Monterrey Consensus Review Session “External Debt”

Monterrey Consensus Review Session
“External Debt”
Hitoshi Shoji
Advisor
Development Assistance Strategy
Department
Japan Bank for International Cooperation
(JBIC)
March 10th 2008
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The Monterrey Consensus:
External Debt
1. Vigorous and expeditious pursuit of external debt
reduction
2. Introduce flexibility to HIPCs eligibility criteria
3. Consideration by the IMF and the WB of fundamental
changes in countries’ debt sustainability situation
cased by natural catastrophes, severe terms of trade
shocks or conflicts
4. Putting in place a set of clear principles for the
management and resolution of financial crises that
provide for fair burden-sharing between public and
private sectors and between debtors, creditors and
investors
5. No detraction of ODA because of debt reduction
6. Innovative mechanism to comprehensively address
debt problem of developing countries
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1. Delivered outcomes on Debt Relief
 HIPCs and MDRI
 Topping up
 Decrease in debtservice, increased
fiscal space and
increase in poverty
reducing
expenditure
Source: “Heavily Indebted Poor Countries Initiative and
Multilateral Debt Relief Initiative -Status of
Implementation” (IDA, IMF), 2007
 But, ODA flow
diminished
 Sustainable lending
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2. However, challenge remains
 Deterioration of debt sustainability in the
HIPCs benefited countries
 Huge investment needs for economic
development
 Emerging agenda: fulfillment of large
financing needs without further
deterioration of the debt situation with
inherited economic structure
Source: “Heavily Indebted Poor Countries Initiative and Multilateral Debt Relief Initiative -Status of Implementation”
(IDA, IMF), 2007
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3. Actions toward Emerging Agenda
(1) Debt Sustainability Framework (DSF)
 Increase of private flows to emerging
markets
 Partner countries’ vulnerability vis-à-vis
the international capital flow
 Attention needed by both public and
private sector for the debt sustainability
to avoid further external debt problem
 Debt sustainability framework by WB
and IMF: alignment by all lenders
 Strengthening borrowers public debt
management capacity
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3. Actions toward Emerging Agenda
(2) Financing Gaps to Achieve MDGs
 Huge investment needs to achieve MDGs
“The MDG financing gap for all low-income countries will …
rise to $135 billion by 2015.”
(Investing in Development, Millennium Project, 2005)
“Africa’s infrastructure investment needs will amount to
around $20 billion per year…”
(An Africa Action Plan, World Bank, 2005)
“East Asia’s funding challenge is to resource estimated
infrastructure needs of approximately $200 billion annually
over the next five years.”
(Connecting East Asia, ADB/JBIC/World Bank, 2005)
 Trilemma; unchanged economic
structure, large investment needs,
insufficient domestic savings
 Limited grant resources; use of loan
unavoidable
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3. Actions toward Emerging Agenda
(3) Examples of Harmonized Actions
 “Joint Statement by Development Finance
Institutions for Sustainable Debt
Management”
(AFD/JBIC/Korea Eximbank/KfW/Thailand
NEDA, 2007)
 “Enhanced Private Sector Assistance
(EPSA) for Africa”
 Minimal Interest Rate Initiative
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3. Actions toward Emerging Agenda
(3) Examples of Harmonized Actions (cont’d)
 OECD-DAC “Paris Declaration for Aid
Effectiveness”: Ownership, Management
for Development Results and mutual
accountability
(4) Catalytical Role of ODA
 Public Private Partnership (PPP): critical
for “mobilizing international resources
for development”
- Important role of public sector
- Expansion of ODA concept
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3. Actions toward Emerging Agenda
(5) Development Impact of Debt Relief
 Necessary to constantly monitor its
development impact
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4. Way forward
Debt reduction has been achieved, but
the question of how to satisfy the
financing needs without further
deteriorating debt sustainability
remained to be solved.
 Debt Sustainability Framework (DSF)
 Harmonized Actions
• Catalytical role of ODA
• Monitoring development Impact of debt
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relief

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