THE STANDING SENATE COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE
EVIDENCE
OTTAWA, Wednesday, May 22, 2024
The Standing Senate Committee on Foreign Affairs and International Trade met with videoconference this day at 4:14 p.m. [ET] to study the subject matter of those elements contained in Divisions 6, 7, 8 and 9 of Part 4 of Bill C-69, An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024.
Senator Peter M. Boehm (Chair) in the chair.
[Translation]
The Chair: Honourable senators, my name is Peter Boehm. I am a senator from Ontario and the chair of the Standing Senate Committee on Foreign Affairs and International Trade.
Before we begin, I would like to ask all senators and other in-person participants to consult the cards on the table for guidelines to prevent audio feedback incidents.
Please take note of the following preventative measures in place to protect the health and safety of all participants, including the interpreters. If possible, ensure that you are seated in a manner that increases the distance between microphones. Only use a black approved earpiece. The former grey earpieces must no longer be used. Keep your earpiece away from all microphones at all times. When you are not using your earpiece, place it face down, on the sticker placed on the table for this purpose.
[English]
Before inviting committee members to introduce themselves, I wish to acknowledge our new — and I understand interim — member, Senator Percy Downe of Prince Edward Island. He is no stranger to this committee, having served on it for many years in previous parliaments, if I’m correct on that. Welcome. Senator Downe replaces Senator David Richards of New Brunswick, who I wish to thank for his contributions to this committee.
With that, I would ask members to introduce themselves.
Senator Downe: Percy Downe, Charlottetown.
Senator Greene: Steve Greene, Nova Scotia.
[Translation]
Senator Gerba: Amina Gerba from Quebec.
[English]
Senator Woo: Yuen Pau Woo, British Columbia.
Senator Ravalia: Mohamed Ravalia, Newfoundland and Labrador.
Senator MacDonald: Michael MacDonald, Nova Scotia.
Senator M. Deacon: Marty Deacon, Ontario. Welcome.
Senator Boniface: Gwen Boniface, Ontario.
Senator Harder: Peter Harder, Ontario.
Senator Coyle: Mary Coyle, Antigonish, Nova Scotia.
The Chair: Welcome, senators, and I would like to welcome all who may be watching us across the country on ParlVU.
Colleagues, we will now begin our study on the subject matter of Bill C-69, An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024. The specific elements referred to this committee by the Senate are Divisions 6, 7, 8 and 9 of Part 4.
Today, we have the pleasure of welcoming the following government officials:
From Finance Canada, Darren Mason, Director, International Monetary and Financial Policy, International Policy and Analysis Division; Philippe Hall, Director, Multilateral Institutions, International Finance and Development Division; and Gina Clark, Senior Director, International Finance Section, International Finance and Development Division.
From Global Affairs Canada, Geneviève Brown, Executive Director, Innovative Finance for International Assistance Division.
From Export Development Canada — returning to the committee — Lorraine Audsley, Senior Vice-President, Chief Risk Officer and Chief Sustainability Officer.
From FinDev Canada, David Bhamjee, Vice-President, Strategy and Engagement.
Thank you all for being with us today. Before we hear your remarks and proceed to questions and answers, I would ask everyone present to please mute notifications on their devices. We are ready to hear your opening remarks, and these will be followed by questions from senators and your answers. We begin today with Ms. Clark.
Gina Clark, Senior Director, International Finance Section, Department of Finance Canada: Thank you, Mr. Chair.
Today, I am speaking on behalf of the Department of Finance and will present a brief summary of Divisions 6, 7 and 9 of Part 4.
[Translation]
First, regarding Division 6, since the start of 2022, Canada has provided around $6.9 billion in financial assistance to Ukraine under section 8.3 of the Bretton Woods and Related Agreements Act. In Budget 2024, Canada announced its intention to provide Ukraine with $2.4 billion in loans for 2024, to ensure that the government of Ukraine can continue to deliver for its citizens. Of this amount, $2 billion was already provided on March 20, 2024, through the International Monetary Fund Administered Account for Ukraine.
[English]
The Budget 2024 commitment is part of the Group of Seven commitment to help address Ukraine’s urgent financing needs following Russia’s war of aggression against Ukraine. To enable the full extent of this support, the government proposes amendments to the Bretton Woods and Related Agreements Act to increase the maximum financial assistance that may be provided in respect of a particular foreign state from $7 billion to $15 billion and, in respect of all foreign states, from $14 billion to $22 billion.
Next, regarding Division 7, G7 and like-minded countries, including Canada, have called on multilateral development banks to improve their efficiency, responsiveness and to significantly scale up financing in order to meet the growing needs of developing countries.
The proposed amendments to the International Development (Financial Institutions) Assistance Act and the European Bank for Reconstruction and Development Act would enable Canada to use innovative financial instruments, such as the purchase of hybrid capital and the provision of guarantees, to bolster regional and multilateral development banks’ ability to support developing countries.
