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.

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