Debt relief to the world’s poorest nations must be accompanied by increased development assistance, which in turn requires greater transparency, Finance Minister Trevor Manuel said on Monday.
Welcoming a decision of the Group of Eight (G8) industrialised nations to write off the multilateral debt of 18 poor countries, Manuel said this had closed the door on huge net capital outflows.
Money spent by these countries on debt servicing was ”considerably” more than development assistance flowing in.
The other side of the coin, the minister said, was to now ensure that poor countries have sufficient resources to deal with the development issues they face.
On issues of transparency, Manuel said steps were underway to introduce a system requiring of donor and recipient countries to report on assistance provided, ”then one can see if there is a matching of the commitment”.
This would help eliminate the problem of countries reporting ”huge” Official Development Assistance (ODA) grants, which never materialised.
There was often a ”huge gap” between pledges made and assistance given, Manuel said.
”The question is, does that money ever flow, and if so, to whom does it flow? We need some measure to be able to manage this process going forward.”
He pointed out that while bilateral debt forgiveness and emergency aid had increased, other ODA to Africa had declined between 1993 and 2003.
This happened when donors merely ”move the deckchairs around”, with bilateral debt cancellation being scored against ODA ”when in fact if we want to do the many things we must to, we need additional resources”.
Manuel welcomed commitments by donor nations, also noted by the G8 finance ministers, to boosting the proportion of their gross national incomes spent on ODA.
Among others, the EU has pledged to reach a ratio of 0,7% by 2015.
Manuel said Africa now faced the challenge of boosting its ”absorbing capacity”.
”We need to know what the money will buy and strengthen the capacity of institutions to receive the money and report on it.”
He welcomed the finance ministers’ commitment to eliminating trade-distorting agricultural subsidies paid by rich nations, rectifying trade barriers faced by poor countries, boosting treatment for diseases like Aids and malaria, and creating a trust fund to shield poor countries from commodity price and other exogenous shocks.
They also committed themselves to putting in place ”appropriate grant financing” to ensure that countries did not immediately re-accumulate unsustainable external debts.
The commitments, Manuel said, were a ”very, very significant breakthrough, and will make a sizeable difference”.
The benefits, he added, would not be limited only to recipient countries. In Africa, for example, countries who had their debt written off would now be able to spend more on development and attract investments — boosting inter-continental trade.
On the issue of the International Monetary Fund selling off gold reserves for debt relief, Manuel said the option was no longer on the table. -Sapa