The Canadian government’s annual reporting on its activities at international financial institutions is getting better, according to the authors, and to a Canadian civil society group which recently gave the latest report its best grade ever.
The Halifax Initiative said the report on 2007 activities merited a B+, up from last year’s rating of B-, and way up from the D grades of 2001-2005.
Canada is among only about a dozen countries that make annual reports on their activities at the IFIs. Canada writes one report concerning the International Monetary Fund and the World Bank and another on the European Bank for Reconstruction and Development. They not only disclose Canada’s voting record but also provide a narrative on Canadian priorities.
The Halifax Initiative, a coalition of groups that monitors development policy and the IFIs, praised the IMF/World Bank report by the Ministry of Finance for having an improved format and more comprehensive content.
Ministry officials who spoke with freedominfo.org said they had made “significant improvements” especially by providing more forward-looking information, an element not required by the two-decade-old law that mandated an annual report. “We do try to speak as much as possible about the priorities we have worked on and intend to work on in the coming year,” said one official, who spoke on condition that names not be used. The report also provides context, describing major issues facing the three IFI’s without using IFI lingo, the officials said.
Disclosing IMF, World Bank Votes
The reports indicate how the Canadian representatives at the three institutions voted during 2007, noting that many decisions are made without votes. “Canada attempts to influence the development of policy proposals before they are brought to the Board (through informal discussion with staff and management) or to influence other members of the Executive Board before or during the course of Board deliberations,” the report indicates in the section on the IMF.
The report says that Canada’s Governor approved the Republic of Montenegro’s request for IMF membership and supported an increase in the salaries for the Executive Directors at the IMF to reflect the increase in the cost of living in Washington, D.C.
The report covers only oppositions or abstentions by the Executive Director, who represents Canada, Ireland and the Caribbean. One abstention was recorded. “In June 2007, Canada’s Executive Director at the IMF abstained on the vote to approve the completion of the third review of Nigeria’s Policy Support Instrument due to slippages in macroeconomic and structural policy implementation.”
At the World Bank in 2007, the report says, the Executive Director representing Canada supported all policies and projects approved by the Board, with two exceptions.
First, in November 2007, Canada’s Executive Director “abstained on an IFC (International Finance Corporation) investment in the Masinloc Coal-Fired Thermal Power Project in the Philippines, owing to concerns over a significant investment in a less-than-cleanest technology coal plant.” The report adds: “While it was recognized that coal will continue to be an important energy source for the Philippines over the medium term, investments in such operations should be set within an overall strategy to move toward cleaner energy sources. In the absence of such a strategy for the Philippines, IFC investment in this project was seen as not advisable.”
In December 2007, Canada’s Executive Director “abstained on a proposal to extend the IFC’s Performance-Based Grants Initiative (PBGI) pilot. The PBGI is designed to provide aid to the private sector for reaching specific performance based targets. In reviewing the proposal, it became clear that some of the funds were being used for technical assistance and did not differ from existing business lines at the IFC. This, combined with inadequate responses from IFC management to a series of questions raised by the Executive Director and his colleagues about the PBGI, led to an abstention by a number of Executive Directors. The Executive Director will review the use of performance-based aid to the private sector once a thorough evaluation of the PBGI pilot has been completed.”
The Canadian Governor to the World Bank took part in four votes in 2007:
• Canada did not support a transfer from IBRD (International Bank for Reconstruction and Development) surplus funds to the Trust Fund for Gaza and West Bank in January 2007, “owing to concern over the possibility of indirect benefit for the Hamas-led Palestinian Authority, and Canada’s legal and foreign policy position.”
• Canada supported the Republic of Montenegro’s request for membership in MIGA in January 2007.
• Canada supported a transfer from IBRD surplus funds to the Low-Income Countries Under Stress Trust Fund in January 2007 to support the poorest, conflict-affected countries.
• Canada supported an increase in the salaries for the Executive Directors at the World Bank in August 2007 to reflect the increase in the cost of living in Washington, D.C.
