Recent developments in
IMF-CSO relations
Global governance, sovereign debt
restructuring set IMF-CSO agenda
The IMF continued its vigorous and
productive outreach with civil society
organizations in the last quarter of 2002,
beginning with a major meeting with global
trade union leaders in October. Over 90
labor union leaders from around the world
met with IMF management and staff to discuss
issues ranging from the Fund's proposal to
create a new framework for sovereign debt
restructuring, to improving global
governance.
The meeting covered many of the themes
recurring in the IMF's interaction with
other civil society groups during late 2002.
IMF staff participated in two conferences
organized by civil society organizations
that debated various aspects of global
governance. At a conference organized by the
Montreal International Forum, IMF
representatives discussed quotas and voting
systems, transparency, and the Sovereign
Debt Restructuring Mechanism (SDRM). At a
conference on globalization and global
governance that was held in Helsinki, the
Director of the IMF's European offices
argued that reform of the IMF and the World
Bank will not resolve all issues of global
governance. This is because many emerging
market crises and the growing gap between
poor and rich countries can be traced to
policy weaknesses and governance problems in
those countries themselves. To be sure, the
exchange of ideas on this important topic
will continue in the future.
The IMF's work on poverty was discussed
in various settings, including at a Poverty
Reduction Strategy Paper (PRSP) conference
in Almaty, Kazakhstan, which debated recent
progress in promoting economic growth and
poverty reduction in the CIS-7 countries.
The Fund and the World Bank also continued
their efforts to improve poverty and social
impact analysis, which could become an
important building block for the PRSP
approach. At a conference in Copenhagen
organized by the European Network on Debt
and Development in November, IMF staff
debated the challenges involved in reaching
the Millennium Development Goals.
Finally, IMF missions and resident
representatives continued their outreach
efforts in various parts of world. A few
examples of this work is mentioned under
"Country Notes."
We would like to thank each of you for
the contributions you have made to our work.
We value your input and rely on your
analysis. We look forward to continuing our
work together during the year ahead.
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Contents
Feature Article
Management of IMF and World Bank
meet with global union leaders
IMF and World Bank management and staff
met with leaders of the international labor
movement in Washington, D.C. on October
21-23. The agenda focused on issues of
concern to labor unions, including poverty
reduction, reform of the international
financial architecture, and ways to enhance
the dialogue between labor unions and the
Bretton Woods institutions. The delegation
included over 90 labor union representatives
from about 40 countries, and was headed by
Guy Ryder and Willy Thys, General
Secretaries of the International
Confederation of Free Trade Unions (ICFTU)
and the World Confederation of Labor (WCL),
respectively.
The current state of IMF cooperation
with labor unions
The Fund's relationship with labor unions
has three elements: collaboration with the
International Labour Organization (ILO);
mission and resident representative contacts
with country-level labor unions; and
management and staff contacts with
international labor federations. With regard
to the last of these, in addition to the
leadership meetings in Washington, IMF staff
has developed worldwide links through the
labor federations with national labor
unions, and meets regularly with labor union
leaders through the confederations in
Washington. Meetings with regional labor
confederations also take place, but on a
more ad-hoc basis.
Prospects for the world economy and
the IMF's role
In his introductory remarks, IMF Managing
Director Horst Köhler briefed the delegates
about his recent meeting with the ILO's
World Commission on the Social Dimensions of
Globalization and his contacts with labor
unions in Algeria and Mauritania during his
recent trip to North Africa. With regard to
short-term economic prospects, he stressed
the downside risks to global growth and
called for a collaborative approach to help
strengthen economic recovery. Such an
approach ought to include the elimination of
trade-distorting practices by industrial
countries, he said, as these are detrimental
to the growth in developing countries.
Köhler also referred to key reforms underway
in the Fund, including efforts to streamline
Fund conditionality, strengthen the
framework for crisis prevention and
resolution, and promote transparency and
openness on the part of both the Fund and
its membership.
In their response, labor representatives
emphasized the likely negative impact on
workers of a downturn in the global economy.
They were encouraged by the dialogue between
the Fund and the ILO Commission and noted
that it could help improve social peace and
restore confidence in many crisis countries.
They were supportive of the Fund's
commitment to strengthen the dialogue with
labor unions both at country and global
levels.
The IMF's crisis resolution framework
Timothy Geithner, Director of the IMF
Policy Development and Review Department,
spoke about the IMF's crisis resolution
framework. The framework was strong, he
said, but to work effectively, it should be
supported by appropriate national economic
policies and a stable external environment.
Geithner then presented his views on the
Sovereign Debt Restructuring Mechanism
(SDRM).
Labor representatives indicated their
broad support for the SDRM proposal, but
raised concerns similar to those of many
other civil society organizations. In
particular, they noted that the initiative
does not go far enough to design a
comprehensive legal framework modeled on
domestic insolvency regimes. They also noted
that the SDRM should address the legality of
contracted debt, include official
multilateral debt, and limit debt repayments
to a socially sustainable level.
