U.S. Department of the Treasury

(Archived Content)

FROM THE OFFICE OF PUBLIC AFFAIRS

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1. We reaffirm the commitments we made at our meeting in February this year to help developing countries achieve the Millennium Development Goals by 2015, to make particular efforts in Africa, which on current rates of progress will not meet any of the Millennium Development Goals by 2015, and to set out for G8 Heads of Government and States the steps we believe can be taken to further implement the Monterrey Consensus on an open world trade system; increased aid effectiveness; absorptive capacity; increased levels of aid; and debt relief.
2. We reaffirm our view that in order to make progress on social and economic development, it is essential that developing countries put in place the policies for economic growth, sustainable development and poverty reduction: sound, accountable and transparent institutions and policies; macroeconomic stability; the increased fiscal transparency essential to tackle corruption, boost private sector development, and attract investment; a credible legal framework; and the elimination of impediments to private investment, both domestic and foreign.
3. We reaffirm our view of February that it is crucial that the international community improves the effectiveness of aid. In particular bilateral and multilateral donors need to: harmonize their operational procedures; align aid behind country-owned priorities for growth and poverty reduction; and provide for measurable results. Donors must also: focus their aid on poverty reduction; enhance efforts to untie aid, based on DAC principles; and deliver aid in a more predictable way.   We welcome the progress made at the Paris OECD DAC High Level Forum in March, and call on the OECD DAC to set by September this year, ambitious and credible targets against all the indicators of progress agreed at the March meeting.
   
4. A successful outcome for the Doha Development Agenda, our highest common priority in trade policy for the year ahead, will bring real and substantial benefits to poor countries. The Hong Kong Ministerial in December will be a critical step towards a successful outcome of the DDA in 2006, which delivers substantial increases in market access for developing countries; establishes a timetable for the elimination of all trade-distorting export support in agriculture; and provides effective special and differential treatment for developing countries.
5. However, not all countries will benefit in the short term from reductions in trade barriers. Some countries lack the capacity to produce and deliver goods to international markets competitively; for others, the transitional costs of moving to more open markets may be substantial.   We also recognize that poor countries face particular problems and need the flexibility to decide, plan and sequence reforms to their trade policies to fit with country-owned development programs.  We commit to provide support to enable developing countries to benefit from trade opportunities.  We call on the IFIs to submit proposals for the Annual Meetings for additional assistance to countries to develop their capacity to trade and ease adjustment in their economies, based on a systematic analysis of transition costs, so they can take advantage of more open markets.
6. Tackling diseases that undermine growth and exacerbate poverty in developing countries will require not only strengthened health systems, but also improved treatment, including universal access for AIDS treatment by 2010 and development of vaccines, including for HIV and malaria.   We have made progress this year in implementing the Global HIV Vaccine Enterprise agreed at Sea Island, and are committed both to taking this further; and to scaling up our support for vaccines and medicines research through the successful Public Private Partnerships model.  We call for a report on progress by the end of the year.   We recognize also that advance purchase commitments (APCs) are potentially a powerful mechanism to incentivize research, development and the production of vaccines for HIV, malaria and other diseases. We asked Minister Siniscalco to consult the relevant institutions, governments and industry, with the aim of developing concrete proposals by the end of this year. 
7. The Enhanced HIPC Initiative has to date significantly reduced the debt of 27 countries, and we reaffirm our commitment to the full implementation and financing of the Initiative. Moreover, individual G8 countries have gone further, providing up to 100 per cent relief on bilateral debt. However, we recognize that more still needs to be done and we have agreed the attached proposal.   We call upon all shareholders to support these proposals which we will put to the Annual Meetings of the IMF, World Bank and African Development Bank.
8. We also recognized at Monterrey that a substantial increase in ODA and private capital flows will be required to assist developing countries to achieve the Millennium Development Goals.  We acknowledge the efforts of all donors, especially those who have taken leading roles in providing and increasing ODA and committing to further increases.
9. Specifically we welcome: the progress the EU has made towards the 0.39 per cent ODA/GNI target agreed at Barcelona; the announcements by France and the UK of timetables to reach 0.7 per cent ODA/GNI by 2012 and 2013 respectively; and the recent EU agreement to reach 0.7 per cent ODA/GNI by 2015 with an interim target of 0.56 per cent ODA/GNI by 2010 - a doubling of EU ODA between 2004 and 2010.  In line with the EU agreement, Germany (supported by innovative instruments) and Italy undertake to reach 0.51 per cent ODA/GNI in 2010 and 0.7 per cent ODA/GNI in 2015. We welcome the tripling of US ODA to Sub-Saharan Africa and the near doubling of US ODA to all developing countries since 2000. The US now accounts for roughly 25% of all ODA to Sub-Saharan Africa. In addition, we welcome the launch of the Millennium Challenge Account and the President's Emergency Plan for AIDS Relief. We welcome Japan's commitment to double its ODA to Africa over the next three years and Canada's budget plans to finance its commitment to double aid levels from 2001 to 2010, and to double aid to Africa by 2008.   In addition, we welcome Russia's $2.2 billion contribution to the HIPC Initiative.
10. As we prepare for decisions at the G8 Summit in Gleneagles we continue our work program on: the IFF and its pilot, the IFF for Immunization; some of the revenue proposals from the Landau Report, including a pilot project, supported and led by France and Germany, for a contribution on air travel tickets to support specific development projects and to refinance the IFF; the Millennium Challenge Account; the Enhanced Private Sector Assistance with the African Development Bank; and other financing measures; so that decisions can be made on how to deliver and bring forward the financing urgently needed to achieve the Millennium Development Goals.
11. Nigeria is key to the prosperity of the whole continent of Africa.  We welcomed Nigeria's progress in economic reform as assessed in the IMF's intensified surveillance framework, noted its move to IDA-only status, and encouraged them to continue to reform.  We are prepared to provide a fair and sustainable solution to Nigeria's debt problems in 2005, within the Paris Club.

