Thank you for the invitation to come here. I'm hoping to provide information, and I know there were some questions in the previous committee meetings about the Department of Finance's role in the Bretton Woods institutions in particular and in development assistance.
As you're aware, most of the activities of the Department of Finance don't deal with development assistance. We're responsible or draw authority from over 143 statutes, one of which is the Bretton Woods and Related Agreements Act, which is clearly the most relevant in terms of development assistance, and I understand that's reflected in clauses 9 and 10 of the bill.
The Bretton Woods act lays out the minister's authority with respect to contributions to the World Bank and to the IMF. There are three main development assistance payments made by the Minister of Finance: first, contributions to the interest-free lending window of the World Bank, called the International Development Association; second, contributions to the low-interest lending window of the International Monetary Fund, called the poverty reduction and growth facility; and third, payments under the multilateral debt relief initiative, under which donors are financing 100% relief for eligible countries from their debt with the IMF, the World Bank's IDA, and the African Development Fund. This year, the department will make payments totalling $367 million for those three items. This is out of a total international assistance budget for Canada of about $3.8 billion.
Along with the authority to make payments, the Bretton Woods act also sets out reporting requirements for the Minister of Finance that are statutory and require us to report to Parliament on an annual basis. I've quoted section 13 of our act, and I believe that was distributed to you along with the report that the Department of Finance submits each year in this area. Section 13 requires us to submit
a report containing a general summary of operations under this Act and details of all those operations that directly affect Canada, including the resources and lending of the World Bank Group, the funds subscribed or contributed by Canada, borrowings in Canada and procurement of Canadian goods and services.
I note that this particular language in section 13 is echoed in clause 10 of the bill.
Finally, the Bretton Woods act also sets out the Minister of Finance's role as Canada's representative on the board of governors of the World Bank and the IMF. As governor, the Minister of Finance exerts his influence through exchanges of views at the annual meetings of the board of governors of these institutions.
So these are the discussions that deal with the World Bank and IMF's broad policy agendas. The day-to-day decisions are actually delegated to a 24-member executive or board. These executive directors on the board are nominated by the governors of the constituencies they represent, but I'd point out that they're employees of the bank and fund. They're not employees of their home governments.
Another important point is that our executive directors at those two institutions don't represent Canada alone. There is not a Canadian executive director. The executive director represents Canada, Ireland, and a number of the Caribbean constituencies. So there's not a uniquely Canadian individual who just represents Canada at those institutions—and that's relevant, as you're going to see later.
I'll move on with some comments on Bill C-293. There are three areas I'd like to highlight. The first is the potential impact on the Minister of Finance's legal powers in non-development-related areas. I assume from the testimony I heard earlier and the comments of committee members that this is unintended, but our legal counsel raises serious concerns that this may be an unintended effect of the legislation, the way it's currently worded. The second is the potential blurring of accountabilities set out under the Bretton Woods act with regard to reporting. The third is the disclosure limitations due to the confidentiality rules imposed on the World Bank and IMF executive boards.
In terms of the Minister of Finance's powers, I'll divide it into two layers. This discussion already began in the earlier hearings. It's a question of the scope of the definition of “development assistance”, as contrasted with what can be spent under clause 4. I'll give three examples of how it's potentially problematic.
The contribution Canada makes to reduce money laundering in a developing country would likely fall under the development assistance definition Mr. McKay has put forward to the committee. They would be funds provided to a developing country that advance the economic development of that country by having a better banking system. But one could make a strong argument that the primary focus of anti-money-laundering funds is not poverty reduction. The concern about how the bill is written right now, and any activity that falls under that definition of development assistance, is that the government would be stopped from spending money in any of those areas of that broad definition of development assistance that don't have poverty reduction as the primary goal. It's not that we couldn't just count it as ODA; we actually couldn't spend money in that area.
That's the primary concern we're putting forward--areas of spending of the Department of Finance like anti-money-laundering. Another area is unilateral tariff relief. It may have a positive impact on the economic development of developing countries, but its primary objective is not poverty reduction.
I don't think that was the intention of the bill, but counsel are very concerned that this is the effect of the existing legislation. Activities that would fall under a broad definition of development assistance, including anti-money-laundering, unilateral tariff relief, and even bilateral debt relief in countries like the former Yugoslavia, would be subjected to the test of poverty reduction. If they failed that test, the government would not be allowed to provide funds in that area.
On bilateral debt relief, for example, you will recall that the government provided such relief in the former Yugoslavia following the Balkan conflicts. This type of assistance easily fits under the definition of development assistance; however, the driver for providing the relief was not the underlying prevalence of poverty in those countries. It was a recognition of the financial reality that in light of the particular challenging economic and financial situation, the country did not have the capacity to make its debt service payments over the coming years. Had Bill C-293 been in place, the minister might not have been able to deliver this type of assistance, as it would have been difficult to establish a direct causal link between the debt cancellation and poverty reduction, as required under clause 4.
