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Wednesday, 6 October 1971
Page: 1924

Mr PEACOCK (Kooyong) (Minister for the Army and Minister assisting the Treasurer) - by leave - I wish to inform the House of certain action that the Government has taken in regard to Australia's participation in the third replenishment of the resources of the International Development Association, or IDA as it . is commonly called. Honourable members will recall that in May of this year Parliament approved legislation authorising Australia to contribute a further sum equivalent to $US48m to IDA over a period of 3 years commencing in 1971-72, in accordance with the agreement previously reached between various countries regarding the third replenishment of the resources of that institution. This agreement, however, is subject to the explicit condition that it will not enter into effect unless and until at least 12 developed member countries with subscriptions and contributions totalling not less than SUS 1,900m have formally notified IDA that they have taken all the steps necessary to enable them to make the payments designated for them. In practice, this means thai the agreement cannot become effective unless and until it is ratified by the United States. lt was hoped that this condition would be satisfied by 1st July, by which time IDA had exhausted all its existing commitment authority. The position at that date, however, was that 10 developed member countries, including Australia, with subscriptions and contributions totalling SUS 1, 008m had given the requisite formal notifications to IDA. Although the United States Administration had commenced proceedings to have Congress pass the necessary legislation to authorise payment of the subscription and contribution totalling $US960m for that country, action on this matter had not then been completed and indeed still remains outstanding.

This left IDA in the position where it had to curtail its previous rate of lending substantially, since there was no guarantee that funds would be made available to it when needed to finance new projects approved after 1st July. A similar situation occurred 3 years ago when the second exercise to replenish IDA's resources was held up for 12 months due to a delay by the United States Congress in ratifying the relevant agreement. Then, IDA was able to carry on only because a number of countries, including Australia, agreed to make voluntary contributions to it in advance of the second replenishment formally entering into effect.

In view of the critical importance of IDA to the many developing countries with pressing external debt servicing problems and a limited capacity to service additional borrowings overseas on commercial terms, the President of IDA, Mr McNamara, appealed to individual developed member countries recently to make voluntary contributions to IDA in advance of the third replenishment formally entering into effect. That IDA has been able to continue its lending activities since July has been largely due to the fact that a number of countries, including Canada, Denmark, Finland, Norway, Sweden, the United Kingdom, Japan and Yugoslavia, have responded to this request and agreed to make such voluntary contributions to IDA.

As. . has been previously stated in this House, Australia continues to hold IDA in high regard as an effective and efficient aid institution. It is by far the largest agency lending on concessional terms in the world today. It has been of particular benefit to developing countries in our own part of the world. In the past, about three-quarters of all IDA lending has gone to countries in the Asian region, including in particular India, Pakistan and Indonesia. There is no need for me to emphasise the importance of these countries to Australia, or our interests in helping them to develop their economies and raise the living standards of their populations, in future. It is also likely that Papua New Guinea will benefit from the third replenishment of IDA's resources. So far, Papua New Guinea has received loans and credits totalling $US45m from the World Bank group. Further proposals to borrow from these institutions on the Territory's behalf are under consideration at the present time.

With these considerations in mind, line Government decided that Australia should join the other countries I have mentioned in making a voluntary contribution to IDA equivalent to the first annual instalment - $US16m - of our commitment under the third replenishment exercise, subject to the explicit understanding that this contribution would be duly credited against Australia's obligations under the relevant agreement when it enters into effect. I might add that because of the usual lag between commitments and disbursements of funds by IDA, this action is not expected to add to the burdens on the Commonwealth Budget in the current financial year. IDA is not short of funds at the present time. What it is seeking is authority to enter into additional commitments which will require outlays in the future.

The Treasurer (Mr Snedden) announced the Government's decision on this matter during his address to the annual meeting of the Boards of Governors of the International Monetary Fund and the World Bank - and its 2 affiliates, IDA and the International Finance Corporation - in Washington on 29th September.

The International Development Association (Further Payment) Act 1971 which was passed in May provides sufficient legislative authority for Australia to make such a voluntary contribution to IDA without further recourse to Parliament. However, I thought it only right and proper to inform honourable members of the Government's decision and to give some account of the considerations which lay behind it. I present the following paper:

Voluntary Contribution to IDA by AustraliaMinisterial Statement, 6th October 1971.

Motion (by Mr Swartz) proposed:

That the House take note of the paper.

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