Archived - Canada at the IMF and World Bank Group 2014–15 – Part 2 of 3

Report on Operations Under the Bretton Woods and Related Agreements Act

Table of Contents

The IMF works to safeguard the stability of the international financial and monetary system in order to facilitate international trade, promote sustainable economic growth and raise global living standards. Canada has been a central and influential member of the IMF since 1945, being one of only 29 countries that signed the original IMF Articles of Agreement. Since then, the IMF has grown to include a near-global membership of 188 member countries. Canada plays an important collaborative role with international partners to ensure that the IMF is effectively fulfilling its mandate. A healthy and stable global economy creates more jobs for Canadians, promotes stable prices for goods and services, and improves our standard of living. Canada’s participation at the IMF encourages international cooperation, sustainable economic growth and better living standards for Canadian citizens and others across the globe. Canada is engaged in all aspects of the IMF’s governance and activities.

The IMF is accountable to the 188 governments of its member countries through a number of mechanisms, first and foremost the Board of Governors, which is tasked with taking the most important institutional decisions. Canada’s Governor to the IMF is the Minister of Finance, the Honourable William Francis Morneau, and the Alternate IMF Governor is Bank of Canada Governor Stephen Poloz. The Board of Governors meets once a year and can be called upon to formally vote without meeting on resolutions required by the Articles of Agreement (e.g., SDR allocations, quota increases, admitting new members), and on resolutions that amend the Articles or By-Laws of the Fund. Below are the positions taken by the Minister in his capacity as IMF Governor during the 2014–15 reporting period.

As a result of the relatively large size of the Canadian economy and its openness to international trade, Canada’s Governor holds a sizeable voting share at the IMF of 2.56 per cent, making Canada the 9th largest member during the reporting period. The 2010 quota and governance reforms continued the process of increasing the voting shares of dynamic emerging market and developing countries, bringing them more in line with changing global economic realities. When these reforms entered into force in January 2016, Canada’s voting share declined slightly to 2.21 per cent (11th overall), as demonstrated in Table 5.

Although Canada’s voting share has declined against the rising importance of emerging market economies, most of the decisions at the IMF are taken by consensus, allowing Canada to sustain its influence. Canada’s standing within the Fund also ensures the participation on behalf of our constituency of the Minister of Finance in the IMFC, an important advisory body to the IMF. The IMFC is composed of 24 member countries and reports to the Board of Governors. The IMFC usually meets twice a year, during the IMF-World Bank Annual and Spring Meetings, and produces communiqués providing direction and guidance to the IMF Managing Director and Executive Board.

The Minister of Finance also tables written statements during the Annual and Spring Meetings that outline Canada’s and our constituency’s views on the specific governance, surveillance and lending activities of the Fund. In 2015, the Honourable Joe Oliver, Canada’s previous Minister of Finance for Canada, tabled an IMFC statement [PDF Version 150 KB] on behalf of Antigua and Barbuda, the Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Ireland, Jamaica, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines on April 18, 2015 in Washington, D.C.

The Minister of Finance also tabled an IMFC statement [PDF Version 219 KB] on behalf of the same constituency on October 11, 2014 in Washington, D.C.

The Board of Governors has delegated many of its powers to the 24-member Executive Board, chaired by the Managing Director of the IMF. Canada currently holds one of the 24 seats on the Executive Board and represents a constituency of 12 countries. The constituency system allows for all 188 member countries to be represented at a smaller table that is more conducive to overseeing the day-to-day business of the Fund. Canada represents a constituency that includes Ireland and most Commonwealth Caribbean countries. The Executive Director for Canada therefore holds a voting power, with all constituency members combined, of 3.60 per cent (following the entry into force of the 2010 reforms in January 2016, our constituency’s combined voting share decreased to 3.38 per cent). During the reporting period, our constituency ranked 12th largest out of 24 (currently 13th largest, following implementation of the 2010 reforms).

The Executive Board formally meets at least three times a week, with a majority of the business on country matters including Article IV reviews, lending program reviews and requests for new lending arrangements. The Board also reviews and decides on policy and reform proposals, multilateral surveillance products, and administrative and finance matters.

The Executive Board usually operates on the basis of consensus, so formal votes are rare. Canada attempts to contribute to the development of policy proposals before they are brought to the Board through informal discussions with staff and management, or through consultation with other members of the Executive Board before formal Board deliberations. The Executive Director representing Canada, Ireland and the Caribbean recorded one abstention vote in 2014–15.

