Draft International Development Association (Multilateral Debt Relief Initiative) (Amendment) Order 2017 Draft African Development Fund (Multilateral Debt Relief Initiative) (Amendment) Order 2017 Draft International Development Association (Eighteenth Replenishment) Order 2017

Roberta Blackman-Woods Excerpts

Monday 20th November 2017 General Committees

[Dr Roberta Blackman-Woods (City of Durham) (Lab)]

It is a pleasure to serve again under your chairmanship, Mr Evans. I thank the Minister for so clearly outlining the nature of the orders, and the overall purpose of the funds. I will go through the orders, taking the International Development Association (Multilateral Debt Relief Initiative) (Amendment) Order 2017 first, the African Development Fund (Multilateral Debt Relief Initiative) (Amendment) Order 2017 second, and the International Development Association (Eighteenth Replenishment) Order 2017 third.

I am grateful to the Minister for outlining the IDA order. We all agree with the policy background to these funds. At their heart, they are about trying to help the poorest countries to reduce poverty by providing grants and concessional loans. The policy framework focuses on economic growth, social sector support and protecting the environment—supporting sustainable development, forestry recovery and the like. That is a policy agenda we can all sign up to.

The explanatory note says that the final amount, which may be up to the limit of an additional £462.46 million, was

“reached in agreement with the board of governors of the IDA.”

I ask the Minister for further information—he can give it to us today, or I am happy to put this request in writing—about the nature of those negotiations. How was that amount agreed, and with whom? Who are the other donors who are contributing to the cost of the multilateral debt relief initiative? We also need clarification about the extent of the UK’s burden share, and whether it is likely to increase with the amount that has been given. We do not want to divide the Committee on any of these orders, but it would be good to have that additional information.

Moving on to the African Development Bank multilateral debt relief initiative, I am extremely grateful to the Minister for outlining the order to the Committee and for allowing us to scrutinise it in detail. The additional £66.8 million that the order allows is to be disbursed through to 2029. It is clearly an important part of the multilateral debt relief initiative and the overall African Development Bank strategy. The Labour Opposition welcome the ongoing support for the bank. Again, I would like to request further information from the Minister about the relationship and strategy with the African Development Bank. DFID’s latest multilateral aid review in 2016 noted that, despite many strengths within the African Development Bank, its capacity constraints are preventing it from achieving its full potential. In several areas—“leave no one behind”, “performance in fragile states”, “human resources” and “accountability”—the bank scored only adequate. It was noted that the bank’s move of headquarters to Abidjan led to a particular set of challenges. First, will the Minister assure the Committee that he is confident that, since 2016, the bank has been headed in the right direction to overcome those challenges?

Secondly, the order notes that, although the UK is only a 1.753% shareholder in the bank, it contributes 10.467% of the burden share for the upcoming replenishment, which the Committee will discuss later. I also note that the 2016 multilateral aid review says that, in 2016, the UK contributed 14% of the burden share for replenishment. What opportunities do the MDRI and the replenishment offer give the UK to push for further progress on reforming the bank as an institution? If our share of replenishment is going up each time, is that giving us more power to press the bank to improve? Again, we are not going to divide the Committee on that issue.

I am grateful to the Minister for outlining the International Development Association (Eighteenth Replenishment) Order 2017. Again, I have a request for more information, either today or subsequently. How will the association use this contribution as leverage to borrow from the market, especially as this can happen for the first time under this replenishment? It has been suggested that market borrowing will constitute a third of the IDA’s overall financing in IDA18, and that for each £1 of grant finance that the UK and other donors put in, the association is now able to deliver £3 to its clients. How will that market borrowing work in practice? How can we be sure that it will not impact on, or divert from, the central mission of the IDA, which is, as I said earlier, to help the world’s poorest countries? Is it possible to say how much of the UK contribution will be leveraged in such a way?

Are the Government seeking reform of and improvement to the IDA or the wider World Bank Group as part of this replenishment? I note DFID’s growing approach of making multilateral funding contributions conditional on reform progress, and that the most recent multilateral aid review scored the World Bank as good, rather than very good, in the areas of “partnership”, “leave no one behind”, “performance in fragile states” and “accountability”, where there is certainly room for improvement. Given that we are increasing the amount of funding through the orders, it would be useful to know that the Government are pressing the World Bank on these matters. Again, I do not intend to divide the Committee on the order.