These amendments mirror Canada’s existing legislative authorities provided under the Bretton Woods and Related Agreements Act with respect to the World Bank Group and would expand Canada’s toolkit regarding its ability to support regional development banks, such as the European Bank for Reconstruction and Development and the African Development Bank Group.
Similarly, the International Monetary Fund’s 16th General Quota Review was concluded in December 2023, increasing IMF general quotas for all countries by 50% in proportion to members’ existing quotas.
[Translation]
This will reinforce the quota-based nature of the IMF and will enhance its capacity to support global financial stability. The proposed amendment to the Bretton Woods and Related Agreements Act increases Canada’s IMF quota subscription accordingly.
Lastly, Division 9 amends the Export Development Act to lower the statutory limit of total liabilities and obligations allowed in respect of Canada Account transactions from $115 billion to $100 billion.
This concludes my opening remarks. I will be pleased to answer your questions on Division 9. I am accompanied by other colleagues who will be able to answer your questions on Divisions 6 and 7. Thank you.
The Chair: Thank you very much, Ms. Clark.
Lorraine Audsley, Senior Vice-President and Chief Risk and Sustainability Officer, Export Development Canada: Good afternoon, Mr. Chair and committee members. Thank you for inviting me to appear before you today.
[English]
I am looking forward to discussing and answering questions about Bill C-69.
EDC was here just last month regarding another study, but for anyone tuning in who may not be familiar with Export Development Canada, I wanted to offer a brief overview of our mandate and work. We are a Crown corporation that works to support and grow Canada’s export trade, helping to create Canadian jobs and boosting the domestic economy. Trade is a critical driver of Canada’s prosperity. Together, imports and exports represent 68% of the country’s GDP, with exports specifically accounting for 34% of GDP.
We support Canadian exporters through a suite of financial solutions to help mitigate risks for Canadian exporters and investors, as well as through knowledge products like webinars and digital content. Together, these offerings give Canadian companies the tools they need to reduce financial risk, the capital to enter and invest in new markets with confidence and, ultimately, to grow internationally. We operate on financially sustainable commercial terms, always ensuring our work complements that of private commercial bankers and insurers. As the committee may be aware, EDC has been consistently profitable throughout our 80-year history and regularly pays a dividend to the Government of Canada.
The support EDC offers directly to Canadian exporters and investors is on our corporate book. Of interest to this committee today and its study of Bill C-69, however, is the Canada Account. This is an account EDC administers on behalf of the Government of Canada. I am pleased to offer some insights into this account here, and I will be happy to answer any specific questions you might have.
Canada Account is a financial mechanism at the government’s disposal. It is available to facilitate transactions the government determines are in the national interest. Often, it is used to support a transaction that EDC is not otherwise able to take on. This can be due to the size of the transaction, market risks, borrower risks or financing conditions.
In order for EDC to underwrite transactions using this account, we must receive specific authorization from the Minister for International Trade, with the concurrence of the Minister of Finance. Transactions under Canada Account can include business in all of EDC’s product categories, including financing, accounts receivable insurance, contract insurance and bonding, and equity.
While EDC negotiates, executes and administers these transactions on behalf of the federal government, it is the government that assumes the risks.
Finally, I’d like to note that, similar to EDC’s financing transactions, we disclose those transactions flowing through Canada Account on our web page.
Thank you again for inviting us to be here today, and I look forward to our discussion.
The Chair: Thank you, Ms. Audsley.
David Bhamjee, Vice-President and Chief Strategy and Engagement Officer, FinDev Canada: Good afternoon, and thank you for the invitation to join the committee today to talk about the review of the relevant sections of Bill C-69. My colleagues, Stephanie Emond and Agathe Gout, were before you a few weeks ago to discuss FinDev Canada and its activity in Africa. Given the recency of that, I will keep my remarks brief so that we can focus on the matter at hand.
Briefly, FinDev Canada is Canada’s development financial institution, or DFI. We support development through the private sector by providing financing, investment and blended finance solutions, as well as technical assistance, to support sustainable and inclusive growth in emerging markets and developing economies. All of this is in alignment with the Sustainable Development Goals and the Paris Accord commitments. We were established in 2018 to complement the range of tools that Canada had in place already to address the significant development challenges these markets face, with a particular focus on supporting the private sector and stimulating private investments.
As the committee is aware, FinDev Canada has been included in the Bill C-69 divisions that are being reviewed. The references to the corporation refer to decisions taken by the Government of Canada in relation to the renewal of the International Assistance Innovation Program, or IAIP. My colleagues from Global Affairs Canada are well placed to speak to the overall policy intent of the IAIP and its renewal.
As it relates to FinDev Canada, this renewal work and the decision made to provide the corporation with access to concessional financing and technical assistance funding will help the corporation in support of its mandate and Canada’s broader international development priorities. This decision is welcomed by FinDev Canada, as it will greatly enhance its toolbox, enabling the corporation to broaden its offering in a meaningful way in support of development, private capital mobilization and capacity building.
With that, I would be happy to answer any questions from the committee.
The Chair: Thank you very much.