To learn more about the governance, representation and accountability structures of the IMF, please visit the IMF’s Governance webpage.

IMF activities focus on three primary areas, all aimed at promoting a prosperous global economy by contributing to international monetary and financial stability and growth: surveillance, technical assistance and lending programs.

Canada’s engagement in all three areas is discussed below.

The IMF oversees the international monetary system and monitors the economic and financial policies of its 188 member countries. This activity, known as surveillance, is one of the IMF’s core activities. The Fund seeks to identify risks to global economic and financial stability through surveillance at the national, regional and global level.

Bilateral Surveillance

Article IV of the IMF Articles of Agreements requires the Fund to undertake regular consultations with each member country on economic conditions and policies. Over time, Article IV consultations have evolved to provide the Executive Board and the public^[1] with: an overview of the state of the economy, financial sector and public finances; an assessment of the appropriateness of the exchange rate regime; an assessment of the economy’s strengths and weaknesses and possible negative spillover effects of the country’s policies on others; and advice on appropriate corrective measures.

On occasion, an Article IV consultation is complemented by a Financial Sector Assessment Program (FSAP) review, which is a comprehensive assessment of a country’s financial sector. For the 25 jurisdictions with systemically important financial sectors (including Canada), mandatory FSAP reviews are completed every five years.

The Executive Board discusses and assesses each Article IV consultation. Canada’s Executive Director and his staff take part in each discussion, offering verbal and written statements highlighting our constituency’s view on the state of the country’s economy and posing additional questions to ensure the review is thorough and addresses important risks to the country’s outlook. The Department of Finance and Bank of Canada are consulted on Article IV consultations for systemically important economies. Global Affairs Canada is also consulted when Canadian foreign policy or development priorities arise. Canada’s most recent Article IV consultation was published in January 2015.

Multilateral Surveillance

In addition to its bilateral consultations, the IMF produces the semi-annual World Economic Outlook, the Global Financial Stability Report and the Fiscal Monitor. These flagship reports summarize the IMF’s assessment of the global economy, financial and monetary systems and fiscal developments. The IMF also publishes Regional Economic Outlooks on a semi-annual basis, and specialized surveillance reports such as the External Sector Report and the Spillover Report, which provide more technical insights into the inner workings of the global economy. Canada’s Executive Director is actively engaged in discussing and shaping these multilateral surveillance products to ensure they provide an objective overview of the state of the global economy, the key risks, and required measures to boost global growth and promote job creation. The Minister of Finance also provides views on the state of IMF surveillance and proposed reforms through his participation in the IMFC.

For more information on IMF surveillance, please visit the IMF website.

Capacity development, through technical assistance and training, is an integral part of the IMF’s mandate. Canada works closely with the IMF’s Institute for Capacity Development to improve the capacity of member countries to promote sustainable economic growth through stronger institutions needed to achieve macroeconomic stability and enable resilience to shocks. Improved capacity in member countries also supports the effectiveness and sustainability of economic surveillance activities and lending programs.

The IMF offers technical assistance and training to members in areas such as tax policy and revenue administration, public expenditure management, debt management, monetary policy, exchange rate systems, financial sector sustainability, and statistics. IMF spending on technical assistance and training has grown in the years following the global financial crisis, expanding by approximately 63 per cent between FY2009 and FY2014 to approximately US$235 million in FY2014. Much of the IMF’s capacity development services are utilized by developing countries, including several members of Canada’s constituency in the Caribbean. Canada is an increasingly important donor in this area. Typical activities supported by Canada in developing countries include diagnostic studies, training courses, workshops, online advice and support, and the placement of technical assistance experts and advisors.

Regional Technical Assistance

The IMF has also developed a regional approach to the delivery of technical assistance and training with support from donors such as Canada. In addition to the training offered at the IMF Institute for Capacity Development in Washington, D.C., seven regional training institutes and nine Regional Technical Assistance Centres (RTACs) in Africa (five RTACs), the Caribbean, Central America, and the Pacific and the Middle East help deliver more accessible and regionally tailored programming to member countries across the globe.

Canada is a major contributor to the RTACs. It is the largest donor to the Caribbean Regional Technical Assistance Centre (CARTAC), having provided $20 million for CARTAC Phase IV (2011–2016) and $63 million in total to all phases of CARTAC. Since 2011, the current phase of CARTAC has trained 4,500 Caribbean policy makers and government officials.

