IFAD Asset Request Portlet

Asset Publisher

Statement by President Lennart Båge

Location: Washington , DC

23 April 2004

Development Committee of the World Bank and the IMF

Mr. Chairman,

At the Millennium Summit in September 2000, world leaders set specific targets to halve the number of people living on less than one dollar a day, provide clean water and basic education for all, reverse the spread of HIV/AIDS and reach other development goals by 2015. The MDGs provide the foundation for a new global partnership to reduce poverty. But meeting them requires that international and national resources be focused on where poor people live and on the basis of their livelihoods. Three quarters of the world's extreme poor, some 900 million poor men and women, those living on less than USD 1 per day, live in rural areas in developing countries and mainly depend on agriculture for their living. Even in 2025, when the majority of the world's population is projected to live in urban areas, 60% of poverty will still be rural poverty and most of the ‘dollar poor' will still be rural.

The rural character of poverty is especially important in Africa . The share of the population living in poverty ranges between 25 percent in Zimbabwe to over 60 percent in Mozambique . In the low-income countries of Lesotho , Malawi , Tanzania and Zimbabwe , some 80-90 percent of the poor live in rural areas, where they have limited access to land and water.

Poverty is also primarily a rural problem in Asia and the Pacific. Over eighty per cent of the poor live in rural areas in the major countries of the region but of course rural poverty trends vary considerably from country to country. East Asia and South-East Asia have made impressive progress in reducing rural poverty over the last three decades. Rural poverty is still extensive in South Asia . In the Latin American and Caribbean region, poverty rates are worse in the countryside than in the cities: two out of three rural dwellers are living in poverty and rural poverty rates in the region have held steady during the past decade despite heavy rural-urban migration. Even more alarming is the statistic that six out of ten rural residents are poor - far higher than the urban figure.

In order to achieve the Millennium Development goals it is clear that the world must invest more in rural and agricultural development. Yet, the proportion of ODA devoted to agriculture and the rural sector has fallen sharply in recent years - by almost 50% between 1988 and 1999. Today, only 12% of ODA goes to agriculture, compared with 20% in the late 1980s. While there are signs that both donor countries and member countries are shifting their focus to the rural poor, much more emphasis to rural poverty and agricultural development is essential for meeting the Millennium Development Goals.

Poor access to markets is a major problem for many rural people. While trade liberalization and globalization present opportunities for the rural poor, they cannot take advantage of them unless they can compete on an equal footing. It has been estimated that the potential gains from freer trade in agriculture - the sector that most closely affects the rural poor - could mean an annual increase in global welfare in developing countries by 2015 of USD 160 billion. Meanwhile, subsidies for agriculture in the OECD countries are soaring, and are equivalent to more than six times total ODA.

The other challenge is enabling poor people to gain access to both the resources and services that they need to better their lives. Strong national policies, improved market access and institution building all work to reduce rural poverty. The development of small enterprise groups can benefit rural economies because they help promote growth in rural areas. In addition, the promotion of rural entrepreneurs also helps revitalize local economies through the development of various activities aimed at satisfying the basic needs of rural households, manufacturing and repair workshops, garment making, hairdressing, small traders and the like.

While poverty has largely been seen as an issue for public action, the role of the public sector is diminishing. Private investment needs to play a larger role, especially as market forces are becoming the major resource- allocation mechanism. The challenge is to establish a mutually reinforcing relationship between the smallholders and medium, even larger private sector entities.

My final comment regards the discussion of debt sustainability. As the note to the Committee mentioned, successful implementation of the HIPC Debt Initiative is key to maintaining debt sustainability in low-income countries. IFAD is fully committed to participating in the HIPC Debt Initiative. The cost of IFAD's participation is currently estimated at about USD 469 million, with a present value of USD 308 million. IFAD so far has not had access to the core resources of the World Bank HIPC Trust Fund. Bilateral contributions to IFAD for HIPC total about USD 45 million. Thus IFAD is internalizing 90% of its HIPC burden which will affect its capacity to provide new assistance significantly, especially in the coming five years. IFAD has substantial exposure to heavily indebted poor countries covered by the Initiative especially in Africa . Taking this into account, IFAD should receive treatment on its HIPC participation comparable to that accorded, for example, to the African Development Bank as well as the Inter-American Development Bank. Furthermore, if a lack of additional external resources for IFAD's participation in the Debt Initiative were to lead to a reduced lending program, Africa and the group of highly concessional borrowers, accounting for over 70% of IFAD's lending, would be seriously affected. I hope the Development Committee which has a major responsibility for the HIPC Debt Initiative will respond in an appropriate way.

Thank you.

24-25 April 2004
Washington , DC