Colleagues, just a couple of points at the top: We have many witnesses and a complex portion of Bill C-69 to look at. I would like you to be very clear in terms of to whom you are directing your questions. That’s the first point.
Also, in a rare display of generosity, you will have five minutes to ask your questions and receive the answer. Nonetheless, my normal suggestion remains: Try to keep your preambles short and your questions pointed. That will allow for maximum answers. If we have enough time, we will move to a round two.
Senator Ravalia: Thank you to all of our witnesses for being here this afternoon.
My first question is with respect to Division 6, and I will direct it to you, Ms. Clark. Which countries are the main beneficiaries of the financial assistance currently provided through the act, and which countries would be the main beneficiaries under the proposed amendments?
Ms. Clark: Thank you for your question. I will turn the question over to my colleague, Darren Mason, who is the responsible director.
Darren Mason, Director, International Monetary and Financial Policy, Department of Finance Canada: Thank you for the invitation to be here today. It is my pleasure to respond to the senator’s question.
The government actually publishes the information related to its lending. It’s publicly available on the website. That lists all the countries to whom it has extended financial assist, including under section 8 of the Bretton Woods and Related Agreements Act.
Senator Ravalia: Thank you. Would you be able to outline for me those countries and the amounts involved?
Mr. Mason: I would be happy to consult the web page and get back to you with a list of those countries.
Senator Ravalia: Thank you very much.
In follow up, what criteria are used to determine the allocation of increased financial support to different countries?
Mr. Mason: Again, I would be happy to take that question.
Section 8 of the Bretton Woods and Related Agreements Act indicates that, in order for the Minister of Finance to extend assistance under this legislation to foreign states, the Governor-in-Council must be of the opinion that it is in the national interest to do so. It also stipulates other conditions in the legislation. For example, one is that the country in question must have an arrangement with the International Monetary Fund. So there are conditions stipulated in the legislation.
Senator Ravalia: Recognizing the context and difficulty that Ukraine is currently facing in its aggression from Russia, I was wondering if a disproportionate amount of this funding is actually going to Ukraine and whether that might impact our ability to support other countries that are in need of this money.
Mr. Mason: Thank you again for the question.
I think that relates back to the first question you asked in terms of to whom the lending is going under the provision of this legislation. That’s information we can provide. You will see from that that Ukraine is one of the largest borrowers pursuant to the section at this time.
The Chair: Mr. Mason, there are three elements there where you’re going to provide written responses. Please send them through the clerk of the committee, Ms. Cardinal.
Senator Woo: My question is regarding the Canada Account, so either Ms. Clark or Ms. Audsley can respond to it. Has the threshold been lowered to $100 million? Can you explain what “threshold” means, how it works and why there has been a lowering of the threshold?
Ms. Clark: I can start, and my colleague can complete the answer. Thank you.
The limit that’s established in the act sets the maximum amount of liabilities that can be acquired under the Canada Account. That includes all potential exposures such as guarantees, loans or other stakes that are taken under the Canada Account. Right now, that limit is set at $115 billion, and it’s being reduced down to $100 billion.
There was a significant increase that was undertaken in 2022 in the context of the COVID response measures. That increased the overall limit. As we’re seeing COVID measures being wound down, including the Canada Emergency Business Account, which was delivered through the Canada Account, we are starting to move toward lowering that limit.
Ms. Audsley: My colleague has captured it well. It is essentially a limit within which we need to remain. We report against that in our annual report. We have not actually been close to it. I’m happy to talk about how much we have actually used under it, if that is of interest to members.
Senator Woo: Yes, please.
Ms. Audsley: I’m happy to.
As my colleagues said, the limit was increased to account for CEBA, so it went up to $115 billion from $75 billion. At no point, even with that higher limit, have we exceeded 63% usage. With the CEBA repayments already coming in, we are already down to 43% usage of that limit. That was extraordinary, given the CEBA amounts, which were large amounts. With those continued repayments, the usage of that account will continue to fall.
Senator Woo: How extraordinary was it that the Canada Account was used for COVID relief for Canadian businesses doing domestic activity as opposed to activities abroad, which would be more intuitively expected coming from EDC?
Ms. Clark: At the time of the pandemic, the government expanded EDC’s mandate to provide four domestic authorities. That was done in the 2008-09 crisis as well, which allowed the government to provide support via the Canada Account for the auto industry. Those powers were eventually rolled back but then reintroduced in the context of the pandemic to allow for those domestic supports.
Senator Woo: And do they still exist?
Ms. Clark: They’ve been wound down, as well. I think it was as of December 2022 that those authorities expired.
Senator Woo: Thank you.
On the allocation for development assistance broadly, I understand much of it is going through the multilateral institutions. Is any amount set aside for delivery through Canadian NGOs and civil society organizations?
Mr. Mason: I think Global Affairs might be best placed to talk about it.
Geneviève Brown, Executive Director, Innovative Finance for International Assistance Division, Global Affairs Canada: I’m sorry. Could you please repeat the question? I apologize.
