Swiss parliament: A six pack for international cooperation

By next spring, the Parliament will approve six messages on Switzerland’s international cooperation. They are about increasing official development assistance to 0.5 percent of gross national income (GNI), increased support for development banks and the International Monetary Fund (IMF) and the prolongation of aid to Eastern Europe.

Binding 0.5 per cent target

In December 2000, Parliament had in principle spoken out in favour of increasing official development assistance to 0.5 per cent of GNI by 2015. It requested a supplementary message, which the Government finally tabled after various delaying manoeuvres, though with scant enthusiasm (see box). Should the Parliament accept this message, it will be codifying the 0.5 per cent target in a binding manner. The requisite budget increases for 2011 and 2012 are contained in an additional credit line of over 640 million francs. Of these funds, 40 per cent will go towards multilateral institutions (United Nations Development Programme UNDP, African Development Fund, multilateral debt reduction programme). The rest will be allocated bilaterally in the areas of water and climate.

The second submission regulates Switzerland's participation in capital increases for the World Bank and development banks in Africa, Asia and Latin America. These banks provide their member countries with development project loans, which must be repaid. The Federal Council wishes to allocate 3.5 billion francs to these increases. Of that amount, only about 170 million francs will effectively be disbursed, the rest being guarantees that are hardly ever invoked.

No bilateral aid cuts

The capital increases are directly linked to the 0.5 per cent supplementary message. Should the Parliament reject the supplementary message but accept the capital increases, the Swiss Agency for Development and Cooperation (SDC) would need to offset them internally by curtailing bilateral aid.

That nevertheless contradicts the 2008 parliamentary decision to limit the multilateral share of the SDC budget to 40 per cent. Besides, it would be scandalous for Switzerland to cut its non-reimbursable aid to its bilateral partners so as to enable development banks to give them more loans. The SDC priority countries are amongst the poorest in the world and, because of interest, any lending is an additional burden on their already tight budgets.

Prolonging aid to Eastern Europe

The third message concerns aid to Eastern Europe (the Balkans, Central Asia, Caucasus). It is basically a technical issue: the Government wishes to submit all lines of credit together to Parliament at the beginning of the new legislative period, so that they can all take effect in 2013. Amongst others, they include lending for development aid in the South and in Eastern Europe, humanitarian assistance and human rights promotion. Because the present line of credit for aid to Eastern Europe will expire in mid-2011, it will have to be extended by one and a half years and replenished accordingly. No increases are planned, and the spend will continue to be around 200 million francs per year.

More money for the IMF

Furthermore, the Government wishes to support the International Monetary Fund (IMF) more strongly in order to stabilize world financial markets. The Senate has already approved special credit of over 10 million francs for the IMF. The House of Representatives delayed the credit so that it could be dealt with simultaneously with the 0.5 per cent supplementary message.

In addition, the Government is requesting further 15 billion francs to be made available for new IMF credit arrangements. This is a kind of reinsurance for the IMF, whereby its member countries guarantee that they will make a particular sum available to the Fund in the event of a crisis. Should such a case arise, the IMF can invoke these guarantees so as to be able to assist its member countries with loans. States pay market rates of interest on these loans.

The situation is different with the IMF's Poverty Reduction and Growth Trust (PRGT). This is reserved for the poorest countries, which can obtain low-interest loans in times of financial crisis. For this fund, the Government is requesting a line of credit of some 950 million francs – that is the sixth message to be addressed by Parliament in its winter and spring session.

These three IMF contributions by Switzerland are not reflected in the Federal budget, because it is the Swiss National Bank that will provide the funds. The Confederation will become involved should the IMF be unable to repay its debts to the National Bank, something that has never happened to date and is also most unlikely in the future. The funds are not development assistance, since IMF loans are repayable with interest even for the poorest countries.

All or nothing

Yet there is a link between the IMF initiatives and the first three messages: it is not acceptable for Switzerland to participate in the stabilization of financial markets without simultaneously ramping up its involvement in combating extreme poverty. Stabilizing financial markets is important for all – for the rich and the poorest countries alike. The latter, however, need much more than stable financial markets in order to free themselves from poverty. They need cheap loans for development projects, and these they obtain from development banks. And they need aid in the true sense: non-reimbursable, and funded by the industrialized countries largely in the form of bilateral projects and programmes.

This is why Alliance Sud is working for the acceptance of all six submissions by the Parliament. If the 0.5 per cent target does not succeed, the Parliament should consequently also reject the capital increases and IMF credits. Internationally, Switzerland should commit itself at all levels or not at all. It would be extremely cheap to participate in international burden sharing only where it costs little and serves national interests.

Article published in: Alliance Sud News no. 65, automn 2010

Box:

0,5%: Will the Government stand by its decision?

For one and a half years the Swiss Government attempted to delay any binding decision on the 0.5 per cent target. Instead of the requested supplementary message, it merely presented the Parliament with a dismissive report. For the first time this summer the majority in the Government shifted in favour of a 0.5 per cent message. However, the text of the message promises a new savings package in the event that the Parliament accepts the Government’s 0.5 per cent request.

This is odd, for as recently as June the Government laid out the financial plans to 2014, which included additional spending for the 0.5 per cent target and explained that the Federal budget was still on the right path to consolidation. There was no mention of new savings measures. It now states in the message that a new savings package can only be avoided for the years 2013/14 if instead of following the Government's request, the Parliament would be content with 0.45 per cent for the time being, leaving the discussion of the 0.5 per cent figure for 2012. This would save all of 110 million francs from projected bilateral aid in the area of water supplies (87 million instead of 197 million francs), whilst multilateral contributions would remain intact.
The divergence between the Government's request and the text of the message is obviously down to a compromise with the minority around outgoing Finance Minister Merz. Parliament is thus dealing with a novelty – a government bill that calls itself into question.

Michèle Laubscher, Alliance Sud