Furthermore, the IMF should play only a
limited role in the decision-making process.
A few representatives thought that sanctions
should be included to force a return of
flight capital and that CSOs should be
consulted on an equal footing with the
international financial community.
Geithner stressed that the IMF provides
resources that reduce the strain on
governments and make possible levels of
social expenditure that would not otherwise
be sustainable. That is one of the reasons
why its preferred creditor status is central
to the process. In domestic insolvency
cases, companies going through a workout
often need access to new funds on preferred
terms so that they can maintain a minimum
level of operations while they reorganize.
Geithner also warned participants about
the potential impact of questioning the
legality of debt contracted by previous
governments, as this might affect sovereign
lending in the future, including to
countries that have borrowed responsibly and
are servicing their debts in a timely way.
He stressed that the revised framework does
not anticipate a major role for the Fund in
initiating negotiations or arbitration (see
below under "further reading" for details).
Moreover, there is no requirement for a Fund
program to be in place unless requested by
the country. With respect to the situation
in Argentina, Geithner questioned whether
sanctions would lead to financial re-flows.
The authorities should instead focus on
creating an economic environment that would
encourage the return of funds.
Lastly, Geithner noted that outreach
activities are underway to encourage further
debate of the SDRM proposal. The Fund will
continue to put the development of its
proposal before the public and give the
international community a more fully
articulated SDRM design some time over the
next few months.
The case for standards and codes, and
against a Tobin tax
Mark Allen, Deputy Director of the Policy
Development and Review Department, explained
how lessons from various crises continue to
shape the IMF's thinking about reforming the
international financial architecture. He
noted in particular efforts to strengthen
surveillance of countries, including of
their financial sectors, and steps to
improve their transparency, such as
encouraging countries to adopt
internationally recognized standards and
codes. Allen stressed that further work is
needed to strengthen standards in corporate
governance and accounting, including in the
major industrial countries.
Labor representatives said that the
potential for global financial instability
has increased considerably with the
continued world economic slowdown and the
crises in South America. They favored a move
toward a more regulated international
financial system, including through capital
controls. A currency transactions tax (often
called the Tobin tax) to reduce speculative
currency flows and raise money for poverty
alleviation was also warranted.
In his response, Allen responded that
there is no support in the Fund for a Tobin
tax approach for a number of reasons,
including the fact that it would not reduce
the volatility of flows to emerging markets.
It seemed more important to address the
excessive temptation to borrow that open
international capital markets can create:
countries should have more effective
restraints on the amount of borrowing that
they permit their governments, banks and
corporate sectors to undertake. Addressing
the problem at the source rather than by
attempting to tax international flows was
more promising, Allen argued. Labor
representatives indicated their willingness
to continue their research on this issue and
said they looked forward to close
cooperation with the Fund.
Global governance issues
Reinhard Munzberg, Director of the IMF's
UN Office, outlined the various mechanisms
for the Fund's cooperation with UN agencies,
which include the UN's Chief Executive Board
for Coordination, the Social and Economic
Council, the Development Committee of the
IMF and the World Bank and the International
Monetary and Financial Committee of the IMF.
He explained how the momentum generated by
the WTO conference in Doha, and the UN
conferences in Monterrey and Johannesburg,
has resulted in closer cooperation between
the UN system and the Bretton Woods
institutions. In particular, Monterrey was
an example of effective multi-level
cooperation in which IMF staff contributed
to discussions related to debt relief,
capacity building, and a "two-pillar"
approach to development. Thanks to
initiatives like the Monterrey conference,
the Fund is now better informed about what
other organizations are doing, and vice
versa.
Labor representatives raised the issue of
a global governance deficit that has to be
tackled in order to improve transparency and
provide better coherence in international
policymaking. In this regard, they supported
the creation of a Global Economic and Social
Council to oversee the interaction of the
various international institutions.
In his response, Munzberg did not
discount the need to discuss appropriate
global structures. However, he said the main
emphasis should be for each institution to
focus on its responsibilities, particularly
with regard to the work needed to reach the
Millennium Development Goals.
Poverty Reduction Strategy Papers
Union representatives were also updated
on IMF/World Bank work. Brian Ames, an
Advisor from the Policy Development and
Review Department, and Sudhir Shetty, a
Sector Manager from the Poverty Reduction
Group at the World Bank, presented findings
from the
PRSP review and most recent
progress report. In particular, they
highlighted the need to further promote
country ownership, increase transparency,
prioritize expenditures, boost capacity
building, and institutionalize civil society
participation. They also noted the
importance of Poverty and Social Impact
Analysis (PSIA) to the PRSP process.
Labor representatives were concerned
about the level of participation of local
unions, and called upon the Fund to reject
all PRSPs in which labor did not
participate. They also emphasized the need
for "alternative" approaches to
macroeconomic and labor market reform
policies in PRSPs.
