differences are that "Bretton Woods Institutions" has been changed to "the Bank and the Fund" as both entities are defined in the Bretton Woods legislation. The term "Bretton Woods institutions" is used colloquially. It is not defined in the Bretton Woods Agreements or the legislation to give effect to Ireland's membership of these institutions. It is used only as shorthand. Therefore, the Deputy's wording has been changed to "the Bank and the Fund".
However, I assure the committee that the proposed annual report under this section will include an account under the criteria set out under subsection (2) for all bodies included in the World Bank group in addition to the World Bank itself. The World Bank group includes the International Development Agency, the Multilateral Investment Guarantee Agency, the International Finance Corporation and the International Centre for the Settlement of Investment Disputes. I have specified that the annual report shall, inter alia, include amounts under the headings suggested by Deputy McDowell. The inclusion of the phrase “inter alia” will allow the Minister to extend the scope of the report beyond the categories mentioned by the Deputy and will give the Oireachtas or any of its committees the opportunity to call on the Minister to do so.
I have also adopted a different formulation in subsection (2)(c) to cover the provision by the Central Bank of an account of its activities as agent of the Minister under the Bretton Woods legislation. I favour this formulation because it is designed to provide the Houses of the Oireachtas with a pertinent level of information on the role and activities of the Central Bank under the Bretton Woods legislation.
Deputy McDowell's phrasing would oblige the Central Bank to put forward details of all its financial transactions with the fund down to account level. I believe the House wants an overall view of what the Central Bank did in any one year rather than to be submerged in data about Ireland's transactions in SDR holdings. The provision of an annual report will allow the various joint committees the opportunity to review annually the progress being made on key issues affecting the Third World, the newly industrialising countries, proposals to reform the international financial architecture as well as such facilities as the Enhanced Structural Adjustment Facility of the IMF. Earlier I agreed, at the request of Deputy Noonan, to introduce an amendment on Report Stage which will specify that the annual report must be debated not later than 31 March each year.
I am satisfied with the Minister's amendment and I withdrew amendment No. 10 on that basis. Deputy McDowell caught the central idea but the parliamentary draftsman always makes technical amendments. I support the Minister's amendment.
I am not sure I understand the distinction between an account of the activities of the Central Bank and particulars of any actions taken by it which the Minister appears to see. However, we will not fall out about it. Will the Minister elaborate on Ireland's participation in the IMF? I understand we have an alternate director who is appointed for a two or three year period.
It is a three year period.
Is it usually somebody from the Central Bank or the Department of Finance?
It rotates between the Central Bank and the Department of Finance. The person who recently took up office is from the Central Bank. The person who was with the IMF has returned to the Department of Finance.
Is that Mr. O'Loughlin?
Yes.
How does it work? Does the alternate director represent Government policy or is the person on secondment and acting as an independent agent? Do they represent Ireland? Does the Minister view the current alternate director as his representative and somebody who is directly accountable to him or is he simply taking time out from the Central Bank? Is it intended that there should be a direct line of accountability?
All civil servants act on behalf of the State and espouse the policy of the Minister and Government of the day. That is my clear understanding of the position of the officials working in the IMF.
Irish officials working with the Commission in Brussels do not necessarily represent Irish policies.
That is the case.
Is the current alternate director on secondment for three years or is he a direct representative of the Minister or the Government?
It is an interesting point. He represents the Irish Government on the board. The analogy with the Commission is not valid because when one is appointed to the Commission, one acts independently of one's member state.
That is my point.
I understand the person acting in the IMF is a representative of the Government. There may be occasions with regard to some issues of which I am not aware where that line is blurred. However, I understand the official in the IMF acts on behalf of the Government. It is an Irish position.
Who pays his salary?
The IMF.
Is it paid in gold or in dollars?
SDRs.
Do the telephones work regularly between Merrion Street or the Central Bank and Washington or is the representative cast aside for three years and allowed to do his own thing?
There is daily contact between the official in Washington DC and people at home.
I would be interested to hear Mr. O'Loughlin's reflections since he has just returned from the United States. He is the sort of person who would like to share that with us.
That could be arranged. I am sure he could be invited to appear before the Committee.
Since we are shedding light in these previously dark corners we might as well do it with the benefit of his assistance.
I am sure Mr. O'Loughlin will be glad to oblige.
Amendment agreed to.
Amendment No. 16 cannot be moved as it is an alternative to amendment No. 15.
Amendment No. 16 not moved.
SECTION 9.
I move amendment No. 17:
In page 7, line 1, to delete "for Finance".
Amendment agreed to.
Section 9, as amended, agreed to.
Section 10 agreed to.
Schedule agreed to.
Title agreed to.