SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate -
Wednesday, 21 Jun 2006

International Development Association: Motion.

Chairman

The purpose of today's meeting is to consider the motion re proposed approval by Dáil Éireann of Ireland's contribution to the International Development Association's multilateral debt relief initiative, and to the International Development Association's 14th replenishment.

On 13 June 2006 the Dáil ordered that the following proposal be referred to this committee for its consideration:

That the proposals that Dáil Éireann approve, in accordance with Articles 29.5.2 of Bunreacht na hÉireann

(i) Ireland's contribution of €58,640,000 to the International Development Association's multilateral debt relief initiative, to be paid at a time and in a manner as the Minister for Finance may determine; and

(ii) Ireland's contribution of €70,000,000 to the International Development Association's 14th Replenishment, payable at a time and in a manner as agreed by the Minister for Finance with the International Development Association.

I welcome the Minister for Finance and his officials and call on him to make an opening statement.

Minister for Finance (Mr. Cowen)

The select committee has decided to consider two separate commitments that now arise in relation to Ireland's membership of the International Development Association, IDA. These commitments are as follows: Ireland's contribution to the International Development Association's 14th replenishment; and our commitment to meeting the costs of the multilateral debt relief initiative as it impacts on IDA.

The International Development Association, established in 1960, is the arm of the World Bank which helps the world's poorest countries to reduce poverty. It provides interest free loans and grants for programmes aimed at boosting economic growth and improving living conditions. IDA financing helps these countries deal with the complex challenges they face in striving to meet the millennium development goals.

The International Development Association is financed, in the main, by replenishments given by donor countries, such as Ireland, agreed every three years. This resolution relates to the 14th replenishment. In the period 2006-08, IDA 14, as it is called,will make US$33 billion available in loans and grants to 81 of the poorest countries. This represents an approximately 25% increase in overall resources over the previous replenishment. It is the largest expansion of resources by the International Development Association in two decades.

Following discussions with the donors, the board of governors of the International Development Association approved the 14th replenishment of IDA resources on 18 April 2005. In light of the Government's commitment to increase spending on overseas development aid to reach the UN target, Ireland agreed to pledge, subject to Dáil approval, an increased contribution of €70 million to the 14th replenishment round of IDA. Our contributions to IDA are accountable as part of our official development assistance, ODA, programme and count towards the attainment of the UN target for ODA of 0.7% of GNP.

The Development Banks Act 2005 provides for approval of staged payments by Dáil resolution. This resolution provides for this payment to be made, in accordance with a schedule of payments, to the International Development Association. The payment will be made in stages between 2006 and 2014 in accordance with its needs.

The International Development Association is focused on the poorest countries in the world, especially in Africa. The 14th replenishment agreement recommended that, in accordance with IDA priorities, the countries of sub-Saharan Africa should receive priority in the allocation process. In this process, donors supported a renewed focus on stronger, broad-based economic growth. This is essential if poor countries are to achieve the millennium development goals.

IDA funding targets poverty reduction. It is the single largest source of donor funds for basic social services in the poorest countries. Loans address basic needs such as primary education, basic health services and clean water and sanitation. IDA also funds projects which safeguard the environment, improve conditions for private business, build infrastructure, support reforms to liberalise countries' economies and strengthen their institutions. Funding also targets law, justice and public administration. These projects pave the way towards economic growth, job creation, higher incomes and better living conditions.

The International Development Association lends to those countries that had an income in 2005 of less than $1,025 per person and lack the financial ability to borrow from World Bank. Some 81 countries are currently eligible to borrow from the International Development Association. Together these countries are home to 2.5 billion people, half the total population of the developing world of which an estimated 1.5 billion survive on incomes of $2 or less a day.

IDA loans have maturities of 20, 35 or 40 years with a ten-year grace period before repayments of principal begins. No interest is charged but credits carry a small service charge. This is currently 0.75% on funds paid out. More recently, support is also delivered in the form of grants, concessional long-term loans and sometimes a mixture of grants and credits.

The International Development Association is funded largely by contributions from the governments of the richer member countries. Additional funds come from the World Bank's income and from borrowers' repayments of earlier IDA credits. Given its focus on the poorest countries, Ireland has been a strong supporter of IDA over many years. Its focus on the poorest of the poor in the developing world make it an efficient support mechanism. Recent examinations of the operation of IDA indicate that it is very efficient and effective in the use of ODA resources in comparison with other operators in the field.

By mid-2005, Ireland had contributed a total of US$206,690,000 to IDA. The Dáil previously approved a contribution by Ireland of €50 million to the last replenishment round — IDA 13. Currently, this amount is being paid in instalments over a number of years to 2008.

Members also have before them a motion relating to the multilateral debt relief initiative. Ireland has a strong record on the issue of debt relief for developing countries. We give our bilateral development assistance in the form of grants rather than loans. We took a lead in advocating 100% debt relief for highly indebted poor countries becoming the first Government of an EU country to do so when we issued our paper on debt cancellation several years ago. This committee has discussed that subject several times and supported debt cancellation.

