6 Financing for development and the international finance institutions
The World Bank, IMF and a large part of the UN system are key institutions with regard to framework conditions for and financing for development. The UN contributes through its special organisations and funds for development by giving legitimacy to international sets of rules with a bearing on development, professional expertise, aid and mobilization of other resources for financing development and through its peace operations. Throughout its history, the World Bank has provided strong guidelines on the development of poor countries through the conditions and advice that has been linked to the loans given by the bank to poor countries. Parallel to this, the IMF has given credits to developing countries in financial difficulties. The fund’s stablisation progammes for the macroeconomy have been the basis for credits for development purposes and has put strong restrictions on the countries’ budget expenses and latitude within economic policy.
Norway is one of the UN system’s largest contributors. Table 6.1 shows how Norwegian contributions for development aid are spread between the five largest multilateral recipients.
Table 6.1 Multilateral organisations: The five largest recipients of Norwegian aid (NOK million)
2003 | 2004 | 2005 | 2006 | |
---|---|---|---|---|
World Bank1 | 1 046 | 1 067 | 1 523 | 1 526 |
UNDP | 1 129 | 1 106 | 1 350 | 1 293 |
UNICEF2 | 584 | 890 | 1 328 | 1 152 |
Global funds3 | 343 | 505 | 721 | 970 |
World Food Programme | 334 | 315 | 607 | 539 |
1 Includes support to IBRD, IDA and IFC, with deductions for debt relief and support channeled to the Fast Track initiative (education) and the global fund for aids, tuberculosis and malaria (GFATM).
2 Excluding support for the GAVI Alliance (the Global Alliance for Vaccines and Immunization).
3 Includes GFATM, GAVI and Education for all.
The table shows that there has been an increase in the support to all of the five largest multilateral recipients during the period 2003 – 2006. The largest increase has been in the support to global funds, particularly in the field of health. The largest recipients among the global funds in 2006 were GAVI, with NOK 499 million, GFATM, with NOK 271 million and the Fast Track Initiative, with NOK 200 million. The support from the global funds was channeled through existing multilateral organisations such as the World Bank, UNICEF and WHO, but managed by separate boards in the funds.
The support through the multilateral organisations is given in two ways; as basic support to the organisations’ programmes approved by the board (general contributions) or as earmarked support to concrete programmes and projects (multi-bilateral aid). The general contributions are regarded to be multilateral support, while earmarked funds are considered bilateral support. It is the earmarked support in particular, i.e. multi-bilateral aid, that has increased in recent years.
6.1 The UN system. International law and resource mobilisation
Large parts of the UN system, such as the United Nations Development Programme (UNDP) are focusing on aid, and the UN is a significant international player in this field. Other special organisations have mandates that extend considerably beyond aid at the same time as their activity is aimed at meeting developing countries’ challenges and influencing the framework conditions that the international society puts on poor countries’ development. Examples include the High Commissioner for Refugees (UNHCR), who works with migrants and internal refugees, UNCTAD, which deals with the relationship between development and trade issues, the Security Council in the role as clearing body for the use of peace-keeping forces, the WHO, which provides advice on health and defence against international epidemics to all countries, UNESCO, which works with education and research, the UN’s Environment Programme (UNEP) and the Intergovernmental Panel on Climate Change (IPCC), which works with environmental and climate change matters, among others.
One of the main tools these organisations have to affect framework conditions is international conventions, which are international laws and rules that are devised in collaboration with countries and as far as possible try to provide equal conditions for all affected countries. After approval in the member countries’ national assemblies, the conventions shall, in principle, be incorporated into national legislation. The UN is thus an important forum for setting international rules that can contribute to better development conditions for poor countries in most of the areas that the Policy Coherence Commission deals with.
The UN is also one of the most important channels for and managers of international initiatives and processes that contribute to development. A key central process of this type was initiated in Monterrey, Mexico in 2002, Financing for Development (FFD), where world leaders including the USA agreed to mobilise more funds for development, as laid down in the The Monterrey Consensus. Increasing aid was a key point, but focus was also put on mobilising resources in addition to aid to developing countries by means of better framework conditions for industry and internationally through debt relief, better trade terms and more foreign investments and a more flexible policy from international financial institutions. Some of these areas are also among the central non-aid areas for resource mobilisation in the UN’s Millenium Development Goal no. 8.
