Declining ODA, a worrying factor: Sinha

By Sridhar Krishnaswami

WASHINGTON, APRIL 30. The financial crisis in Turkey and Argentina and the cyclical slowdown of the global economy underline the fact that developing nations as a whole are still exposed to an uncertain and challenging economic and social future. But there are other areas of serious concern such as the dwindling of Official Development Assistance, the Finance Minister, Mr. Yashwant Sinha, said.

In an address to the Development Committee on Monday, Mr. Sinha, who is the chairman of the committee said the Official Development Finance - at the concessional and non-concessional level - of $ 47.1 billion in 2000 is substantially lower than the $ 55.2 billion achieved in 1990. The ODA from the OECD has declined from 0.33 per cent of GNP in 1990 to 0.24 per cent in 1999.

While global foreign direct investment continued to grow rapidly, the FDI to developing countries declined in 2000 by five per cent for the first time in a decade. The share of ODA going to Sub- Saharan Africa and South Asia which together account for a majority of the world's poor, had declined continuously from a high of a little over 49 per cent of total aid flows in 1990 to a little more than 37 per cent last year. ``All these cause enormous concern,'' Mr. Sinha said.

Welcoming the ``much greater participatory tone and tenor'' of the ongoing IDA-13 replenishment discussions, Mr. Sinha stressed that the replenishment process must be based on three premises - the replenishment must be substantially larger than IDA-12; given the problems of debt sustainability in HIPC countries, there should be an increased proportion of grant financing; and scarce resources must be allocated strictly on the basis of poverty and performance.

The point has also been made that as over the years repayments of IDA loans will be considerably lower due to debt forgiveness under HIPC, the current replenishments must be substantially higher to ensure that there is no net reduction in the quantum of IDA assistance.

Commenting on the World Bank's recent efforts to assist countries in the formulation of poverty reduction strategies and greater country ownership of the Poverty Reduction Strategy Papers (PRSP), Mr. Sinha said these proposals regarding the PRSP must be realistically costed ``as there is a need to underpin the strategy with a credible financing plan which incorporates the projected level of domestic borrowing as well as external flows''.

As a part of the agenda of the development committee, Mr. Sinha said the challenge of achieving the goals of the International Bank for Reconstruction and Development cannot be met without rapid progress in the so-called middle income countries which would include India and China. ``The Country Assistance Strategy (CAS) should continue to be the primary instrument for the Bank's work and support to a country,'' the Finance Minister remarked.

The World Bank, in Mr. Sinha's view, should begin making assessments of the current development policy and strategy with a special focus on poverty reduction; undertake assessments of fiduciary and safeguard policies simultaneously; and once the assessments have been completed, propose a Country Assistance Strategy that would encompass lending and non-lending programmes. Mr. Sinha expressed deep concern at the decline in annual IBRD commitments and disbursements saying this suggested the need for changes in the pattern and structure of the Bank's lending.

Commending the World Bank and its strategic partners in the war against HIV-AIDS, Mr. Sinha said the fact that this war could only be decisively won if the vicious cycle of AIDS- Poverty- Illiteracy was broken. ``While we mobilise resources to battle AIDS, we should not lose sight of the need to strengthen the basic health infrastructure in the developing countries, to deliver effective service to all sections of society,'' he argued.

The fight against HIV-AIDS would determine the outcome of the fight against poverty reduction in Africa. ``Patent rights should not come in the way of the patient's right to live,'' Mr. Sinha said going on to make the point that while the recent resolution of the drugs' price issue in Africa is a positive development, ``...much remains to be done to allow drugs to reach the needy at affordable prices and in a timely and regular manner.''

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