World Council of Churches

A worldwide fellowship of churches seeking unity, a common witness and Christian service

WCC-IMF-WB high-level encounter

22 October 2004

22 October 2004
Ecumenical Centre, Geneva, Switzerland

Synthesis of discussions and summary of agreements

Background

1. Since May 2002, the World Council of Churches (WCC), World Bank (WB) and International Monetary Fund (IMF) have been engaged in a series of staff level meetings and encounters aimed at improving mutual understanding of organisational standpoints and responsibilities in the face of pressing development challenges. From the beginning of the dialogue process, a meeting of the top leadership of the three organisations was envisioned. This meeting was intended to be a politically symbolic event that would underline the responsibility of all three organisations to fight poverty and its root causes. Thus, on 22 October 2004, Rev. Dr. Sam Kobia, General Secretary of the WCC, Mr. James Wolfensohn, President of the WB, and Mr. Agustin Carstens, Deputy Managing Director of the IMF, came together for the first time at the headquarters of the WCC in Geneva, Switzerland for a high-level encounter. The meeting was also participated in by church leaders and church representatives from around the world as well as staff from the WCC, IMF and WB (annex 1).

2. The objectives of the high level encounter were two-fold: firstly, to explore common and differing perceptions of the three organisations regarding economic growth, distribution and redistribution of resources, ideas of equality and participation in poverty eradication; and, secondly, to work towards a statement underscoring the common commitment of the three organisations to combating poverty and working for social justice, and outlining the areas of disagreement and possible plans for future collaboration amongst the three institutions.

3. Towards this end, the presentations made by the leadership of the three organisations addressed the topics of poverty eradication, human rights and social justice, voice and vote in the WB and IMF, and putting partnership to work (annex 2). A joint statement including a paper on "Common Ground and Differences of Views between the Bretton Woods Institutions (World Bank and the International Monetary Fund) and the World Council of Churches" was also issued at the end of the encounter (annex 3).

4. This report outlines the encounter's presentations, main discussion points as well as the agreements reached by the three organisations for possible joint work. Future collaboration between the three organisations will continue to be geared towards achieving clarity on positions and roles as well as jointly contributing to the attainment of the United Nations Millennium Development Goals (MDGs), including the objective of halving poverty rates by 2015. Notwithstanding outstanding issues between the three organisations, previous encounters have identified the MDGs as goals that are commonly shared by the WCC and the BWIs.

Presentations

5. In their presentations, Rev. Dr. Kobia and Dr. Agnes Abuom, WCC President for Africa, provided the context of the ongoing conversations between the WCC and the BWIs as well as emphasised WCC's continuing quest for socio-economic justice based on the Biblical standard of God's preferential option for the poor.

6. Rev. Dr. Kobia posed a series of fundamental moral questions, among them: How can we build a world economy that is people-centred? Can the current paradigm of finance and trade be made just for all? What can be done to resolve the debt-poverty-debt cycle of many nations? Can growth without redistribution eradicate poverty, and can it preserve the environment? Are there more just and sustainable alternatives to known economic systems?

7. Dr. Abuom asserted that poverty can be eradicated only if it is viewed as a lack of justice and a violation of human rights. She articulated WCC's perspectives on an alternative way of doing economics: first, that economic policies should be guided by the principles of justice and human rights including economic, social and cultural rights (ESCR); second, that increased trade alone does not resolve both poverty and inequity and that the development of home markets are a pre-condition for people-owned growth; third, that the problem of environmental destruction resulting from increased material expansion of rich countries has to be addressed; forth, that the transfer of resources from already poverty-stricken countries to rich countries must be stemmed through various policy options; and fifth, that the democratisation of the BWIs is essential to poverty eradication since this has to do with economic power-sharing in the world.

8. Speaking for the WB, Mr. Wolfensohn underlined the importance of building bridges with faith-based groups, particularly through the WB-initiated World Faiths Development Dialogue, in order to deal with the issues of poverty, equity and injustice. A faith-based, cultural dialogue on development was deemed particularly apposite in view of the recognised links between poverty, peace and stability. He pointed out that the world is currently facing a crisis due to short-term fears and misplaced priorities: while rich countries extend only USD 60 billion in development assistance, their annual spending on defence and agricultural subsidies amount to a staggering USD 900 billion and USD 350 billion, respectively. In a situation of crisis, he expressed the need to set aside differences and work together to realise a world without poverty. Among others, he urged developing countries to face the problem of governance and corruption. Rich countries, for their part, must help build capacity, increase aid and further trade opportunities in the former. Mr. Wolfensohn also shared current efforts to integrate a discussion on human rights, including the rights-based approach to development, at the WB. Such efforts had admittedly met with strong resistance from its board of directors, but Mr. Wolfensohn stated that the WB, under his leadership, remained committed to working on this cause.

