Doubling aid to halve poverty

A proposal for an International Finance Facility which could double the amount of development aid provided by the richest countries to the poorest was published today by Chancellor Gordon Brown and International Development Secretary Clare Short.

The Facility is designed to provide additional financing to help meet the internationally agreed Millennium Development Goals so that by 2015 every child is in education, infant mortality is reduced by two thirds and maternal mortality by three quarters, and poverty is halved.

The founding principle of the new International Finance Facility (IFF) is long-term, but conditional, funding guaranteed to the poorest countries by the richest countries. On the basis of these long-term donor commitments, the Facility would leverage in additional money from the international capital markets. It would seek to raise the amount of development aid from just over $50 billion a year today, to $100 billion per year in the years to 2015.

The Facility will ensure not only additional money, but also value for money. It will do this by providing, for the first time, a predictable and stable flow of aid, allowing developing countries to plan long-term investment effectively and efficiently.

It would thus build on existing agreements, between developed and developing countries, with each country:

pursuing anti-corruption, pro-stability policies and agreeing the necessary transparency in economic and corporate policies to achieve this;
committing to the Doha development agenda – a sequenced opening up of markets to global trade;
improving the environment for investment and private sector-led growth; and
as part of country-owned poverty reduction strategies, agreeing clear and costed plans for building education, health and economic capacity.

Chancellor Gordon Brown said:

“The IFF will provide developing countries that reform with the means to invest in schools and healthcare, roads and legal systems, helping to create the environment businesses need as well as create the conditions that will enable countries to participate in, and benefit from, global trade. And as families in those countries are lifted out of poverty, new and dynamic markets will be created.”

Clare Short said:

"The Facility could double the aid currently available, which would provide sufficient investment to enable every country committed to reform to make progress towards the Millennium Development Goals. This would help create a more just and safer world."

Notes for editors

The details of the UK proposal are set out in “International Finance Facility” published today and available from HMT and DFID website and public enquiry units.

The proposal is for an International Finance Facility to bridge the gap between the resources that have already been pledged and what is needed to meet the Millennium Development Goals by 2015.

The Millennium Development Goals (MDGs) were agreed at the UN Millennium Assembly in 2000 by individual countries, the UN, IMF, the World Bank and OECD. 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.

The World Bank and the United Nations estimate that an additional $50 billion in aid from the international community will be needed each year if the Millennium Development Goals (MDGs) are to be achieved by 2015.

The IFF would build on long-term donor commitments to raise the additional money needed to meet the MDGs, comprising a series of pledges for a flow of annual payments to the IFF. On the basis of these commitments, the IFF would leverage up immediate resources for aid by issuing bonds in the international capital markets. Additional aid could then be disbursed to developing countries in the form of grants, debt relief and, possibly, highly concessional loans

Aid flows would provide predictability by funding 4 – 5 year disbursement programmes to poor countries through existing bilateral and multilateral mechanisms.

There would be necessary safeguards for donors comprising:

one or two high-level financing conditions as a basis for the pledges by donors to the Facility; and
more detailed conditionality, based on clear development criteria, that governs the disbursement programmes funded by the IFF.

The IFF would provide a predictable and stable flow of aid to be deployed as a co-ordinated programme of investment to meet the MDGs.

The IFF proposal offers a number of advantages:

it is focussed on the financing necessary to help achieve the internationally agreed Millennium Development Goals;
it is founded on developed countries’ long-term commitments to those countries that are striving towards achieving the goals;
it bridges the gap by leveraging these long-term commitments, enabling the 0.7 per cent target to be met sooner and allowing a substantial increase in aid when it will have the most impact on achieving the targets by 2015;
it will also allow a critical mass of aid to be linked up as a co-ordinated programme of sustained investment across health, education and other anti-poverty programmes;
by crystallising long-term commitments from donors it can provide a predictable and stable flow of aid over the medium term to countries that remain committed to achieving the goals, thereby helping provide a catalyst for increased private investment;
its structure encourages donor pooling and co-ordination, improving the effectiveness of aid. By bringing together donor flows and diversifying risk it is able to secure value for money; and
it is based on a tried and tested principle for raising development finance.

The document is available on this website and the DFID website.

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.