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Policies and actions for achieving the MDGs and related outcomes

Global monitoring report 2004

Development Committee

April 25, 2004

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MDG Prospects-Need to Scale Up Action, Significantly and Swiftly

  1. On current trends, most MDGs will not be met by most countries. The income poverty goal is likely to be achieved at the global level, but Africa will fall well short. For the human development goals, the risks are much more pervasive across the regions. Likely shortfalls are especially serious with respect to the health and related environmental goals-child and maternal mortality, access to safe drinking water and basic sanitation. Few, if any, regions will achieve the mortality goals.

  2. The implication is clear. Achievement of the MDGs requires rising above current trends and substantially accelerating progress toward the goals. There is an urgent need to scale up action, on the part of all parties. The agenda has three essential elements:

    • Accelerating reforms to achieve stronger economic growth-Africa will need to double its growth rate.

    • Empowering and investing in poor people-scaling up and improving the delivery of human development and related key services.

    • Speeding up the implementation of the Monterrey partnership, matching stronger reform efforts by developing countries with stronger support from developed countries and international agencies.

Priorities for Developing Countries
  1. Policies in developing countries have improved, enhancing their capacity to make effective use of resources for development, domestic and external. Performance varies widely, however, and reform needs to be accelerated and deepened in many countries, especially in Sub- Saharan Africa. The analysis suggests four areas for particular attention:

    • Improving the enabling climate for private sector activity, by solidifying progress on macroeconomic stability, further reducing barriers to trade, and shifting emphasis from regulating business operations to strengthening market institutions. In macroeconomic policy, the main area for improvement is fiscal management. Strengthening property rights and the rule of law are the key areas for attention with respect to the institutional environment. An improved enabling economic climate is essential both for mobilizing domestic investment and attracting more foreign investment.

    • Strengthening capacity in the public sector and improving the quality of governance- the biggest challenge for many countries. The most serious shortcomings are in transparency, accountability, and control of corruption. Performance is better in general in public financial management-expenditure and revenue management-but needs to improve further. On average, low-income countries can increase tax revenue by at least 1-2 percent of GDP by eliminating tax exemptions and improving tax administration. The bulk of the financing needed to achieve the MDGs, however, will have to come from improving the efficiency of existing spending, economic growth, and external resources. In Africa, which has the weakest governance indicators, the New Partnership for Africa's Development (NEPAD) initiative provides a very promising foundation for reform to build on.

    • Scaling up investment in infrastructure and ensuring its effectiveness, according priority to infrastructure services closely linked to the human development goals-water and sanitation, transport. Compared to the levels of the 1990s, infrastructure spending (investment plus operation and maintenance) will need to rise by 3.5 to 5 percent of GDP in low-income countries and 2.5 to 4 percent of GDP in lower-middle-income countries, with the pace of the increase depending upon institutional capacity and macroeconomic conditions in the country concerned.

    • Enhancing the effectiveness of service delivery in human development, by better targeting education, health, and social assistance services toward poor people, addressing governance-related impediments to service quality and effectiveness, increasing community participation, and scaling up on the basis of successful programs (for example, the Female Secondary School Assistance Program in Bangladesh, the Education with the Participation of Communities (EDUCO) program in El Salvador, and the Education, Health, and Nutrition (Progresa) Program in Mexico). Implementation needs to be expedited on two key donor-supported programs-the Education for All-Fast Track Initiative (EFA-FTI) and the Global Fund for HIV/AIDS, Tuberculosis, and Malaria (GFATM). As of January 2004, only $6 million had been disbursed under the former against initial commitments of $170 million (total external financing needs for primary education in low-income countries are estimated to rise to at least $3.7 billion by 2005-06 compared with actual assistance of about $1 billion in 2002) and $230 million under the latter against $3.4 billion in pledges and $1.5 billion in commitments. Swifter action is needed on the part of both donors in providing funds and recipients in addressing implementation constraints.

  2. Cutting across the policy agenda is the empowerment of women, by removing barriers to their fuller participation in the development process, and the need to ensure environmental sustainability. These cross-cutting concerns should be fully integrated into policymaking.

  3. Within the foregoing agenda, specific priorities and sequencing of actions of course vary across countries and must be determined at the country level in the context of coherent, countryowned development strategies, as reflected in the Poverty Reduction Strategy Papers (PRSPs) in the case of low-income countries and respective national strategy frameworks in middle-income countries.

Priorities for Developed Countries
  1. Overall, developed country actions to date have fallen well short of the Monterrey vision. Progress seriously lags commitments in most areas. This must change, and change quickly, to help accelerate progress toward the development goals. The vision of Monterrey needs to be translated rapidly into concrete actions. Priorities for developed countries relate to trade and aid policies. But also important are the broad conduct of macroeconomic and financial policies conducive to robust growth in the world economy and increased attention to key global public goods, including environmental sustainability.