In his response, Ames stressed that PRSPs
are country-owned documents, and it is
incumbent on national authorities to involve
civil society in the formulation of their
poverty reduction strategies. He noted that
there may well be scope for alternative
policy choices on issues related to the pace
and prioritization of privatization and the
size of fiscal deficits related to
countries' unique circumstances (e.g.,
existing levels of debt). However, it is a
responsibility of civil society to propose
alternative and realistic approaches.
Looking ahead: prospects for IMF
cooperation with labor unions
Deputy Division Chief Peter Fallon and
Economist Nadeem Ilahi from the Policy
Development and Review Department presented
the results of a recent survey on
consultation between the IMF and labor
unions. The survey showed that more meetings
between IMF staff and labor unions are
taking place now than in the past at the
country level, and that mission chiefs
generally are positive about these contacts.
While labor representatives recognized
that there has been progress, they noted
that in many countries these meetings still
do not take place, even when there are major
labor market issues. They stressed that the
nature, frequency and substance of mission
contacts with labor unions will require
further improvements and that staff should
ensure that labor union views are reflected
in country reports.
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Contents
Global Governance
IMF staff discuss global governance
and SDRM with civil society in Montreal
IMF staff participated in a conference on
Global Governance in Montreal on
October 13-16. The conference was organized
by the Montreal International Forum, which
is a global alliance of individuals and
organizations seeking to increase the
influence of civil society on the United
Nations and other multilateral institutions.
The conference was attended by civil
society representatives from all continents,
high-level UN officials, academics and
various advocacy groups. IMF staff
participated as panelists in sessions
devoted to "Democratizing Economic Global
Governance: What Role for the UN and Civil
Society vis-à-vis the IFIs?" and "The Rise
of Global Indebtedness and the Need for an
Insolvency Framework."
The Bretton Woods institutions and
global governance
In the discussion of global governance,
participants wondered whether the quota
formulas employed by the Bretton Woods
Institutions reflect the relative economic
positions of member countries. Many stressed
the difficulty of making any substantive
changes in the representation of developing
countries on the IMF and World Bank
Executive Boards and hence in their
governance, because of the de facto veto
power of key members. They asked whether
different economic views were accommodated
within the Fund.
In his presentation on governance,
Bassirou Sarr, Advisor in the External
Relations Department, explained the workings
of the IMF quota and voting systems. He
stressed that the IMF's preference for
consensus in its decision making actually
aims to respect the interests and views of
the developing world in a way that any
delineation of voting rights would not be
able to achieve.
Sarr also noted the various reform
initiatives now underway in the Fund, in
particular those related to enhancing
transparency, and increasing accountability
and openness. He indicated that those
efforts, as part of the Monterrey process,
aim to foster effective interaction with UN
agencies and enhance interaction with civil
society.
The IMF's proposal for a Sovereign
Debt Restructuring Mechanism
Matthew Fisher, Assistant Director in the
Policy Development and Review Department,
participated in the panel session on the
Sovereign Debt Restructuring Mechanism
(SDRM).
During the discussion, civil society
organizations were generally supportive of
the establishment of a mechanism that could
allow countries unable to service their
sovereign debt to declare a temporary debt
payment standstill and seek an orderly
restructuring. But they also indicated that
their own preferred framework for
international insolvency was different from
the one advocated by the IMF. They said an
acceptable international insolvency
framework would adopt the key legal
principles underlying all insolvency
resolution procedures. In addition,
so-called illegitimate debt should be
disqualified from the restructuring, the
IMF's preferred creditor status should be
abolished, and the Paris Club should be
dissolved. Moreover, analysis of debt
sustainability should take into account
parameters such as the need to maintain
social spending, and contingency clauses
should be included to take into account
exogenous factors such as declines in
commodity prices. Finally, the UN-not the
IMF-should have the central role in the
SDRM, and civil society organizations should
continue to be consulted while the framework
is being developed.
During his intervention, Fisher noted the
more limited role that the IMF is likely to
play in the new version of the sovereign
debt restructuring framework. Fisher also
invited participants to think through the
consequences of a radical change in the
validity of creditor claims for the
operation of capital markets. He stressed
that it was necessary to trade concerns
based on ethical considerations regarding
certain types of debt, with the likely
impact on the ability of emerging market
countries to mobilize resources from private
capital markets. Fisher also informed
participants of the outreach effort that the
Fund will undertake with civil society as it
continues its work on an SDRM proposal. In
the near term, the IMF is planning a
workshop and conference on the SDRM on
January 22 (see "current and upcoming
events" for details).
Further reading
For more information on the IMF and the
global governance debate, see the recent
pamphlet by the IMF's former Secretary
Leo Van Houtven entitled "Governance of the
IMF-Decision Making, Institutional
Oversight, Transparency, and
Accountability". You may also refer to the
transcript from a recent Economic Forum
debate entitled "Governing the IMF".
For more information on the SDRM, please
refer to the
pamphlet by the IMF's Deputy Managing
Director Anne Krueger entitled "A New
Approach to Sovereign Debt Restructuring".