The issue of debt relief gained greater prominence in the lead up to the meeting of the G8 leaders at Gleneagles in July last year. The intentions of the G8 leaders emanating from that meeting formed the basis of a debt relief initiative — cancellation of 100% of outstanding obligations of highly indebted poor countries to the International Monetary Fund and the concessional financing arms of the World Bank, the IDA, the African Development Bank, the African Development Fund.

This initiative is known as the multilateral debt relief initiative, MDRI. The full cost of it is in the region of US$50 billion. Of this, the total cost to IDA is estimated at $37 billion over 40 years — equivalent to one quarter of IDA's total resources.

The multilateral debt relief initiative provides irrevocable, up-front debt stock cancellation in addition to debt relief already committed under the HIPC initiative. The objective is to provide additional support to heavily indebted poor countries to reach the millennium development goals while preserving the financing capacity of the international financial institutions.

The success of the multilateral debt relief initiative will be measured by the increase in resources it frees up for the beneficiary governments for poverty reduction and in meeting the millennium development goals. The IMF can cope with the costs of the multilateral debt initiative to the IMF, which are relatively modest for that organisation, from its own resources. However, for the World Bank, debt cancellation is a major problem.

Earlier this year, the board of the World Bank agreed the multilateral debt relief initiative. It was subsequently adopted by the board of governors of the International Development Association. The bank is expected to begin providing this debt relief on 1 July 2006, the start of the bank's fiscal year.

As Ireland's contribution to finance the IDA share of the multilateral debt relief initiative, I agreed to a commitment, subject to Dáil approval, of €58,640,000 to help meet the cost of this initiative. This commitment emphasises Ireland's long-standing support of debt relief, the World Bank and of the International Development Association. This funding is accountable as part of our ODA programme. It will help meet the costs of the cancellation of existing debts that are due to IDA under the MDRI process. As already stated, these debts to be cancelled relate to some of the world's poorest countries.

There is a real concern that funding the MDRI could undermine IDA operations in the long term. I have raised this concern in the past, including at last year's annual meeting of the IMF and World Bank. Africa has a significant share of IDA lending. As African countries will benefit most from the MDRI, this debt cancellation has an important knock-on effect on IDA. While the debts will be forgiven immediately, the real resource losses for IDA may not become apparent for many years as the repayments of debtors cease. To fund this future reflow shortfall, the G8 has offered, in general, only short-term commitments to meet a long-term problem. The longer-term underwriting of this shortfall is largely dependent on ongoing political goodwill and delivery by many states of promises that are to last for 40 years.

With this in mind, I took the initiative and committed, again subject to Dáil approval, that Ireland would make its full contribution to the debt cancellation cost available up front in 2006 to help the World Bank proceed with this initiative immediately. Other states may pay for this debt cancellation over a much longer period and in smaller instalments. This early delivery of money by Ireland to provide up-front financing was specially welcomed by the President of the World Bank, Mr. Paul Wolfowitz, as being of assistance in driving the debt cancellation process forward and it helped allow the World Bank to cope with other countries' less certain commitments. It is hoped that Ireland's commitment will encourage other countries to also pay up front and strengthen the initiative. The Development Banks Act 2005 provides for approval of such a payment by Dáil resolution. This resolution will provide for this payment, in full, of €58.64 million during 2006.

I acknowledge the support the House has given me and my predecessors in supporting our contributions to the developing world in general and in respect of the various replenishments of International Development Association in particular over the years. Ireland has an excellent record in support of IDA and of debt relief in general. The proposed contributions to the 14th replenishment and to the MDRI mark a further concrete contribution by Ireland towards the realisation of the millennium development goals set by the United Nations.

Deputy P. McGrath

I again welcome the Minister. We are meeting on a regular basis these days. We must all be busy.

I welcome any contribution towards debt relief in Third World countries, our continued commitment to the debt relief initiative and also our contribution towards the replenishment. Any such contributions must be welcomed.

We cannot forget the commitment that was given by the Taoiseach on our behalf to the world when he stated that we would reach our overseas aid commitment of 0.7% of GNP. We have fallen dramatically short of that, despite these figures put forward by the Minister. We must state how disappointed we are about that. The Minister might be in a position to give us an undertaking on when he expects that the commitment relating to 0.7% of GNP will be met. Will it be over the next two, three, four or ten years? It would be worthwhile to get that commitment.

This payment of €70 million will be spread over a period of eight or nine years and involves instalments of €8 million, €9 million or €10 million per annum. Will this €70 million be stitched into the contribution by Ireland for this year, given that it will be paid, not this year but over the period 2006 and 2014? That involves an average contribution of approximately €8 million or €9 million. Will the Minister provide details of the mechanism triggering the drawdown of that money? Will it be on request or front-loaded? In what way will it be done? How will it be counted in terms of Ireland's commitment to overseas aid? Might we see this €70 million repeated each year in the figures? I ask for commitments in that regard.

Will the Minister provide details on where this money will be spent? We hear from time to time that there are major problems with regard to how money is allocated in many of these development countries. Unfortunately, in some countries development aid money goes to the government, which may not spend it wisely or which may substitute the money coming in from other countries to free up funding to purchase armaments and spend in areas other than those for which it was intended.

