I move: "That the Bill be now read a Second Time."
The purpose of this Bill is to authorise a contribution of £13 million by the Irish Government to the 11th replenishment of the resources of the International Development Association — IDA — which is an affiliate of the World Bank. It is one of the bank's main instruments in the fight against extreme poverty. It was set up in 1960 to assist the poorest countries which cannot afford to borrow money from the World Bank on its normal terms. These countries have an annual per capita income, in 1995 terms, of $905, or IR£588, or less. There is also an exception for small island economies that have limited creditworthiness.
IDA beneficiaries are the people of the world's 79 poorest countries, which have a total population of 3.3 billion. That is equal to 57 per cent of the world's population. The IDA is the world's most important source of global multilateral concessional assistance. Its activities span the globe, including China, Bangladesh, India, Pakistan, Egypt, most of sub-Saharan Africa and some countries in Central and South America. Some 41 IDA-supported countries are in sub-Saharan Africa.
Sustainable poverty reduction remains the overarching objective of the IDA and, indeed, is the overarching objective of development. Broad-based economic growth led by the private sector and environmental sustainability are two key supporting objectives of the IDA. The IDA also recognises that development requires growth accompanied by a broad-based investment in basic health, education and infrastructure. The critical underpinning requires macro-economic stability accompanied by structural adjustment and the building of civil society.
The IDA is mostly funded by regular grant contributions from its richer member countries. These resources need to be replenished from time to time, normally at three year intervals. The negotiations for the 11th replenishment were completed in 1996 and this replenishment will cover the period from June 1996 to June 1999. These funds are supplemented by repayments made by IDA's borrowers in respect of earlier loans and transfers from the available net income of the World Bank.
Deputies will be aware that the United States is contributing only to years two and three of the IDA 11. Because of this, it has been necessary for IDA to establish a one-year interim fund on an exceptional basis. The absence of the US contribution for the first year prevented the other donors from agreeing an adequate and fully burden-sharing funding basis for the full IDA 11 period.Hence the need to split the three-year period into a once-off year-long fund without US participation, followed by a two-year arrangement inclusive of US involvement.
A figure of 7.1 billion special drawing rights — SDRs — about IR£6.67 billion, will be provided in donor contributions to enable IDA to commit a total of about 14.5 billion SDRs, about IR£13.6 billion, during this period. Of the total donor contributions to IDA 11, some 2.1 billion special drawing rights, about IR£1.97 billion, will be provided to the interim fund and five billion special drawing rights, about IR£4.7 billion, will be provided for the association's operations in 1998 and 1999.
The agreement to the 11th replenishment was achieved under difficult budgetary circumstances for many of the contributing countries. It will allow the IDA to continue its activities at current levels for the next three years. This is a noteworthy achievement in itself. However, it also gives cause for concern for the longer term as it reflects a decline in donor contributions to a level below those of the 9th and 10th replenishments. During that period the Irish contribution to IDA has increased by 2 per cent in absolute terms. The Irish contribution to IDA 11 will amount to IR£13 million which is equivalent to 0.13 per cent of total donor contributions. Of the 36 donor countries, Ireland, Brazil, Luxembourg, Portugal and Switzerland increased their basic shares from that in IDA 10. Ireland's total commitment of IR£4.3 million in 1997 will be to the interim fund. The balance of the Irish commitment will amount to IR£8.7 million and will be devoted to operations in financial years 1998 and 1999.
The actual cash payments for IDA 11 will be made over a seven year period beginning in 1997. Contributions to the IDA are payable from the Central Fund. Ireland's contributions to the International Development Association count as part of our official development assistance programme, about which I will comment further at a later stage.
Apart from the critical question of the size of the replenishment, during the negotiations attention also focused on other key policy issues, such as the poverty focus of the association, the environmental impact of its projects and the problems facing low income highly indebted countries in servicing and, in some cases, redeeming their debt. To ensure IDA resources are applied effectively in the programme for a given country, the development effort is centred around what is referred to as a country assistance strategy. These strategies, which have evolved in recent years, are a more effective instrument for prioritising activities.
Poverty assessments are one of the main pieces of analytical work available as background for individual country assistance strategies. Officials and citizens of borrower countries have also been encouraged to participate in preparing the country assistance strategies and in some countries, with government consent, interested citizens and NGO representatives have been invited to discuss lessons learned from the implementation of national adjustment programmes. However, evidence from the field and from NGOs indicates that the country assistance strategies process has some way to go before it can be truly classified as highly participatory.