The UN’s Global Summit in New York in 2005 was a milestone conference both for the Monterrey Consensus and for the achievement of the Millenium Development Goals. The summit confirmed that limited progress had been made in the mobilisation of resources for development. This was also the catalyst for the G8 leaders agreeing at Gleneagles in the same year a large-scale effort for the mobilisation of more aid for development. The third such conference is being held in Doha in 2008. At the time of writing, however, development aid has fallen, a trade solution in the WTO appears to be a long way off, the fulfilment of the Millenium Development Goals is poor and unevenly distributed throughout the world, energy and food prices are rising, the growth in the North is falling and consequently the demand for the developing countries’ goods, which means that the FFD conference in Doha will no doubt have a much more difficult task in inspiring increased efforts to assist developing countries than the two previous meetings.
Considerations of the Commission
The Commission regards the UN as the most important arena in the efforts for peace, security, the environment, development and the protection of human rights. The UN has a global mandate, global support and a broad, multidisciplinary area of responsibility. This gives the organisation a special position. The Commission believes it is important for Norway to continue its efforts aimed at strengthening the institutions in the UN that are responsible for work relating to the environment, poverty and sustainable development. Fighting poverty requires a stronger international legal system with better policy instruments and possibilities for monitoring and sanctions.
The Monterrey Consensus and Financing for Development is the only international process where various policy areas for development are considered coherently. Trade, debt and investments were important topics, as were aid and national development policy. This makes Financing for Development a key process in the efforts to mobilise resources and improve framework conditions for development. There are major indications that the third milestone conference in Doha in 2008 will be a challenge since many of the promises made in Monterrey have not been kept. Nevertheless, the Commission believes it is important that Norway prioritises the efforts to mobilise resources and change framework conditions through the Financing for Development process. A lack of results in terms of development will lead to a poorer negotiation climate in other negotiation processes as well.
With regard to the efforts to mobilise more resources for development, the Commission believes it is important that national resource mobilisation is moved up on the international agenda. Many developing countries lose large sums of money due to both legal and illegal tax avoidance as a result of tax havens and a lack of transparency, combined with poor tax regimes.
In order to strengthen the developing countries’ negotiation capacity in connection with international agreements on trade and investment, the Commission believes it is important to strengthen UNCTAD as a producer of knowledge and arena for negotiations on south-south trade. UNCTAD has a large degree of legitimacy among developing countries, and through its annual reports on trade, investments and development, put the focus on key topics that developing countries have been concerned with in international negotiations.
Commission member Kristian Norheim does not share the views of the rest of the Commission regarding the issues discussed in the preceeding four paragraphs.
6.2 World Bank Group
The World Bank Group was founded in 1944 at the same time as the International Monetary Fund (IMF), and has formal status as one of the UN’s special organisations. Today, the World Bank Group is by far the largest international development institution, and the only development bank with a global mandate. In addition to the bank’s role as the world’s leading multilateral donor, it is playing an increasingly important role with regard to laying framework conditions for commercial investments in developing countries and as an indicator of how safe such investments are.
Most of the World Bank’s capital base consists of guarantees from member countries. This gives the institution a high degree of creditworthiness and thereby the possibility to borrow from international capital markets on extremely favourable terms. The money is then loaned out to borrowing countries on approximately the same terms, which are normally much more favourable than the loans the countries would have had access to on the global capital markets. With regard to the poorest countries that do not have access to loans from the capital markets, the World Bank mobilises resources to its development fund (IDA) through periodic negotiations between donor countries.
The World Bank’s financing has becoming increasing complex and varied over time. Traditional loans where the bank negotiates directly with the recipient and sets the terms, have been supplemented with various fund investments aimed at small and medium-sized companies and credit schemes that offer liquidity to the finance industry in developing countries. This is a reflection that a well-functioning financial market is regarded as necessary in order to create sustainable economic growth.