Overseas aid moneys can do fantastic work. I recently travelled to Kenya and was privileged to visit a GOAL project operating in a shanty town in Nairobi. I was frightfully impressed and proud to be Irish on seeing how our contributions are being used so effectively and bringing such relief at local level. It was extremely impressive. One should compare that with what we often hear John O'Shea say about some of those countries, namely, that the money sent to them goes to government agencies and governments which use it either as a substitute for other spending or perhaps directly for buying armaments. How can we control what happens to the money at that end?

What proportion of these moneys is being channelled through NGOs as distinct from the governments, some of which are quite corrupt? Being in Kenya for a few days, it was interesting to read in the newspapers what unfolded day after day. For example, considering the Minister's former profession, they discovered the week we were there that there was a parallel land registry office in operation. Some bright spark had set up his own office to stamp land registry applications and collect the fees and the big questions emerging related to the extent to which he been successful in issuing papers far and wide and whether people were aware if they had received real or forged documents. Perhaps the Minister would indicate the controls and safeguards that are in place to ensure that this money gets to the real source of the poverty to help the people where it matters most.

Mr. Cowen

I thank Deputy Paul McGrath for his comments. This motion refers not a bilateral aid programme but rather to financing a multilateral international financial institution. That is not the same as a bilateral aid programme, under which one becomes involved in a bilateral agreement with specific countries. In this, we are giving a contribution to an international financial institution which decides, based on its mandate, how to give out the money. I stated earlier that it is regarded as an effective institution in that regard. There are approximately 39 countries — they are the poorest in the world — which obtain funds from this association and five of the top ten borrowers are countries with which Ireland has an aid programme, quite apart from what we would be providing through this mechanism. This funding is the largest source of donor funds for basic social services in the poorest countries. That is where it is going in the main.

In the 12 months to 30 June 2005 the funds were targeted as follows: 36%, human development such as education, health, social safety nets and water supply and sanitation; 23%, law, justice and public administration; 18%, industry; 14%, infrastructure; and 8%, agriculture and rural development. Poverty reduction is the focus of our bilateral aid programme and the IDA, dealing with the poorest countries, has a mandate and vision similar to the core objectives of our overseas development aid programme. We have been strong supporters for many years of this international financial institution as an effective mechanism for dealing with these issues.

The multilateral debt relief initiative is aimed at cancelling the debt of the poorest countries. The IDA, IMF and African Development Fund, among others, have provided 100% relief on eligible debt to a group of low income countries, freeing governments, mainly in Africa, of the burden of debt. The initiative is intended to free up resources for poverty alleviation to help them advance towards the UN millennium development goals, which are focussed on halving poverty by 2015.

The moneys Ireland contributes to the 14th replenishment fund will be spent by the IDA between 2006 and 2008. A further replenishment will be reconsidered in the normal fashion in three years. On the question of the contribution to overseas development, the percentage is based on how it is paid out over the period. The debt relief initiative involves an up-front payment and it is reckonable in 2006. The €70 million allocation is reckonable over a three-year period and we are allowing the IDA to suggest to us the best way to provide it during that period. We will go with its requirements.

Mr. P. McGrath

The Minister referred to an eight-year period in his opening contribution.

Mr. Cowen

The funds are replenished every three years.

Mr. P. McGrath

If the fund is short-changed at international level, will the Minister be required to make the €70 million payment over three rather than eight years?

Mr. Cowen

We expect it be spent over three years and then there will be a replenishment. However, if the association wants €50 million next year, that will be provided. It will be allocated in the manner the IDA decides. That might well be determined by more shaky commitments not coming through in the way the association expects. We are leaving the discretion with the IDA. The money is available on demand if we can be satisfied the moneys contributed to the association address our priorities. Our bilateral aid programmes have absolute priority in the reduction of poverty and our membership of the international financial institutions addresses our commitment to alleviate poverty in the wider world. This commitment avails of mechanisms that have a poverty alleviation mandate in respect of heavily indebted poor countries. We also have bilateral aid programmes with six programme countries in sub-Saharan African, namely, Lesotho, Mozambique, Tanzania, Ethiopia, Zambia and Uganda, and we also have programmes with Vietnam and East Timor. Ireland has been a member of the IDA since 1960 and it has supported its work because of its focus on poverty reduction in the poorest countries. We steadily increased our contributions as funds permitted and we are glad our current economic position allows us to make a significant increase.

Ms Burton

At the end of last week's meeting when members were informed the motion was on the agenda, I asked the Chair to request the Department of Finance and the Minister to provide us with a breakdown before this meeting outlining how the money Ireland has contributed to the various funds is being spent and how it is proposed this round of significant funding will be spent? I am extremely disappointed that we have been given no more information today than was in the Dáil motion last week. The total amount that will be allocated to the respective funds is the only information outlined. I sought a breakdown of the budget headings and the countries and funds involved and I also requested the fund titles, the distribution schedules and so on. I am extremely disappointed that almost no useful information has been provided, bar the Minister's reference to the HIPC initiative and a number of other initiatives. We have no idea how much we contribute. Did the Chairman ask the Department for the information, which I requested in good faith legitimately as a member of the committee for the purposes of today's meeting?