IDA recognises that the impact of its programmes on poverty can be judged only by the results of its operations achieved in the field. It has taken significant steps to better define how its projects will contribute to poverty reduction. Monitorable indicators, related to the objectives of each new project, are defined and recorded at the design stage. IDA attaches great importance to the completion of country poverty assessments for all major IDA recipients. It continues to emphasise social sector lending for health, education and social welfare and poverty-targeted investments that disproportionately benefit the poor or contain specific mechanisms for identifying and reaching them.
Total IDA disbursements on social sector investment projects have been increasing rapidly. These disbursements under IDA 10 amounted to US$3.5 billion or IR£2.27 billion. Total disbursements increased at an annual rate of 24 per cent during the IDA 10 period which compares with an average annual increase of 11 per cent during the IDA 9 period. The bulk of this assistance helps meet the basic needs of the poor, such as the provision of primary education, basic health care, access to clean water, and low-cost sanitation, in the poorest countries
IDA is now the largest external financier and source of advice on social sector policies in poor countries and disbursements for social sector investment projects are expected to continue to increase rapidly. IDA also plays a key role in the economic and social development of these countries.Its purpose is not to provide short-term humanitarian aid, but to create the conditions in which the countries concerned can permanently raise the living standards of their peoples. Its lending programmes are primarily aimed at providing resources for investment projects that are not only essential for the economic and social development of the borrowing country, but also technically and economically sound. The IDA also lends for more comprehensive economic programmes which facilitate the long-term growth of the economy or of a sector. In recent years, it has increasingly provided financial aid to enable poor countries to introduce and implement urgent economic policy reforms and structural adjustments.
IDA remains committed to sound environmental stewardship and has financed a significant and increasing number of projects specifically aimed at environmental objectives such as conservation, sustainable resource use and pollution management.Even more important is IDA's continuing effort to thoroughly integrate environmental considerations across the spectrum of its projects and other activities. IDA employs an environmental assessment process to ensure its operations meet a high environmental standard.
The acceleration of development in Sub-Saharan Africa remains IDA's greatest challenge. Those African countries which are trying to perform well on a sustained basis will continue to receive priority in the allocation of IDA resources. Approximately 40 per cent of IDA's financial support goes to sub-Saharan Africa, making IDA the most important source of concessional lending for the region — concessional lending means lending at less than the normal commercial terms. Countries in sub-Saharan Africa have recently experienced an upturn in growth which reached 4 per cent in 1995 after averaging just 0.7 per cent in the previous four years. This recovery was due in part to the effect of reforms undertaken by a number of countries. Many countries persisting with reform programmes, such as Ghana, Tanzania and Uganda, have recovered dramatically from economic decline in the 1980s. Africa is now just working its way from stagnation to recovery and carrying out important political reforms in parallel. The aggregate figures mask great variations in performance between countries in the region. While the growth of GDP of some African borrowers began to improve in recent years, poor policy performance and civil conflict in some countries have made it difficult for IDA to support the desired level of investment in the area.
The problem of the crushing burden of service payments, in respect of debts incurred in the past, faced by the poorest countries provides a grim background to the activities of IDA and the World Bank. An equitable resolution of this problem is the aim of all parties. Members will already be aware of the main features of the debt initiative, agreed by the IMF, the World Bank and bilateral creditors last year. I do not propose to repeat them here. However, the establishment of a debt initiative of any description is a major achievement in itself and a testimony to the negotiating skills of the managing director of the IMF, the president of the World Bank and their staffs. This could not reasonably have been foreseen a number of years ago. Now it is becoming a reality and countries are being considered for assistance under it. Members might wish to be reminded that because of their high grant element, IDA credits do not generally worsen borrowers debt service burdens. This grant element consists of long maturities — often 30 years or more — significant grace periods of approximately ten years in which there is no capital repayment and negligible interest rates of approximately three-quarters of 1 per cent. This is a particularly important consideration in the case of the 41 IDA borrowers which are classified as heavily indebted poor countries. Specific measures are being taken to ease the burden on those countries.
I will now report on the use of the funding provided to IDA under the 10th replenishment from 1 July 1993 to 30 June 1996. During the period of IDA 10, the association has promoted economic and sectoral reforms in recipient countries as a means of encouraging growth and development. Concern with basic social services has been another major theme for IDA. It has made provision for specific budgetary allocations for these sectors as well as the promotion of arrangements on the ground to make optimum use of scarce resources.