Textbox 6.1 The most important issues for Norway in the World Bank
Norway took over the Nordic-Baltic board position in the World Bank’s Board of Directors on 1 July 2006. This entails Norway having responsibility for coordinating and presenting Nordic-Baltic points of view in the bank’s board up to 2009. Norway thus has a unique opportunity to affect the World Bank.
According to the Ministry of Foreign Affairs, the most important issues for Norway during this period are as follows:
Anti-corruption, good governance and human rights
Energy for the poor and private sector development
The environment
Gender equality
Peace and state-building
The Ministry of Foreign Affairs further states that,
«Norway will work actively for the World Bank placing greater emphasis on distribution issues in its policy, and ensures that public goods such as health and education benefit poor population groups. It is also important to work for a World Bank that listens to and cooperates with other development policy players, both globally and nationally. In line with the Soria Moria declaration, Norway will also work to strengthen developing countries’ influence in the bank and for a World Bank that does not set requirements for privatisation against the wish of the national authorities. It is also an expressed goal to work for greater transparency in connection with Norway’s role in the bank.»
The Nordic-Baltic constituency consists of: Denmark, Estonia, Finland, Iceland, Latvia, Lithaunia, Norway and Sweden, and makes up 0.63 per cent of the votes on the World Bank’s board.
Source: «New role for Norway in the World Bank», Ministry of Foreign Affairs, press release, 4/7/2006.
The debate on the development effect of the World Bank’s activities has been about the latitude recipient countries have been given for formulating their own development policies as well as formal political power on the bank’s board and management committees. One fundamental principle in the World Bank’s statutory set of rules is that it shall limit itself to only setting financial conditions for its operational activities. The interpretation of what contributes to development has changed considerably, and the bank now applies a broad understanding of the term «financial conditions». For instance, the concept of governance is now included, which can be a fairly wide-reaching concept.
Textbox 6.2 Trust Fund for Environmentally and Socially Sustainable Development (TFESSD)
The World Bank currently has around 1,000 trust funds from many different donors, in different areas. In 1999, together with Finland, Norway established the Trust Fund for Environmentally and Socially Sustainable Development (TFESSD). The objective of the fund is to strengthen the World Bank’s and the partner countries’ capacity and efforts within the environment, social development and poverty.
With the establishment of the fund Norway has stated that it would like to put emphasis on the bank’s efforts to reduce poverty in a sustainablility perspective and contribute to increased collaboration between various departments in the World Bank, as well as with the UN system and other institutions and specialist environments. The fund received NOK 70 million support from Norway in 2005.
An independent evaluation carried out in 2008 recommended that the formulation of goals for the fund should be more closely defined, priority changes should be less frequent and the programme periods should cover several years, and sector boards involved in the trust fund should be more closely examined, with a view to making the fund more strategically oriented.
Source: TFESSD
Throughout the 1970s and 80s, the World Bank’s activity was based on a paradigm where a liberal market economy was seen as a prerequisite for economic sustainable development. This resulted in lending terms that forced the recipient countries to make extensive market reforms. After negative experiences with sector loans and structural adjustment programmes in the 1980s, many stakeholders have demanded that the World Bank should, to a far greater extent, recognise the necessity of the recipient countries themselves developing ownership to their own development strategies, and be given latitude to adapt their investments to national political and economic conditions. Opinions vary on whether and to what extent the Bank has changed as a result of the criticism. The World Bank is still criticised for continuing to lay down terms for privatisation and economic liberalisation in connection with loans.
![Figure 6.1 The conditions for access to credit are important for growth
and development.](/contentassets/9b801d1fe4804a9a9e30d8d621a3b021/en-gb/hfig/fig6-1.jpg?preset=fullsize)
Figure 6.1 The conditions for access to credit are important for growth and development.
Many donor countries, including Norway, have argued that the World Bank should increase its recipient orientation and contribute to increased national ownership of development programmes and projects. Together with the IMF, the Bank requires developing countries to devise national Poverty Reduction Strategies (PRS) – as a basis for ensuring that the institutions’ policies are in line with the recipient countries’ own priorities, with poverty reduction as the key issue. Many critics question the developing countries’ real ownership of the PRSs and whether the World Bank still has too great an influence on their political priorities through the de facto approval of the countries’ plans entailed in this scheme.
