Africa: Monterrey Promises, 1/2, 03/20/02

UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER

Africa: Monterrey Promises, 1 Date distributed (ymd): 020320 Africa Action Document

Africa Policy Electronic Distribution List: an information service provided by AFRICA ACTION (incorporating the Africa Policy Information Center, The Africa Fund, and the American Committee on Africa). Find more information for action for Africa at http://www.africaaction.org

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Region: Continent-Wide Issue Areas: +economy/development+ +US policy focus+

SUMMARY CONTENTS:

This posting contains a brief statement by Africa Action on issues neglected or ignored at Monterrey. It also includes a recent action alert from the Globalization Challenge Initiative on the privatization of water in Ghana - an illustration of how policies imposed by "donors" in the guise of "reform" in fact add additional burdens on the poor and undermine the purported commitment to poverty reduction.

A related posting also distributed today contains excerpts from a briefing paper on poverty reduction released by Oxfam International on the eve of the global Financing for Development Conference being held this week in Monterrey. The Oxfam paper serves as one benchmark for the enormous gap between the rhetoric of world leaders, including new promises rolled out for Monterrey, and the reality of actual resources delivered for public investment to address global inequality.

The official Financing for Development conference site, with live webcast, speeches, and other documents, is available at: http://www.un.org/ffd

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Africa Action Statement on the Monterrey Conference on Financing for Development and the Bush Administration proposal for increased Aid to Poor Countries

March 20, 2002

President Bush travels to Monterrey, Mexico tomorrow to attend the International Conference on Financing for Development, a global summit to discuss reducing world poverty. The two key issues highlighted by the rich donor countries are (1) how much aid should they provide poor countries, and (2) what they will require of poor countries in terms of better governance.

We welcome the momentum toward realistic levels of development assistance, and agree that governments of both rich and poor countries should be held accountable. But we are appalled that the priority concerns of African countries have been largely sidelined.

The cancellation of Africa's illegitimate foreign debts and the full funding of the UN Global AIDS Fund are the essential first steps for saving millions of lives lost each year in Africa to poverty and the closely linked health crisis. These issues should top the agenda.

In Monterrey, Bush will present a new U.S. initiative. On Thursday last week, the President announced a proposed increase in U.S. assistance to developing countries. But the proposal was so hastily prepared that the White House has already had to issue corrections. As now described, the White House proposes an additional $10 billion in aid to developing countries over three years beginning in 2004. Named the Millennium Challenge Account, the initiative offers increased funding to countries who meet specific criteria including economic policies and governance conditions defined by Washington. Currently, most U.S. aid goes to two strategic allies in the Middle East, not to fight poverty in Africa.

The Bush initiative requires closer scrutiny. It reflects the White House's concern with criticism at Monterrey and from groups like ourselves, pointing out the fact that the richest country in human history is not contributing its fair share. But itdoes not show serious planning and commitment commensurate to the need.

The essence of the initiative is a bargain: countries deemed to be well behaved will be rewarded with greater U.S. funding. But the planned increase does not begin until 2004, and the requirement for greater resources to fight poverty is immediate. The promised increase is still well below what the U.S. can and should provide immediately to channels for effective delivery of resources that are available now.

It has been clearly demonstrated, for example, that public investment in health is effective in reducing poverty and promoting economic growth. It is correct to demand that resources are used effectively to achieve their intended purposes, but the monitoring mechanisms should be independent rather than unilaterally imposed by donors. These investments by rich countries are an obligation and moral responsibility, not an optional commitment.

The Bush proposal also fails to offer anything new on debt cancellation. The U.S. contribution to the Global AIDS Fund remains a meager pledge of $500 million over two years. Bush's announcement may reap short-term public relations dividends, but it fails to address today's most desperate needs.

Similarly the summit taking place this week in Monterrey has misplaced its priorities. The leaders of the world's richest countries promote free trade and foreign investment as the engines of development, supplemented by small increases in aid. But the principal obstacles to reducing poverty in Africa remain the hemorrhaging of some $14 billion in annual debt repayments to rich foreign creditors and the AIDS pandemic and the larger health crisis it represents.

