Ministers called for acceleration of remaining HIPC relief, automatic cancellation of debts for any country hit by major natural disasters, and presentation of proposals for a more comprehensive, transparent and impartial debt relief process to the next G20 meetings. They also stressed the need for urgent action to mobilise more innovative financing, especially financial sector taxes, and to improve low-income country representation in the G20. For the full communiqué, click here.

GFSR October 2010 is now available. Chapter 1 analyses challenges to advanced countries as they deal with slower recovery, higher debt levels and rollovers, and a still-impaired financial sector. Chapter 2 examines the increased vulnerability of banks to funding in the wake of the simultaneous and protracted inability to roll over or obtain new short-term funding across markets and borders. Chapter 3 examines the financial stability implications of credit rating agencies in light of the recent escalation of sovereign credit risk, and ratings downgrades of structured credit instruments.

The October 2010 edition argues that a resurgence in FDI, portfolio, and other flows to the LA-5 (Brazil, Chile, Colombia, Mexico and Peru) is providing cheap and ready finance to boost domestic demand, but simultaneously risks overheating, lost competitiveness, higher sterilisation costs, and boom-bust. SSA growth is accelerating, and although FDI and remittances were less affected by the crisis than feared, remittances remain vulnerable to global conditions. Prospects across both regions vary by country.

The first set of Country Profiles has been uploaded for countries participating in the FPC CBP. These are presently available for Bolivia, Burkina Faso, The Gambia, Ghana, Nicaragua, Tanzania, Uganda, and Zambia, with more countries to follow. Each Profile summarises institutional arrangements and cooperating partners; latest FPC, investor perception and CSR data and analysis; FPC CBP support and country achievements; progress made and future priorities in building capacity; and a list of further reading. They may be downloaded via the Where We Work page, and the FPC Assessing Country Capacity pages. Profiles will be updated on an ad hoc basis, subject to developments in each country, and announced on this page.

The Global Forum on Transparency and Exchange of Information for Tax Purposes has published phase 1 reviews on legal and regulatory frameworks in 8 countries including Bermuda, Botswana, Cayman Islands, Jamaica and Panama. Common deficiencies relate to access to information on nominees, trusts and the need to maintain good accounting records. Phase 2 reviews examining exchange of information practices will take place by 2012. Botswana and Panama will have to address phase 1 recommendations before proceeding to a phase 2 review. More than 100 jurisdictions and observers are now part of the Global Forum.

The Central Bank of The Gambia has published quarterly BOP data online, covering Q2 2009 - Q2 2010. This is within the IMF GDDS timeliness guidelines of 6-9 months. Items covered include FDI liabilities (split into equity and reinvested earnings), other investment liabilities (distinguishing trade credits), other investment assets (distinguishing currency and deposits), and investment income on direct equity and portfolio investment.

Bank of Zambia analysis shows that banks generally determine lending rates based on cost of funds, economic and market conditions and political risks. Factors vary among banks according to their impact on the cost of funds and the bottom line. Decisions made in setting and adjusting base lending rates are largely decided qualitatively. Factors contributing to high rates include default risk, information asymmetries, operational inefficiencies and the need for high returns on shareholders equity. The interbank rate is not a significant factor. The report identifies conditions for an effective interest rate targeting framework, and makes recommendations covering efficiency, consistent use of macroeconomic factors in determining lending rates, development of formal frameworks for the interest rate decision making process, and more competition among banks.

The 2010 Ibrahim Index, published today, shows that overall governance performance in Africa is being driven by gains in economic and human development but undermined by democratic recession. The Index measures the delivery of public goods and services to citizens by governments and non-state actors across 88 indicators related to sustainable economic opportunity (covering private sector, infrastructure, environment, and public management), safety and rule of law, participation and human rights, and human development.

New analysis finds that while current reforms are moving in the right direction, many difficult decisions lie ahead. It identifies five key priorities in the reform agenda: 1) A level playing field in regulation; 2) Improve the effectiveness of supervision; 3) Develop coherent resolution mechanisms at the national level and for cross-border financial institutions; 4) Establish a comprehensive macro prudential framework that will require indentifying, monitoring, and addressing systemic risks generated by individual firms and collective behavior; and 5) Reforms must address emerging exposures and risks in the entire financial system, not just banks.

Many small vulnerable economies (SVEs) continue to face debt solvency and liquidity problems as only a few of these countries have benefitted from international debt relief initiatives, such as HIPC and MDRI. This is one of the issues that Commonwealth Finance Ministers will be addressing at their forthcoming October 2010 meetings. DFI was commissioned to prepare a background study on options for reducing the existing debt burden of SVEs which forms the basis for Section 2 of the FMM discussion document, which is available here