REPORT OF IFAD SECOND CONSULTATION ON THE SIXTH

UNCLAS SECTION 01 OF 02 ROME 002415 SIPDIS TREASURY FOR WSCHUERCH, MJASKOWIAK, JP PASSINO USDA FOR FAS/LYNN REICH AND DAVID WINKELMAN STATE FOR IO/EDA ROSE BERSTEIN USAID FOR AA/PPC;DAA/G/EGAD;AFS FROM FODAG E.O. 12958: N/A TAGS: AORC EAID IFAD EAID AORC IFAD SUBJECT: REPORT OF IFAD SECOND CONSULTATION ON THE SIXTH REPLENISHMENT UNCLASSIFIED PAGE 02 ROME 02415 01 OF 02 161556Z ¶1. SUMMARY: THE SECOND CONSULTATION SESSION ON THE SIXTH REPLENISHMENT OF RESOURCES FOR THE INTERNATIONAL FUND FOR AGRICULTURAL DEVELOPMENT (IFAD) WAS HELD APRIL 18-19, 2002 IN ROME. MARK JASKOWIAK (DIRECTOR, OFFICE OF SPECIALIZED DEVELOPMENT INSTITUTIONS, U.S. DEPARTMENT OF TREASURY) REPRESENTED THE UNITED STATES AT THE CONSULTATION AND AT RELATED CONSULTATIONS HELD WITH LIST A (DONOR MEMBER COUNTRIES) AND IFAD MANAGEMENT. ISSUES OF IMPORTANCE THAT WERE DISCUSSED INCLUDED A PROPOSAL BY MANAGEMENT ENTITLED ""OPERATIONALIZING IFAD'S STRATEGIC FRAMEWORK;"" A NUMBER OF SPECIFIC POLICY ISSUES SUCH AS IFAD'S FIELD PRESENCE, PERFORMANCE-BASED LENDING SYSTEM, RESULTS-ORIENTED ACTION PLANS; AND VARIOUS REPLENISHMENT- LEVEL SCENARIOS INCLUDING IMPLICATIONS FOR THE USE OF ADVANCE COMMITMENT AUTHORITY AND LENDING LEVELS. THE NEXT CONSULTATION WILL BE HELD JULY 2-3, 2002. END SUMMARY. OPERATIONALIZING IFAD'S STRATEGIC FRAMEWORK -------------- ¶2. STRATEGIC FRAMEWORK:. PARTICIPANTS DISCUSSED IFAD'S PROPOSED STRATEGIC FRAMEWORK AND COMMENDED THE EFFORT OF BOTH STAFF AND MANAGEMENT. THE CONSENSUS HIGHLIGHTED THE IMPORTANCE OF THE DOCUMENT AND THE NEED TO FURTHER DEVELOP IT AS A STRATEGIC TOOL TO GUIDE THE ORGANIZATION'S ACTIVITIES AND RESOURCE ALLOCATIONS. DELEGATES FROM THE NETHERLANDS, UNITED KINGDOM, AND SWITZERLAND WERE AMONG THOSE DELEGATIONS THAT CALLED FOR MORE DETAILED INFORMATION (I.E., SIMILAR TO A CORPORATE PLAN) IN THE REPORT. ERITREA, MEXICO, BRAZIL AND ITALY UNCLASSIFIED PAGE 03 ROME 02415 01 OF 02 161556Z SUPPORTED BOTH THE DOCUMENT AND THE REGIONAL ALLOCATION SYSTEM. USDEL OUTLINED ITS POLICY PRIORITIES FOR THE REPLENISHMENT, INCLUDING: 1) THAT THE DOCUMENT INCLUDE MORE DETAILS WITH RESPECT TO THE FOLLOWING: THE CURRENT ALLOCATION PROCESS, REGIONAL STRATEGIES, AND THE NEED TO DEVELOP A PERFORMANCE-BASED ALLOCATION SYSTEM FOR IFAD; 2) THE NEED FOR MORE QUANTIFIABLE MEASURES TO PREDICT AND ASSESS THE PERFORMANCE OF IFAD AND ITS PROJECTS; AND 3) IFAD'S CATALYTIC ROLE WITH OTHER MDBS, GOVERNMENTS AND THE PRIVATE SECTOR, SHOULD BE FURTHER ARTICULATED. THE U.S. WILL CIRCULATE A MORE DETAILED PAPER ON POLICY REFORM BEFORE THE NEXT REPLENISHMENT MEETING IN JULY. MANAGEMENT