    • Sustaining stable and strong growth in the global economy. A key issue is the orderly resolution of fiscal and external imbalances, especially the large U.S. external current account deficit. An abrupt adjustment in the large economies could retard growth and leave global economic conditions vulnerable to shocks. Further work by developed countries-working with emerging market countries and the IFIs-is needed to improve the international financial architecture to enhance prospects for stronger and more stable capital flows to developing countries and to reduce the likelihood and severity of financial crises. Rapid progress is being made in the use of collective action clauses, but substantial work remains to improve practices in sovereign debt restructuring.

    • Ensuring a successful, pro-development, and timely outcome to the Doha Round. High-income countries, given their weight in the system, must lead by example. They should aim for reform targets that are sufficiently ambitious. These could include: complete elimination of tariffs on manufactured products; complete elimination of agricultural export subsidies and complete decoupling of domestic agricultural subsidies from production, and reduction of agricultural tariffs to, say, no more than 10 percent; and commitments to ensure free cross-border trade in services delivered over telecommunications links, complemented by actions to liberalize the temporary movement of workers. Developing countries also must seize the opportunity provided by the Round to further their own trade liberalization. In order for developing countries to take full advantage of improved market access, they (especially the low-income ones) will need support in dealing with the "behind-the-border" agenda. Some countries will also need assistance with adjustment costs associated with trade liberalization.

    • Providing more and better aid. Aid flows need to rise well above current levels. Although donors have made post-Monterrey additional commitments of about $18.5 billion p.a. by 2006, estimates show that an initial increment of at least $30 billion annually can be effectively utilized by developing countries. As countries improve their policies and governance, the amount of additional aid that can be used effectively will rise into the range of $50 billion plus p.a. that estimates suggest will be needed to support adequate progress toward the MDGs. ODA rose by $6 billion in nominal amount ($4 billion in real terms) in 2002, but the increase was almost wholly accounted for by special-purpose allocations-technical cooperation, debt relief, emergency and disaster relief. More aid will need to be provided in forms that can flexibly meet the incremental costs of achieving the MDGs, including providing a higher proportion directly to countries in the form of cash, supporting good policy performance with predictable and longer-term aid commitments, and allowing for the financing of recurrent costs where country circumstances warrant. There is also substantial scope for increasing the effectiveness of aid by improving the allocation of aid across countries, aligning aid with national development strategy and priorities (as expressed through PRSPs in the case of low-income countries), and harmonizing donor policies and practices around the recipient country's own systems. To ensure debt sustainability in heavily indebted poor countries that are pursuing good policies, a larger proportion of additional aid should be provided in the form of grants. Timely and adequate assistance in the event of adverse exogenous shocks is especially important for these countries.

    • Improving policy coherence for development. Increased aid and other actions need to be part of a coherent overall approach to supporting development. In many cases, there are contradictions in policies, with support provided in one area undercut by actions in another. Putting in place processes that enable an integrated assessment of the coherence of policies that affect development-trade, aid, foreign investment and other capital flows, migration, knowledge and technology transfer, environment-would help avoid such outcomes. Recent actions by Sweden to institute an "integrated global development policy," and by Denmark and other countries to prepare regular assessments of their contribution to the goal of establishing a global partnership for development, go in the right direction.

Priorities for International Financial Institutions
  1. Review of how the international financial institutions are playing their role in contributing to the achievement of the MDGs and related outcomes shows that they have made progress in enhancing their development effectiveness. This is reflected in progress in country focus and ownership, results orientation of operations, transparency and accountability, and partnership. But there is much more to do. There are three key areas for action to deepen and build on the progress made:

    • Refining and strengthening institutional roles in low-income countries, including by deepening the PRSP process, harmonizing operational programs and practices around national strategies and systems, while also continuing to adapt approaches and instruments to the evolving needs of middle-income countries.

    • Furthering progress on the results agenda, including implementation of the action plan endorsed by the sponsoring agencies at the Marrakech Roundtable on Managing for Development Results held in February 2004.

    • Improving selectivity and coordination of agency programs in line with comparative advantage and mandate to achieve greater systemic coherence and effectiveness.

Priorities for Strengthening the Monitoring Exercise
  1. To carry this agenda forward, the Bank and the Fund plan to focus future Global Monitoring Reports on specific challenges-at the country, agency, and global levels-for meeting these priorities. This will require further work, especially in the following areas:

    • Strengthening the underlying development statistics, including timely implementation of the action plan agreed among international statistical agencies at the Marrakech Roundtable.

    • Conducting research on the determinants of the MDGs, on critical issues such as effectiveness of aid, and on development of more robust metrics for key policy areas such as governance and for the impact on developing countries of rich country policies.

    • Deepening collaboration with partner agencies in this work, building on respective agency comparative advantage and ensuring that the approach to monitoring and evaluation is coherent across agencies.

Issues for Discussion
  1. The following issues are proposed for Ministerial consideration at the Development Committee meeting on April 25, 2004:

    • Do Ministers agree with the priorities for action and the associated accountabilities-for developing countries, developed countries, and international financial institutions-as summarized above? What specific actions would they propose to scale up and speed up action?

    • What guidance would Ministers offer as to how the monitoring exercise should evolve so as to support most effectively the Development Committee's strategic oversight of the policy agenda?

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