9. On behalf of the IMF, Mr. Carstens articulated their institutional mandate to promote stability, international monetary cooperation and world trade, thereby contributing to growth, employment expansion and an improvement in living standards; and, more specifically, to ease the liquidity problems of countries in financial crisis through the provision of loans. He acknowledged that improvements in equity between and within countries were difficult to achieve, but underscored the importance of improving social services. He pointed out that issues of development and ESCR per se are not among the IMF's main thrusts since theirs is a financial institution that has to be relevant to all of its members. Nonetheless, he highlighted various development initiatives of the IMF in recent years, particularly the Poverty Reduction Strategy Paper (PRSP) and Heavily Indebted Poor Country initiatives, which, among others, have allowed a greater focus on poverty reduction, as well as increased country ownership of and civil society participation in policy discussions. Mr. Carstens welcomed the dialogue process with the WCC, including the continuation of exchanges between the organisations on country-level case studies on development issues.

Main discussion points: questions and responses

10. The presentations made by the Rev. Dr. Kobia and Dr. Abuom as well as Mr. Wolfensohn and Mr. Carstens, on behalf of the WCC and the BWIs, respectively, provoked questions from representatives of WCC's church constituency, faith-based organisations and civil society partners. On the whole, the discussions that followed mirrored the ongoing debates between the WCC and the BWIs on a wide range of development topics.

11. Continuing concern was voiced around odious and illegitimate debt, the payment of which has placed - and continues to place - tremendous burdens on already cash-strapped developing countries. Past and current initiatives to address the debt problem have achieved minimal results. What are the views of the BWIs on the alternative proposal to establish an independent arbitration panel to look into debts incurred under odious and illegitimate circumstances that would merit their cancellation?

12. In reply, the IMF reiterated its stance that debt cancellation would only undermine the financial viability of developing countries. They pointed out the difficulty of ascertaining odious debts since loans are extended by the IMF - whose primary mandate includes helping developing countries to weather financial crises - in good will. They nonetheless conceded that their organisation approaches debt primarily as a contract; thus, moral judgements are deemed beyond their organisation. While applauding the moral dimensions of the church-initiated Jubilee campaign, the WB stated that debt cancellation is overly simplistic given the varying complexity of developing country conditions. They also noted that debt is only part of a bigger development problem; thus, meriting a shift in focus to a broader agenda.

13. A related question on the heightened volatility of - and injustice in - the international monetary system was brought to fore. The high degree of instability as manifested in recurrent financial crises may be linked to the continued indebtedness of poor countries and the net transfer of wealth from poor to rich countries resulting from the remarkable privilege of rich countries, particularly the United States, to create liquidity. Instability is inimical to the sustainability of the international monetary system. Do the BWIs view this as a concern?

14. The IMF pointed out that increased volatility was an effect of heightened capital mobility and may be dealt with by fostering an environment of financial and banking transparency as well as ensuring debt sustainability. The IMF also stated that the current status enjoyed by the currencies of rich countries is based on the strength of their economies, which was achieved through hard work.

15. The role of trade liberalisation in reducing poverty remained a controversial point. In view of unfair protective measures extended by rich countries to their agricultural sectors, the following questions were posed: why are developing countries being pressured by the BWIs to liberalise their domestic markets through loan conditionalities contained in Letters of Intent? Do the BWIs possess any disciplinary powers over developed countries to correct this injustice?

16. The IMF opined that trade through export expansion continues to be the most rapid avenue for growth and therefore poverty reduction in poor countries. According to their perspective, policy conditionalities attached to loans do not necessarily have motives other than improving the financial standing of borrowing countries. They also called attention to the fact that their organisation does not function as a regulatory, supranational authority, with disciplinary power over nations.

17. The need for alternative sources of financing MDGs was put forward in light of the slow progress made to-date on improving market access, increasing levels of official development assistance, and reducing debt burdens for poor countries. Moreover, liberalisation and privatisation policies promoted by the BWIs in poor countries with the objective of raising finances have thus far yielded limited outcomes. Are the BWIs willing to seriously look into alternative and innovative resources for development finance, particularly the imposition of taxes on arms trading and financial transactions as well as user fees on air transport?