WILL REDRAFT THIS STRATEGIC FRAMEWORK DOCUMENT FOR FURTHER CONSIDERATION DURING THE JULY 2002 REPLENISHMENT CONSULTATIONS. FIELD PRESENCE -------------- ¶3. THE ISSUE OF IFAD'S FIELD PRESENCE WAS RAISED BY MANY DELEGATIONS DURING THE COURSE OF DELIBERATIONS. DISCUSSIONS IN SUPPORT OF THIS ISSUE WERE FOCUSED ON IMPROVING IFAD'S ABILITY TO PARTICIPATE IN POLICY DIALOGUE, ADVOCATE FOR POLICY CHANGE, BUILD STRONGER PARTNERSHIPS, AND CO-FINANCE PROJECTS. MOST DELEGATIONS AGREED THAT IT IS IMPORTANT TO IMPROVE IFAD'S PERFORMANCE AT THE COUNTRY-LEVEL, BUT WERE SOMEWHAT RESERVED IN THEIR SUPPORT OF FIELD PRESENCE. USDEL SUGGESTED THAT IN ORDER TO HAVE A MORE MEANINGFUL DISCUSSION ON FIELD PRESENCE, MORE INFORMATION WAS NEEDED REGARDING THE DEFINITION OF FIELD PRESENCE AND LONG-TERM BUDGETARY IMPLICATIONS. UNCLASSIFIED PAGE 04 ROME 02415 01 OF 02 161556Z USDEL ALSO STRESSED THAT SINCE FIELD PRESENCE RELATES TO IFAD'S ORIGINAL MANDATE AS A NON-IMPLEMENTING AGENCY, ANY PROPOSED POLICY CHANGE WOULD REQUIRE APPROVAL BY THE GOVERNING COUNCIL IF NOT A CHARTER REVISION AS WELL. MANAGEMENT WILL PROVIDE A PAPER ON IFAD FIELD PRESENCE FOR DISCUSSION AT THE NEXT REPLENISHMENT CONSULTATION IN JULY 2002. PERFORMANCE-BASED LENDING -------------- ¶4. WITHIN THE CONTEXT OF BETTER UTILIZING IFAD'S SCARCE RESOURCES AND ITS SPECIAL MANDATE TO REDUCE POVERTY AMONG THE RURAL POOR, THE USDEL EXPRESSED SUPPORT FOR THE DEVELOPMENT OF A PERFORMANCE-BASED SYSTEM OF ALLOCATING LOANS. SUCH A SYSTEM WOULD HAVE THE SAME OVERALL GOAL AS MODELS CURRENTLY IN USE AT OTHER IFIS, BUT WOULD BE TAILORED TO IFAD'S PARTICULAR MISSION, SIZE, AND CAPACITY. ALLOCATIONS BASED ON COUNTRY PERFORMANCE WOULD BETTER ENABLE IFAD TO TARGET LIMITED RESOURCES MORE EFFECTIVELY. MOST DELEGATIONS, WHILE EXPRESSING GENERAL SUPPORT FOR THE CONCEPT OF PERFORMANCE-BASED LENDING, UNCLASSIFIED UNCLASSIFIED PTQ3551 PAGE 01 ROME 02415 02 OF 02 161556Z ACTION IO-00 INFO LOG-00 NP-00 AID-00 AMAD-00 CIAE-00 COME-00 CTME-00 DODE-00 ITCE-00 SRPP-00 EB-00 EXME-00 EUR-00 UTED-00 TEDE-00 INR-00 ITC-01 NSAE-00 OES-01 OIC-02 OMB-01 OPIC-01 SS-00 STR-00 TEST-00 SAS-00 /006W -------------- AF7E79 161602Z /38 R 161542Z MAY 02 FM AMEMBASSY ROME TO SECSTATE WASHDC 3782 USMISSION USUN NEW YORK USMISSION GENEVA INFO USDA FAS WASHDC 2135 DEPT OF TREASURY WASHDC UNCLAS SECTION 02 OF 02 ROME 002415 SIPDIS TREASURY FOR WSCHUERCH, MJASKOWIAK, JP PASSINO USDA FOR FAS/LYNN REICH AND DAVID WINKELMAN STATE FOR IO/EDA ROSE BERSTEIN USAID FOR AA/PPC;DAA/G/EGAD;AFS FROM FODAG E.O. 12958: N/A TAGS: AORC EAID IFAD EAID AORC IFAD SUBJECT: REPORT OF IFAD SECOND CONSULTATION ON THE SIXTH REPLENISHMENT