See also the
factsheet entitled "Proposals for a
Sovereign Debt Restructuring Mechanism", the
paper "The Design of the Sovereign Debt
Restructuring Mechanism-Further
Considerations", and the
summing up from the most recent meeting
of the IMF Executive Board on the SDRM.
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IMF states its views on how to
govern the global economy
Flemming Larsen, Director of the IMF's
European offices, attended a conference on
globalization and global governance in
Helsinki, Finland on December 2-4, 2002.
Larsen participated in a panel discussion
entitled "How to Govern the Global Economy?"
Other panelists included Ann Pettifor,
Director, Jubilee Research at the New
Economics Foundation; Nitin Desai,
Under-Secretary-General for Economic and
Social Affairs at the United Nations; and
Datuk Seri Syed Hamid Albar, Minister for
Foreign Affairs, Malaysia.
The IMF and global governance
The conference topics reflected concerns
expressed by civil society representatives
at other recent conferences on global
governance, including the perceived
unilateralist attitude of the United States.
Of more direct relevance to the IMF,
speakers also addressed the perceived need
for better management of global economic and
financial crises. A prevalent view seemed to
be that if only the IMF (like the World Bank
and the WTO) were governed better, and more
democratically, it would not commit all the
mistakes it is alleged to commit, and the
many crises could be either prevented or at
least resolved without the social costs that
they currently entail.
Larsen argued in his presentation that
although there are certainly also global
governance problems (including for instance
agricultural subsidies and the failure to
put into force the OECD's anti-bribery
convention), a key reason for the many
emerging market crises and the growing gap
between poor and rich countries could be
traced to policy weaknesses and governance
problems in those countries themselves. It
was therefore hard to imagine that any new
global governance structure, or even a
"democratization" of the IMF along the lines
proposed by some civil society
representatives, would obviate the need for
countries to strengthen their fundamentals.
The need for regulation of financial
markets
Larsen also responded to criticism by his
co-panelist, Ann Pettifor. He agreed with
Pettifor that everything was not perfect and
that markets, and especially financial
markets, needed to be regulated, as the
Enron scandal had demonstrated. However, he
also noted that adopting Pettifor's views in
their totality would amount to a return to
the government-dominated economic and
financial model and high inflation era of
the 1970s-an economic model that had been
rejected in the vast majority of the world's
democracies, starting in her own country,
the United Kingdom, and culminating with the
collapse of communism. Pettifor responded by
acknowledging that markets were necessary,
but that governments needed to take control
of the markets rather than the other way
round as at present. The two agreed on the
need for NGOs to work with national
governments-as the debt reduction campaign
had so successfully demonstrated-rather than
trying to bypass national parliaments and
governments.
Further reading
Larsen's
intervention is available on the IMF
website.
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Transparency at the IMF and the
rights of the public to seek information
Andrew Puddephatt, Executive Director of
the London-based NGO "Article XIX" met with
IMF staff on November 27 to discuss
transparency at the IMF. The IMF was
represented by Deputy General Counsel
William Holder of the Legal Department,
Deputy Division Chief Przemek Gajdeczka and
Senior Economist Robert Price of the Policy
Development and Review Department, and
Advisor Roger Nord and Senior Public Affairs
Officer Sabina Bhatia of the External
Relations Department.
Article XIX has assisted several
countries with the introduction of
"transparency laws." However, it also
focuses on international organizations, and
provided input to the World Bank's Policy on
Information Disclosure in 2001.
Puddephatt criticized the IMF's
transparency policy for "failing to fully
guarantee the public's right to know in
accordance with international standards." In
particular, he said that the Fund does not
have an independent review process that
would allow the public to appeal against an
unfavorable decision regarding the release
of information. He also argued that the Fund
should have process guarantees on its
transparency policy, e.g. time-bound
decisions and written explanations for any
refusal to release information.
Holder disagreed with the contention that
the public's right to access information is
based on a principle of international law,
extending to information held by
international organizations, and that the
Fund's policies breached such a principle.
He said the IMF is an international
institution that is governed by its Articles
of Agreement, which have the status of an
international treaty, i.e. of international
law. With respect to the criticism that
there was no independent review of refusals
to disclose information, the Fund was open
to suggestions. He said there might be merit
in having an appeal process for cases where
access to the IMF's archives was denied.
However, while the staff and management
could make recommendations, authority
ultimately rests with the Executive Board.
Puddephatt also expressed interest in
proposals made in the most recent
staff paper on IMF transparency, but not
adopted by the Executive Board. These
included a proposed move to presumed
publication of Article IV staff reports. At
present, the decision whether to publish
such reports rests with the member country.
In response, Holder explained that the
IMF is trying to strike a balance between
the legitimate interest of the public for
access to information and the legitimate
interest of Fund members for
confidentiality. According to its Articles
of Agreement, the Fund can publicly express
its views on a member's policies only with
the consent of the member (barring the
rarely used exception of Article XII,
Section 8). Furthermore, the voluntary
system of encouraging publication through
peer pressure has worked well in making
countries more transparent.