Canadian Activities at the EBRD
At the EBRD, “the Canadian Director supported all policies in 2007, as well as the vast majority of the 262 projects approved by the Board.” There were 14 exceptions, however, which reflecting four policy concerns.
One such reason to object was when the Canadian representative thought an applicant for EBRD support could gain access to private sector funding on reasonable terms. The Canadian Director abstained or voted against five projects on these grounds, including a loan to a Russian bank, to Kaufland Romania to enable expansion of its store chain throughout the country, to a Kazakhstani bank, to Erste Leasing in Hungary, and to a Russian power cable company.
Second, doubts about whether a loan would help move a country closer to a full market economy led to abstentions or opposition to three projects: an EBRD equity investment to support a capital increase to a Slovenian bank, an EBRD equity investment in a Russo-Ukrainian property partnership, and to BaltCap Private Equity Fund L.P.
Third, Canada does not support steel projects at multilateral development banks that contribute to excess global capacity. The Canadian Director abstained or voted against two projects, in Russia and Poland, on these grounds.
Finally, the country strategy for Bulgaria was being reviewed in 2007. The Canadian Director “had concerns with aspects of the business environment in the country and did not want to vote on projects in Bulgaria until the new strategy was adopted (properly noting the problems),” according to the report. As a result, the Canadian Director abstained or voted against four projects in Bulgaria on these grounds.
Canada Supports Some Transparency Improvements
While describing and praising improvements in transparency at the IMF and World Bank, and taking some credit for them, the Canadian government suggest various reforms.
“For the IMF, proactive transparency efforts regarding its loan conditionality, especially in low-income countries, needs to be improved,” according to the report. “This was highlighted in the IEO report An IEO Evaluation of Structural Conditionality in IMF-Supported Programs, which focused on the impact of recent streamlining conditionality initiatives at the institution and the need for better communication of the goals and design of conditionality.”
The report continues, “In Canada’s view, better communication in IMF documents and outreach sessions about the nature of program conditions and their desired impact would have two beneficial results. First, it would ensure that conditionality is well rooted in the core goals of the country program. Second, it would provide interested parties with a better understanding of the reasoning behind various conditions that might otherwise appear poorly conceived.”
The report goes on to support current strictures at the IMF and World Bank against disclosure of representations made by Executive Directors in their respective Executive Boards.
The current policy not allowing such disclosure “reflects in part the nature of the IMF and World Bank as financial institutions, providing advice and financing to members on matters that may require discussion of commercially confidential or market-sensitive information,” explains the report. It continues, “Further, the IMF and World Bank provide forums for the debate of politically sensitive national policies, in a similar manner to the functioning of the Canadian Cabinet system. The effectiveness of the institutions often hinges on their ability to act as trusted advisors and provide a forum for frank debate on policy development. Canada supports this policy.”
A Dozen Countries Require Annual Reports
A tally by the Halifax Initiative indicates that about a dozen countries prepare annual reports on their activities at the World Bank and the IMF, the Bretton Woods Institutions. A footnote to the report states: “Australia, Belgium, Finland, France, Germany (just on the World Bank), Italy, Ireland, Japan (through separate reports from different departments), Norway, Spain, Sweden and the United Kingdom all produce annual BWI reports.”
The United States also reports but in a variety of reports, and a website provides information on its voting.
Explaining the importance of such reporting, the Halifax Initiative stated: “The annual report is also important because, despite sustained calls for improved transparency at the institutions, there is still limited disclosure of IMF and Bank Board discussions. This makes it difficult for parliamentarians and the public to determine whether the government positions that are put forth in Board discussions are consistent with stated Canadian priorities. The annual report, then, is the only tool by which Finance Canada regularly informs parliamentarians about government activities at the Bank and IMF.”
“Yet these reports have never been debated by Parliament nor by any parliamentary committee. The Canadian Executive Directors to the Bank and Fund have not appeared before a commons committee since the last hearing was held in 1995,” the Halifax Initiative laments.
By Toby McIntosh
Filed under: IFTI Watch