Chairman

The Deputy's request was conveyed in writing to the Department and I will give her a copy of the letter. The content of the Minister's presentation is a matter for him.

Ms Burton

I disagree. I spent a considerable part of my life working on development programmes in both Ireland and Africa. Other than the allocations, the organisations to which they are being allocated and the timeframe, there is neither accountability or transparency in the material provided. I have been a strong supporter during a long period of my working life of Ireland making contributions to development and it is extremely odd that we are discussing sums in excess of €100 million to be allocated over a number of years with almost no detail provided. It is unusual for the Department of Finance to do this and it is almost unknown for any other Department to do so. The approach being adopted by the Minister is that because the funds are increasing, correctly, so that Ireland eventually achieves the 0.7% target, he is committing the Dáil and the committee to a series of blank cheques to be paid in good faith to the various arms of the international Breton Woods agencies and that is not good enough. The Chairman will recall that when a committee delegation visited Washington two years ago, at my request, we met representatives of the World Bank and the IMF.

The Department is represented at the IMF and the Minister attends board meetings. The meeting this committee had with the IMF demonstrated that there is no accountability, which is disgraceful. I raised the issue of HIPC and debt relief measures with the World Bank and the IMF representatives on behalf of Ireland. They undertook to return to me, as a member of the Irish delegation, or to the committee with a response on a number of specific questions on this type of funding.

Let me give an example. A number of years ago the IMF and the World Bank foisted on the city of Dar es Salaam a water privatisation programme. This turned out to be a total disaster from which Tanzania and the city of Dar es Salaam have been trying to recover. The Minister made specific reference to the provision of clean water in his speech. Much of the provision of clean water, as provided for by many of the directives of the IMF and World Bank, is via the privatisation of public water supplies. Does the Department of Finance have a position on money used for water programmes where the condition attached to such programmes is the privatisation of the supply? This has disastrous consequences, as was the case in Tanzania. I do not know whether the Minister of State at the Department of Foreign Affairs with responsibility for development aid, Deputy Conor Lenihan, or President McAleese had an opportunity to see the shambles the IMF and the World Bank visited on Tanzania.

With regard to conditions imposed on Zambia, these were debated here at length by various NGO organisations from which the Department has received numerous representations — for example, from Jean Sommers and Debt and Development Coalition Ireland — with regard to conditions. I have read the submissions relating to the conditions attached to Zambia qualifying for relief through these funds. Rwanda is recovering from a period of genocide and although it is paying significant sums in interest on debt, it barely qualifies for debt relief. How do any of these countries benefit from this initiative and how are the millennium development goals being implemented with regard to issues such as clean water? It seems they are thwarted. I could go on and produce similar examples from almost every sub-Saharan country.

The Minister of State at the Department of Foreign Affairs gave an extensive interview in Monday's The Irish Times. I presume that when President McAleese had returned to Ireland for Mr. Haughey’s funeral, he felt more free to talk at length about the future direction of the Irish aid programme. He referred to the fact that when the White Paper is published in September, it will contain significant elements for the private sector. The bulk of the money going to the World Bank and IMF programmes already ends up in the private sector, either for privatisation-type projects or for paying debts to commercial banks that loaned money to developing countries.

Does the Minister intend to significantly privatise large elements of the Irish aid programme? That would be wrong. Ireland's skills in the aid area are clear and primarily relate to health, education and basic supply issues. They follow the traditions of Irish missionaries who made significant inputs to health and education back over the past 150 years. Why should Fianna Fáil decide what should be done with the contributions of generations of Irish people, from missionaries through to NGOs? Ireland is a small country and the moneys involved are tiny in the context of the totality of the World Bank and IMF contributions. I see no reason, despite Deputy Conor Lenihan's announcement that there will be a significant element for the private sector when the White Paper on development aid is published in September, that we should veer away from tried and trusted inputs that deliver to people.

The Minister made glowing reference to Mr. Paul Wolfowitz. The latter is a renowned neocon architect of the war in Iraq. Having made a mess of that, he was offered the presidency of the World Bank. I do not doubt that he is making valiant efforts to try and make the World Bank more developmental. However, I am at a loss to understand how he is succeeding in doing that. The Minister sounds as if he has been very impressed in his meetings with Mr. Wolfowitz and with his tenure so far as president of the World Bank. Will he enlighten us as to what Mr. Wolfowitz has added, what developments he has made or what gains he has brought about since becoming president?

I do not know where Ireland's €110 million goes. With regard to HIPC funds to which Ireland contributes, will the Minister indicate the amount of our contribution that has been drawn down, the amount waiting to be drawn and what happens to the money during the seven to 14 years it takes for the various countries to qualify for it?

Chairman

I will ask the Minister to respond now because I want to give other Deputies an opportunity to contribute.

Mr. Cowen

This €50 million goes into a general fund of €33 billion. Like previous Governments, we support the international financial institutions and Ireland has supported these particular ones since 1960. The Government is doing nothing different to that which was done by previous Administrations. The Deputy's question of where our €50 million contribution to a fund of €33 billion went cannot be answered in specifics. However, I can give the answer I gave to Deputy Paul McGrath and describe the general areas to which the funds go. I cannot provide an answer to a question seeking specifics. The moneys go into a general fund and we give full discretion to the international financial institutions to disburse them in accordance with their mandate.