Senator Woo: I understand there is an allocation of additional funds for development assistance work broadly. I heard in the opening statements that much of it will be channelled through the multilateral institutions. I’m wondering if there are any specific allocations that are intended to go through Canadian NGOs and development groups that do work in the areas of priority for Canada.
Ms. Brown: Thank you for the question, and thank you for having me here this afternoon.
The question pertains to the elements of the budget that were addressed by my colleague. The amounts that were addressed, if I’m correct — I think you can correct me, Gina — are not speaking to the budget that is available for Canadian civil society organizations or Canadian partners. They’re specific to international organizations, yes. Of course, there is funding in the Global Affairs budget that is available for Canadian organizations, but that is not what’s addressed in terms of the language or the portions of the budget that are under consideration.
Senator Woo: None of these monies are relevant to the Canadian delivery? That’s a separate budget?
Ms. Brown: That is my understanding of how the changes are being put forward in the budget, yes.
[Translation]
Senator Gerba: Welcome to the committee. I’m interested in Division 9 of Bill C-69, particularly subsection 171(1), which amends subsection 24(1) of the Export Development Act by reducing the total amount of debt and obligations authorized for Canada Account transactions from $115 billion to $100 billion. I would like to know what the anticipated consequences of such a reduction would be, particularly with regard to the transaction limit on Canadian businesses, especially SMEs. That’s my first question, for Lorraine Audsley. I have a second question, if time permits: Would that limit the scope of the services that Export Development Canada already provides to businesses?
Ms. Audsley: Thank you for the question.
[English]
From an impact perspective, our current exposure under the Canada Account is a little bit over $49 billion of the $115 billion, so with the cap being reduced to $100 billion, there is still ample room for us to do business, should that be required, being in the national interest.
As for whether it would have an impact on our ability to serve customers, the Canada Account is one part of our business. As I said, it’s a mechanism of the Government of Canada and is not EDC’s core corporate book. There is no impact to our corporate book of any sort, so we will be able to continue to support Canadian exporters, as we have. In fact, we’re looking to expand our risk appetite to be able to serve more Canadian customers. We have a focus in our strategy across all segments — small, medium, large and international — and that will continue.
[Translation]
Senator Gerba: If I understand correctly, there would be no impact on businesses or on your operations with exporting businesses. Where do you think the concrete expressions of this reduction will be felt? Or will there be no impact at all?
Ms. Audsley: I don’t think there will be a big impact. It was exceptional because of the Canada Emergency Business Account program, and the pandemic is behind us, I hope.
[English]
I do not expect that it will have a significant impact. I can ask my colleagues to comment on that as well.
Ms. Clark: I would agree with my colleague. I think it’s an important distinction to make. The Canada Account is a separate account that’s administered by EDC on behalf of the Government of Canada. This decision has no impact on EDC’s core operations, which will continue to effectively deliver services to Canadians.
[Translation]
Senator Gerba: Mr. Hall, with regard to the amendment to Division 7 of the bill that deals with the range of instruments, as mentioned earlier, among these multilateral institutions is the African Development Bank. Could you explain how Canada is currently contributing to the African Development Bank, and tell us in detail how the new provisions will be implemented within the bank?
Philippe Hall, Director, Multilateral Institutions, Department of Finance Canada: In terms of Canada’s participation in the African Development Bank, I would say that the minister responsible for representing Canada as governor of the African Development Bank is currently the Minister of International Development. At Finance Canada, we work very closely with our colleagues at Global Affairs Canada to help them represent our interests within the bank.
This is achieved through our participation on the bank’s board of directors. The Minister of International Development has appointed a director general, who represents us on a daily basis on all matters considered by the board of directors. His name is Edmond Wega. We also take part in the concessional fund meetings. The Board of Governors meets annually. The annual meeting of the African Development Bank’s Board of Governors will be held next week in Nairobi, Kenya. One of our colleagues there will be representing Canada.
I would add that our financial participation in the African Development Bank is determined by two elements, the first being our subscription to the bank’s capital and the second, our contributions to the bank’s concessional fund. Every three years, Canada and all donor countries participate in a replenishment of this fund.
[English]
Senator MacDonald: I have a question on Division 7, Measures Relating to Modernizing International Financial Institutions.
The 16th General Review of Quotas of the International Monetary Fund, or IMF, was concluded in December 2023 with the IMF governance voting to increase quotas for all countries by 50%. A legislative amendment is now required to increase the amount Canada is permitted to pay the IMF for quota subscriptions in order to respect the implementation deadline of November 2024 agreed to by the governors. How will the increase in Canada’s IMF quota subscription, which requires significant financial outlay, benefit the Canadian economy and its international standing?
Mr. Mason: Thank you for the question.
Yes, that is correct. IMF governors typically review quotas every five years, and the most recent review — the 16th review — concluded in December. IMF governors voted to increase quotas by 50% for all members in proportion to existing quota shares. Therefore, Canada’s quota will increase, in fact, from $11 billion Special Drawing Rights to $16.5 billion Special Drawing Rights, and it will maintain Canada’s existing quota share of 2.3%.
