International finance facility

A detailed proposal for an International Finance Facility that could raise the amount the developed world spends on aid from the current $50 billion a year to $100 billion a year up to 2015 has been published by Chancellor Gordon Brown and International Development Secretary Clare Short.

The Facility is designed to achieve both the additional finance and the value for money necessary to meet the internationally agreed Millennium Development Goals so that by 2015 every child has schooling; infant and maternal mortality is reduced and poverty halved.

The UK Government will work closely with other governments, business and non-governmental organisations to develop this proposal further and to build support for the creation of an International Finance Facility.

Chancellor Gordon Brown said:

“Now is the time – for reasons of justice, altruism and simple enlightened self-interest – for an unprecedented act of statesmanship by the world’s richest countries. It is not just the poorest, but us all who stand to gain in a world more united, more just and more prosperous – a world that grows together rather than apart.”

International Development Secretary Clare Short said:

“This is a fund to which countries are invited to commit on a long term basis in order to double aid from $50 billion to $100 billion per year. The money will be spent to support reformers in the poorest countries in order to increase education and health care necessary for development.”

Notes for editors

The technical details of the proposal for an International Finance Facility are set out in “International Finance Facility – a technical note (PDF)” available from the HMT and DFID websites and public enquiry units.
More information, including the wider context of this proposal, is also available in “International Finance Facility” published on 23 January 2003 and also available from HMT and DFID websites and public enquiry units.
Views and queries about the IFF can be emailed to: IFF@hm-treasury.gov.uk
The proposal is for an International Finance Facility to achieve both the additional finance and the value for money necessary to meet the internationally agreed Millennium Development Goals by 2015.
The IFF is a new mechanism to help developed countries deliver their commitments to increased and more effective aid.

How the IFF works

The Facility would be built on long-term donor commitments to make ‘streams’ of annual payments to the IFF, earmarked for specific countries.
The IFF would borrow against the security of this committed income stream by issuing bonds in the international capital markets.
Donors would be legally bound to make the payments to the IFF in each ‘stream’, subject to one or two high-level financing conditions related to the relevant recipient countries.
In this way, the IFF will deliver upfront resources over the next few years when it will have the most impact on achieving the targets.
And the IFF would not be an agency for disbursement. It would disburse funds through existing effective bilateral and multilateral mechanisms.
It would be a temporary finance facility. It would be in existence, raising and disbursing funds, for around 15 years with the repayment phase continuing for around a further 15 years after which the Facility would be wound up.
The IFF will build on existing agreements between developed and developing countries, with developing countries demonstrating that the money will achieve the results intended and developed countries making a commitment to provide long-term, predictable, untied and effective aid as investment to the countries that need it most.

Advantages of the IFF

The proposed Facility is the best means of putting aid funding on a stable footing for 2015. For poor countries aid will be available when it is needed: now in advance of 2015, and rich countries will have more than double that time – 30 years – to repay their pledges.
In delivering a substantial increase in aid when it will have the most impact the IFF is focused on achieving the Millennium Development Goals.
It will provide a critical mass of aid to be linked up in a coordinated programme of sustained investment across health, education and other anti-poverty programmes.
And by crystallising long-term commitments from donors, the Facility can provide a predictable and stable flow of aid over the medium term, thereby helping provide a catalyst for increased private investment.

Millennium Development Goals

The Millennium Development Goals (MDGs) were agreed at the UN Millennium Assembly in 2000. They are to:

eradicate extreme poverty and hunger by halving, between 1990 and 2015, the proportion of people whose income is less than one dollar a day and the proportion of people who suffer from hunger;
achieve universal primary education, by ensuring that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling;
promote gender equality and empower women by eliminating gender disparity in primary and secondary education, preferably by 2005, and to all levels of education no later than 2015;
reduce by two thirds, between 1990 and 2015, the under-five mortality rate;
improve maternal health by reducing by three quarters, between 1990 and 2015, the maternal mortality ratio;
combat HIV/AIDS, malaria and other diseases; and
ensure environmental sustainability, including by halving by 2015 the proportion of people without sustainable access to safe drinking water (sanitation) and by 2020 to have achieved a significant improvement in the lives of at least 100 million slum dwellers.

Media enquiries should be addressed to HM Treasury press office on 020 7270 5238 or public enquiries to Public Enquiry Unit on 020 7270 4558.