Ms Burton

Full discretion gives them a blank cheque.

Mr. Cowen

It does not. It never has been, since 1960, termed a blank cheque when previous Governments gave moneys. We are not giving blank cheques. We give specific moneys to enable these institutions to make the contribution they make. The Deputy may rest assured that the general areas to which the moneys go are consistent with the core objectives of our overall overseas development assistance programmes. That is the position. The funds go towards poverty alleviation, social services and the range of areas I mentioned in response to a previous question. That is where our €50 million and the €33 billion go. There is no demarcation or retention of specific national funds. Nothing states the parish or location in a country to which that day's money is allocated. Money is put into a general fund. We make the contribution as a donor. Those with responsibility for management of the fund under the statutes implement it in accord with their policies. It is not in any sense an absence of accountability. It is a question of us deciding whether we want to give the money. If members do not want to do so, they should reject the motion otherwise they should vote for the motion. That is the purpose of this discussion. We do not micromanage in all areas. Such responsibility lies with those disbursing the funds.

The Deputy's second question related to an interview given by the Minister of State over the weekend regarding the impending White Paper. Obviously the draft White Paper will first come before Government to decide whether it should be policy. The Minister of State may have been referring to the encouragement of the private sector. Social corporate responsibility and getting the private sector involved in development issues is now regarded as an enhancement of future development programmes. I have no objections to, for example, software companies assisting in devising programmes using technology to enable those in remote areas of poor countries get access to e-learning or learning methodologies being improved by the use of private sector technology.

I would welcome getting Irish companies to partner local regional or national governments to achieve that, as would anyone involved in development programmes. The more we can get that type of expertise allied to the core objectives of alleviating poverty and increasing social inclusion the better. Why would we not encourage the private sector, where appropriate? To assist in that respect would be very much welcomed. That is the context in which the Minister of State spoke.

Programmes in these countries should be delivered in the most efficient and effective way possible. It may involve public service delivery or tendering work to the private sector to get the job done. It is a matter for host governments to decide how they want to pursue their policies regarding various services. Our development programme, like any development programme, is about making funds available and partnering other donor countries as we are doing in certain respects in Africa. Frequently three or four governments in Europe pool together their resources under certain headings to bring critical mass to do a job in those poorer countries over a multi-annual programme. It is not a question of knowing exactly where the Irish money goes. The Irish money is often pooled with other money from like-minded countries that want to assist in ensuring that the pooled funds work together in partnership with governments or NGOs in those countries rather than us all doing our individual thing, which can result in the total being less than the sum of its parts. There is no more in it than that.

Ms Burton

I ask the Minister to be kind enough to reply to my questions on the Dar es Salaam water privatisation as an example of World Bank policy, conditionality regarding Zambia, and HIPIC and Rwanda. These are three specific questions on which I would like accountability.

Mr. Cowen

Were I the Minister for Foreign Affairs dealing with the overseas development aid programme, I would be in a position to give specifics on all aspects of our bilateral aid programmes. I am the Minister for Finance and am here——

Ms Burton

These are not bilateral. They are done entirely through the World Bank and its agencies.

Chairman

The Deputy should allow the Minister to respond.

Mr. Cowen

I know they are not bilateral. I made that point to Deputy Paul McGrath.

Ms Burton

They are appointed agencies.

Mr. Cowen

It is a pity the Deputy is not in my seat and I in hers. We make these contributions to international financial institutions. While I attend the AGM of the World Bank, I do not attend board meetings

Ms Burton

The Minister is entitled to do so.

Mr. Cowen

I have never met Mr. Paul Wolfowitz. Regarding what was referred to as a "glowing reference", I believe the narrative is rather neutral. It states:

Other states must pay for this debt cancellation over a much longer timeframe in smaller instalments. The early delivery of money by Ireland to provide up-front financing was especially welcomed by the president of the World Bank [Mr. Paul Wolfowitz] as being helpful to driving the debt cancellation process forward and it helped to allow the World Bank to cope with other countries' less certain commitments.

It is a matter of fact that that occurred and in the interests of transparency, accountability and information, there is no harm in mentioning it. It suggests that Ireland is doing all it can to assist this institution to make sure it can drive forward the debt cancellation process, which is presumably not contentious across parties here.

Regarding our contribution, I believe this is a welcome development. The purpose of this committee meeting is to decide whether the Dáil wishes to pass this resolution — I would highly recommend doing so. The specific policy matters on overseas development aid will be addressed by the Minister of State when he returns.

Caoimhghín Ó Caoláin

I welcome the proposal for Ireland's contribution of €70 million towards the International Development Association's 14th Replenishment and the €58.64 million to the International Development Association's Multilateral Debt Relief Initiative. Earlier during questions to the Taoiseach and also last week when the matter of referring the motion to the committee was discussed on the Order of Business I raised this important issue. I appreciate that it is allowed under OECD guidelines and I want to explore whether the Minister believes there is merit in its pursuit. I am convinced there is merit. I refer to the issue of the inclusion of the moneys under the multilateral debt relief initiative in the overall presentation of the State's commitment to overseas development aid, that is as part of what amounts, I understand, to 0.5% of GNP.