Canada also contributes to the five RTACs in Africa (AFRITAC East, Central, South, West and West II). Each centre works at both the country and regional level to improve the capacity of member countries to design and implement policies that promote growth and reduce poverty. For example, in 2014–15, AFRITAC East played a key role in developing financial sector regulatory and supervisory frameworks in the region. Strong partnerships and results have been achieved in enhancing risk-based banking supervision frameworks, consolidated supervision, and anti-money laundering and combating the financing of terrorism supervisory frameworks.

Canada also contributes to the Central America, Panama, and the Dominican Republic Regional Technical Assistance Centre (CAPTAC-DR), established in 2009. Canada recently approved a $10 million contribution to Phase II of CAPTAC-DR, doubling its $5 million contribution to Phase I (2009–2014).

Canada-IMF Technical Assistance Sub-Account

Canada’s experience has shown that sound economic policies play a critical role towards securing sustainable economic growth and job creation. To promote these policies and build capacity in the Caribbean and in the Middle East and North Africa region, Canada established a $19 million Technical Assistance Sub-Account at the IMF in 2012. The purpose of the account is to fund additional priority technical assistance projects that would not otherwise be possible within the existing technical assistance budget at the IMF.

Enhancing Public Financial Management in the Caribbean

In order to assist Caribbean countries during a period of rising vulnerabilities, Canada launched the Enhancing Public Financial Management in the Caribbean initiative. The fund aims to help targeted countries in the region improve their fiscal and economic management. It supports two packages of technical assistance. The first, valued at $5 million, will help support fiscal and economic reforms that will form the basis for the sustainable public financial management needed as a precondition for investment and growth in Jamaica. The second, valued at $10 million, is helping to address financial vulnerabilities in the Eastern Caribbean.

Canadian Technical Assistance in Ukraine

In March 2014, Canada announced that it would provide $20 million to the IMF for technical assistance to help Ukraine stabilize and rebuild its economy, including through activities to enhance the capacity of the National Bank of Ukraine (NBU) to undertake banking and financial sector reforms and strengthen Ukraine’s public financial management and tax policies and administration.

Strengthening the National Bank of Ukraine

Canada continues to support the IMF in its delivery of technical assistance to strengthen the capacities of the NBU. During the reporting period, technical assistance focused on crisis management, design and initial implementation of the 2014 Stand-By Arrangement program and the 2015 Extended Fund Facility (EFF) program, and institutional reform of the NBU itself. In particular, Canada-funded technical assistance helped stabilize financial markets, reform the monetary and exchange rate framework (ongoing), undertake a fundamental restructuring in the banking system, introduce a modern functions-based structure at the NBU, and draft amendments to the NBU Law and Budget Laws to enhance the independence and governance of the NBU (these amendments were adopted by Parliament on June 18, 2015). In total, Canada supported 24 expert missions during the reporting period.

As part of its central role in the international monetary system, the IMF makes its resources available to help members finance temporary balance of payments problems while economic adjustments are underway. Members requesting financial assistance must reach an agreement with the IMF staff on a set of economic measures and reforms aimed at addressing the root causes of the country’s balance of payments difficulty. The details of this integrated economic program and the amount and duration of financing are then approved by the Executive Board. Typically, IMF financial assistance is provided in stages, or tranches, with the release of each tranche accompanied by a program review by the Executive Board to verify that the country is continuing to follow the agreed economic program and is meeting agreed policy conditions.

The IMF’s lending facilities are divided into two broad groups: non-concessional (includes precautionary lending) and concessional. Table 6 provides an overview of each lending facility.

Financial Resources

The IMF’s total financial resources are composed of both permanent (quotas) and temporary (multilateral borrowing agreements, bilateral lending agreements) resources. Table 7 provides an overview of each of these sources, whereas Table 8 summarizes Canada’s commitments and financial position at the Fund as of April 30, 2015. Table 9 provides a summary of Canada’s commitments following the entry into force of the 2010 quota and governance reforms.

Quotas

The IMF works much like a credit union. It has access to a pool of liquid resources provided by its members, primarily through their payment of quotas, which consist of convertible national currencies, SDRs and other widely used international currencies. Upon joining and subject to regular reviews, each member of the IMF is assigned a quota, based broadly on its relative weight and integration in the world economy. Quotas play an important role at the IMF as they make up the base of the IMF’s lending resources and largely determine a country’s voting share.

