To ask Her Majesty's Government what effect the global economic recession has had on (a) International Monetary Fund lending to the poorest and least developed countries, and (b) the volume of lending by the International Development Association. [HL6318]
In the year following the onset of the crisis last September, the International Monetary Fund (IMF) made new commitments of $3.4 billion to 26 low-income countries. This is nearly six times the average level of IMF lending to low-income countries in the three years before the crisis. The IMF expects to lend a total of $8 billion to low-income countries in 2009 and 2010. The sharp increase in the IMF’s assistance to the poorest countries follows the London Summit commitments to double the level of finance available from the IMF for each low-income country and to double the total capacity of the IMF to lend to all low-income countries.
In order to help poor countries tackle the effects of the economic downturn, the International Development Association (IDA) of the World Bank has agreed measures to fast-track and frontload funds. Fast-tracking refers to using streamlined processes that allow new funding to be approved more quickly. Frontloading means allowing countries to anticipate funding from next year to allow more investment in the current year. In response to the crisis, IDA members agreed to increase the amount of funding that could be frontloaded from 30 to 50 per cent. These measures resulted in IDA commitments reaching $14 billion in the IDA’s financial year 2008-09, which ended in June 2009. This is a record, and 25 per cent higher than the previous year. However, there has not been a similar increase in the spending of these funds, and we continue to press for reforms that will improve the Bank’s performance in this area.
At the London Summit, G20 leaders asked the Prime Minister to review the adaptability and responsiveness of the IFIs. His report was submitted to G20 leaders in September and has been placed in the Library of the House. One of its key findings was that the World Bank lacked the means to provide additional funding to the poorest countries when shocks occurred, and the Prime Minister proposed a new crisis response facility within the IDA. Shareholders have agreed to ask the Bank to bring forward proposals on establishing such a facility.