In general, Ireland welcomes the increased priority accorded to investment in people under IDA 10 and particularly the incorporation of gender and policy issues into country assistance strategies.We also strongly support the highlighting of child labour, forced labour and environmental procedures under the country assistance strategies.
The specific highlights of the period covered by commitments from 10th replenishment include the following. The number of eligible countries increased from 70 to 79. Most of the new borrowers are newly independent countries, such as Armenia, Bosnia-Herzegovina, Eritrea and Tajikistan, in need of exceptional assistance with policies, institutions and aid co-ordination. IDA was able to respond and did so in partnership with other agencies. Sound economic and social policies are a prerequisite for effective resource use and, thus, for accelerating growth and reducing poverty. IDA resources are allocated primarily on the basis of country performance. Poor countries with the best policy performance receive the largest relative commitments. IDA's implementation efforts have resulted in a marked acceleration in the pace of disbursement. Total disbursements during the IDA 10 period exceeded US$17 billion or IR£11.04 billion, some 20 per cent more than during the IDA 9 period. The evolution of disbursements during the IDA 10 period reflects the increasing priority accorded to investments in people. Disbursements for social sector investment projects to improve education, health care, nutrition, water supply and sanitation for poor people increased by nearly 70 per cent relative to the IDA 9 period, reaching US$3.5 billion. Many countries have made formulating and adopting policies conducive to poverty-reducing growth their highest priority. During the IDA 10 period new adjustment operations which accounted for one-quarter of commitments supported policy reforms in more than 30 countries. A total of 41 of IDA's borrowers are in Sub-Saharan Africa. Most of them depend on aid flows to a great extent. Because these countries must grow rapidly if they are to offer their expanding populations a way out of poverty, this region has the greatest concentration of IDA activities. Individual operations, as well as country assistance strategies, are increasingly designed following consultations and drawing on lessons learned not only in IDA operations but also by other agencies. Nearly one-half of IDA 10 operations made use of one or more of the four strongest forms of participation which include joint assessment, shared decision-making, collaboration and empowerment of beneficiaries. Formulation of country assistance strategies benefited from consultations with a wide range of policy makers and representatives of civil society.
The IDA 10 period saw a continuation of IDA's efforts to develop and implement effective programmes of assistance, focused on country specific poverty reduction strategies. Progress was made in many areas. However, much remains to be done to further improve ownership of reform programmes and foster local institutional capacity, to sharpen the poverty focus of IDA activities, to enhance project effectiveness and to strengthen partnerships with all stakeholders, both internationally and within the poor countries it is IDA's mandate to serve.
Other areas which have been prioritised under IDA 10 include research into disadvantaged areas, involvement of non-governmental organisations and gender sensitivity, recognising in particular the role of women. Some specific actions taken by the IDA during the 10th replenishment include the following: in Africa more than six million textbooks were distributed, mainly to primary schools; in Pakistan more than 7,000 school classrooms were constructed; in India 64,000 health care workers were trained; and in Bangladesh, more than 250 kilometres of rural roads were improved. Overall, given that development is predicated on sound economic and social policies, it is not surprising that the poor countries with the best performance receive the largest relative commitment from IDA. Ireland supports the concentrated use of scarce resources on good performers, but is concerned that this policy should not be pursued to such a degree that the poorest countries might irretrievably lose out and we have continued to make that point in discussions with the various agencies.
Ireland's key focus in its dealing with the International Development Association, specifically with IDA 11, is to ensure that adequate resources are provided to Sub-Saharan Africa, which is a particular objective of Irish policy; IDA resources be used efficiently and effectively in terms of lowest possible amount of administration; funding be linked to sound economic practices, including good government; and progress is made on creating the conditions that will promote the development of civil society.
Our Government accepts that an important determinant of good performance is whether the borrower's macro-economic and structural policies contribute significantly to the central objective of reducing poverty within a framework of good government. This brings me to the issue of Ireland's contribution to the IMF's Enhanced Structural Adjustment Facility known as ESAF. With regard to the Enhanced Structural Adjustment Facility of the IMF, which refers to cheap loans granted to the poorest countries, I state again that the Government does not propose to authorise Ireland's contribution to ESAF in advance of a satisfactory operational implementation of a comprehensive debt relief framework. The Government accepts that the debt initiative adopted at the annual meetings of the IMF and the World Bank in October 1996 represents a step in the right direction. The Minister for Finance, Deputy Quinn, indicated on behalf of the Irish Government to the executive director of the Irish constituency at the IMF that the Irish contribution to the current ESAF would need to follow rather than precede implementation of the debt initiative for the Highly Indebted Poor Countries known as HIPCs. Ireland's contribution to ESAF remains conditional on a satisfactory operational implementation of the debt initiative. The same considerations will apply to any other source of funding that might become available as a result of the optimisation of the use of resources by the IMF.