The Taoiseach recently restated the Government's position at the United Nations conference in New York. Hopefully we are now back on track to deliver on the 0.7% of GNP commitment. This will not be achieved by 2007, but by 2012 I hope we will be able to meet the commitment. It is important that we do so. It is a domestic demand and also has an international expectation. It is disappointing that we will not be able to deliver by 2007, as was first promised. Regarding debt cancellation being specifically included in the overall figure, other inventive inclusions on the part of other states clearly represent abuses. They cover a range of expenditures, including the provision of education for foreign students in European universities and housing refugees etc. However, I am of the view that the inclusion of the figure for debt cancellation in the overall committed figure for overseas development is inappropriate because it gives a false reading. Does the Minister find a common view with my suggestion that Ireland might press for a better observed presentation of the factual position on overseas development aid from all countries? I accept that Ireland is unlikely to take such a position unilaterally. Such a better presentation is necessary so that we can have an accurate reflection of the transfer of moneys to deserving people throughout the world, particularly in Africa. The Opposition voices represented at this meeting have common concerns about the suitability of the various financial institutions, such as the World Bank and the International Monetary Fund. We should reflect on the proposals made last year by Debt and Development Coalition Ireland, which said the IMF should have primary responsibility for providing the first port of call for addressing the issue of debt cancellation in light of its reserve and its gold reserves. The coalition said the IMF and the other multilateral banks, such as the World Bank and the African Development Bank, should utilise their own resources in the first instance, not to provide programme resources but to engage in debt cancellation. The coalition urged the Minister for Finance to press at international level for the maximisation of the use of the existing reserves to address debt cancellation. It argued that we should not depend on individual states' contributions, such as the €58.64 million the committee is currently addressing. According to the coalition, such moneys could be better spent on direct supports, for example to address HIV and other such diseases.

Are the Minister and the Government willing to initiate and lead a global debate on the type of international financial institutions which should replace the World Bank and the IMF, which are patently undemocratic in their construction, their purpose and their intent? The presidency of the World Bank is always the reserve of an appointee of the continent of North America. The voting rights within both bodies are stacked in favour of the developed states, rather than the developing countries. It is not disputed that the interests represented by the institutions to which I refer are those of the developed countries. We have an almost self-perpetuating situation in respect of debt accrued by certain countries — arguably odious debt in many of these cases. It has been documented in respect of a number of countries. It is certainly a term that could be applied — the argument is sustainable — to many countries other than the small number to which it has been directly applied. This is another aspect of the matter that I would like the Minister to examine. It is clear that some of the debt incurred in a number of other states has not directly benefited the poor, impoverished and marginalised of those countries. We are allowing the dominant position of the World Bank and the IMF, which demand to be fed moneys on foot of existing debt, to continue. As a result, we are putting off the day when the continued impoverishment of certain people will be genuinely addressed. I refer to citizens who cannot hope to break out of the cycle of debt, marginalisation and low expectation for generations to come. I have raised a number of points. I apologise if they are a little disjointed. I hope there will not be a huge gap between the Minister's disposition to these matters and the positions I have articulated. I will be interested to hear where the Minister stands on each of them.

Mr. Cowen

The multilateral debt relief initiative was agreed at Gleneagles by the G8 countries as part of a compromise deal. It is significant that it was agreed to allocate $50 billion towards debt relief to deal with the historical problems of people, particularly those living in the most indebted and poorest countries which are not in a position to meet the terms in which the indebtedness developed in the first place. It is significant because the issue of debt cancellation has been on the development agenda for ten, 15 or 20 years. The International Monetary Fund, which will be particularly affected in the event of 100% debt cancellation, is meeting the costs from its own resources. The international financial institutions also have to provide stability in the global system.

The cancellation of debt has short-term benefits. It is hoped resources which would otherwise have been diverted to make interest payments on international debt will be made available to develop social programmes. Governance issues also need to be considered. When the heavily indebted poor countries initiative was developed, it was made clear that countries had to undertake a series of reforms to qualify for it. We are all aware that the governance mechanisms in many indebted countries are ropy and poor. Many of the societies and organisations in such places are rudimentary. In 1996, the World Bank and the IMF launched an unprecedented programme to ease the crippling debt burden of some of the world's poorest countries. The heavily indebted poor countries initiative was further enhanced in 1999. It provided deeper and faster debt relief to a larger group of eligible countries. The programme's links with ongoing poverty reduction efforts were increased. Some 29 countries are benefiting from relief under that programme. At the decision point, the governments pledged to introduce a series of key reforms tailored individually for each country according to the areas in which they are needed. Such reforms include the introduction of sound macro-economic policies and measures to help to achieve tangible reductions in poverty levels. In several cases, governance and anti-corruption measures are key issues that need to be addressed. Temporary debt relief is provided by many creditors as of the decision point. In implementing the agreed reforms, governments are also satisfactorily implementing a poverty reduction strategy and maintaining sound policies. At that point, countries can be granted irrevocable debt relief. The programme has a progressive element which seeks to assist countries to find means by which they can achieve basic viability.