In 2010, IMF members approved major reforms of quotas and IMF governance. Now that these reforms have entered into force, aggregate quotas have doubled to approximately SDR 477 billion (see Table 7). Quota levels and shares are traditionally reviewed every five years. The 15th General Review of Quotas was originally set to begin in 2013; however, as a result of delays in implementing the 2010 reforms, the deadline for completing the 15th Review has been repeatedly extended. Discussions on the 15th Review will now begin in 2016.

At end-FY2015, Canada’s contribution to the IMF’s overall quota was SDR 6.37 billion, representing 2.67 per cent of the total. As of April 30, 2015, SDR 1.22 billion (about $2.09 billion) in drawings by the IMF against Canada’s quota was outstanding.^[2] Canada’s quota increased from SDR 6.37 billion to SDR 11 billion following the entry into force of the 2010 quota and governance reforms.

Multilateral Borrowing Agreements

During periods of heightened global or regional economic instability, the potential borrowing needs of members may exceed quota-based resources. In these cases, the IMF has the ability to augment its quota resources with loans from member countries. The IMF currently has two standing multilateral borrowing agreements with its largest members, including Canada: the General Arrangements to Borrow (GAB) and the New Arrangements to Borrow (NAB).

The IMF has GAB agreements with 11 countries totalling SDR 17 billion and NAB agreements with 40 countries totalling SDR 370 billion (following the entry into force of the 2010 reforms, the Fund’s total NAB agreements were rolled back to SDR 182.4 billion).^[3] The GAB was recently renewed for a period of five years in December 2013; however, it has not been activated since 1998 and cannot be used at the same time as the NAB. The NAB can be activated with the consent of participants for six-month intervals. In April 2011, due to heightened global uncertainty, the NAB was activated. It has been reactivated for consecutive six-month periods nine additional times, most recently in September 2015, for a total amount of SDR 183 billion. At end-FY2015, Canada’s share of the GAB was SDR 893 million, while its share of the NAB was SDR 7.62 billion. As of April 30, 2015, the IMF had drawn SDR 761.16 million or about $1.3 billion from Canada’s NAB contribution to fund lending arrangements. Canada’s NAB arrangement was rolled back from SDR 7.62 billion to SDR 3.87 billion following the entry into force of the 2010 quota and governance reforms.

Bilateral Lending Agreements

The IMF’s resources are being further augmented on a temporary basis as a result of new bilateral credit line pledges of US$461 billion made by 38 countries in 2012 in the face of the sovereign debt crisis in the euro area. As of March 12, 2015, 33 agreements are now effective for $369.3 billion of these loans, which can only be activated as a last line of defence once quota and NAB resources have been significantly depleted and the IMF’s Forward Commitment Capacity (see below) has fallen to SDR 100 billion. Canada did not participate in these bilateral borrowing arrangements.

General Resource Safeguards

Not all of the IMF’s resources are available for lending. This is because the IMF does not draw from the quota of members in programs, or from members who are not considered to have a strong balance of payments position. Only a subset of the membership provides loanable resources to the Fund. These financially strong members participate in the institution’s Financial Transactions Plan, which sets out at regular intervals the Fund’s anticipated drawings on members’ quotas and NAB commitments. Further, the Fund sets aside a prudential balance of 20 per cent of useable quota and NAB resources. The prudential balance is an important safeguard to the liquidity of members’ claims. The IMF therefore uses a measure known as the Forward Commitment Capacity (FCC) as a measure of resources available for new financial commitments in the coming year. It is equal to: uncommitted useable resources, plus repayments one year forward, less amounts that have already been committed under existing lending arrangements, less the prudential balance. The FCC does not include unactivated bilateral loans or the GAB. As April 30, 2015, the FCC totalled SDR 301 billion or about US$424 billion.

The IMF’s resources are protected by a number of financial safeguards including the institution’s preferred creditor status, encashability of creditors’ claims in certain circumstances and the Fund’s precautionary balances. The IMF has never suffered a loss on its lending activities. Funds provided to the IMF do not affect Canada’s net debt measure as they constitute financial assets of the Government of Canada. Interest is earned on these claims at the SDR interest rate when they are drawn to fund lending programs. Claims on Canadian lending to the IMF are booked as a part of the official international reserves of the Government of Canada, in line with international accounting practices, and are managed by the Bank of Canada as agent for the Crown.