Even within the Bretton Woods institutions, and particularly the World Bank, there are areas where we would potentially not be able to provide funding because it would fall under the broad definition of development assistance but not meet the poverty test.
If I could cite one example here of the World Bank private sector development agencies--the International Finance Corporation and the Multilateral Investment Guarantee Agency--the primary vehicle through which they provide assistance is funding to private sector organizations in those countries. Over the long term, the hope is that funding will eventually improve the state of the economy in those countries, which will help all citizens, including the most poor.
But when payments are made at the front end, it's difficult to make a direct link between a grant or risk insurance provided to a small company and poverty reduction. The concern is that with the broad definition of development assistance and the limiting factor that only those things that reduce poverty are allowed to be funded, the government would be prevented from contributing to these important World Bank agencies, to which most other countries in the world contribute.
The second point is around blurred accountabilities. As I mentioned earlier, the reporting requirements of Bretton Woods make it clear that the Minister of Finance is accountable for operations under the act. Indeed, it sets out a clear reporting requirement for the Minister of Finance that results in an annual report to Parliament.
Clauses 9 and 10, as I read them, will now create three reports on development assistance: one by the CIDA minister, and a second report for the Minister of Finance in clause 10, which is largely duplicative of a third report we do right now and which I believe you have; it is the Bretton Woods Act report that the Department of Finance already submits. So there's a danger here of some blurring of accountability in terms of who's accountable to Parliament to report on what. Under Bretton Woods, it's clearly the Minister of Finance who's accountable.
Perhaps I could address one particular concern, and it's a high one that is shared by the representatives of Canada at the World Bank and at IMF institutions. That regards the confidentiality rules in those institutions.
Paragraph 10(b) of the legislation, and it's echoed in paragraph 9(1)(d) of the legislation as well, requires that the minister present to Parliament:
a summary of any representation made by Canadian representatives with respect to the priorities and policies of the Bretton Woods Institutions;
The World Bank's policy on disclosure of information and the IMF's transparency policy both require that certain items discussed by the executive director and the board of governors be confidential. To provide an analogy, the executive director meetings are not unlike cabinet. In order to encourage a full and frank exchange of members, the information that is shared between members at those meetings is kept confidential. That's enshrined in the articles of the IMF and the World Bank, which provide, in perpetuity, archival immunity for this sort of information.
As I mentioned, there's a second problem. If you're trying to decipher “Canada's position” at these agencies, the representative of Canada is not uniquely the representative of Canada. They're also the representative, in our two constituencies, of Ireland and the major Caribbean countries. So deciphering the position they ultimately took at a committee...even if we could get over the confidentiality hurdle, determining which part of that position was exactly Canada's position is just not possible given the way the institution is structured.
I'd point out that this sort of protection is also identified in our own Canadian legislation, in the Access to Information Act, which provides specific exemptions for information given in confidence from foreign governments or international organizations like the IMF and World Bank and where the disclosure of information could reasonably be expected to be injurious to the conduct of international affairs.
Given the frank nature of exchange in the meetings, were Canada to publish a detailed summary of the position it took, let's say, vis-à-vis the performance of another country's economy in the IMF proceedings, that could have a market impact in terms of what we're saying and where we think the country should go, but it could clearly have a state-to-state impact that's a potential concern.
This doesn't mean we can't report on any of the representations made by Canada. For example, as a matter of practice, though it's not required in law, we do, as part of the Department of Finance report on the Bretton Woods institutions, provide the positions adopted by the board of governors and the Canadian positions on all those resolutions taken. We're just highlighting for the committee the challenge around trying to push this to a point where our executive directors would be put in an impossible position of providing us information that would be in breach of their confidentiality requirements.
In summary, there are three essential concerns that we'd like to raise before the committee.
The first is in regard to the definition of development assistance in clause 4. If there's a broad definition of development assistance, it risks capturing activities like anti-money-laundering, which, under clause 4, we would not be allowed to fund because they don't have poverty reduction as their primary goal.
So we're raising that particularly from the Department of Finance perspective because the Minister of Finance is responsible, has ultimately the residual authority under the Financial Administration Act to spend in any area. If you restrict the Minister of Finance so that he cannot spend in a particular area, that is, development assistance that does not have poverty reduction as a goal, we're in effect preventing the Government of Canada anywhere from operating in that area. We think that's problematic.
The second is on the reporting requirements. We have an existing report on the Bretton Woods institutions. Indeed, paragraph 10(d) replicates the language of our report. I'd point out that only 12 of 185 member countries actually provide such a report. When Ireland recently added themselves to this list, they used Canada's report as a model, so we think it's a good report. We're worried that clause 10 simply duplicates that.
While I too am a friend of the pulp and paper industry in Canada, I think we should avoid anything that simply replicates the reporting so that we have the identical text in two reports.
Finally, on confidentiality, the new element in that reporting requirement, we're highlighting the difficult position we'd be putting Canada's representatives at the institutions in, to the extent that they were called upon to breach their confidentiality requirements. We would reveal, in effect, what are the equivalent of cabinet confidences.
Thank you.
