DEVELOPMENT: IFAD To Cancel 350 million Dollar Debt

By IPS Correspondents Reprint | | Print |

Jaya Ramachandran

ROME, Feb 17 2000 (IPS) - The United Nations International Fund for Agricultural Development (IFAD) concluded its two-day deliberations here Thursday with an agreement for full participation in the debt initiative for highly indebted poor countries (HIPC DI).

IFAD expects to write off 350 million US Dollars in debt as part of HIPC DI. The Fund cancelled around six million US Dollars per year in 1998 and 1999 and plans to forgive about 30 million US Dollars a year over the next seven years as the programme unfolds.

The gathering, known as the 23rd session of the Governing Council of IFAD, comprised ministers and high-ranking officials from 161 countries.

The Governing Council Thursday urged the Executive Board to define the modalities and procedures for the Fund’s participation. These could involve IFAD’s own resources, the HIPC DI Trust Fund administered by the World Bank and the IFAD Trust Fund for debt cancellation.

The Board comprises 18 members representing the Oil Producing and Exporting Countries (OPEC), members of the Organisation for Economic Cooperation and Development (OECD) and developing nations from Africa, Asia, the Caribbean and Latin America.

A resolution approved by the Governing Council assured that ‘care shall be taken to minimise the impact’ of IFAD’s participation in the enhanced HIPC DI “on the annual lending programme”.

The resolution added: “IFAD shall participate fully in the process of establishing poverty reduction strategies by eligible countries, given its special expertise in combating rural poverty.”

Member countries were invited to contribute to the enhanced HIPC DI either through the HIPC DI Trust Fund of the World Bank, explicitly earmarking those contributions for debt owed to IFAD, or through the IFAD Trust Fund for the HIPC DI.

The cost of the debt relief to IFAD is expected to be the order of 350 million US Dollars. Countries included in the HIPC DI owe IFAD about 1,2 billion US Dollars.

IFAD is already providing debt relief to Uganda, Bolivia and Mozambique under HIPC and has made commitments to assist Burkina Faso, Guyana, Cote d’Ivoire and Mali.

The Council gave ‘a decisive thrust’ to the consultation on the Fifth Replenishment of IFAD for the period 2000-2002. The financing institute is funded by voluntary contributions from member states, that are replenished periodically, from special contributions, loan repayments and investments income.

Member nations also decided to strengthen IFAD’s resolve to build on the experience acquired in the past two decades in giving the poor a chance to reverse their plight. There was broad consensus that the annual programme of operations of 450 million US Dollars in real terms for the coming three years be maintained.

The Governing Council also had tabled before it the Lending Programme 2000, involving 446 million US Dollars, with an average loan size of 14.8 million US Dollars. Approximately 36.77 percent of the loans have been allocated for Africa, IFAD’s top priority, 31.01 percent for Asia and the Pacific, 17.03 percent for Latin America and the Caribbean, and 15.19 percent for Near East and North Africa.

IFAD’s mandate within the UN system is to help improve the living conditions of the rural poor in food-deficit regions of the world on a sustainable basis. IFAD funds rural development projects aimed at assisting the poorest of the poor to help themselves, their families and their communities.

Between 1978 and 1999, IFAD committed over 6.5 billion US Dollars in loans benefiting more than 250 million individuals. Until the end of last year, the Fund had financed 550 projects in 115 countries and provided 1337 grants for research and technical assistance.

Technical assistance grants to institutions and organisations are aimed at strengthening technical and institutional capacities linked to agricultural and rural development.

These are limited to 7,5 percent of the resources committed in any financial year. IFAD’s lending terms and conditions vary according to the Gross National Product (GNP) per capita of a country in need of aid. However, over two-thirds of IFAD’s loans are provided on highly concessional terms and given to the most needy countries and rural population groups.

Importance is attached to arriving at an equitable regional distribution and ensuring aid to all member states requiring assistance.

The Governing Council also reviewed operational cooperation between IFAD and the World Food Programme (WFP). From 1978 to 1998, WFP co-financing of IFAD-initiated projects amounted to 118,7 million US Dollars.

This represented the fourth largest volume of co-financing among multilateral institutions in the same period. In the case of co-financed projects, IFAD normally supports credit-based activities and finances the costs of skilled labour, while WFP focuses on food-for-work programmes for unskilled labour.

During the Governing Council meetings, several speakers referred to the particular role IFAD had to play in the face of globalisation.

An IFAD report stressed that globalisation pointedly draws attention to the fact that poverty is often a function of marginalisation, social exclusion and/or geographic isolation.

Economic growth and development are bypassing upland dwellers, indigenous populations, and ethnic minorities, the landless, rural youth and, particularly, women in all these categories.

The United Nations Secretary General, Kofi Annan, urged IFAD member states ‘to do all they can to make IFAD’s financial position as strong as possible’.

In a message, Annan said: “I ask this for the sake of the poorest: for the small farmers, the rural landless, the fisherfolk and the nomads with a few sheep or cattle. For the indigenous people, across all groups, for the poor rural women.”

The President of Italy, Carlo Azeglio Ciampi, regretted that hunger was still continuing to spread throughout the world, adding: “Despite the most praiseworthy efforts that have been already made, they are still insufficient.”

Italy’s Agriculture Minister, Paolo De Castro, who delivered the President’s message, added that the three Rome-based UN agencies, FAO, WFP and IFAD, each with its specific operational strategies, have the potential to achieve a significant level of synergy, exploiting their complementary functions to the full.

IFAD President Al-Sultan pointed out that 1,3 billion people, accounting for one-fifth of the world’s population, were suffering from hunger and poverty. The Fund’s projects approved in 1999, were expected to help some 10 million people gain the means to work themselves out of poverty.

“If we are assured the resources, IFAD, on these trends should be able to help some 150 million people move out of poverty between now and 2015, a significant contribution to the international poverty reduction target,” he added.