For more information on the IMF’s balance sheet, see Annex 2. The IMF’s 2014 Annual Report also contains an in-depth examination of the IMF’s finances. For up-to-date information on the state of IMF finances, the IMF prepares a weekly summary of its financial assistance to member countries, available IMF resources, arrears and key IMF rates, as well as a monthly summary of its total resources, useable resources and FCC.

Concessional Lending and Debt Relief Resources

The IMF’s concessional lending and debt relief for low-income countries are financed through separate trust funds rather than from quota subscriptions. Low-interest loans are provided under the Poverty Reduction and Growth Trust (PRGT), while debt relief is provided under the Heavily Indebted Poor Countries Initiative, the Multilateral Debt Relief Initiative and the Catastrophe Containment and Relief (CCR) Trust. The resources for these activities come from members’ voluntary contributions and the IMF itself. They are administered under various Trust agreements, with the IMF acting as Trustee. More information on the IMF’s debt relief activities is available on its Where the IMF Gets Its Money webpage.

Concessional lending from the PRGT requires both loan resources and “subsidy” resources. Donor countries enter into loan agreements, with the IMF as Trustee for the PRGT. The borrowed funds are then on-lent as part of the IMF’s PRGT programs. Interest is paid by the Fund on loan contributions, and all resources provided under the loan agreements are treated as official foreign exchange reserves and are covered by the IMF’s preferred creditor status.

As PRGT loans carry a fixed low interest rate (currently zero), subsidy resources are needed to cover the difference between the concessional interest rate paid by poor and vulnerable members and the SDR interest rate paid to PRGT lenders. For Canada, the contribution of subsidy grants carries a budgetary cost. In addition to donor-financed subsidy contributions, the IMF also uses annual interest earnings from the PRGT’s subsidy resource holdings and reserves (which serve as security for PRGT lenders) to augment subsidy resources. These internal resource flows give the PRGT a “self-sustaining” concessional lending capacity.

Following the onset of the global financial crisis, the IMF successfully mobilized a major PRGT financing package composed of internal funds and new donor resources to scale up assistance to the most vulnerable IMF members. The aim of the exercise was to boost the PRGT’s capacity so that it could lend concessional resources of up to SDR 11.3 billion over the 2009–2014 period. Canada played a leadership role throughout this process, including contributing $40 million of subsidy resources and SDR 500 million (about $850 million) in loan resources. These contributions were announced in Budget 2010.

In order to boost the Fund’s concessional lending capacity, the IMF Executive Board agreed in September 2012 to transfer to the PRGT windfall profits of over SDR 1.75 billion from a 2009–10 sale of IMF gold. This transfer formed part of the strategy adopted by the Executive Board to make the PRGT self-sustaining over the longer term. In April 2014, the Executive Board approved amendments required to implement the self-sustaining PRGT. Specifically, these included authorizing the eventual use of investment income earned on PRGT reserves to subsidize loans, and allowing the Fund to make PRGT loan commitments during the 2016–2020 period. The Minister of Finance consented to these amendments in June 2014 and they became effective in November. In early 2015 Canada, alongside other PRGT lenders, also consented to the extension of its borrowing agreement with the Fund. Together these amendments have put the PRGT in a stronger position to support the most vulnerable IMF members.

IMF disbursements (i.e., outflows of IMF resources to borrowing members) from the General Resources Account increased slightly to SDR 12 billion in FY2015 from SDR 11.7 billion in FY2014, while repayments (i.e., inflows of IMF resources) rose to SDR 38 billion in FY2015 from SDR 20.6 billion the year before. As a result, resource repayments were in excess of disbursements (by SDR 26 billion) for the second consecutive year. Both disbursements and repayments from the Poverty Reduction and Growth Trust increased modestly, with disbursements rising to SDR 0.7 billion in FY2015 from SDR 0.6 billion in FY2014, and repayments increasing to SDR 0.5 billion in FY2015 from SDR 0.4 billion in FY2014.

Outstanding credit from the GRA decreased to SDR 55.2 billion in FY2015 from SDR 81.2 billion in FY2014. Outstanding credit from the PRGT edged up slightly to SDR 6.3 billion in FY2015. As a result, total credit outstanding was SDR 61.5 billion, down from SDR 87.3 billion the prior year.

The overarching mission of the World Bank Group is to end extreme poverty by 2030 and boost shared prosperity by fostering the income growth of the bottom 40 per cent for every country. The World Bank Group concentrates on fostering a climate conducive to investment, job creation and sustainable growth. It also seeks to empower the less fortunate, through the provision of health services, education and other social services, to enable them to participate in development. The World Bank Group is a vital source of financial and technical assistance to developing countries around the world.

