Joseph Stiglitz of Columbia University participates in a panel discussion on the post-2015 sustainable development agenda (IMF staff photo).
2015 IMF-World Bank Annual Meetings
Ready for Takeoff: Implementing the Post-2015 Development Agenda brought together policymakers, academics, as well as representatives from the private sector and international organizations to discuss how best to catalyze action on the sustainable development goals, adopted in September, which will serve as the guidepost for global development over the next 15 years.
“It’s not hard to make promises, but delivering on them is much more difficult,” said IMF Managing Director Christine Lagarde in opening remarks at the seminar, which took place during the IMF-World Bank Annual Meetings in Lima, Peru.
Public money not enough
Moderator Nikiwe Bikitsha, a South African journalist, began the debate by asking how panelists viewed as the key priorities of the post-2015 development agenda.
“You really have to approach it in a comprehensive way,” noted Joseph Stiglitz of Columbia University. As such, he said, each country ought to have a national dialogue about its own development goals and the interaction between these different goals.
For Magdalena Andersson, Sweden’s Minister of Finance, revenue mobilization was seen as essential. “Public money is never going to be enough to reach the goals—we also have to work with the private sector to leverage public money.”
Akinwumi Adesina, the newly appointed President the African Development Bank (AfDB), concurred. “Africa needs roughly $100 billion for investment in infrastructure. But right now we have only about $50 billion,” he observed. Multilateral development banks should be doing more to promote risk-sharing instruments that allow the private sector to lend significant amounts without shouldering excessive risk. “Risk sharing is what permits the AfDB to partner with the private sector,” he said.
Mobilizing domestic revenue
While panelists agreed that private-public partnerships were a key factor in low-income countries’ development, some also noted that governments did not have to rely solely on external funding sources. “There is a lot of potential revenue in the country that countries could tap,” said IMF Deputy Managing Director Min Zhu, noting that the IMF has devised a new “revenue gap analysis” tool that helps countries understand where the gaps are in their revenue collection.
To fill the gap, countries could consider raising taxes, said Stiglitz, observing that in countries with tax rates as low as, say, 17 percent, raising the rates is feasible: “If you're going to have the investment that you need in education, investment, and technology on a sustainable basis, you have to have the tax revenues.” Even short of raising tax rates, stressed Zhu, there are ways of improving the tax efficiency by reducing tax exemptions and broadening the tax base, as Vietnam and Tanzania have done successfully.
Realistically, though, “you can't tax very poor people,” Adesina said. Giving potential entrepreneurs access to finance is critical to giving a “leg up” to people in low-income countries. This has to be done before one even begins to talk about taxes, he stressed. “If you look at the financial sector today, those that pay back their loans are women. We need to put out an affirmative finance action for women in Africa where we work with banks and microfinance institutions devote at least one-third of what they lend to women-owned businesses.”
Claver Gatete, Rwanda’s Minister for Finance and Economic Planning, also zeroed in on the role of governments in ensuring that women are active participants in the economy. “Countries have a big role to play to ensure that the gender gap is closed,” he said. “When we agreed that a gender imbalance was there, we put it in the constitution” that women had to hold at least 30 percent of posts in decision-making organs.
He also noted that Rwanda’s financial inclusion of women has been growing steadily—in part because the government has put in place targets (80 percent of women will have access to finance by 2017 and 90 percent by 2020). “If you have a law, if you have targets, if you have institutions [that promote financial inclusion for women], the gap can be closed, and Rwanda is there to prove it,” Gatete said.
Creating value, generating jobs
Beyond mobilizing revenue and facilitating the economic participation of women, there is still more to be done, said Tony Elumelu, a successful Nigerian entrepreneur. His country has benefitted from external resources by way of aid and by way of private flows, he said. While aid has helped address some of the continent’s issues, it has not helped significantly alleviate poverty or create jobs.
The answer, he said, is private investment—and preferably partnerships between local investors and international ones. “We're a commodity-based continent, but we do not have the resources to process our commodities. Our commodities are processed offshore—value is created outside of Africa and brought back. In the process, we actually lose an opportunity to create jobs for our people.”
The seminar also explored the role of the international financial institutions in helping spur progress toward the new sustainable development goals.
Zhu noted that the IMF is active in several ways. It has put more resources on the table by allowing low-income countries to borrow up to an additional fifty percent from the IMF’s concessional facilities at an interest rate of zero percent. It is also intensifying its policy dialogue with member countries and strengthening its efforts to help increase their institutional capacity, particularly in the context of the sustainable development goals.
As for the World Bank, Managing Director and Chief Financial Officer Bertrand Badré explained how he sees his institution’s role. “We have to work together. We can create additional resources, we can share innovation, and we have to make things easier for investors.” He noted that the World Bank, together with the IMF, the European Investment Bank, and regional development banks, had just issued a report From Billions to Trillions: Transforming Development Finance. Now, he said, it was time to move from trillions to action.
