DFID's goals for the G20 summit in Pittsburgh

10 September 2009

Economic crisis

One of DFID's principle goals in Pittsburgh is to help the poorest countries through the economic crisis by delivering on the agreement reached during the G20 Summit in London to provide $50 billion to Low Income Countries (LICs). See below

Since April, DFID has been leading global efforts to ensure the International Finance Institutions (such as the World Bank, the International Monetary Fund and regional development banks) rapidly deliver the London Summit commitments by making funds available faster to poorer countries.

Good progress is being made, with most commitments having been delivered.  Countries such as Tanzania, Kenya and Mozambique are already benefiting from the increased finance available from the IMF. See progress below

DFID will also be calling for the G20 to endorse the principle of a new crisis response facility run by the World Bank that will rapidly provide finance to low income countries that experience severe economic shocks. We will also support G20 proposals to improve access to finance for the poorest, including branchless banking services, and finance for small and medium enterprises to promote growth and new jobs. 

London Summit Commitments for LICs

At the London Summit G20 leaders agreed to provide $50 billion to support social protection, boost trade and safeguard development in LICs, comprising:

• $21 billion in Special Drawing Rights from the IMF
• $6 billion extra financing for multilateral development banks for spending on private sector
• $10 billion additional finance through the IMF
• $12 billion in trade finance through the IFC’s Global Trade Liquidity Programme.

New crisis finance: International Financial Institutions have been responding to the crisis

Good progress has been made on the IMF commitments to LICs including:

• Swift and substantial new crisis finance - $3.4 billion in new commitments to date, nearly six times pre-crisis lending . Ghana has received $581m in new commitments with Ethiopia and Kenya receiving $280m and $203m respectively
• Delivery of new Special Drawing Rights (SDRs). $283 billion has been delivered in two tranches on 28 August and 9 September. LICs received $21 billion
• The IMF Board has agreed a package expected delivered $17 billion to LICs over 2009-2014, including $8 billion in 2009 and 2010. This package incorporates the effects of doubling access and extra capacity from gold sales. It compares with average finance of $1 billion per year over 2000-2008.  So the package is more than $10 billion additional finance for LICs over 6 years  agreed at London Summit , with $6 billion additional in two years.

Multilateral Development Banks have responded to the crisis:

• $4bn approved by the World Bank and a further $2bn in train at the Asian Development Bank 
• The Multilateral Development Banks (MDBs) have all substantially increased their lending, planning to lend in excess of $110bn more this year in response to the strong crisis-driven demand, including over $60bn committed by the World Bank. The lending projection for the next three years exceeds $305bn, with World Bank lending projected to increase to more than $100bn

In addition:

• The World Bank board has agreed its concessional funding for low income countries - IDA - can be frontloaded and fast-tracked to help countries cope with the crisis. Low income countries many of which are Sub Saharan African countries can now bring-forward up to 50% of their IDA allocation from the year ahead. $1.5 billion has already been approved.
• The African Development Bank has already committed additional funds for crisis-affected countries, for example $100mn balance of payments support for the Democratic Republic of Congo and a $1.5 billion budget support loan for Botswana.

Global Trade Liquidity Programme

The Global Trade Liquidity Programme (GTLP) has received direct and parallel contributions of $4 billion for the first phase of its programme against the London Summit target of $3-4bn. This figure will increase as more partners and banks join the programme. This will provide up to $50 billion of trade liquidity support over the next 3 years including $12billion for LICs. The UK has provided $400 million to the GTLP, other contributors include the African Development Bank, Canada and the Netherlands; the Japan Bank for International Cooperation; the OPEC Fund for International Development and the Saudi Fund for Development.

In addition to the $50bn, the London Summit also agreed to make resources available for social protection to help the most vulnerable, including through contributions to the World Bank’s Vulnerability Framework and Rapid Social Response Fund.

Ensuring access to social protection programmes now and in the future for the poorest people is one of the UK’s top development objectives. DFID, in its recent White Paper, committed to help build social protection systems to get help to 50 million people in over 20 countries over the next three years (2009/10 to 2011/12). DFID is currently supporting social protection initiatives in over 30 countries and country offices are programming an additional £50 million for 2009/10 on social protection, employment and complementary interventions.

The UK has committed £200 million to the World Bank to scale up social protection programmes. The World Bank has responded strongly – new programmes have been implemented in Ghana, India, Kenya, Pakistan and Rwanda.  The World Bank has plans to triple support for safety nets and other social protection programmes to $12 billion over the next two years. $4.5 billion has already been allocated in FY 2009.

The World Bank’s Rapid Social Response Programme is now established as an umbrella for support from international donors. The programme covers a number of trust fund arrangements with donors which so far includes Australia (US $30m), Russia (US $50m) and the Netherlands ($20m). DFID has committed £2 million technical assistance towards the Rapid Social Response Programme (RSRP), which will deliver social protection funding for the poorest and most vulnerable.