18. In reply, the BWIs expressed the view that such taxes were simply not practical and may even have unintended negative side effects. According to the IMF, taxes on arms trading would only encourage illegal trading and the creation of black markets. On the other hand, taxes on financial flows would require complex, integrated financial mechanisms and systems at the global level in order to avoid leakages. It was also pointed out that the political support of key economic players would be critical to the implementation of global measures to tax arms trading and capital flows. The WB observed that while this concern may be taken up at the next meeting of the Group of Eight, it was extremely unlikely that the United States would agree to these measures.

19. Addressing inequality was argued as central to fighting poverty. Policies associated with globalisation have brought about benefits for a few, thereby exacerbating the already wide gap between rich and poor. Moreover, the process of wealth creation, which may very well generate the conditions for poverty, remains a concern that has received very little attention in the mainstream. Studies commissioned by churches have indicated that inequality is a significant impediment to pro-poor growth in developing countries. Hence, there is a need to empower the poor themselves rather than focusing solely on private sector-led expansion. Are the BWIs in agreement with this analysis? What other mechanisms are seen by the BWIs as important for accelerating poverty eradication?

20. The WB concurred that the problem of poverty has to be resolved by engaging the poor as instruments of change rather than objects of charity. The example given was that of China and the success of its community-based development approaches that essentially distributed responsibility to the poor themselves. The WB also mentioned homegrown initiatives (e.g. the New Economic Partnership for African Development), stamping out corruption in developing countries and opening up of the markets of rich countries to developing country products, as critical to growth and poverty alleviation. They expressed willingness to work with the WCC on community development projects.

21. Concern was raised over the privatisation of indigenous peoples' land and water resources within the mainstream market-based and growth-centred development paradigm espoused by the BWIs. Land and water are fundamental to the identity, livelihood and existence of indigenous peoples, who have lived out alternative models of people-centred, ecologically sustainable communities. Are the BWIs prepared to seriously listen to indigenous peoples' concerns and recognise alternative models of sustainable communities?

22. The WB objected to the perception that their organisation sets rules for taking over the ancestral lands of indigenous peoples. Contrarily, the WB mentioned projects implemented by their organisation in support of indigenous communities. However, they observed that prejudice against indigenous peoples and other groups continues to be a pervasive problem in many of our societies. The WB expressed hope that their organisation could work together with the WCC on indigenous peoples' issues. The WCC has a longstanding programme, currently based in Bolivia, which provides a space for indigenous peoples to articulate their concerns.

23. The issue of governance re-surfaced. Governance was expressed as a matter of concern not only for developing countries - which do not necessarily have a monopoly on corruption - but also for global institutions. As international financial institutions, what are the BWIs' views on global economic governance including raising the voice and vote of developing countries at the BWIs?

24. The WB responded that they were willing to take governance as an issue for the BWIs and WCC to work on jointly. On improving the voice and vote of poor countries in the governance structures of the BWIs, the WB pointed out that the staff of the BWIs can only do so much: essentially the issue boils down to the difficult question of whether rich countries are willing to give up their some of their decision-making power and influence to poor countries.

25. Questions on process and vision of partnership were directed to the BWIs, particularly the WB: What are the conditions for partnership? What is the WB's vision for working together?

26. The WB underscored the need to work together on the PRSP process, specifically in terms of providing inputs on the proposals and projects of the BWIs. This was deemed crucial for building consensus on development issues within countries. They expressed belief in the importance of engaging young people in particular in development programs and debates related to employment, education and HIV-AIDS.

Potential areas for future collaborative work

27. The high-level encounter underlined the criticality and urgency of the problems facing developing countries: there was a shared feeling among the organisations that the world is presently in a situation of crisis, which warrants strong and immediate responses. Concurrently, the meeting witnessed the commitment of church communities and the BWIs to engage in an honest dialogue despite unresolved issues (which were also reflected in the open forum discussions). There was common agreement that interaction among the three organisations would carry on even after the high-level encounter.

28. More specifically, the WCC and the BWIs agreed that the conduct of country-level case studies on PRSPs and exchanges thereon will continue to be pursued. These case studies are intended to further illuminate areas of agreement and disagreement by analysing economic policies promoted by the BWIs on the ground as well as permit more concrete discussions of development issues, particularly where views between organisations differ.

29. Based on the open forum discussions, other potential areas for collaborative work between the WCC and the BWIs were identified, among them the conduct of joint activities addressing the issue of governance, indigenous peoples' needs, HIV-AIDS and community development programmes.