Further reading
See Managing Director Horst Köhler's
statement on "The Fund's Transparency
Policy" to the International Monetary and
Financial Committee, as well as the most
recent Board
paper on the IMF's transparency policy,
entitled "The Fund's Transparency
Policy-Review of the Experience and Next
Steps". You may also want to refer to a
recent
speech by the Secretary of the Fund,
entitled "The IMF and Transparency-Moving
Forward".
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Contents
Poverty
IMF, World Bank evaluate experience with
Poverty and Social Impact Analysis
Many countries-including those preparing
Poverty Reduction Strategy Papers
(PRSPs)-are grappling with the need to
evaluate the impact of key policy reforms on
the poor. Poverty and Social Impact Analysis
(PSIA) is intended to help policy makers and
analysts in developing countries, as well as
representatives of donor agencies and civil
society organizations make better policy
choices.
Even though there is a long history of
work in the area of social impact analysis,
there have been-and still are-weaknesses in
its application to government policy. These
weaknesses reflect in large part the
challenges involved in conducting PSIA,
which include data constraints (in many
instances, the data required to do a
comprehensive analysis are not readily
available); analytical constraints (the
impact of macroeconomic and structural
reforms cannot easily be analyzed at the
microeconomic or household level); capacity
constraints (in poor countries, capacity to
analyze policy is weak); and time
constraints (while the analyst may face
difficult data and analytical challenges,
the policy maker is often under pressure to
make fast policy decisions).
With the advent of the PRSP approach, the
World Bank and the Fund have intensified
efforts to help countries improve their
analysis of the impact of proposed policies.
As part of these efforts, the Fund, the
World Bank, and the U.K. Department for
International Development (DFID) held a PSIA
workshop in Washington, D.C., on October
15-17. The purpose of the workshop was to
discuss early experiences with a series of
World Bank/DFID-sponsored pilot studies. The
findings will hopefully contribute to a more
informed dialogue on the impact of various
policies on poverty and social conditions.
The pilot studies included Armenia (water
tariff reform); Chad (cotton sector reform);
Guyana (sugar, water, and bauxite sector
reforms); Honduras (electricity
privatization); Indonesia (rice tariff
reform); Malawi (agriculture marketing
reform); Mongolia (cashmere tariff reform);
Mozambique (fuel tax); Rwanda (the fiscal
deficit); Pakistan (energy tariff reform);
and Uganda (export initiative).
Seventy country representatives, and
researchers and staff from the Fund, Bank,
and DFID attended the workshop. On the final
day, many CSO representatives attended an
open forum organized to brief the public
about the outcome of the workshop.
The workshop focused on the practical
implications of undertaking PSIA in a
cross-section of countries covering a
diverse set of reforms. These were some of
the findings:
- PSIA should be part of countries'
budget process, systems for monitoring
poverty, and poverty reduction strategies,
as well as the on-going public policy
dialogue.
- An understanding of the country's
political context is important for PSIA.
Although all policy decisions are
ultimately political, PSIA can contribute
toward more evidence-based policy-making
and therefore a more informed public
debate.
- There is a need for closer
coordination and better organization of
PSIA work carried out by donors.
Currently, many reforms are implemented
without an understanding of the impact
they will have on poverty and on social
conditions more generally. Until
countries' capacity to carry out their own
PSIA has been strengthened, the World Bank
and bilateral donor agencies should play a
lead role in financing and in carrying out
analysis of key policy reforms identified
under national poverty reduction
strategies. Over the medium term, local
capacity to carry out PSIA must be
strengthened. This work should involve not
only governments, but also academia, civil
society, and donors.
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Contents
Forum on CIS-7 poverty reduction
initiative
The PRSP process in the CIS-7 countries
is at a crossroads, participants concluded
at a CIS-7
poverty reduction strategies forum in
Almaty, Kazakhstan on December 9-13. Over
200 public officials and CSO
representatives, as well as donor
representatives, attended the forum, the
third in an annual series organized as part
of the
CIS-7 Initiative, launched in February
2002.
The forum heard that all the CIS-7
countries-Armenia, Azerbaijan, Georgia, the
Kyrgyz Republic, Moldova, Tajikistan, and
Uzbekistan-are now growing after a decade of
decline and stagnation. Several countries,
like the Kyrgyz Republic, have begun to see
substantial poverty reduction, especially in
rural areas.
Most of the countries are well on the way
to formulating full Poverty Reduction
Strategy Papers (PRSPs) or have already
completed them. Economic growth provides an
opportunity to reduce poverty, but it should
be ensured that growth reaches the majority
of the population. In this connection,
delegates called for measures to encourage
social inclusion, with policies aimed at the
needs of disadvantaged groups, including
many children, women, internally-displaced
persons, and migrant workers.
Participants stressed that the PRSP needs
to become part of the regular business of
government in the region and should not be
seen as a document prepared just to satisfy
the demands of international donors. Civil
society representatives also urged that
their specialized knowledge about local
conditions be used by governments and
international institutions in policy design.
