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The spring meetings of the International Monetary Fund and the World Bank this weekend come at a time when foreign aid is back at the top of the international political agenda. But for more aid to be effective, tough decisions will have to be made, not only in poor countries, but in rich nations as well
" . . . as President George Bush’s war on terrorism got under way, and concern grew about the risks posed by “failed states”, aid policy assumed a new geopolitical significance. Writing big cheques to ease poverty and speed development started to make sense in domestic political terms for leaders in the rich nations."
" . . . will begin tackling some of the issues raised. How much aid makes sense? What is the best way of providing it? How can waste, corruption and plain inefficiency in many developing countries be by-passed? And, just as important, what obligations is it fair to impose on the recipients of the largesse?"
"As is so often the case in international economic policy, America holds the key to progress. The world’s largest economy is also the biggest shareholder in the IMF and the World Bank: what it says goes. America can be instrumental in shaping policy through these institutions, through the G7 industrial countries, and bilaterally."
"Work is also under way in the IMF and the G7 on ways to reform the international financial system. This now has two objectives. One is to make it harder for terrorist organisations to obtain funding by cracking down on money-laundering and increasing financial transparency. The other is to reduce the occurrence and severity of financial crises in emerging-market countries."
"It is also starting to dawn on those involved in reshaping international financial institutions that the various mechanisms for helping developing countries are more interlinked than ever before, and more interdependent. Sending generous cheques will not of itself guarantee poverty reduction. Reconstructing the international financial architecture also is not, by itself, enough. The steps which industrial economies will need to make if they are serious about helping the world’s poorest countries to develop their economies have barely begun to register with political leaders in rich countries."
"Industrial countries still spend more on subsidies to their farmers than they do on foreign aid, even though opening their food markets to foreign competition, and cutting and eventually eliminating farm subsidies, would bring huge benefits both to developing-country farmers and rich-country consumers and taxpayers."
"Trade issues, though, will be conspicuous mainly by their absence from the Washington meetings this weekend. This linkage between aid and trade, for now, is one which the rich nations would rather ignore. But it is one which, if they really mean to help poorer countries, rich countries will have to face sooner or later. For everyone’s sakes, rich and poor alike, it should be sooner."
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