The PRSs were introduced as a result of widespread scepticism in the aid community concerning whether many of the World Bank’s financial loan terms actually reduced poverty in the recipient countries. However, many donors, including Norway, believe that the bank should strengthen its poverty focus further (see box 6.1). Norway and the UK, among others, therefore believe that both the World Bank and the IMF should align allof their loan terms for developing countries with their PRSs. The basis for this is both the consideration to national sovereignty and the recognition that many of the conditions for market economy reforms in developing countries do not necessarily reduce poverty. The Government has an expressed goal of using aid funds and its involvement in international fora to strengthen the capacity of the public sector in developing countries.
6.2.1 Debate on executive bodies
In addition to the criticism of the loan conditions, the executive bodies of the World Bank and the IMF have also been subject to criticism. It has been claimed that by the very fact that their own decisions are not made on a purely demoractic basis, the institutions lack the legitimacy to promote democratic reforms in developing countries. The debate has also covered the informal arrangement whereby the president of the World Bank is American and is nominated by the USA, while the IMF’s president is European and in reality appointed by the EU. This power constellation has been subject to criticism as it heavily affects the interests of the countries that are actually affected most by the decisions taken.
6.3 Norway’s involvement in the International Monetary Fund (IMF)
The IMF was founded in Bretton Woods in 1944, at the same time as the World Bank, and 185 countries are currently members. The idea behind the IMF was to stimulate more international, economic cooperation in order to prevent a repeat of the wave of economic protectionism and instability that led to the global financial crisis in the 1930s. Since its inception, the fund has been working to facilitate sustainable economic development based on international financial stability. It has become a key player in international economic co-operation, with the main responsibility to facilitate the stability in the international monetary system and act as a forum for co-operation on monetary and foreign exchange policy issues.
Like the World Bank, the IMF has continuously modelled its loan programmes in accordance with the development of international financial markets and changes in the demand for long-term capital. Currently, the IMF’s activity is concentrated in three main areas: monitoring the economy in the member countries, loans in crisis situations and technical assistance. The IMF’s influence on the recipient countries’ political and economic policies have increased in recent decades, but has diminished in the past few years in line with many developing countries gaining access to alternative sources of long-term capital. The IMF’s fiscal policy advice in relation to many countries that applies for support in connection with financial crises was for a long time to demand extensive and speedy market economy reforms. Central to this was an inflation target of five per cent, requirements for balanced national budgets and growth in the GDP per capita. In developing countries, it was often the budget items that particularly affected welfare schemes that it gave least resistance to cutting. At the same time, it was discovered that the requirements for higher interest rates and lower public expenses hindered both private and public investments. This meant that help from the IMF was often associated with social and political fundamental changes in developing countries.
In 1996, in recognition of the fact that many countries were struggling to recover from a debt crisis, the World Bank and IMF cancelled their loans to many of the Highly Indebted Poor Countries (HIPC). The initiative linked the debt cancellation to criteria for the need for debt relief and to conditions related to economic policy and governance. To start with, the countries must develop a Poverty Reduction Strategy Paper (PRSP), where they outline their strategy for reducing poverty, which is also more generally used as a basis for support from the World Bank, IMF and other multilateral and bilateral donors. The World Bank and IMF then carry out a debt analysis in which the country’s financial situation is carefully considered. Before the debt is effectively cancelled, the country must implement some of the imposed reforms in order to ensure that the saved expenses contribute to development and the reduction of poverty. Next, calculations are made of how much debt relief is required to make the debt manageable. Negotiations are then carried out between the creditors.
Textbox 6.3 Norway and the IMF
In accordance with paragraph 25 of the Norges Bank Act, Norges Bank shall administer the financial rights and fulfil the corresponding obligations that ensue from Norway’s participation in the IMF. Norges Bank is also the secretariat for the IMF work in Norway. This is a task that Norges Bank carries out on behalf of the Ministry of Finance.
