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International Development

Volume 707: debated on Thursday 12 February 2009

Question

Asked by

To ask Her Majesty's Government how they will use the United Kingdom's international development budget to offset the falls in capital flows to the poorest developing countries during the current economic crisis. [HL1164]

The current global economic and financial crisis will negatively affect capital flows to developing countries. Recent papers published by the World Bank and others estimate capital inflows at $466 billion in 2008, compared to $564 billion in 2006 and $929 billion in 2007. Recent forecasts from international institutions and credible experts such as the Institute for International Finance suggest that capital flows could fall to around $165 billion in 2009.

In response, DFID is working with its partner countries and international institutions:

a. to uphold its ODA commitments to keep the UK on track to spend 0.7 per cent of GNI on ODA by 2013;

b. to maintain the focus of its bilateral programmes (in 2007/08, our country specific bilateral aid was £2183 million of which £1920 million went to low income countries);

c. to ensure a robust multilateral response to support less developed countries, including through the countercyclical response of international finance institutions - such as increasing World Bank lending threefold, accelerating disbursements from the International Development Association (IDA) and International Finance Corporation (IFC) facilities that aim to mobilise close to $30 billion—and by exploring the option of a “vulnerability fund” to support developing economies;

d. to work on remittances to ensure that flows remain efficient, cost-effective and transparent; and

e. to maintain a substantial investment climate reform programme to help improve the environment for both foreign and domestic investment flows.