The CIS-7 Initiative is sponsored by the
IMF, the Asian Development Bank, the
European Bank for Reconstruction and
Development, and the World Bank. It aims to
reduce poverty, promote economic growth, and
reduce debt to sustainable levels in the
seven low-income countries of the
Commonwealth of Independent States. The
CIS-7 Initiative was officially endorsed at
a
ministerial meeting in Washington, D.C.
in April 2002, when ministers adopted a
statement of principles and objectives.
The forum was organized by the World
Bank, the IMF, and the UNDP, with financial
support from the Swiss government. Previous
forums in the series were held in Moscow in
2000 and in Budapest in 2001. Organizers
said regional partnership events were also
being developed, with the aim of improving
donor coordination and offering forums to
resolve trade and other cross-border
disputes.
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Contents
IMF staff debate Millennium Development
Goals and empowering the poor
Fund staff participated in the 13th
Annual Eurodad Conference entitled
"Empowering the Poor and Delivering the
Millennium Development Goals (MDGs): The
Coming Reality Check" held in Denmark on
November 2-3, 2002. The
conference, which involved over 100
representatives from Northern and Southern
NGOs, was organized around two topics-one on
"pro-poor economic policy" and the other on
"The Millennium Development Goals: how can
donors deliver on their promises."
Brian Ames, Advisor in the IMF's Policy
Development and Review Department,
participated on a panel discussion on the
MDGs. Among other things, Ames stressed
that the key challenges that lie ahead
include the need to further open up the
policy dialogue to alternative
macro-economic scenarios and policy choices
and to ensure that the Poverty Reduction
Strategy Paper (PRSP) process drives the
Poverty Reduction and Growth Facility (PRGF)
rather than the other way around.
Wayne Camard, Senior Economist in the
External Relations Department, served as
"resource person" for a workshop on how to
make private flows to developing countries
more pro-poor, especially as official flows
seem unlikely to reach the levels needed to
achieve the MDGs. Camard noted that rapid
employment growth, though not explicit in
the MDGs, was needed to achieve them. He
warned that policies would need to be
carefully formulated to ensure that doors
were not slammed on the poorest in order to
protect the urban middle classes in
developing countries. This provoked a lively
discussion over how to strike a balance
between the goals of promoting employment
and of protecting workers (and in some cases
the state) from the excesses of investors.
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Contents
Other Policy Themes
Sachs, Birdsall and others debate
IMF role in institution-building
The IMF held a
discussion in its Economic Forum series
on November 8, entitled "Promoting Better
National Institutions: The Role of the IMF".
The panelists were Guillermo Ortiz
(Governor, Bank of Mexico), Nancy
Birdsall (President, Center for Global
Development), Jeffrey Frankel (Professor
of Economics, Harvard University) and
Jeffrey Sachs (Professor of Economics,
Columbia University). Eduardo Aninat
(Deputy Managing Director, IMF) was the
chairman.
In his presentation, Sachs said that
macroeconomic policy will not be sufficient
to address the problems of "dying societies"
in Southern Africa. These countries need a
much larger infusion of outside help than is
currently on offer. Sachs acknowledged that
IMF Managing Director Horst Köhler is
delivering this message constantly, but
said it was not being acted upon. Nowhere
was there a realistic assessment of what is
needed to make these countries' societies
function.
Sachs also said the IMF has a "dismal"
track record of promoting economic progress
in the world's poorest countries. If the IMF
wants to remain active in Africa it has to
understand that macroeconomic policy goals
such as achieving fiscal balance and
maintaining monetary discipline are not the
essence of the problems there. If the Fund
tries to force the issue of macroeconomics
it will "continue to fail" in the continent.
Up to now, Sachs said, the IMF's approach
to the economic problems of African
countries has been to add up the
contributions of a country's donors,
establish the total available, and then
advise the country on how to live within its
means. Sachs said the international
community should take a different approach:
it should determine what a country needs to
spend in order to reach the Millennium
Development Goals. If the country has
insufficient resources, it should be the
IMF's responsibility to inform donors of the
amounts they need to provide to close the
financing gap.
Birdsall spoke about the importance of
the social contract in open economies, and
the role of fiscal policy in affecting
income distribution. She also told the forum
she was a member of a commission that called
for the Poverty Reduction and Growth
Facility (PRGF) to be moved from the IMF to
the World Bank. She said it is "completely
wacky" for the Fund to run the PRGF. The
IMF's role toward national institutions
should be to "first, do no harm," to
intervene with transparency, and to link its
actions to effects.
Ortiz said it was as important to
preserve institutions as it was to create
them, and the Fund should avoid any
breakdown of institutions. Ortiz said a
tragedy of Argentina's situation was its
institutional breakdown.
Frankel said there were functions and
responsibilities once considered outside the
Fund's and the Bank's purviews that were now
inside. Although there was a view that "the
IMF should have stuck to its knitting but
has now become imperialist," he believed the
expansion in the Fund's purview had been
appropriate.
