Letter from Prime Minister Martin Re: Eradicating debt at UN summit/WB-IMF Annual meetings - January 3, 2006

January 3, 2006

Mr. John Mihevc
Halifax Initiative Coalition
Suite 104, 153 Chapel Street
Ottawa, Ontario, K1N 1H5

Dear Mr. Mihevc:

Thank you for your letter of September 12, 2005 regarding Canada's contributions to the global fight against poverty. I regret the delay of my reply.

The United Nations Millennium +5 Summit and the annual meetings of the World Bank and International Monetary Fund (IMF) were extremely important opportunities to secure commitments to advance international efforts toward poverty alleviation. Canada was very active in the lead-up to these events and Canadian officials worked hard to ensure that there was no erosion of existing international commitments in the United Nations Summit Outcome document. In this, I believe, we were largely successful.

Although I was disappointed in some respects with the final results of the Summit, I am pleased that many of our objectives were advanced, including a reaffirmed commitment by all member states to achieve the Millennium Development Goals (MDGs). These accomplishments were very much in line with the UN Secretary-General's recommendations in his report, In Larger Freedom. I have attached a copy of my statement of September 16, 2005 to the UN General Assembly in New York during the Millennium +5 Summit.

In regard to development assistance levels, Canada remains committed to the internationally agreed target of devoting 0.7 percent of gross national income to official development assistance. We will

continue to work towards this goal as resources allow. In addition, our long-term goal as a country is to devote no less than five percent of our research and development investment to a knowledge-based approach to development assistance. The Government will therefore seek to increase federal research for development to five percent of the federal research budget as part of this Five Percent Challenge.

As your letter correctly recognizes, Canada has been a leader in promoting debt relief and in carrying through with both bilateral and multilateral initiatives. We took direct action through the bilateral Canadian Debt Initiative to freeze and forgive all debt payments owed to Canada by heavily indebted poor countries (HIPCs) - more than $1 billion when fully implemented. We have also contributed $346 million to HIPC Initiative trust funds to finance debt relief at international financial institutions.

A very positive development for the world's poorest countries was the June 2005 agreement between G8 Finance Ministers to put forward a debt proposal that provides for 100 per cent cancellation of debts owed to the IMF, the International Development Association and the African Development Fund by countries that have completed the HIPC process. I was pleased to see that this proposal was accepted by shareholders at the Annual Meetings of the IMF and the World Bank. This debt cancellation will provide significant support for countries' efforts to reach the MDGs, while ensuring that the financing capacity of the international financial institutions is not reduced.

On the issue of conditionality, both the IMF and the World Bank are trying to integrate greater attention to issues related to poverty and the social impact of adjustment in their work. Over the past year, Canada has advocated the establishment of the Policy Support Instrument at the IMF, which will allow countries to develop and submit their own reform programs to the Executive Board for discussion. This is a significant improvement that will enhance country ownership.

Thank you for taking the time to make me aware of your views on these important matters and for your organization's continuing contributions to the Make Poverty History global campaign. A copy of this letter will be sent under separate cover to your colleague Mr. Gerry Barr.

Yours sincerely,

[original signed]

Paul Martin