G8 Proposals for HIPC debt cancellation

Donors agree to complete the process of debt relief for the Heavily Indebted Poor Countries by providing additional development resources which will provide significant support for countries' efforts to reach the goals of the Millennium Declaration (MDGs), while ensuring that the financing capacity of the IFIs is not reduced. This will lead to 100 per cent debt cancellation of outstanding obligations of HIPCs to the IMF, World Bank and African Development Bank. Additional donor contributions will be allocated to all IDA and AfDF recipients based on existing IDA and AfDF performance-based allocation systems. Such action will further assist their efforts to achieve the MDGs and ensure that assistance is based on country performance. We ask the World Bank and IMF to report to us on improvements on transparency on all sides and on the drive against corruption so as to ensure that all resources are used for poverty reduction. We believe that good governance, accountability and transparency are crucial to releasing the benefits of the debt cancellation.  We commit to ensure this is reaffirmed in future bilateral and multilateral assistance to these countries.

Key elements:

• Additional donor contributions will be allocated to all IDA and AfDF recipients based on existing IDA and AfDF performance-based allocation systems.
• 100 per cent IDA, AfDF and IMF debt stock relief for Completion Point HIPCs.  
• For IDA and AfDF debt, 100 per cent stock cancellation will be delivered by relieving post-Completion Point HIPCs that are on track with their programs of repayment obligations and adjusting their gross assistance flows by the amount forgiven. Donors would provide additional contributions to IDA and AfDF, based on agreed burden shares, to offset dollar for dollar the foregone principal and interest repayments of the debt cancelled. Additional funds will be made available immediately to cover the full costs during the IDA-14 and AfDF-10 period. For the period after this, donors will commit to cover the full costs for the duration of the cancelled loans, by making contributions additional to regular replenishments of IDA and AfDF.
• The costs of fully covering IMF debt stock relief, without undermining the Fund's financing capacity, should be met by the use of existing IMF resources. In situations where other existing and projected debt relief obligations cannot be met from the use of existing IMF resources (e.g. Somalia, Liberia, and Sudan), donors commit to provide the extra resources necessary. We will invite voluntary contributions, including from the oil-producing states, to a new trust fund to support poor countries facing commodity price and other exogenous shocks.
• Globally and on this basis we are committed to meeting the full costs to the IMF, World Bank and African Development Bank.  We will provide on a fair burden share basis resources to cover difficult-to-forecast costs, in excess of existing resources, to the IMF, IDA and AfDF over the next three years. Subject to further analysis by the institutions we will provide up to $350-500 million for this purpose.  We are also committed, on a fair burden share basis, to cover the costs of countries that may enter the HIPC process based on their end-2004 debt burdens. We will also seek equivalent contributions from other donors to ensure all costs are covered and we will not jeopardize the ability of these institutions to meet their obligations.
• Utilize appropriate grant financing as agreed to ensure that countries do not immediately re-accumulate unsustainable external debts, and are eased into new borrowing.

We call upon all shareholders to support these proposals which would be put to the Annual Meetings of the IMF, World Bank and African Development Bank by September.