Norges Bank in consultation with the Ministry of Finance and other Norwegian authoritative bodies prepares Norwegian positions in connection with issues being submitted for decision in the IMF’s board. The Norwegian points of view are then discussed with the other countries in the constituency1 with a view to reach a common position. The Nordic and Baltic countries make up a constituency in the IMF and have a joint representative in the IMF’s board.
According to the Ministry of Finance, some of the most important current issues are as follows:
1. The voting weight of developing countries
The Government supports proposals to increase the number of board seats in order to improve the developing countries’ representation in the IMF and to increase the number of basic votes and by so doing strengthen the voting weight of the developing countries.
2. Conditionality requirements
In accordance with the Government’s plan of action for fighting poverty, we will help to ensure that the fight against poverty is the top priority in the work of the World Bank and IMF. In this connection, the Government will oppose requirements for liberalisation and privatisation in IMF programmes if those requirements are not development or poverty-oriented or a part of the fight against corruption.
3. Debt relief
The Government has been a leading force in the implementation of the debt relief initiative. Norway argued for the Nordic-Baltic constituency in the IMF supporting the majority in the IMF’s board to cancel the debt of 19 out of 20 relevant countries in January 2006. Norway was in the minority in the Nordic-Baltic constituency, but the IMF board were made aware of Norway’s point of view.
1 Same constituency as the World Bank
The IMF has established its own subsidised credit scheme for poor countries (PRGF). This is perhaps the most important development policy initiative that the IMF has undertaken in recent years. Although this mechanism reflects a recognition from the IMF that strong requirements for market liberalisation can have negative social consequences, it does not necessarily mean that the IMF’s initiative will now have an entirely positive development effect. For example, the debt relief has to a large extent been used for repayment of debt from IMF’s previous loan programmes. This indicates that the reforms have not been particularly successful and that setting conditions is not necessarily an effective instrument for assisting receipient countries. Nevertheless, the dramatic reduction in debt servicing that the IMF and other creditors have been involved with, has been pivotal to increasing the efforts related to initiatives to reduce poverty in many countries, e.g. investments in health and education, which incidentally are a part of the conditions for receiving such debt relief.
The World Bank has estimated that the 22 first countries to reach the decision point for debt relief under the HIPC scheme, increased their input in social initiatives over public budgets by a total of USD 3.4 billion in 2001 and 2002. Around 40 per cent of these funds went to education initiatives and 25 per cent to health initiatives.
In recent years, the IMF’s role with regard to stabilising international financial markets has been subject to broad debate. The growth of short-term financial flows and the consequences of the IMF’s interventions in various financial crises have raised questions on the IMF’s relevance use of stabilising initiatives in a globalised world and on how and under what circumstances the fund should be involved in developing countries. The powerful positions that the World Bank and IMF have in global development policy have also led to many developing countries wanting more influence in the management systems. Like the World Bank, the IMF’s undemocratic management system has been criticised, and various proposals for a broader and more democratic voting system have been put forward. The main argument for increased representation from the developing countries is that these should to a greater extent be able to decide which guidelines they shall be subject to, and what priorities the fund should have. The most important counter argument is that conflicts of interest can arise if the borrower has the opportunity to formulate conditions that they themselves must be bound to, and that this can gradually undermine the fund’s financial sustainability.
Another ongoing debate is whether and how the IMF should become involved in microeconomic affairs that affect poverty in developing countries. The IMF’s increasing focus on poverty reduction reflects the general legitimacy crisis that many development institutions found themselves in in the 1990s due to a lack of results. In this connection, the IMF has to an increasing extent been coerced into documenting and strengthening the development effect of various loan schemes. Reducing poverty subsequently became one of the fund’s express aims and the PRGF was introduced. This scheme signalled not only the beginning of an increasing effort between the IMF’s and World Bank’s programmes in the poorest countries, but also the IMF’s activities and goals being considered to an increasing extent based on a broad development perspective where the criteria for success is whether they contribute to the reduction of poverty in the different countries.