This year is going to be critical in determining how the U.S. and other rich countries respond to Africa's economic challenges. In the aftermath of September 11th, they are being forced to address the widening divide between rich and poor countries. New international efforts, including those emerging from Monterrey, must be measured by how they respond to Africa's greatest immediate challenges: Debt and AIDS!

- - Africa Action

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Globalization Challenge Initiative http://www.challengeglobalization.org

Ghana Water Privatization: Update

March 14, 2002

Dear Friends,

A heartfelt thanks to all of you for signing on to the letters to the IMF and the World Bank regarding water privatization in Ghana. We have received a very unsatisfactory reply from the IMF which you can view at: http://www.citizen.org/cmep/Water/cmep_Water

Below we have drafted a response to the IMF's letter and we would encourage everyone to respond directly to the IMF. Ghana was awarded entry into the debt relief program of the IMF and the World Bank last week. Prior to entry, the government of Ghana negotiated the next tranche of their loan from the IMF. Again, the loan included conditions requiring full cost recovery (increased consumer fees) for water and electricity and an automatic adjustment formula (that would tie water and electricity fees to the fluctuations of the Ghanaian currency on the international market)! Below is an action alert regarding these loan conditions. Again, we encourage everyone to write directly to the IMF in protest. E-mail and fax numbers of key IMF officials are below.

Action Alert

New IMF Loan to Ghana Includes Conditions That Will Raise the Cost of Water

A newly released IMF loan document, dated March 5, 2002, discusses the conditions imposed for the fourth and fifth tranche of Ghana's loan under the IMF's so-called Poverty Reduction and Growth Facility. The document states that IMF authorities will continue to require implementation of full cost recovery(1) in the public utilities as a condition for releasing the next tranche of the loan. In addition, the IMF will continue to require that the Public Utility Regulatory Commission develop an automatic tariff adjustment formula(2) for electricity and water. (See definition of full cost recovery and automatic adjustment formula at bottom of alert) (See the IMF document at:
http://www.imf.org/external/pubs/cat/longres.cfm?sk=15691.0)

IMF and World Bank loan conditions mandated a 95 percent price hike in water fees in May 2001. The new IMF loan conditions mean that additional price hikes will be planned. "The current water tariff rates that the government of Ghana and the World Bank think are below the market rate, are already beyond the means of most of the population in Ghana," says Rudolf Amenga-Etego of the National Coalition Against Privatisation of Water. "So, how will the population possibly be able to absorb a so-called market price in the context of privatization?"

For a number of years, World Bank and IMF policies have been pushing the government of Ghana to increase consumer fees for water and lease the water system to transnational water corporations. A broad cross-section of Ghanaian civil society, including students, trade unions, nurses, farmers and women's groups, many under the banner of the Ghana National Coalition Against Privatisation of Water, oppose the proposed privatization of the urban water system and the increased water fees.

The average price for a bucket of water, which used to be 400 cedis, rose to 800 cedis following the May 2001 price hike. (One U.S. dollar exchanges for 7,000 cedis.) Currently about 35 percent of the Ghanaian population lacks access to safe water and 68 percent lack sanitation services. More than 60 percent of the population earns less than US$1 a day and approximately 40 percent fall below the national poverty line.

TAKE ACTION

Please send a fax or e-mail to the following people urging them to remove IMF and World Bank conditions requiring full cost recovery, automatic tariff adjustments, and water privatization in Ghana. Water is essential to human life! Access to clean and affordable water is a human right! It should not be treated as a common commodity or economic good to be bought and sold in the market place.

Please send a copy of your message to <waterforall@igc.org >

Mr. Horst Kohler Managing Director International Monetary Fund 700 19th Street, N.W. Washington, D.C. 20431 Email: hkohler@imf.org Fax: (202) 623-4661

Mr. G.E. Gondwe Director, African Department International Monetary Fund 700 19th Street, N.W. Washington, D.C. 20431 USA Fax: 202 623-6587

Mr. Hugh Bredenkamp West Africa Region International Monetary Fund 700 19th Street, N.W. Washington, D.C. 20431 Email: hbredenkamp@imf.org Fax: 202 623-4232

Mr. James Wolfensohn President The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Email: jwolfensohn@worldbank.org

