January 12, 2007
The Honourable James Flaherty
Minister of Finance
Department of Finance Canada
140 O’Connor Street
Ottawa, ON K1A 0G5
Re: conditions attached to World Bank and International Monetary Fund development policy lending
Dear Minister Flaherty,
We are writing you to ask you to clarify the Canadian government’s position with respect to the issue of conditionality, and the recent review of World Bank conditionality conducted by the Bank and Norwegian government.
As you know, last November, the Norwegian Ministry of Foreign Affairs hosted a meeting in Oslo to discuss the issue of the conditions attached to World Bank and International Monetary Fund lending. The Norwegian Government, in fact, was interested in conducting an independent review to determine the extent to which the Bank and Fund continue to promote privatization and trade liberalization in the conditions they apply to country lending. Both the Norwegian and British governments have untied their bilateral lending from such conditions.
As part of the Utstein (or Nordic plus) group, the Canadian government was invited to attend the meeting, along with Germany, the United Kingdom, the Netherlands, Sweden, Denmark and Finland. Officials from both Finance Canada and the Canadian International Development Agency were set to attend, but withdrew days prior to the meeting.
While this decision was regrettable, we can appreciate that the government is not able to send representatives to every meeting to which it is invited. Nevertheless, it would be important for Canadian civil society to know where the government stands on the issue of World Bank and International Monetary Fund conditionality. Does Canada, for example, endorse macroeconomic conditions such as high interest rates aimed at combating moderate levels of inflation, and stringent fiscal policies which impair much needed spending on social and economic development?
We would also appreciate your views on some issues raised in the Chairman’s summary from the Nordic plus government meeting since Canada is deemed to be a member of this group of countries. With respect to this summary, we would be interested in knowing precisely a) what the position of the government is in each of the five areas listed, b) where the government feels the Bank needs to focus greater attention to improve existing practices, c) which of these areas the government of Canada sees as a priority for reform:
- country ownership, and the ongoing lack of policy space to allow for countries to spell out alternative policies to those prescribed by the World Bank and IMF and formulate their own development strategies;
- the lack of accountability of both donors and recipient governments to the citizens of the recipient country, and the ongoing absence of national parliaments from the decision-making process as it relates to Bank and Fund development policy lending and the conditions it requires;
- the ongoing challenges of harmonizing policies and conditions across a broad set of donors, and financial institutions, reducing duplication of cross-conditionalities, and determining which conditions are the most critical;
- making aid flows more predictable, a critical issue to ensure that countries are better able to balance their budgets, and the conditions attached to loans more transparent.
We have attached a copy of the Chairman’s summary for your reference.
We look forward to receiving your response on these important issues.
Coordinator, Halifax Initiative Coalition
Josée Verner, Minister of International Cooperation
Samy Watson, Canadian Executive Director to the World Bank
Jonathan Fried, Canadian Executive Director to the International Monetary Fund