The World Bank Group is made up of five complementary but distinct entities: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a unique role in promoting global poverty reduction.

All figures in this section reflect the World Bank Group’s 2015 financial year (July 1, 2014 to June 30, 2015) unless otherwise indicated. Further information on the World Bank Group’s financial performance can be found on its Results webpage.

IBRD—International Bank for Reconstruction and Development

Established in 1944, IBRD is the original institution of the World Bank Group and continues to be its main lending agency, providing loans to middle-income and creditworthy low-income countries.

IBRD raises most of its funds in the world’s financial markets by selling AAA-rated World Bank bonds. It lends these funds to its client countries at a rate of interest that is much lower than the rate they could secure on their own. IBRD can borrow at attractive rates due to its financial strength and because it is backed by capital commitments from member countries, including Canada.

IBRD does not seek to maximize profit; rather, it aims to earn enough to ensure its financial strength and to sustain its development activities. In FY2015, IBRD’s loan portfolio included commitments of US$23.5 billion to 112 projects in 45 countries, an increase from US$18.6 billion in FY2014. Europe and Central Asia received the largest portion of IBRD funding (28.4 per cent) in FY2015, followed by Latin America and the Caribbean (24.3 per cent). More information about the IBRD can be found on the IBRD website.

IDA—International Development Association

In the 1950s, it became clear that the poorest developing countries could not afford to borrow capital at the interest terms offered by IBRD. In response, IDA was set up to reduce poverty by providing interest-free credits and grants. IDA offers 25- and 40-year interest-free loans and grants to countries at risk of debt distress and represents the largest source of development financing for many of these countries. IDA is focused on countries with lower creditworthiness and an annual per capita income of less than US$1,215. 78 countries are currently eligible to receive IDA resources. Countries that are eligible for IDA lending but also have an active IBRD lending program pay some interest on loans from IDA compared to the interest-free loans offered to IDA-only borrowers.

New IDA commitments are financed through contributions from donor governments, including Canada, annual transfers from IBRD and IFC net income, and principal repayment on past loans. Donor contributions make up the largest component of IDA’s finances. Every three years, IDA funds are replenished through new donor pledges. The 17th replenishment round was concluded in December 2013 and approved by the Board of Governors on May 5, 2014.

Sub-Saharan Africa received the largest share of IDA resources in FY2015—US$10.4 billion, or 54.6 per cent of total commitments. South Asia received 30.4 per cent of new commitments, totalling US$5.8 billion. More information about IDA can be found on its website.

IBRD and IDA lending for infrastructure (Transportation; Energy and Mining; Water, Sanitation, and Flood Protection) combined for approximately 39 per cent of total lending in FY2015. Other sectors that were a major focus for lending included Public Administration, Law and Justice (16 per cent), Health and Other Social Services (16 per cent) and Education (7 per cent).

IFC—International Finance Corporation

IFC works with the private sector in developing countries to reduce poverty and encourage sustainable economic growth. It provides financing for private sector projects, assists in mobilizing financing in international financial markets, and provides advice and technical assistance to businesses and governments. IFC provides financing where sufficient private capital cannot be obtained from other sources on reasonable terms. It is now the largest multilateral source of loan and equity financing for private sector projects in the developing world.

IFC is legally and financially autonomous, but it collaborates and coordinates with IBRD, IDA, MIGA and other organizations.

In FY2015, IFC committed US$17.7 billion in new investments (US$10.54 billion on IFC’s own account and US$7.13 billion in core mobilization). New commitments on IFC’s own account included US$2.38 billion in Latin America and the Caribbean, US$2.29 billion in East Asia and the Pacific, US$1.83 billion in Sub-Saharan Africa, US$1.53 billion in Europe and Central Asia, US$1.40 billion in South Asia, and US$0.89 billion in Middle East and North Africa.

For more information about IFC, visit the IFC website.

MIGA—Multilateral Investment Guarantee Agency

MIGA encourages foreign investment in developing countries by providing guarantees to foreign investors against loss caused by non-commercial risks. MIGA also provides technical support to help developing countries promote investment opportunities and uses its legal services to reduce possible barriers to investment.

In FY2015, the total amount of guarantees issued for projects in MIGA’s developing member countries was US$2.8 billion, down slightly from US$3.2 billion in FY2014.