[Rory Stewart]

The hon. Lady raised three specific questions: first, on the multilateral debt relief to the IDA; secondly, on the multilateral debt relief to the African Development Bank; and thirdly, on leverage of, and improvements to, the IDA. I very much welcome the decision not to divide the Committee. For 15 or 20 years, this has been a cross-party, consensual issue on which we have worked together. It is a rarity in politics when both sides of the House agree on what we are trying to do—in this case, to tackle challenges in some of the poorest and most fragile countries in the world. Although we may occasionally have discussions about how best to achieve that end, I think we agree on the end, and broadly agree that the World Bank, with which we are generally proud to be partnered, is a good partner in an imperfect world.

On the first question, about how we set the amount of money that goes into the IDA through the MDRI, that calculation was made at the G7 summit in Gleneagles in 2005. The UK agreed to a 13.82% imputed burden share on the total amount of debt that was owed to the International Development Association. The variation that the Opposition have noted in the statutory instrument represents an attempt to calculate shifts in the exchange rate and shifts in interest rates, but there will be no change—and there has been no change since 2005—to the UK’s 13.82% imputed burden share.

The second question was about improvements to the African Development Bank. We absolutely agree that there are some challenges within the African Development Bank; our multilateral development review pointed that out. Those challenges will perhaps be more relevant to the next Statutory Instrument Committee, in which we will talk about the replenishment of the bank, rather than the debt—the more technical process of simply wiping off past debt that these heavily indebted poor countries ran up.

It is true that we have identified particular problems in moving from Tunis to Abidjan, which has affected recruitment. That is why, when we come to that statutory instrument, the Opposition will discover that we are not putting the same amount of money into the African Development Bank that we did in the last replenishment; we will in fact be reducing it by 25%. That is one of the ways in which we are attempting to reflect some of our concerns around its performance. Provided it meets the performance indicators, we hope that we will be able to increase that funding in future years, but there is a reduction, representing the fact that we feel that there have been some challenges recently.

That brings us to the IDA. We are absolutely focused on making sure that the IDA focuses on the world’s very poorest. Generally speaking, the IDA has a good record on that. In answer to the question of my hon. Friend the Member for Congleton, it is true that alongside Pakistan, Bangladesh, Nigeria and Ethiopia, which I mentioned as major recipients, there is an outlier: Vietnam. We expect increasingly to take money out of lower-middle-income countries and put it towards the poorest countries in the world. That is a very good challenge for us.

Our current leverage in the bank’s structure is about 1:8—in other words, we put in about 15% of the total 100%. The £1 to £3 market borrowing will be a small, experimental part of the IDA’s innovative funding. Obviously, in so far as we can crowd in private sector money, that is a good idea, but as the shadow Minister pointed out, that cannot be at the cost of the bank’s mission. The point of the IDA is concessional lending to the world’s poorest people. If the money can come in purely from the private sector, there is no point to the IDA at all, and we cannot allow an attempt to drag in private sector money to distort the bank’s objectives towards what the private sector would be doing in the first place. We are very focused on global public goods—in particular, bringing them more firmly into the poorest countries of the world—and on fragile and conflict-affected states and reform that focuses more on economic development.

[Dr Blackman-Woods]

I have one, brief follow-up question for the Minister. Will he keep the House updated on leverage, how it is working and the outcome of that leveraged income? That would be helpful.

[Rory Stewart]

We would be absolutely delighted to do that, and the shadow Minister put her finger on a critical issue: we have to make absolutely sure that any additional leveraged money fulfils our global public goods purposes, and does not distort the prime objective of the fund.

Question put and agreed to.

DRAFT AFRICAN DEVELOPMENT FUND (MULTILATERAL DEBT RELIEF INITIATIVE) (AMENDMENT) ORDER 2017

Resolved,

That the Committee has considered the draft African Development Fund (Multilateral Debt Relief Initiative) (Amendment) Order 2017.—(Mr Rory Stewart.)

DRAFT INTERNATIONAL DEVELOPMENT ASSOCIATION (EIGHTEENTH REPLENISHMENT) ORDER 2017

Resolved,

That the Committee has considered the draft International Development Association (Eighteenth Replenishment) Order 2017.—(Mr Rory Stewart.)