Fax: 202 522-7700

Mr. Callisto Madavo Africa Region Vice President The World Bank 1818 H Street, N.W. Washington, D.C. 20433 USA Fax: 202 477-0380 Email: cmadavo@worldbank.org

Mr. Peter Harrold Country Director for Ghana The World Bank P.O. Box M. 27 Accra, Ghana Fax: (233-21) 227-887 Email: pharrold@worldbank.org

At the websites below you can find background information including:

1. A very detailed report and analysis by Christian Aid

2. Water is Life. A statement from CAP of Water Campaign.

3. International Sign-On letters sent to the IMF and the World Bank regarding water privatization in Ghana

http://www.waterobservatory.org

http://www.citizen.org/cmep/Water/cmep_Water/

(1) Full cost recovery is the term used by the World Bank to mean removing public subsidies for water and increasing consumer fees or tariffs until they cover the full costs of operation and maintenance of the water utility. Imposing "full cost recovery" commonly precedes privatization in order to improve the financial standing of the company prior to its sale.

(2) Automatic tariff adjustment formula in Ghana would require that tariffs reflect shifts in the international exchange rate of the cedi. In other words, consumer rates go up when the value of the cedi depreciates in international markets. This is a common requirement of multinational corporations who want to be shielded from the effects of shifts in soft currency exchange rates when they invest in developing countries.

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Letter to the International Monetary Fund

March 13, 2002

Mr. Horst Kohler Managing Director International Monetary Fund 700 19th Street, N.W. Washington, D.C. 20431

Cc: Mr. G.E. Gondwe, Director, African Department
Mr. Hugh Bredenkamp, West Africa Region Ms. Kathleen L. White, Public Affairs Division

Dear Mr. Kohler:

We thank Ms. Kathleen White of the External Relations Department for her response to the international sign-on letter on water sector reform in Ghana. However, it appears that neither yourself nor the members of the African Department take the concerns of international civil society organizations very seriously. The statements and concerns in our letter, dated February 19, 2002, still stand. Nothin in Ms. White's reply even begins to be persuasive enough to convince us otherwise. Allow me to respond to her letter point by point.

First, on the fundamental question of public debate and public participation in key policy decisions such as the provision and management of water services. Ms. White's reply states that ".we would endorse the principle that key policy choices should be subject to public debate and participation, as you suggest."

Unfortunately, the twenty-year history of IMF structural adjustment programs around the world belies this statement. Time and time again, in country after country, key policy decisions have been made in closed-door meetings between IMF officials and Finance Ministers without the benefit of citizen participation. And, this is precisely what has happened in Ghana. We are certain that you and the members of the African Department are well aware of the fact that the last two tranches of Ghana's IMF loan (the fourth tranche and the fifth tranche) from the Poverty Reduction and Growth Facility include conditions related to implementation of full cost recovery and automatic tariff adjustment formulae for electricity and water. These, like many other key policy decisions, have not been subject to broad-based citizen participation.

Second, Ms. White's reply states "we have, in fact, supported the proposals drawn up by the independent Public Utilities Regulatory Commission (PURC) to move to full cost recovery, and to adopt automatic adjustment formulae to keep tariffs in line with the costs of water provision."

Yes, the Ghana Public Utilities Regulatory Commission is a constitutionally-mandated independent agency. Perhaps it should be considered inappropriate for the IMF to use its leverage through loan conditionalities to meddle in the internal affairs of an independent agency. The IMF states that this pricing reform (full cost recovery and automatic adjustment formulae) is "necessary to safeguard macroeconomic stability." Does this mean that it is outside of the purview of the PURC to make this decision? By stating that the PURC's implementation of full cost recovery and automatic adjustment mechanisms will be a condition for completion of the fourth and fifth review of Ghana's IMF loan, the IMF is again undercutting the possibility of a participatory decision-making process. As a constitutionally mandated independent agency, the PURC has the responsibility to be accountable to the citizens of Ghana, not to the dictates of the IMF - even when the IMF places substantial pressure on the independent agency, and the government, through the imposition of loan conditions of this type.