For more information about MIGA, visit the MIGA website.

ICSID—International Centre for Settlement of Investment Disputes

ICSID, established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, provides facilities for conciliation and arbitration of investment disputes between member countries and foreign investors. On November 1, 2013, Canada deposited its Instrument of Ratification of the ICSID Convention with the World Bank. Canada signed the ICSID Convention on December 15, 2006. ICSID membership now provides Canadian investors with an additional mechanism for the resolution of investment disputes pursued under international arbitration.

The World Bank Group’s Internal Checks and Balances

The World Bank Group has in place several bodies to ensure that its activities are achieving results, are carried out with integrity, and are working for the benefit of the vulnerable and disadvantaged in developing countries.

The Independent Evaluation Group (IEG)

IEG is an independent unit within the World Bank Group reporting directly to the Bank’s Executive Board. It assesses the development impact of IBRD, IDA, IFC and MIGA programs, aiming to provide an objective assessment of their work, create accountability in the achievement of the Bank’s objectives and ensure that the Bank learns from its experiences. Its reports are available on the World Bank website.

Internal Audit Department

The Internal Audit Department’s work primarily focuses on determining whether the World Bank Group’s risk management, control and governance processes provide reasonable assurance that: significant financial, managerial and operating information is accurate, reliable and timely; resources are acquired economically and used efficiently; assets are safeguarded; actions of the organization are in compliance with policies, procedures, contracts, and applicable laws and regulations; and significant programs, plans and business objectives will be achieved.

The Inspection Panel

The primary purpose of the Inspection Panel is to address the concerns of people who may be affected by IBRD and IDA projects and to ensure that the Bank adheres to its operational policies and procedures during the design, preparation and implementation phases of projects. The Panel is appointed by and reports directly to the Executive Board. More information on the Panel is available on the World Bank website.

Compliance Advisor Ombudsman (CAO)

The Office of the CAO is committed to enhancing the development impact and sustainability of IFC and MIGA projects by responding quickly and effectively to complaints from affected communities. It also supports IFC and MIGA in improving the social and environmental outcomes of their work and fostering a high level of accountability. The CAO’s annual report can be accessed on its website.

Department of Institutional Integrity (INT)

INT investigates allegations of fraud and corruption in World Bank Group operations as well as allegations of staff misconduct, and reports its findings directly to the President. INT also assists in preventative efforts to protect World Bank Group funds and ensure they are used for intended purposes. In FY2014, the World Bank Group disbarred 118 entities. More information on INT can be found on the World Bank website.

Canada’s Capital Subscriptions and Shareholding

The World Bank Group is governed by member countries, each of which owns shares of the agencies that make up the World Bank Group. Decision-making power is primarily exercised by countries through their Governor and Executive Director, depending on the nature of the decision, and during negotiations on capital increases and fund replenishments.

Canada is among the 10 largest shareholders at the World Bank Group, having contributed a total of US$7.2 billion in capital subscriptions to IBRD, IFC and MIGA and US$11.2 billion in contributions to IDA.

Canada’s voting power ranges from 2.5 per cent to 3.0 per cent within the Bank’s different institutions. Voting power at the Bank is mainly a function of the shareholdings held by a country, which in effect means that voting power reflects the relative economic strength of individual members. A small share of a member’s voting power is also determined by basic votes, which are distributed equally among all members. At the end of 2010, new shareholding and voting reforms were agreed for IBRD, which will result in a shift in voting shares in favour of developing countries and emerging economies as member states subscribe to the general and special capital increases. As these voice reforms are implemented, Canada is expected to fall from the 7th largest to the 11th largest shareholder, allowing greater voice for and recognition of certain major emerging market countries.

Canada’s Governor at the World Bank Group

Each member appoints a Governor to represent it on the Board of Governors, the highest authority governing the World Bank Group. Canada’s Governor at the World Bank Group is the Minister of Finance, the Honourable William Francis Morneau.

Governors are responsible for core institutional decisions, such as admitting or suspending members, increasing or decreasing the Bank’s authorized capital stock, determining the distribution of net income, and reviewing financial statements and budgets.

The Board of Governors is asked to vote on a number of resolutions throughout the year. Canada’s positions on resolutions taken in the period July 1, 2014 to June 30, 2015 are shown below.

