Raise ODA for developing countries: India

Washington, Apr 24: India made out a strong case for raising the level of Official Development Assistance (ODA) to help developing countries achieve the Millennium Development Goals (MDGs).

India's economic secretary A K Jha, who made this plea at the annual spring meeting of the IMF-World Bank here yesterday, said ''the annual increases ODA will have to accelerate from an average of just under six per cent during 2001-04 to nearly 11 per cent over the next two years and seven per cent through 2010.'' He said such a provision was necessary to reach the target of of at least 0.5 per cent by 2010 and 0.7 per cent of donor countries Gross National Income (GNI) by 2015.

''While we welcome the new aid commitments,'' Mr. Jha said, adding that the decline in lending through the concessional and non-concessional windows of the MDBs in 2005 is a source of concern.

He was addressing the Development Committee meeting of the World Bank and the Joint Ministerial Committee the International Monetary Fund (IMF) on the Transfer of Real Resources to Developing Countries.

Arguing on the basis of India's development experience, he pointed out, ''it has been our consistent preference that increasing amounts of development assistance be routed through the multilateral agencies.'' Mr Jha said, ''We believe this is the best way to achieve flexibility, harmonization, and selectivity in aid - the three elements identified by the GMR for enhancing the quality and composition of aid.''

While welcoming the ongoing efforts of the various multilateral agencies toward greater alignment with country systems, he said India hoped that this effort would receive clear and unequivocal support from the top management of these multilateral agencies.

''Ultimately, successful alignment with particular country systems is the best solution to sustainable development and scaling- up of investments,'' he said.

Turning to how higher oil prices are impacting all, but more the developing countries he said that in many emerging markets, especially in Asia, this has manifested itself in higher current account deficits and balance of payments pressures, increased public debt and rising interest rates and inflation, adversely affecting the public investment and poverty reduction.

A sustained escalation of global energy prices would have a serious impact on the welfare for a large number of oil-importing developing countries, which may suffer from negative resource flows.

To illustrate, in 2005, while the net ODA was 106 billion US dollar, the outflow from the developing countries on account of higher oil prices was an additional 130 billion US dollar. If this trend continues, oil importing developing countries may face an uphill task in attaining the Millennium Development Goals (MDGs), Mr Jha pointed out.

He said that while we support the Aid for Trade agenda as a means of enhancing the capacity in developing countries for realising the gains of trade, Aid for Trade can only be a complementary approach to assist developing countries in the process of trade liberalisation and not a substitute for the gains to be derived from genuine, commercially- meaningful market access for their products and services in developed countries.

''We believe that Aid for Trade must be disbursed through the existing mechanisms. It would also be most effective if it is integrated in the country development and poverty alleviation strategies rather than being delivered through a separate vertical fund created for this purpose,'' he added.

Stressing that poverty, discrimination, and injustice in the world is because 80 per cent of the people who inhabit the earth have access to a mere 20 per cent of the global income he said ''We had agreed on a global compact at Monterrey in 2002, and we are now reiterating similar feelings through the principle of mutual accountability. The challenge really is on how to scale up resource flows to the developing countries and make certain that aid is used effectively toward reaching the MDGs.'' These two issues certainly cannot be separated. How we meet this challenge will determine the fate of humanity in the next decade, he added.

Meanwhile, the IMF has proposed several structural reforms aimed at improving its ability to respond to crises in a rapidly changing global economy.

The proposed reforms include increasing the voice of emerging market countries in the Fund's decision-making process.

The world's lender of last resort also agreed to overhaul its economic surveillance mechanism. The change could give the Fund more oversight in exchange-rate policies as well as broader powers in addressing regional trade disputes, such as the massive trade deficit between the United States and Asia.

The I M F's 184 member countries is finishing spring meetings urging the leadership to develop concrete reform proposals for September's meeting in Singapore.

On Friday, the World Bank approved full debt cancellation for some of the world's poorest countries, including Bolivia, Ethiopia, Nicaragua and Rwanda.

UNI