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Contents
Country Notes
IMF mission meets with CSOs in
Georgia to solicit views on PRSP process
During an October-November 2002 mission
to Georgia, IMF staff met with
representatives of civil society.
In one session involving ten different
CSOs, the goal was to get a sense of how
civil society views have been solicited by
the drafters of Georgia's poverty reduction
strategy paper (PRSP), entitled the "Poverty
Reduction and Economic Growth Program", and
whether they thought the document adequately
reflected these inputs.
In another session, the mission team met
with the PRSP drafting committee, which
consisted entirely of representatives of
various Georgian NGOs and think tanks. The
committee members described their public
outreach and information efforts, as well as
the process by which they came to agreement
on the content of the PRSP.
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IMF mission in Pakistan hears
opinions of local labor union leaders
An IMF mission met with several labor
union leaders in Islamabad in mid-November
2002, who expressed interest in being
involved in the preparation of Pakistan's
PRSP. To this effect, they provided the
mission with background material on labor
issues and the observance of labor
standards. The union leaders called for
economic reforms that would stimulate growth
and job creation and underscored the need
for effective consultation with social
partners in formulating reforms, including
privatization. The mission briefed the labor
union leaders on certain aspects of the PRSP
process, and highlighted the concessional
terms attached to the Fund's financial
assistance to Pakistan under the PRGF.
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IMF mission meets with CSO
representatives in Bolivia
In mid-November, an IMF staff team met
CSO representatives in Bolivia for a
wide-ranging discussion of economic policy
issues, framed in the context of the Article
IV discussions. The representatives were
from the Catholic Church (CARITAS), an
organization of small producers, a social
action group (UNITAS), and the organization
for social oversight over
government-financed anti-poverty programs.
The CSOs are seeking to provide effective
input into the design of public policies for
the poverty reduction strategy. In their
view, this policy dialogue can help avoid
social unrest. They expressed interest in
learning more about the government's plans
for a new national dialogue and revision of
the poverty reduction strategy in the course
of 2003. (In early December, these issues
were discussed in a government-sponsored
seminar.)
The CSO representatives also stressed the
need for adequate information to carry out
social oversight of local anti-poverty
programs, as envisaged in the National
Dialogue Law of 2001. Some representatives
also expressed concern that large fiscal
deficits over the last two years have caused
resources to be diverted to meet a rising
debt service burden. Furthermore,
inefficient spending and governance problems
are seen as obstacles to fighting poverty.
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IMF staff update CSOs on the Fund's
work in Nicaragua
Deputy Division Chief Marco Piñón of the
Western Hemisphere Department briefed seven
NGOs on Nicaragua on November 20.
Piñón explained that Nicaragua became
eligible for assistance under the Enhanced
HIPC Initiative in December 2000, but has
not yet reached the completion point. To do
so, it must implement the floating
completion point conditions, and its IMF
program needs to be on track. He said that
Nicaragua could reach the HIPC completion
point during the second half of 2003.
Piñón noted that debt-related problems
include: i) external debt, currently $6.4
billion, and ii) internal debt, which is
growing rapidly. Some of the increase is due
to a recent banking crisis. He said
significant fiscal adjustment is required to
put Nicaragua on a path to sustainable
economic growth.
A participant asked whether the IMF
believes debt relief will be sufficient to
alleviate the plight of the poor. Piñón said
the agreed program assumes that debt relief
will result in additional poverty-related
spending. He added that NGOs can play a role
in ensuring that the savings go to poverty
programs.
Asked about privatization, Piñón said
that the decision to privatize lies with
Nicaragua. The IMF supports privatization if
it will help attract private capital,
technology, and other important resources.
Another participant suggested corruption is
a problem, because privatization would make
it more difficult to hold country officials
accountable. Piñón acknowledged the concern
and urged NGOs to continue highlighting
cases of corruption. A third participant
asked for the IMF's view on tax reform.
Piñón said that the IMF is not proposing new
taxes. Rather, it has advised the
authorities that the best approach would be
to expand the tax base and eliminate
loopholes.
With respect to Nicaragua's PRSP,
participants were concerned that not enough
outreach to CSOs is underway, and asked what
the Fund is doing to encourage more
outreach. Piñón said the Fund has been
urging Nicaragua to broaden civil society's
role.
The IMF's Executive Board approved a new
three-year
PRGF program for Nicaragua on December
5. Nicaragua was also granted about US$ 2.5
million in additional interim assistance
under the HIPC Initiative. On December 12,
the staffs of the World Bank and the IMF
published their
assessment of the government's annual
PRSP progress report, which reviews progress
in implementing Nicaragua's poverty
reduction strategy.
Back to Table of
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Bulletin Board
If you want to be notified when new
documents are being published on the IMF
website, please sign up for email
notification through our
website notification system.