UNCLASSIFIED PAGE 02 ROME 02415 02 OF 02 161556Z EXPRESSED CONCERN THAT THIS COULD BE VIEWED AS PUNITIVE TO THOSE IN MOST NEED. THEY WOULD PREFER TO USE THE CURRENT REGIONAL SYSTEM OF ALLOCATIONS, WHICH STAFF DESCRIBED AS BASED LARGELY ON NEED (NOT PERFORMANCE) AND WHICH HAS NOT BEEN UP-DATED SINCE 1997, DESPITE AGREEMENT DURING THE LAST REPLENISHMENT THAT IT NEEDED MODIFICATIONS. UNDER THIS APPROACH, PERFORMANCE WOULD BE CONSIDERED PRIMARILY AT THE PROJECT LEVEL. AT THE REQUEST OF THE USDEL, MANAGEMENT WILL PROVIDE BOTH A REPORT ON THE CURRENT ALLOCATION PROCESS USED BY IFAD AND A PROPOSAL FOR A NEW ALLOCATION SYSTEM BASED ON PERFORMANCE FOR DISCUSSION AT THE JULY MEETING. REPLENISHMENT LEVEL SCENARIOS -------------- ¶5. NO SPECIFIC LEVEL OF COMMITMENT WAS MADE BY ANY COUNTRY DURING THIS SESSION AND NO CONSENSUS WAS REACHED ON THE OVERALL LEVEL OR ON TARGET LENDING PROGRAMS. MANY COUNTRIES EXPRESSED GENERAL SUPPORT FOR BOTH, HOWEVER. MEMBERS WERE PROVIDED WITH A SERIES OF REPLENISHMENT LEVEL SCENARIOS FOR ILLUSTRATIVE PURPOSES. THE SCENARIOS SHOWED THE RELATIONSHIP BETWEEN THE FUND'S LENDING PROGRAM AND ITS INVESTMENT INCOME AND DIFFERENT REPLENISHMENT LEVELS. CONCERN WAS EXPRESSED BY THE USDEL AND OTHER MEMBERS REGARDING IFAD'S INCREASING RELIANCE ON ADVANCE COMMITMENT AUTHORITY (ACA). USDEL STATED THAT ACA SHOULD BE USED CAUTIOUSLY FOR TEMPORARY SHORTFALLS ONLY AND THAT IT IS FINANCIALLY UNSOUND TO BASE REPLENISHMENT PROPERTIES ON A PERMANENT AND RISING LEVEL OF ACA. THE USDEL CALLED FOR ILLUSTRATIVE TABLES ON UNCLASSIFIED PAGE 03 ROME 02415 02 OF 02 161556Z COUNTRY-SPECIFIC IMPLICATIONS FOR REPLENISHMENT LEVELS INCLUDING FLAT (SAME AS IFAD V) AND SEVERAL INCREASED LEVELS (E.G., 10, 25, AND 50 PERCENT). OTHER MEMBERS ALSO REQUESTED INFORMATION ON ACA USE IN OTHER INTERNATIONAL FINANCIAL INSTITUTIONS AND A TECHNICAL NOTE ON THE PERIOD TO BE USED FOR SETTING THE EXCHANGE RATES FOR CONTRIBUTIONS TO THE SIXTH REPLENISHMENT. ¶6. MOST DELEGATIONS NOTED THE PROGRESS MADE BY THE SECRETARIAT IN MOBILIZING ADDITIONAL RESOURCES FOR IFAD'S SIPDIS PARTICIPATION IN THE DEBT INITIATIVE FOR HEAVILY INDEBTED POOR COUNTRIES (HIPC). USDEL, WHILE GENERALLY SUPPORTIVE OF ANY PROSPECTIVE BILATERAL CONTRIBUTIONS DONORS MIGHT ELECT TO MAKE FOR THIS PURPOSE, CONSIDERED THAT SUPPORT FOR THE HIPC TRUST FUND WAS UNLIKELY GIVEN ITS EXISTING USD $700M SHORTFALL. IFAD MANAGEMENT COMMITTED TO PROVIDING MEMBERS WITH UPDATED INFORMATION ON HIPC FOR THE JULY 2002 REPLENISHMENT NEGOTIATIONS. ¶7. THE NEXT CONSULTATION WILL BE HELD JULY 2-3, 2002. HEILEMAN END UNCLASSIFIED > 2002ROME02415 - Classification: UNCLASSIFIED