Third, Ms. White states that "the PURC's plan was developed through extensive consultation with civil society in Ghana." As you are well aware, the pressure toward water privatization and full cost recovery in Ghana has generated some serious opposition within the country. A broad cross-section of Ghanaian civil society, including women's groups, teachers, trade unions, public health workers and students, have raised concerns that full cost recovery and automatic adjustment formulae could have serious negative impacts on public health, women's work, and access to clean and affordable water. While, as you say, consultations with civil society have taken place, it would be an exaggeration to label them "extensive." But, more importantly, it is clear that the dissenting opinions voiced during those consultations have not swayed the IMF's decision to require the PURC to implement full cost recovery and automatic adjustment mechanisms. This is evidenced by the fact that the same conditions have been imposed on the PURC in the fourth and fifth tranche of the IMF loan.

In a country where 60 percent of the population earns less than US$1 a day and more than two-thirds of the population earns less than US$2, continued price hikes in the cost of water are not just an idle concern. Access to clean water is a life and death matter. As you might imagine, emotions run high on the matter. A regional coordinator of the Ghana National Coalition Against the Privatization of Water stated recently in a letter to the World Bank that automatic tariff adjustment formulae would be ".a deadly poison and a prescription for death for the poor! How on earth can PURC be strengthened if you are prescribing the formula for them."

On a final point, Ms. White states that, "the government indicates in its latest letter of intent under Ghana's PRGF arrangement that it is considering the provision of targeted subsidies to "buy down" water rates for the poor." Universal access to water and sanitiation services should be considered a basic human right. It should not be a charity that can be doled out by governments as "targeted subsidies" to those that fulfill the "needs-based assessment" of some administrative bureaucracy. Rather than impose full cost recovery and automatic adjustment mechanisms that will then require that the government "buy down" water rates for the poor, perhaps there should be a re-consideration of the basic IMF and World Bank prescription. It might even be cheaper to actually provide the funds to rehabilitate the aging infrastructure of the Ghana Water Company, Ltd.

Regards,

Sara Grusky U.S. Coordinator, International Water Working Group Public Citizen, Water for All Campaign

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Africa: Monterrey Promises, 2 Date distributed (ymd): 020320 Document reposted by Africa Action

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Region: Continent-Wide Issue Areas: +economy/development+ +US policy focus+

SUMMARY CONTENTS:

This posting contains excerpts from a briefing paper on poverty reduction released by Oxfam International on the eve of the global Financing for Development Conference being held this week in Monterrey. The Oxfam paper serves as one benchmark for the enormous gap between the rhetoric of world leaders, including new promises rolled out for Monterrey, and the reality of actual resources delivered for public investment to address global inequality.

A related posting also distributed today contains a brief statement by Africa Action on issues neglected or ignored at Monterrey, as well as a recent action alert on the privatization of water in Ghana - an illustration of how policies imposed by "donors" in the guise of "reform" in fact add additional burdens on the poor and undermine the purported commitment to poverty reduction.

The official Financing for Development conference site, with live webcast, speeches, and other documents, is available at: http://www.un.org/ffd

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Oxfam Briefing Paper

Last Chance in Monterrey: Meeting the Challenge of Poverty Reduction

Oxfam International 2002

March 2002

Oxfam International is a confederation of twelve development agencies that work in 120 countries throughout the developing world. Oxfam International Advocacy Office, 1112 16th St., NW, Ste. 600, Washington, DC 20036 Phone 1.202.496.1170, Fax 1.202.496.0128, E-mail: advocacy@oxfaminternational.org, http://www.oxfam.org

[Excerpts only. The full report can be found, in downloadable Word format, on the Oxfam International web site: http://www.oxfam.org]

13 March 2002

Summary

The International Conference on Financing for Development, to be held in Monterrey, Mexico, from 18-22 March, provides a last opportunity to mobilise the financial resources needed to achieve the internationally agreed Millennium Development Goals (MDGs). Failure to grasp that opportunity will result in millions of avoidable child deaths, act as a brake on poverty reduction, and reinforce already obscene inequalities between rich and poor.

The Millennium Development Goals call for universal primary education, the halving of world poverty, and a two-thirds reduction in child deaths, with the targets to be achieved by 2015. Each of the MDGs is achievable but only with political resolve in poor countries, backed by an adequate flow of resources from rich countries.