The debt cancellation initiative advances these concepts further in that instead of simply accelerating debt relief or reducing the amount of debt to be repaid, debts will be cancelled in the hope that the resources previously used for external purposes will be used internally to strengthen the mechanisms of government, establish societal order and create prospects for a sustainable incremental improvement.

Ireland has a strong record on debt relief for developing countries and supported the multilateral debt relief initiative. It would be a matter of concern if countries which benefit from this substantial initiative were again to build up unsustainable levels of debt. This issue is being actively addressed at European Union level and in the International Development Association. Ireland participates fully in discussions aimed at ensuring that poor countries do not return to a position of unsustainable debt. The country allocations will be reduced by the amount of annual overseas development aid debt relief provided under the new initiative. This means that new financing will be lowered by an amount equal to the debt service relief obtained through the multilateral debt relief initiative. This feature helps allay moral hazard and equity concerns associated with debt cancellation.

On the suggestion that the various banks in question are not democratic, a spring meeting is held at which the various committees are represented. While Ireland is not a member, as part of a group of countries it is represented by Canada. As a governor of the World Bank and International Monetary Fund, I can attend the annual meeting. The board has 24 members and Marcel Masse of Canada represents Canada, Ireland and 11 Caribbean states at the World Bank. It is, therefore, incorrect to state I could attend board meetings if I wanted to, although we have a representative at such meetings under the arrangement set out in the World Bank's charter.

On the question of how the international financial institutions can make a better contribution towards addressing the north-south divide, Ireland continues to make an input into policy through the group of which it is a member. The 11 Caribbean states are happy to be associated with Canada and Ireland because many of our policy positions reflect their concerns. Our objective is to bring about a fairer system and address the historic debt problem while avoiding circumstances in which countries become recalcitrant and incur overwhelming debt again. Block building mechanisms should be put in place to make possible the alleviation of the worst aspects of poverty. Given that many of the countries affected are among the poorest in the world, poverty alleviation is a relative term.

The notion that we can cancel all debt and start afresh without affecting the financial system does not hold up. While a more progressive approach in needed and is emerging in terms of political will manifesting itself in a collective manner in the G8 and through reforms to the financial institutions, this is not a pure banking or treasury matter. We must try to invoke some developmental concepts which do not undermine basic banking principles. To do otherwise would cause serious trouble for the World Bank and create a mess.

One must always strike a balance and find a way forward which is sustainable for the host country and credible for donor countries investing significant moneys. The United States, Canada, Japan, Britain, France, Italy and Germany combined provide about 60% of donor contributions, as they should. We must deal with debt cancellation, an issue which was previously discussed but not acted on. Tangible policy decisions have been made since the G8 summit at Gleneagles, indicating that debt cancellation is not only on the agenda but being implemented.

On the question of clarifying what can be considered part of the 0.7% of GDP calculation, this matter is decided by the development aid committee of the OECD. Why should debt cancellation not be considered a contribution towards overseas development aid given that it provides assistance in ensuring that resources which would otherwise be diverted are not diverted? Does the Deputy suggest we should not include debt cancellation in the figure? Should we increase direct overseas development aid so that countries are able to repay debts? That is a circular argument. If money being allocated directly to governments is reckonable, why would the money being used to reduce the same countries' debts not be reckonable?

Caoimhghín Ó Caoláin

What about the commitment to provide 100% debt cancellation and ensure all funding goes directly into coalface projects?

Mr. Cowen

It is not a question of coalface projects.

Caoimhghín Ó Caoláin

The world would not fall apart if we were to see the demise of the World Bank. We need a new beginning.

Mr. Cowen

Reforms are taking place and other issues, not all of a financial nature, need to be addressed. One could have an enlightened financial instrument but it would be pointless if one were to fail to deal with corruption. Governance issues also need to be addressed as part of a multifaceted approach. My contention is not that many of the arguments have no merit but that no simple alternative is available which would immediately turn around the debt problem. Development, governance and anti-corruption measures are necessary, as is a more flexible financing approach. The financial institutions must take a broader approach. They cannot simply demand repayments from indebted countries without caring about the consequences. However, if one asks them to adopt such an approach, they must be assured that they will not have to revisit the problem time and again. If financial institutions are not able to achieve a return from their lending operations, at some point they or the countries in question will lose. Such an eventuality would exacerbate rather than resolve the problem.

Caoimhghín Ó Caoláin

The United States is currently championing the designation of Iraq's $120 billion international indebtedness as odious. There are many other glaring examples of odious debt. Will the Government consider championing the categorisation of some of these examples as odious as a means of assisting the 100% cancellation of the debts incurred by certain countries, from which the people of those states had no benefit?

Mr. Cowen

Ireland has always supported debt cancellation and was among the first countries to seek 100% debt cancellation. We have also been mindful that we were not owed by the countries in question and that this makes it easier to adopt the position we took on some countries as opposed to others. We support the HIPC initiative. In the context of Ireland's election to the Security Council, I found that all the relevant countries acknowledge the progressive positions Ireland has consistently articulated in UN fora on all matters related to debt cancellation, debt relief and north-south issues in general. I assure the Deputy that some of Ireland's strongest support for representation on the Security Council was found among the poorest of the poor countries because they recognised that we would articulate positions consistent with the foreign policy objectives we have.

