CANADA, DEBT, AND THE COMMISSION FOR AFRICA

UNCLAS E F T O SECTION 01 OF 02 OTTAWA 000324 SIPDIS SENSITIVE STATE FOR AF, EB/IFD, AND WHA/CAN E.O. 12958: N/A TAGS: EFIN EAID PREL ECON EINV CA UNGA SUBJECT: CANADA, DEBT, AND THE COMMISSION FOR AFRICA REF: A. PRETORIA 453 ¶B. OTTAWA 35 ¶1. (SBU/noforn) Summary: Canada strongly supports increasing aid to Africa but does not endorse financing proposals such as the International Finance Facility (IFF) advocated by the UK and others or the 0.7% of GDP resource volume target for ODA. Their position is especially delicate as Finance Minister Ralph Goodale is a member of the Commission for Africa (ref B); Africa was a focus of Canada's 2002 G-8 presidency; and half of the annual 8% increase in Canada's aid budget in coming years is dedicated to Africa. Publicity associated with the January 17, 2005 release of the Millennium Project Report to the UN has also contributed to what one official at Finance Canada called "the pinnacle of 0.7% pressure." ¶2. (U) On February 2, Canada staked out a strong position in funding development by proposing 100% debt service relief for the world's poorest countries, including most of Africa. Canada has taken generous positions on debt relief for a range of beneficiaries from Iraq to the tsunami-affected region. Today's proposal is a way to focus on concrete ways in which the GOC can address the Millennium Development goals and support its leadership aspirations in African development without endorsing IFF-type financing proposals or ODA volume targets that the USG also opposes. End summary. Africans Focus on Debt Relief -------------- ¶3. (SBU/noforn) A Finance Canada official who attended the ref A Commission for Africa meetings in Cape Town last month reports that the meetings went well from the perspective of the UK and the African leaders, and that the CFA process seems to have momentum. The Commission succeeded in showing that it was consulting with Africans and that it has buy-in ("glowing with support") from the continent. (Note: He added that it is not clear how the support for the CFA will affect support for the APR (Africa Personal Representative) process. End note.) On the supply-side, he said it is not so clear what developed countries will do. Officials at Finance and at the Canadian International Development Agency have described the CFA's draft report as a "400 page mess," with one person speculating that perhaps it was an attempt to confuse readers. Commission for Africa Juggling Act -------------- ¶4. (SBU/noforn) Officials at Finance, who have the lead on Canada's participation in the CFA process (ref B) are trying to sanitize the final text and ensure that they can agree to the report's points. The biggest problem will be the language calling for donors to commit to the 0.7% of ODA standard. Canada finessed this issue in Cape Town by making sure the communique was on behalf of African finance ministers and not the CFA. From Canada's perspective, most of the focus in Cape Town was on the multilateral debt problem, rather than IFF, and "there was not much talk about 0.7%." Call for 100% Debt Service Relief -------------- ¶5. (U) On February 2, Minister of Finance Ralph Goodale announced a "beyond HIPC" call for donor countries to pay for 100% debt service relief on IMF claims directly. Canada would contribute about C$172 million (US$138 million) over five years to the World Bank's International Development Association and to the African Development Fund. This would reflect Canada's traditional 4% share of global multilateral assistance. The GOC is also looking for ways to bring about greater IMF involvement in debt relief and the best way to finance the associated costs. We understand that Canada's G-7 Deputy has discussed the proposal with his Treasury counterpart in advance of this weekend's meetings in London, and more details of the plan are available on the Department of Finance web page (www.fin.gc.ca/news05/05-008e.html). ¶6. (SBU/noforn) Comment: Canada is strongly committed to supporting development in the world's poorest countries, especially in Africa. The Commission for Africa embodies the tightrope GOC policy makers confront. They are unequivocally behind the Commission's goals, but differ with some of the specific methods being advocated by the UK sponsors. At the same time, there is quiet concern that past initiatives such as the Africa Action Plan launched during Canada's 2002 G-8 presidency, or even NEPAD, will be marginalized instead of being reinforced. In addition, there may be fear that Canada's quiet ongoing commitment in areas such as the policy of 100% debt forgiveness for countries that meet HIPC requirements, or the 8% annual increase in aid budgets, with half of any increase dedicated to Africa, will be buried by the recent crop of high-profile initiatives. (In 2005-06, Canada's 8% aid increase will come to C$248 million, or almost US$200 million.) The GOC is also planning to focus its development assistance on fewer, more responsive, recipients so this proposal on debt service relief could be a precurser to a policy of aiming for greater impact for development assistance. End comment. Visit Canada's Classified Web Site at http://www.state.sgov.gov/p/wha/ottawa CELLUCCI