On present trends, all the MDGs will be missed by a wide margin. Dozens of countries are off-track. If present trends continue, there will be 10 million child deaths in 2015, compared with a target of 4.6 million. The cumulative gap between MDG target rates for reducing child mortality and present trends amounts to 56 million additional deaths between 2000-15.

Trend is not destiny. All of these outcomes, and the vast loss of potential and suffering associated with them, are avoidable. But without a renewed aid effort, it will be too late to achieve the MDGs.

Various estimates have been made of the costs of achieving the MDGs. The World Bank suggests an indicative range of $40-60bn in additional aid per annum. While difficult to calculate exactly how much money is needed, the estimates made are in Oxfam's view significant understatements of the resources needed. The real cost of achieving the MDGs by 2015 will be approximately $100bn in extra aid per annum.

The headline figure is large, but affordable. Ten years ago, donors pledged to spend 0.7 per cent of their GNP on aid. Had they met this target, they would now be spending an extra $114bn. Instead, they have cut their aid budgets, to 0.22 per cent of GNP. Per capita aid to sub-Saharan Africa, the region that is furthest off track for the 2015 goals, fell from $34 to $20 in the second half of the 1990s.

The financing requirements for achieving the 0.7 per cent target are modest in relation to government expenditure. The average increase in government spending required for the G7 countries would be around 1.4 per cent.

Northern governments should set a five-year time frame for achieving the 0.7 per cent aid target. This would generate $130bn a year in additional financing by 2007 sufficient not just to achieve the MDGs, but to sustain a broader campaign against poverty. ...

The current political background gives little cause for optimism. Several major donors including Italy, France, Germany, and Japan have been cutting aid. Others, notably the US, are allowing aid programmes to stagnate at exceptionally low levels. Britain has set an encouraging trend by increasing aid. However, its performance falls far short of the standards required for a country seeking to provide leadership. ...

Some Northern governments have stressed that 'trade not aid' should be the dominant theme at the conference. That approach is disingenuous on two counts. First, rich countries have failed to open their markets to poor countries. Second, increased aid is vital for the world's poorest countries if they are to grasp the opportunities provided through trade.

Oxfam is calling on each OECD government to agree to the following:

* The international donor community should establish a five-year timeframe for reaching the 0.7 per cent of GNP aid target.

* Each low-income and middle-income country should develop clear plans to realise the MDGs and work with donors in estimating the financing required.

* The donor community should fully finance the $10bn Global Fund to Fight AIDS, tuberculosis, and malaria, and the wider programme advocated by the Commission on Macroeconomics and Health.

* Donors should act on their commitment to ensure that no national strategy for achieving universal access to good quality education fails for want of finance by developing a global initiative on education. This would cost an extra $13bn per year.

Two years ago, rich-country governments joined their counterparts in the developing world in making a solemn pledge to win the war against poverty. It is time to redeem that pledge. Since the terrorist attacks of 11 September 2001, Northern governments have embarked on a war against the evils of terrorism. But they have yet to commit themselves seriously to the war against the evils of mass poverty, disease, and illiteracy.

The Monterrey conference provides an opportunity to make that commitment. Northern governments have a choice. They can continue the current practice of using UN summits to deliver large volumes of rhetoric on poverty reduction, devoid of any financing commitments. Or they can commit themselves to the investments in poverty reduction, health, and education that could transform the lives of poor people, creating the foundations for shared prosperity. At a time when globalisation is on trial as never before, they cannot afford to fail.

Background

...

Sixty years ago, the Marshall Plan laid the foundations for the social and economic recovery of Europe after the Second World War. Its architect warned that shared prosperity and collective security in one part of the world could not be protected if mass poverty and hunger reigned elsewhere. Political leaders of the day also had the vision to act.

Contrasts with today are striking. While governments in the rich world seldom miss an opportunity to offer rhetorical commitments on poverty reduction, they have collectively cut aid budgets to their lowest-ever levels in real terms. Today, they are spending 0.22 per cent of their GNP on development assistance, one-fifth of the level provided to Europe under the Marshall Plan. While the world's poor may figure prominently in the pre-Monterrey rhetoric of Northern governments, they are conspicuous by their absence from the priorities that guide budget allocations.