The legislative amendment simply represents a first step in a lengthy implementation process that is required. Officials are still in the process of finalizing advice to the Minister of Finance on how best to make the quota payment to the fund. I would note that, in the past, we have done these quota purchases before, and they have not had a material impact on the budgetary balance or net debt.
You also had a question in terms of how it would impact Canada’s standing at the IMF. In fact, it’s a benefit because it will maintain our quota share, and that means our influence at the fund will be sustained. Because Canada has the largest quota share in our constituency, we typically represent not just ourselves but a dozen other IMF members within our constituency and typically hold the position of executive director within that constituency as well.
Senator MacDonald: Can this committee be provided with a detailed cost-benefit analysis to justify the increased financial commitment?
Mr. Mason: Mr. Chair, I would have to look into whether that’s something we would be able to provide.
The Chair: Okay. Please do that and send us a response in writing through the clerk.
Senator MacDonald: I would like to go back to Division 6, Bretton Woods and Related Agreements Act. Clause 172 would increase the maximum financial assistance that can be provided under subsection 8.3 of the related agreements act to a single foreign state from $7 billion to $15 billion and to all foreign states from $14 billion to $22 billion. Given the significant increase in financial assistance limits, can the committee be provided with economic analysis that demonstrates how this policy will not bring negative impact to Canada’s financial stability and fiscal health?
Mr. Mason: I would be happy to address the senator’s question.
As indicated in the opening remarks of my colleague, one of the reasons that the government is pursuing this legislative increase is to honour the commitments it has made in Budget 2024 to provide Ukraine with financial assistance. This will also provide flexibility in the future should it decide to support Ukraine or other countries, as needed, and should the Governor-in-Council be of the opinion that it is in the national interest to do so. That’s the reason behind the increase.
In terms of whether an economic analysis would be available, again, that’s something that I would have to look into.
Senator MacDonald: Thank you.
The Chair: Thank you very much.
Senator M. Deacon: Thank you for being back here today.
My question will be directed to Finance Canada — Ms. Clark, Mr. Hall or Mr. Mason. It concerns Division 6 and the IMF more broadly. The IMF has seen more competition from countries like China and India in recent years. Are negotiations with debtor countries becoming more drawn out now that they have these alternate routes? I’m wondering if these changes in Division 6 are being undertaken to help bolster the IMF in the developing world in the face of competition.
Mr. Mason: With your permission, chair, I can lead off.
Regarding the financing arrangements that IMF members secure with the fund, those are bilateral negotiations between the IMF as an institution and the country in question. Canada and other IMF members have an opportunity to express our views or, if necessary, vote on proposed financing arrangements through our participation at the executive board.
The good news about the legislative increase that you see in Division 7 related to the outcome of the general review of quotas is this: Because IMF borrowing is quota-based, the fact that governors reached an agreement to increase quotas for all members means that it will unlock potentially greater borrowing for those countries that do need it the most. Their borrowing is a function of their quotas, so the more quotas they have, the higher their borrowing limits can be, and that’s important for countries that are desperately seeking financing.
Senator M. Deacon: Thank you. I think I heard you. As part of this answer, do you know if other members of the Bretton Woods system are doing what they need to bolster these organizations by increasing maximum financial assistance in their own statutes? I think you started to touch on that, so I’m just trying to make sure.
Mr. Mason: Again, Canada is moving forward with implementing the outcome of the sixteenth GRQ, and the targeted deadline that governors have agreed to is November 2024. Our hope and expectation is that other countries are also moving forward with their domestic implementations as well so that these changes can take effect and reap some of the benefits that I described earlier.
Senator M. Deacon: Thank you for that.
The IMF and the World Bank are trying to shift to greener development. We can see that. At the same time, however, many developing countries rightfully and publicly point out that the climate mess that we have is not really their responsibility or perhaps fault. How does Canada navigate this balance between developing fairness while also trying to encourage developing economies to chart a greener path, not just the Global North?
Mr. Hall: I can start off on the World Bank and then turn it over to Mr. Mason for the IMF.
The Chair: We have a minute and a half left, so govern yourselves accordingly, please.
Mr. Hall: I’ll be very short.
You might have heard that the World Bank Group recently nominated and elected a new president. I think it’s fair to say that our governor has been very supportive of this new governor’s reform efforts, which include providing supports to global challenges that go beyond one country’s border, but we are well aware that there is this balancing act to be played between the development objectives of a country and these global challenges.
Given the time, I’ll leave it there for now.
Senator M. Deacon: Thank you.
Ms. Brown: I would just add that there is actually some very important funding going through Global Affairs Canada to the World Bank on climate finance work, and I think that’s worth noting because of Canada’s 5.3 billion commitment for climate financing. We are working very closely with many of the institutions in the World Bank group on aspects of the implementation. Thank you.
Senator M. Deacon: I’d love to hear the numbers on that. Thank you.
The Chair: Thank you very much.