By virtue of its significant shareholding, Canada’s Governor is also accorded a seat at the Development Committee of the Boards of Governors of the World Bank and IMF, which meets twice a year, at the Spring Meetings and the Annual (Fall) Meetings. The Development Committee is a ministerial-level forum of the World Bank Group and the IMF for intergovernmental consensus-building on development issues and the financial resources required to promote economic development in developing countries.

In 2014–15, the Governor tabled two Development Committee statements on behalf of Canada’s constituency, comprising Antigua and Barbuda, the Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Guyana, Ireland, Jamaica, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines, on October 11, 2014 and on April 18, 2015 in Washington, D.C.

The Canadian Executive Director at the World Bank Group

Governors delegate responsibility for the day-to-day running of the organization to 25 full-time Executive Directors, located at the Bank’s headquarters in Washington, D.C. Executive Directors are appointed for two years. They each represent a constituency, which can include more than one country. The Canadian Executive Director, Alister Smith, also represents Ireland and 11 Caribbean countries. Representatives of the governments within the constituency provide advice to the Executive Director on issues discussed at the Executive Board. The Executive Director considers this advice in formulating his positions and applies his own judgment as an officer of the World Bank Group.

The Executive Board usually makes decisions by consensus. In the event of a formal vote, however, the relative voting power of individual Executive Directors is based on the shares held by the constituencies they represent.

Shareholders typically raise serious questions or concerns about specific Bank operations before they get to the Executive Board. In addition, Executive Directors may abstain or vote against projects or policies in consultation with their constituencies. In 2014–15, the Executive Director representing Canada supported all policies and projects approved by the Board, with four exceptions (see following box).

Canada’s Financial Contributions to the World Bank Group in 2014–15

Canada is an important provider of funding for the World Bank Group. In 2014–15, Canada made the following contributions:

IDA Contribution: $883,220,000

IDA is the World Bank’s principal financing tool for the world’s poorest countries, providing them with interest-free loans and grants. IDA allocates its resources primarily through a performance-based allocation mechanism, which includes measures of a country’s social inclusion (e.g., social protection, gender equality) and governance. The higher countries rate on these indicators, the more IDA resources they can receive.

During the reporting period of July 1, 2014 to June 30, 2015, Canada provided two payments of $441.61 million to IDA, for a total contribution during the reporting period of $883.22 million, as agreed under the IDA17 replenishment.^[4] This contribution supports IDA’s efforts to enhance aid effectiveness, finance large regional projects such as infrastructure projects, and provide special assistance for fragile states such as Afghanistan and Haiti, while ensuring countries do not take on unsustainable levels of debt.

Multilateral Debt Relief Through the World Bank: $51,200,000

Under the Multilateral Debt Relief Initiative (MDRI), the World Bank, IMF and African Development Fund have agreed to cancel 100 per cent of eligible debts owed by heavily indebted poor countries. At the G-8 Summit in Gleneagles in 2005, Canada and other donor countries agreed to fully compensate these institutions for the debts they will cancel on behalf of poor countries, so as not to undermine their ability to provide new financial support to all low-income countries. Canada’s total commitment over the 50-year lifespan of the MDRI is $2.5 billion and payments are made annually.

During the reporting period of July 1, 2014 to June 30, 2015, Canada provided $51.2 million to the World Bank Group for the MDRI.

World Bank Group Trust Funds $519,740,000

Trust funds are an important instrument for channelling donor funding through the World Bank Group to address key strategic development issues at the country, regional or global level. In particular, trust funds leverage bank funding for development programs, particularly in post-disaster and post-conflict situations; enable donor and private sector financiers of development activities to partner with the Bank, consistent with harmonization objectives; build capacity to work in innovative areas; and work with civil society organizations. Trust funds can either be single donor or multi-donor; Canada contributes to both types of trust funds, with the majority of its contributions going to multi-donor trust funds.

Annex 5 provides a list of all trust funds to which Global Affairs Canada contributed in 2014–15, unless otherwise indicated.

The disbursements listed below are through Global Affairs Canada, unless otherwise indicated.

¹ Not all countries make their Article IV reports public. The publication of Article IV documents requires approval of country authorities.

² On April 30, 2015, 1 SDR equalled 1.704 Canadian dollars.

³ Of the 40 NAB participants, neither Greece nor Ireland has adhered to the expanded NAB.

⁴ The increase in Canada’s contribution to IDA reflects an administrative change in the timing of our annual payments from April to January each year. Once the 2014–15 transition year is over, Canada’s contribution to IDA will return to $441.6 million per year for the rest of the IDA17 replenishment period.

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