Starved of financial resources, strategies to close the huge gaps in health, education, and living standards between rich and poor are failing. The prosperity generated by globalisation in one part of the world has gone hand in hand with mass poverty elsewhere. ...

Failure to act will reinforce inequalities between rich and poor countries, and call into question the willingness of Northern governments to support more inclusive forms of globalisation. While private capital flows to poor countries are increasing, those countries with the most entrenched poverty are being bypassed. ... Sub-Saharan Africa faces particularly acute problems. Data can express in statistical terms the gap between MDG targets and current trends. But behind the numbers are millions of preventable child deaths, tens of millions of children denied an opportunity for education, and a vast loss of potential associated with poverty.

Considerations of social justice, moral imperatives, and self-interest combine to make an overwhelming case for decisive action at Monterrey. Unfortunately, none of the proposals so far tabled by Northern governments are even remotely commensurate with the scale of the challenge.

1 Missing the targets

The Millennium Development Goals (MDGs) were a concrete expression of what governments described as their 'collective responsibility to uphold the principles of human development'. They endorsed a broad set of targets for 2015, including the halving of extreme poverty (using 1990 as a base year), a two-thirds reduction in child poverty (again with 1990 as a base year), and universal primary education. If actual outcomes are used as a measure of performance, governments are demonstrably failing to discharge their collective responsibility. While human welfare has continued to improve, it has done so at rates falling far short of those required.

Child mortality and health

Nowhere is this more apparent than in relation to child mortality. Using UNICEF data, Oxfam has charted trends in child mortality against the rate of improvement required to achieve the 2015 goal. The picture that emerges is a disturbing one.

In the year 2000, there were 10.9 million deaths among children below the age of five. If the world were on track for achieving the MDGs, that figure would have been 8.9 million. In other words, the gap between the 2015 target rate and the actual child death rate was equivalent to around 2 million child deaths. That gap will have doubled by 2015. On current trends there will be 9.6 million child deaths in that year, compared with an MDG target of 4.2 million (Figure 1). The cumulative total of additional child deaths between 2000-2015 resulting from the widening gap between the MDG target rate and current trends will amount to 56 million a massive loss of life.

There are striking regional variations in these trends. The gap between trend and target rates is widest in sub-Saharan Africa. In 1990, the region accounted for just under one-third of child deaths worldwide. By 2015 that share will have climbed to 55 per cent. While South Asia is reducing child mortality more rapidly than Africa, it too is off-track for the 2015 goal. If present trends continue there will be 2.5 million child deaths in 2015, compared with a target of 1 million under the 2015 scenario.

The bleak prospects for child mortality reflect a failure to address both old challenges and new threats. Acute respiratory tract infection and diarrhoea both continue to kill more than two million people a year. Most of the victims are children almost all of them are poor. Among the new threats, the magnitude of the HIV/AIDS epidemic far exceeds the worst expectations of a decade ago. It is estimated that 40 million people are infected. Over 16 million of the victims are women and another 1.4 million are children under the age of fifteen. HIV/AIDS is one of the most powerful barriers to achieving the 2015 targets in Africa, where it is now the leading cause of death. An estimated 25 million people in the region are living with the disease.

Poverty-related malnutrition is at the heart of the failure to accelerate progress in child mortality. There have been advances. UNICEF estimates suggest that the prevalence of malnutrition fell from 32 per cent to 28 per cent in the 1990s. However, progress has been uneven and inadequate. In sub-Saharan Africa, almost one-third of children suffer from malnutrition, which is the same proportion as ten years ago (with the actual number of cases increasing). In South Asia malnutrition rates have been falling, but even so, the 1990s ended with almost half of all children suffering malnutrition.

Women continue to face disproportionate health risks. Over half a million die each year from problems related to pregnancy and childbirth. For every death, 30 more women are estimated to suffer serious injury and infection. Almost half of these deaths occur in sub- Saharan Africa, and another one-third in South Asia. In sub-Saharan Africa, women face a 1 in 13 chance of dying in childbirth, compared with a risk of 1 in 4,085 in industrialised countries. While there are serious problems in measuring maternal mortality trends, evidence suggests that there has been little change since the early 1990s.