In retrospect, the PRGF and IMF’s general entry into the broader development debate has become subject to criticism from various quarters. A report from a committee headed by Pedro Malan, the former Minister of Finance in Brazil, concluded that the world is served by better interaction between the IMF and World Bank, but that the IMF does not have sufficient institutional capacity and expertise with regard to poverty issues. An analysis conducted by the IMF’s own evaluation department examined the results from 29 countries in Sub-Saharan Africa, which have made use of the PRGF and drew the same conclusion. The report claimed that the IMF’s guidlines and programmes with regard to aid and poverty are undermined by ambiguity and confusion. The report also believed there was a major gap between rhetoric and practice with regard to fighting poverty in low-income countries. This ambiguity, which characterised the IMF’s board and administration, meant that employees chose to prioritise macroeconomic stability, just as before.
Others have expressed skepticism to whether the PRSP process actually strengthens the developing countries’ position. According to the IMF and the World Bank, the PRSPs are developed by the recipient countries with input from the civil society. However, many critics believe that the PRSP process, envisaged as a mechanism to strengthen the recipient countries’ power to formulate their own development strategies, has increased the World Bank’s influence over the countries’ priorities and strategies. In that sense, the initiative represents a continuance of the structural adjustment programmes instead of a break from it. An independent report by researchers at Oxford University published in 2003 concluded that civil society can only influence the programme formulation to a very limited extent, and neither is it possible for Governments in recipient countries to do this, particularly with regard to macroeconomic assessments and guidelines. Many other studies of PRSP processes in various countries have also found that the policy space of the recipient countries is often limited.
6.4 Illegitimate debt and responsible lending
In addition to the introduction of the PRGF and IMF’s new role in the development process, debt relief has been much debated. An important part of this problems is how debt incurred by corrupt and often authoritarian regimes should be handled. Odious debt refers in this context to loans that have been granted even where it was known that the regime does not have the support of the people and that the loan will not benefit the population. Illegitimate debt is a broader concept that refers to loans that are given on immoral and unethical premises, where the creditor must take part of the responsibility for the loan not being repaid. In 2006, Norway Commissioned separate analyses on odious debt from two different international organisations. The World Bank concluded that, under international law, a country cannot refuse to repay national debt even if it is odious. The analysis also said, however, that this should not prevent donor countries and recipient countries from trying to ensure that the loans benefit the population. UNCTAD had a somewhat more nuanced view in its analysis and believe that although the term illegitime debt does not have any foundation in international law, it is still relevant and useful in relation to the debt problem. The problem is that there is no legal forum that can assess whether a loan is illegitimate or not. Instead, questions can be raised in bilateral and multilateral negotiations on debt relief, or legal proceedings on illegitimate debt can be initiated in national courts of law.
The knowledge that a great deal of debt in developing countries can be traced back to authoritarian and corrupt regimes has put pressure on the financial institutions’ and the creditor countries’ loan schemes. Considerable amounts of debt also stem from loans given to projects where it can be claimed that the lender knew, or should have known, that the development policy effect would be minimal. The question of responsible lending has become topical in recent years, largely because of the growth in the number of lenders, where China is the main player. This has led to a growing concern that a lack of coordination and increase in loans can lead to a new debt crisis. The question has been raised, however, of whether responsible lending can be considered solely on the basis of sustainability and debt burden criteria. This has led to a debate on the need for an international framework that can prevent the loans from undermining democracy, the environment, the fight against corruption and human rights. On the other hand, it has been argued that criteria for responsible lending that are too stringent can result in developing countries risking a reduction in the access to loans or that the loans will be more expensive.
Considerations of the Commission
The international financial institutions play a key role in the development policy and are extremely influencial in countries that receive aid and loans. The Commission believes that the need for democractic reforms of the international financial institutions is still great. Conditions are still set in connection with loans, aid and debt relief that can undermine democratic processes and the fight against poverty. A number of studies, including from European Network on Debt and Development (EURODAD 2007) and the study by Benedicte Bull from 2006 financed by the Ministry of Foreign Affairs has shown that the World Bank is still setting requirements for privatisation in its programmes. The Commission believes that it should be left to each individual country to consider in its economic policy the relationship between the private and public sector. A coherent Norwegian policy for development must also to a greater extent than previously entail a critical review of Norwegian policy with regard to the IMF. The need for this has particularly been highlighted by the evaluations carried out by the IMF’s own evaluation office, the IEO in 2007 and 2008, which have raised questions on the number of conditions, their content as well as their relevance for fighting poverty. The World Bank and the IMF also play a sufficiently important role that these institutions’ legitimacy also with regard to demoractic governance is considered to be important.