Senator Harder: Thank you to our witnesses.
My first question is for Ms. Audsley. It’s a follow-up to Senator Woo’s question about the Canada Account. I’m interested about the policy choice that was made. Why not go back to 75? Why did you choose 100? Was that a political decision or an interaction? Just give us some commentary on why 100.
Ms. Audsley: I’ll pass that over to my colleagues at Finance because the decision originated over there.
Ms. Clark: Ultimately, this is a progressive approach. At this time, it was determined that that was a reasonable step down, reflecting the stage as we’re moving away from the pandemic support. This is a first step. There could be future steps, but that’s to be determined in future decisions.
Senator Harder: You understand what I’m saying, though. You’re only at 43, and historically you’re at 75. Why not 75? It’s just a little less candy on the table.
Ms. Clark: I appreciate what you’re saying. Ultimately, you are correct. It is the determination of the minister to decide what the limit will be established at. However, again, this reflects a staged approach. It reflects a number of other decisions that are ongoing and the direction in terms of increasing EDC’s risk appetite and other considerations that are being developed, and so this was determined to be an appropriate first step.
Senator Harder: My second question is unrelated but has to do with the whole area of international debt relief. Quite apart from the instruments of the World Bank, historically Canada has been very much engaged with principally other G7 countries with respect to debt relief. That was pretty effective 20 years ago. Where are we on the next round of pressure for debt relief, not access to debt but debt relief?
Ms. Clark: I can take a first crack at that, Mr. Chair.
I will take it from a slightly different hat as this isn’t specifically related to any of the measures that are under consideration, My team is responsible for Canada’s engagement at the Paris Club, and so in that context we are closely monitoring overall sovereign debt levels and are actively engaged through the G20 common framework for debt sustainability and actively working with countries to treat sovereign lending as quickly and timely as possible.
As noted by your colleague, there are complications to achieving that outcome, namely, that we aren’t as homogenous as we used to be in treating debt, so these are recognized challenges and challenges that we’re working very closely with not just G7 but other like-minded countries to try to advance progress on that front.
Senator Harder: Are you confident that progress can be made over the next cycle?
Ms. Clark: I think that’s a very difficult question for a person to respond to. I can remain hopeful that that would be the case.
Senator Harder: Finance is hopeful. Take note. Thank you.
Senator Downe: My question is for Madam Clark about the European Bank for Reconstruction and Development. As we all know, this bank was formed right after the Cold War in 1991. I think many Canadians would be surprised that, 33 years later, it’s still there, given the development in Europe, and that Canada is the eighth-largest contributor out of 69 countries. What is our total financial liability or exposure at this bank?
Ms. Clark: Thank you for the question. I will turn it over to Mr. Hall.
Mr. Hall: I would be happy to provide you those numbers. I just don’t have them offhand, so I will commit to provide those to you.
Senator Downe: Based on the theory you don’t have a question until you know the answer, it’s well over a billion dollars. My second question is, given our share of the contribution is 3.4% to the bank, what is the corresponding percentage share Canadian businesses are getting in contracts and business from the European bank?
Mr. Hall: Thank you for the question.
To answer the question, I would refer to the report that we release on an annual basis as per the EBRD Agreement Act which obliges us to report on an annual basis to Parliament on our activities at the EBRD. I would be happy to send the member this report.
Senator Downe: There is not enough detail. That’s why I’m asking the question.
Mr. Hall: I was going to say that details the various contracts that are awarded to Canadian firms, but I’m happy to answer any more specific questions with regards to those contracts.
Senator Downe: Could you send us what percentage? Given that we have 3.4%, are we getting corresponding return on investment, if you will, after 33 years? What percentage of contracts are Canadian businesses getting that are awarded by the bank? That’s what I’m interested in.
Mr. Hall: I would have to get back to you with details.
Senator Downe: Thank you.
Could you explain what expansion financially Bill C-69 is proposing for the European Bank of Reconstruction and Development?
Mr. Hall: What we’re trying to do with this legislative change is provide the government with statutory authorities that we currently have at the World Bank Group with the Bretton Woods and Related Agreements Act to give us the tool to invest in new types of innovative financial instruments, such as hybrid capital or guarantees, things we can already do under the Bretton Woods and Related Agreements Act and which we would like to be able to do at the EBRD through these legislative changes.
Senator Downe: Thank you.
The Chair: Thank you, Senator Downe. Great debut, if I may say.
We will go to round two in a moment, but I will use my prerogative as chair to ask three questions, hopefully within the five-minute period.
My first question is prompted by something Senator Downe just mentioned, and that’s with respect to the EBRD. A long time ago, when I was working on some of these questions, we were a regular contributor to the Chernobyl Shelter Fund, which started as a G7 initiative and then was handled and I think is still being handled by the EBRD. I’m making the assumption that we are still contributing to that fund.