Progress in child and maternal mortality is intimately linked to improved access to water. Around one-half of the developing world's population some 2.5 billion people lack access to basic medical goods and services, or to safe water and sanitation. Lack of access to water contributes directly to death and illness. It is implicated in the deaths of the 2.2 million people from diarrhoea, the vast majority of them children. Poor sanitation is also linked to the problem of intestinal worms. These afflict an estimated 400 million school-age children, contributing to malnutrition, anaemia, and an impaired ability to learn.

...

The financing gap

Various attempts have been made to estimate the additional aid costs of achieving the MDGs. According to the World Bank an extra $40-60bn in additional aid will be required for the next 15 years. This is broadly consistent with the estimate of the Zedillo report, which was prepared in advance of the Financing for Development conference at the request of the UN Secretary General.

Any attempt to estimate costs for achieving the MDGs includes an element of speculation. However, both of the above exercises err on the side of understatement, almost certainly by a very wide margin. The World Bank's estimates understate the cost of achieving the MDG health goals, and associated investments in water and sanitation.

Drawing on the World Bank's own data, supplemented by estimates carried out for the Commission on Macroeconomics and Health, Oxfam estimates the real costs to be closer to $100bn (see table 1).

Table 1

Additional aid financing requirements ($bn)

Halving income poverty 46 Reaching MDGs for public health 32 Universal primary education (including incentives for girls education) 13 Access to water 9 Total 100

The costs of this investment in human development have to be assessed against the potential benefits, both human and economic. According to the Commission on Macroeconomics and Health, aid investments equivalent to 0.1 per cent of the GNP of industrialised countries could avert eight million deaths a year by 2015. Using what it acknowledges as extremely conservative estimates, the Commission suggests that the increased wealth generated by improved health would represent three times the costs of increased health spending by rich and poor countries. ...

Closing the financing gap: a five-year schedule for achieving the 0.7 per cent target

An important question for the Monterrey conference is whether or not the financing requirements for achieving the MDGs are affordable. The answer is an unequivocal 'yes'. While all rich-country governments face budget constraints, none would be unable to meet the UN target of spending 0.7 per cent of GNP on aid if this were a political priority.

When the world's governments met at the Earth Summit in Rio de Janeiro in 1992, they adopted a programme for action Agenda 21 setting out policies for combating poverty and improving living standards. Northern governments agreed to finance their share ofthe costs of these policies, partly by raising aid to 0.7 per cent of their GNP.

In the decade since the Earth Summit, aid spending has declined substantially. According to the Organisation for Economic Co- operation and Development (OECD), official development assistance has fallen by one-third as a share of donor GNP, to 0.22 per cent (Figure 2). Only five donors the Netherlands, Denmark, Norway, Sweden, and Luxembourg have achieved the 0.7 per cent target. How big is the shortfall against the promise made at the Earth Summit? If all OECD governments were spending 0.7 per cent oftheir GNP on development assistance, aid flows would be $114bn higher.

The world's largest economies the Group of Seven have led by bad example. In terms of per capita spending, only Japan was spending more on aid at the end of the 1990s than at the start of the decade. Countries such as the United States, Canada, Italy, and Germany have cut per capita aid by one third or more (Figure 3). The United States, the world's wealthiest economy, allocates only 0.1 per cent of GNP to aid, which is less than half of the OECD average. In aggregate terms, net official development assistance fell from $67.5bn in 1994 to $59.1bn in 1999. Although it coincided with a surge in private capital flows to developing countries, very little of that capital was directed to the poorest countries. Just 15 countries receive over 80 per cent of private capital flows. Thus the countries most dependent on aid have suffered major losses. Aid per capita fell from $34 to $20 in sub-Saharan Africa in the second half of the 1990s, and halved in South Asia over the same period. ...

In the most far-reaching proposal under consideration in the run-up to Monterrey, the Commission of the European Union called on its members to undertake a commitment to raise aid/GNP ratios to 0.33 per cent of GNP by 2006. However, even if adopted by all OECD members, the EU proposal would generate only $12bn in additional aid each year far short of the requirements for achieving the MDGs.

