Finance ministers from the G8 industrialised states want African countries to improve budget management to reduce the risk of a new build-up of debt following recent international debt-relief programmes.
The support is part of an action plan due to be agreed on Saturday by ministers at a meeting in Potsdam near Berlin. Peer Steinbrück, German finance minister, said the plan aimed to boost “good financial governance” in Africa, and limit the use of “informal mechanisms” such as slush funds outside the main budget that lead to corruption and budget overruns.
The action plan stresses the importance of good governance at a time when African countries’ finances are being helped by higher commodity prices, increased development aid and debt relief. It also criticises China for recently offering big loans to Sudan and Angola without specifying sufficient governance criteria or conditions for paying back the loans.
For the first time at a G8 finance ministers meeting, five African states are represented. Kwadwo Baah-Wiredu, finance minister of Ghana, said international support on budget management was welcome, but complained that western countries were breaking their promises in providing aid to fill budget commitments for health and education. “Our house is largely in order, now we need the money to fully implement our plans.”
Oxfam, the development agency, said G8 countries would fall $30bn short of their pledge in 2005 to increase aid to developing countries by $50bn by 2010.
Mr Steinbrück also hopes for G8 support for separate proposals to boost domestic bond markets in emerging economies. The initiative is intended to boost growth and reduce the vulnerability of such countries to external financial shocks, for instance from exchange rate changes. The draft plan proposed by Berlin focuses on steps to build market infrastructure and under developed markets in financial derivatives and swaps. G8 countries have technical expertise to offer, it says.
The German finance minister again played down the prospect of early agreement on a voluntary code of conduct for the fast-growing hedge fund industry.