Mr. Hall: As you may recall, those contributions were made by officials from Global Affairs Canada, so they would be best placed to provide the specific answer. My understanding, though, is that that is correct, that Global Affairs Canada is still contributing to that specific fund. As you may be aware, in Budget 2024 as well, Canada announced its intention to buy its share of allocated shares through an EBRD general capital increase, which is motivated on the desire to have the EBRD significantly increase its support to Ukraine.
The Chair: Thank you for that.
Colleagues, that is to provide the continued protection over that radioactive core that is still there.
Ms. Clark, you were mentioning sovereign debt in response to Senator Harder’s question. Something that the Department of Finance had started and had been pushing a few years ago, of course, were sovereign loans to developing countries. Do you have a sense of how this program has fared post-pandemic? In other words, whether the pandemic has made an impact in terms of extending the sovereign loans to countries that may have been at the edge of the breakthrough and not receiving ODA — official development assistance — anymore but then may have slipped back?
Ms. Clark: Thank you for your question. I will turn it over to my colleague who works on that program.
Ms. Brown: Thank you, Mr. Chairman.
We work very closely with Ms. Clark and her team in terms of what she was referring to earlier about monitoring the debt sustainability of countries that we work with.
The Sovereign Loans Program was a pilot that has now ended, but in the context of that, we did do analysis of the impact of the change in interest rates from post-pandemic, what impact they were having on the eligibility of countries to receive loans under the program, and we did see an impact. There were fewer countries that were able to qualify, and we were very careful about the impact that would have long-term in terms of increasing the debt sustainability of those countries. So there was a correlation.
The Chair: Thank you for that.
I still have time for my third question, and it’s to Mr. Bhamjee. We’ve left you in peace until now. Your role is vice-president of strategy and engagement. The organization is relatively new. As with any organization, it has taken some time to develop. A number of other major donor countries have similar development finance institutions. Are you doing any comparisons? Are you looking at best practices that others may have undertaken? I’m thinking, in particular, of big donors, the Nordics, for example, and some of the European countries. Would you have a comment on that?
Mr. Bhamjee: Thank you for the question, Mr. Chair.
Actually, it’s an interesting time. Currently, our CEO and our chief investment officer are at the European Development Financial Institutions annual meetings which are taking place in Oslo. This is an example of an opportunity where the heads of the DFIs have an opportunity to connect with one another and do exactly as you’re describing, which is sharing best practices. A similar such meeting was held earlier in the year in The Hague, more of a “Chatham House Rule” approach. Certainly anytime we’re engaging internationally, whether it’s at COP, whether it’s at the annual meetings or the spring meetings at the World Bank, we would look for opportunities to do just that.
More broadly, if we take a step back, FinDev Canada, as I said, was just established in 2018, so we’re just part way through our sixth year. One of the things that we’ve also looked to do, because of when we started and the pandemic hitting shortly thereafter, partnerships were critical to the organization as it looked to develop, whether with other DFIs, British International Investment in the U.K., FMO in the Netherlands, Proparco in France, et cetera, or some of the multi-laterals in Latin America and the Caribbean, as an example, IDB Invest, so the commercial arm of the Inter-American Development Bank. Those partnership opportunities allowed us to get our feet on the ground and start to affect development impact, but also to learn and share best practices.
One of the things that we actually think is an interesting opportunity for FinDev Canada is, because of our newness and relative size, we have the opportunity of nimbleness and agility. We’re not yet of a size where things such as bureaucracy or whatever else can sometimes rear their head. We have the opportunity to take a more innovative approach.
What we do find sometimes is that our partners learn from us as much as we learn from them, but we take every opportunity to engage, as you’re describing.
The Chair: Thank you very much. Your last comment about nimbleness and the like was quite refreshing.
Senator Woo: Let me pick up on the FinDev question and ask if you and Ms. Audsley might help us understand the division of labour between FinDev and the Canada Account. Both, it seems to me, support Canadian direct investment abroad. I understand the Canada Account is defined by Canadian interests, but some of those interests may have to do with developmental impacts. I know many of these projects are in developing countries. Is there a rapport between the two organizations? Do you have a formal division of labour? Is there a process where you graduate from one to the other? How are you different in terms of financing terms and conditionality and all of the other term requirements that come with support?
Mr. Bhamjee: Implied in your question is that FinDev Canada is a subsidiary of Export Development Canada.
Senator Woo: No.
Mr. Bhamjee: It is, though. That is part of it. We are a subsidiary of Export Development Canada, created in 2018. I think it’s important to articulate a couple of points, because that actually gets to things such as division of labour, et cetera.
One is that we don’t have a Canadian nexus as part our mandate. Within our mandate, it is not a requirement that FinDev Canada is supporting Canadian investment abroad or investment by Canadian institutional investors, for example. We don’t support. We don’t do tied aid. We’re not looking to catalyze opportunities for Canadian companies, for example. Lorraine will be able to speak for some of what EDC does, however, on that side. What we do look to do is further Canada’s international development interests, and we do that through development finance.