... the required increases in aid spending are relatively modest. Excluding the United States, the current gap between aid spending and the spending that would be required to reach the 0.7 per cent target is equivalent to around one per cent of government expenditure. For the United States, the figure is just under two per cent.

... rich countries clearly have the financing capacity to support achievement of the MDGs. Whatever the rigours of the stability pact, the EU spends 25 per cent more subsidising farmers through the Common Agricultural Policy (CAP) than it spends on development assistance. Most of the $35bn allocated to the CAP provides subsidies to large commercial farms and corporations. If the same amount were allocated to development assistance, it would be possible to more than double the aid effort of EU member states and reach the 0.7 per cent target.

The United States would face a bigger challenge than Europe in financing its commitment to the MDGs. Our estimates suggest that the US would need to mobilise an additional $11bn a year in order to reach the 0.7 per cent goal within five years...

As in Europe, the US budget commitment to big farmers and powerful agricultural interests is in stark contrast to the lack of commitment to the world's poor. The USAID programme for global public health provides vital support to developing countries and poor communities in the fight against infectious diseases and preventable child deaths. Yet the $1.3bn allocated to this programme is equivalent in financial terms to the agricultural subsidies transferred in 2000 to the state of Texas. ...Over half of the $21bn in US agricultural subsidies is directed towards the wealthiest eight per cent of farms.

************************************************************ Africa: Monterrey Promises, 2 Date distributed (ymd): 020320 Document reposted by Africa Action

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Region: Continent-Wide Issue Areas: +economy/development+ +US policy focus+

SUMMARY CONTENTS:

The official Financing for Development conference site, with live webcast, speeches, and other documents, is available at: http://www.un.org/ffd

+++++++++++++++++end profile++++++++++++++++++++++++++++++

Oxfam Briefing Paper

Last Chance in Monterrey: Meeting the Challenge of Poverty Reduction

Oxfam International 2002

March 2002

[Excerpts only. The full report can be found, in downloadable Word format, on the Oxfam International web site: http://www.oxfam.org]

13 March 2002

Summary

Oxfam is calling on each OECD government to agree to the following:

* The international donor community should establish a five-year timeframe for reaching the 0.7 per cent of GNP aid target.

* Each low-income and middle-income country should develop clear plans to realise the MDGs and work with donors in estimating the financing required.

* The donor community should fully finance the $10bn Global Fund to Fight AIDS, tuberculosis, and malaria, and the wider programme advocated by the Commission on Macroeconomics and Health.

Background

...

1 Missing the targets

Child mortality and health

...

The financing gap

Drawing on the World Bank's own data, supplemented by estimates carried out for the Commission on Macroeconomics and Health, Oxfam estimates the real costs to be closer to $100bn (see table 1).

Table 1

Additional aid financing requirements ($bn)

Halving income poverty 46 Reaching MDGs for public health 32 Universal primary education (including incentives for girls education) 13 Access to water 9 Total 100

Closing the financing gap: a five-year schedule for achieving the 0.7 per cent target

When the world's governments met at the Earth Summit in Rio de Janeiro in 1992, they adopted a programme for action Agenda 21 setting out policies for combating poverty and improving living standards. Northern governments agreed to finance their share of the costs of these policies, partly by raising aid to 0.7 per cent of their GNP.

In the decade since the Earth Summit, aid spending has declined substantially. According to the Organisation for Economic Co- operation and Development (OECD), official development assistance has fallen by one-third as a share of donor GNP, to 0.22 per cent (Figure 2). Only five donors the Netherlands, Denmark, Norway, Sweden, and Luxembourg have achieved the 0.7 per cent target. How big is the shortfall against the promise made at the Earth Summit? If all OECD governments were spending 0.7 per cent of their GNP on development assistance, aid flows would be $114bn higher.

---------------------- Message-Id: <200203202051.PAA00782@server.africapolicy.org> From: "Africa Action" <apic@igc.org> Date: Wed, 20 Mar 2002 14:28:13 -0500 Subject: Africa: Monterrey Promises, 1/2

Editor: Ali B. Ali-Dinar

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