Support for debt cancellation initiatives, by definition, suggests that some debts must be written off on the basis that some countries' would never be able to unshackled from them. How these debts arose and whether the countries in question should have become so indebted is a separate question that must be addressed as debts are cancelled with a view to ensuring the problem does not recur in five or ten years.

Mr. Finneran

I welcome the Minister for Finance, Deputy Cowen, and compliment him and the Government on the commitment of €70 million to the International Development Association and of approximately €58 million to the multilateral debt relief initiative. I have no doubt that this will be supported by the committee and the Houses of the Oireachtas.

Ireland is to be complimented on the initiative advocating 100% debt relief for highly-indebted poor countries. Our position in that regard is well known internationally. The Government is to be complimented on its stance. I am a great believer in the involvement of the private sector in overseas development aid. This resource has not been tapped to any great extent. Irish companies could become more involved in providing assistance in terms of overseas development.

There is a great tradition of generosity in Ireland. When a disaster occurs, people respond in a generous way. Irish business can also become involved in development work. I know of businesses which are moving in that direction. In recent times, a group was formed on a national basis and I am pleased that some of those involved are from my county. They are involved in building houses in poor parts of Africa. This year, the group plans to erect 4,000 houses in one location. I hope that this is the type of initiative that was intended by the Minister of State, Deputy Conor Lenihan. We should investigate this area and promote it further. Many other private companies would be prepared to give time, effort, money and, in particular, expertise to aid programmes.

Mr. Cowen

In regard to our participation in the International Monetary Fund and the World Bank, the Department produces annual reports on all of these issues and submits them for consideration. They set out all the developments during the course of the year, the critical issues, the nature of our participation in these institutions and whatever other issues arise. Appendices contain speeches or public comments by Government representatives, or officials on behalf of the Government, in both languages for people to consider and examine. In that respect, the Department seeks to discharge its responsibility in a way that the Oireachtas is entitled to expect.

Chairman

I thank the Minister and his officials for assisting the committee.

Ms Burton

I do not expect the Minister to have a command of the details of the various lines in regard to the IMF but he is incorrect in saying that all Irish Governments supported HIPC. His predecessor, Deputy Quinn, on my explicit advice, did not support HIPC. When HIPC was not supported by Ireland, that was the maximum point of influence on the part of Ireland in regard to the policies being adopted by the World Bank.

I do not doubt the Minister's good intentions towards development aid and the poorest countries in sub-Saharan Africa. However, much of what the World Bank and the IMF, in particular, have done, even despite the reforms introduced by Mr. Wolfensohn, are seriously counterproductive in terms of reaching the millennium development goals. There is no measure of accountability to the House for how this money is being spent in our name.

While I do not expect the Minister to have all the details, he could find a mechanism to address some issues of transparency and accountability. He correctly stated that €70 million or €120 million is a drop in the ocean in terms of the billions available to the World Bank and the IMF but €58 million and €70 million are sizeable sums for this country and they are colossal amounts for the poorest people in Africa. If the Minister does not make the people in the IMF and the World Bank accountable and allows them to get off scot free, we will get what we deserve. Will he outline how he intends to introduce a degree of accountability and transparency?

Mr. Cowen

I refer the Deputy to the annual reports where reference is made to the IMF transparency policy. Due to the fact that it is a global organisation, one does not have national representatives on every board. Groups of countries are represented. I met Mr. Massé when I called to the IMF last year to attend the AGM. I spoke to him and found him to be an upstanding and excellent person. He is reflecting our policy positions.

Definite improvements are taking place because of the more effective use of these funds, all of which is documented. I refer the Deputy to the documentation. No one is suggesting that everything is perfect but what is the point of saying that the HIPC initiative was opposed under a previous Administration? Is it to suggest that we would have more influence if we gave nothing and that we would be able to influence the shape of events without making any contribution?

Ms Burton

Conditionality works both ways.

Mr. Cowen

My position is that it is best to make a contribution, work with like-minded colleagues within the constituency and put forward positions that are reflected in the policies being implemented by the bank. That is an ongoing issue, as it is for all of our development programmes, even our country-to-country programmes. Thankfully, when it is peer-reviewed internationally by the OECD DAC committee and others, we can be proud of what this country is achieving with the money taxpayers are providing — that they ask us to provide — which is consonant with the values that have made society what it is today.

I take a pragmatic view on these issues. I believe in collaborating and co-operating and having a say and making a contribution. There is far more credibility behind our position when we make contributions. This country is among the top six or seven donors in the world in terms of development aid. I am proud of that fact. I hope we can reach the contribution of 0.7% of GDP in overseas development aid, as outlined by the Taoiseach. What is important is not the 0.7% that we contribute, it is what the money is doing and the statement it makes to the international community. More importantly, the quality of the programmes we are implementing is bringing real changes to the lives of the poorest of the poor. That is recognised in the international community and the development community and is something of which we should be proud.