Kristian Norheim does not share the views expressed by the rest of the Commission in the above paragraph.
The Government’s decision in 2006 to cancel the debt related to the ship export campaign has generated substantial interest internationally. By acknowledging joint responsibility for the debt, Norway was one of the first countries ever to help put the question of a broader lender responsibility on the agenda. The Commission believes it is important that this decision is actively followed up by Norway. A future international approach to responsible lending must also address irresponsible lending in the past where both bilateral and multilateral lenders have granted loans to oppressive regimes and irresponsible projects.
6.5 Proposals for initiatives for financing for development:
6.5.1 Financing for development
Initiative 1: With the exception of Kristian Norheim, the Commission believes that Norway should give priority to work related to the Financing for Development process in the UN. In addition to the efforts to increase resources and improve framework conditions within aid, trade and debt relief, Norway should also prioritise the international cooperation in order to strengthen the developing countries’ possibilities for national resource mobilisation through taxation. International standards for transparency in reporting on corporate structure, tax, signature bonuses, licences and ownership are in this context of great significance.
Norway should also prioritise efforts aimed at more effective institutional mechanisms to strengthen the follow-up of the Monterrey conference on Financing for Development. An enhanced secretariat and a separate committee for Financing for Development under the general assembly should be considered in this context.
UNCTAD has a key role to play in giving advice, technical assistance and building a consensus around a more development-friendly trade policy. Norway should work to strengthen UNCTAD.
6.5.2 Responsible lending
Initiative 2: In the Financing for Development process and in other contexts, Norway should prioritise the work for international mechanisms that can consider handling illegitimate debt, and also ensure that guidelines for responsible lending have a broader approach than just sustainability analyses. It will be important in this work to have a good dialogue with new lenders so that these also support guidelines for responsible lending.
6.5.3 World Bank and IMF
Initiative 3: With the exception of Kristian Norheim, the Commission recommends that Norway continues to work for a democratisation of the international financial institutions.
Developing countries should be given more voting weight and more «chairs» in the World Bank and IMF. The practice of USA or the EU appointing the management of the financial institution must be phased out.
Norway should attach importance to greater transparency in the IMF. Minutes from the board meetings and the constituency’s input should be publically available.
Initiative 4: With the exception of Kristian Norheim and Julie Christiansen, the Commission recommends that Norway continues its efforts to bring about reform in the World Bank. Economic conditions that entail requirements for privatisation and liberalisation should not be in existence in either the IMF or the World Bank. It should be up to the individual country to determine the balance between private and public sector in their economic policies.
The Commission recommends that the support for the World Bank’s IDA fund is reduced or frozen if no evidence is given of a change in practice with regard to requirements for liberalisation and/or privatisation.
Initiative 5: With the exception of Kristian Norheim and Julie Christiansen, the Commission recommends that development policy goals must also be used as a basis for Norwegian policy in the IMF. Norway should undertake efforts to restrict the IMF’s role in low-income countries to its original mandate:
This will entail a critical review of the PRGF programme with the aim of phasing it out in its present form. This loan scheme means that the IMF has a significant role within long-term development financing while the fund should focus on its original mandate, which is monitoring the economy in member countries, short-term balance of payment problems and crisis situations.
The Millenium Development Goals must also be used as a basis for the IMF’s macroeconomic advice, instead of today’s one-sided focus on macroeconomic structure goals. Norway should undertake efforts to ensure that the IMF reduces the use of rigid inflation targets, wage ceilings, and assessments of the absorption capacity in national economies, since this reduces their latitude to develop alternative macroeconomic models.