A preliminary review of the debt initiative will take place at the spring meetings of the IMF and the World Bank, which are due to commence this weekend. The review of the operation of the debt initiative will provide an opportunity for Ireland to consider again how Ireland's participation in the initiative might best be effected.
A key concern is the view, widespread in Ireland and indeed shared by Deputies on both sides of the House, that the conditions attached to ESAF programmes may impact disproportionately on the poorest and most vulnerable sections of the community. I note and welcome that the IMF has commissioned a small number of independent consultants to carry out an evaluation of several aspects of ESAF-supported programmes.I very much welcome the focus of the consultants and their concentration on three key topics, namely, developments in countries' balance of payments during ESAF-supported programmes; social policies and the composition of Government spending during ESAF-supported programmes; and the determinants and influence of differing degrees of national ownership of ESAF-supported programmes.
The consultants' findings will be relevant to the Government's consideration of Ireland's contribution to ESAF, particularly in the context of the evolution of IMF policy on ESAF conditionality. In this context, I acknowledge the contribution of the non-governmental organisations in highlighting the impact of excessive debt and the difficulties this poses for the affected countries in reducing poverty. Several of these agencies have an impressive track record in working to ease the lot of the poorest. Their considered and thoughtful opinions on a wide range of developmental issues, forged out of long experience in the field, provide a valuable perspective which has not been in any sense ignored by the Government. In our consideration of developmental matters, we have accepted their voice is a valuable contribution at national and international level and I pay tribute to their work and commitment.
Turning to the linkages between our contributions to the IDA and Irish Bilateral Aid Programme, Deputies will appreciate that contributions to multilateral bodies, like the IDA, are only part of Ireland's overall contribution to overseas development. Inclusive of bilateral and multilateral funding, Ireland's official allocation to aid has risen to IR£122 million in 1997. This is the highest level ever in monetary terms and as a percentage of GNP. This also accords with the Government's stated policy to move steadily towards achieving the UN goal of 0.7 per cent of GNP. I should say that this year the figure is 0.31 per cent of GNP. As recently as 1992, the figure was 0.16 per cent of GNP, so we have doubled the amount in the intervening years. I emphasise it is a time of high economic growth so any percentage of a rapidly increasing GNP is valuable in real terms on the amount of money provided.
The priority for Irish Aid is to contribute to the long-term economic and social development of the poorest countries, especially those in Sub-Saharan Africa. Irish Aid has identified six priority countries for the receipt of assistance — Lesotho, Tanzania, Zambia, Ethiopia, Uganda and Mozambique. The bilateral aid programme also co-funds aid projects with Irish and international non-governmental organisations.
Irish Aid works closely with the host governments in partner countries at national, regional and local levels. This approach has the advantage of increasing the likelihood that individual projects will be maintained beyond the duration of direct Irish Aid involvement. More generally, Ireland's primary focus on the poorest countries of Sub-Saharan Africa dovetails well with IDA's emphasis on assisting the poorest developing countries.
Ireland's membership of IDA was authorised by the International Development Association Act, 1960. Our contributions to the various replenishments have been authorised by amendments to that Act and this Bill will enable us to make our contribution to IDA 11. The Bill is essentially a one section Bill authorising Ireland's contribution to the replenishment. The table in section 1 merely sets out the historic pattern of contributions made by Ireland since the inception of the IDA in 1960.
In summary, the Government is determined to continue to work effectively with the IDA in the interest of promoting development in the poorest and least developed countries. This is not to say that the IDA is blemish free. It is quite clear that, in the context of further progress toward the global economy, specific measures are necessary to ensure that the least developed countries get a fair opportunity to participate. First, if this is to be achieved, the developing countries will have to play a greater part and essentially take charge of the development processes. Second, it will be necessary for the IDA to continue to take action to refine its policies and programmes to address real needs in the countries concerned. Third, it will be necessary for IDA to ensure its services are provided in an efficient and effective manner. I recommend the Bill for the approval of the House.