I had an opportunity to speak earlier today at Global Affairs with some representatives from ASEAN, and we start with three premises. First, there are development gaps in the world, and they’re growing, whether they’re related to SDGs or on the climate side with Paris. Second, the public sector can’t close those gaps on its own. Third, given the breadth of those gaps and the public sector’s limitations, the private sector, its capital and its innovation, are critical. If you accept those three premises, this is actually why you have a development finance institution, and that’s why Canada created FinDev Canada.
We don’t have that mandate or that nexus to catalyze things. What we’re looking to do is strengthen these markets. Implied in the understanding of development finance is the world is a better, stable, more effective community if we’re actually raising standards in areas, so for FinDev Canada, related to climate and nature action, related to gender equality and market development.
Ms. Audsley: Export Development Canada’s mandate is distinct from our subsidiary’s in that ours is to support export trade from Canada and Canadian investment overseas and to support Canadian exporters in their international journeys. It’s tied back to the question we always have to ask: Is mandate met? So that benefit of that Canadian story must be there.
We achieve it through many ways. The most obvious is supporting export trade. As I mentioned, we support Canadian companies investing overseas. We can also support large foreign buyers to draw Canadian companies into their supply chains, which is a very valuable opportunity for particularly small- and medium-sized exporters where we can help them connect with large buyers overseas. We have a relatively fair amount of flexibility within our mandate, but it all has to do with coming back to that Canadian piece, that Canadian export and trade.
We offer our services on commercial terms. As I mentioned previously, we cover small, medium and large Canadian exporters. We have an international segment, as I mentioned, to help draw Canadian companies into their supply chains. Making connections is what we call that, and we cover all sectors of the Canadian economy as well. It’s quite a broad-ranging mandate, whereas our subsidiary, FinDev Canada, focuses on that development aspect, and it’s not tied to the Canadian export trade piece.
Senator Woo: Can a Canadian company go to FinDev to propose a project that meets the developmental criteria and which requires developmental finance to meet the gap between feasibility and the market?
Mr. Bhamjee: Thank you for the question.
Certainly, if there is a Canadian investor who sees a project they want to invest in internationally. As I think Senator Boehm had mentioned earlier, it has to be an ODA-eligible, official development assistance-eligible, country. If there is an opportunity there, FinDev Canada would look at and assess that. It doesn’t matter from whom the opportunity might originate, Canadian or otherwise, but it would need to be able to meet our standards as they relate to credit quality, non-credit risk, et cetera.
The last thing I will say about the division of labour is that one of the things that FinDev Canada certainly benefits from is that, as a subsidiary of the EDC, there are elements of our operations for which we actually rely upon EDC’s support. We have a service level agreement in place so that, from a back office perspective, we didn’t have to replicate certain functions within the two organizations. There is an efficiency opportunity there that we benefit from.
[Translation]
Senator Gerba: I wanted to give Mr. Hall, who was interrupted earlier, an opportunity to give us more details on the new possibilities that this amendment to the bill would offer in terms of financing the African Development Bank, or ADB, on the one hand. On the other hand, you also talked about concessional funds. Do these funds help finance Canadian companies doing business in Africa? Is there a way of knowing what criteria are being used for these funds?
Mr. Hall: Thank you for the question. Regarding the African Development Bank — I’ll start with the second question first. Concessional funds help finance different types of projects; these go through a procurement system. Of course, Canadian companies can participate in these calls for tenders. There’s even a group within Global Affairs Canada that promotes and encourages the participation of Canadian companies in such projects. Again, the African Development Bank’s annual report could give you more details on a particular contract.
As for the changes suggested in the bill, again, this is intended to provide the government with an additional tool to possibly use new tools in the future to support the African Development Bank. Current legislation allows Canada to purchase quota subscriptions in the institution but does not provide the authority to purchase hybrid capital. These changes, if accepted, could give the government the opportunity to undertake such transactions.
Senator Gerba: Thank you.
Ms. Brown: I wanted to add a bit of information; through Global Affairs Canada, we also have many projects with the ADB, including with the private sector throughout Africa, and the ADB is an implementing partner for these projects.
Senator Gerba: Thank you for that comment. Is there a platform where companies can access these projects to participate in the call for tenders?
Ms. Brown: My colleague has already answered this part of the question. Since this has to do with development, we don’t do it for Canadian companies. So they can use the ADB systems, but another part of the department that works with Canadian companies helps to promote Canadian companies for international tenders, including for the ADB.
Senator Gerba: Thank you.
[English]
Senator Downe: Since these amendments were made public, has there been any feedback, positive or negative, that you’ve heard from anyone impacted by them?
Ms. Clark: On the section 9 elements, we have heard no feedback, and I don’t believe there has been feedback on the 6 or 7.
Senator Downe: Great, thank you.
The Chair: I don’t see any other senators who would wish to ask questions, so on behalf of the committee, I would like to thank our witnesses for joining us today: Darren Mason, Philippe Hall, Gina Clark, Geneviève Brown, Lorraine Audsley and David Bhamjee. Your answers were comprehensive, and we appreciate the candour with which you responded to the question.
(The committee adjourned.)