Other recent meetings between IMF
staff and CSOs
- Flemming Larsen, Director of the IMF
Office in Paris, participated in a
CIDSE/Caritas Seminar on Global
Governance in Rome on October 24.
- Also on October 24, Division Chief
Mark Plant from the Policy Development and
Review Department and Sector Manager
Sudhir Shetty from the Poverty Reduction
Group at the World Bank participated in a
discussion on the PRSP process called
"Linking and Learning" with Oxfam
International and some of its
partners.
- Director Simon Taylor from Global
Witness met with Division Chief Nancy
Happe, Deputy Division Chief Peter Fallon,
Division Chief Hans Peter Lankes, and
Assistant Director Martin Fetherston from
the Policy Development and Review
Department, and with Division Chief
Rolando Ossowski from the Fiscal Affairs
Department, on October 25.
- Social Development Advisor Caroline
Kende-Robb from the African Department met
with Kadi Jumu from ActionAid Sierra
Leone on November 6.
- Oxfam GB Director Barbara
Stocking met with Timothy Geithner,
Director of the Policy Development and
Review Department, on November 19.
- On December 5, Senior Economist
Alessandro Giustiniani and Ana Lucia
Coronel Andrade, incoming Honduras
Resident Representative, met with a group
of CSOs to talk about Honduras.
- Sergio Pereira Leite, Assistant
Director of the IMF Office in Paris,
participated in an exchange among key
participants in the globalization debate
in Paris on December 5-6 organized by the
Bridge Initiative on Globalization.
- Representatives from the
International Jesuit Network for
Development (IJND) met with EXR staff
on December 9.
Current and Upcoming Events
- The
IMF Independent Evaluation Office has
published a
draft issues paper entitled
"Evaluation of Poverty Reduction Strategy
Papers and the Poverty Reduction and
Growth Facility".
Comments were due by January 13, 2003
but substantive contributions may be
submitted beyond that deadline to
ieo@imf.org
or:
The Independent Evaluation Office
International Monetary Fund
700 19th street, N.W.
Washington D.C. 20431
- On January 16, the External Relations
Department will be hosting a meeting with
Professor Jan Aart Scholte of the
University of Warwick to discuss his
paper "Civil Society Voices and the
International Monetary Fund." The study
covers all aspects of the Fund's relations
with civil society, and focuses
particularly on organizations that have an
interest in global policy issues. Given
the growing emphasis on outreach to civil
society organizations in the IMF, the
External Relations Department is also
inviting Professor Schulte to extend this
work by helping the Fund assess current
outreach practices in country operations,
including the "Southern" perspective and
the PRSP process. The session is for IMF
staff only.
- The IMF is hosting a
conference on the Sovereign Debt
Restructuring Mechanism (SDRM) on
Wednesday, January 22, in Washington. This
conference is a step toward responding to
the request made by the International
Monetary and Finance Committee (IMFC) that
the Fund develop a concrete proposal for
an SDRM for consideration at its Spring
Meetings in April 2003.
To this end, the Fund is inviting
representatives from the financial sector,
the official community, civil society, and
academia to discuss design and operational
issues related to the SDRM. The conference
will conclude with an Economic Forum on "A
New Approach to Sovereign Debt
Restructuring," which will be open to the
public.
- The IMF is organizing a
conference on "Global Linkages" in
Washington, D.C. on January 30-31, 2003,
to explore how economic linkages across
countries have changed in recent years and
what implications these changes have for
policy makers in developed and emerging
markets. A main goal of the conference is
to bring together researchers from
academia, the IMF, and other policy
institutions to discuss the policy
implications of new empirical research in
this area. Participation in this event is
by invitation only. For further
information, please contact Sheila
Kinsella at
skinsella@imf.org or (202) 623-7664.
- Civil society representatives from the
CIS-7 countries, along with government
officials and representatives from
multilateral, bilateral, and donor
organizations, will participate in an
international conference on economic
challenges facing the CIS-7 in January in
Lucerne, Switzerland. The conference,
which is organized as part of the
CIS-7 Initiative, will examine both
the record of transition, including the
role played by the international
community, and issues key to strengthening
growth and poverty reduction prospects.
Issues relating to the improvement of
regional cooperation in trade and energy,
vital for many of the CIS-7 countries,
will also be discussed. Given the breadth
of views represented at the conference and
the difficult issues to be addressed, a
lively discussion is anticipated.
Background papers have been prepared
for the conference by a distinguished
group of authors drawn from both academia
and policy makers. These papers will be
made available via the CIS-7 website. The
conference will also include key note
speeches by Yegor Gaidar (Institute for
the Economy in Transition, Russia), George
Soros (Soros Foundation), and Chingiz
Aitmatov (Kyrgyz Ambassador to the EU and
NATO).
-
The IMF-World Bank Spring Meetings
will take place on April 12-13, 2003.
Selected Speeches
-
Sovereign Debt Restructuring: Messy or
Messier?By Anne O. Krueger, First
Deputy Managing Director, International
Monetary Fund, Annual Meeting of the
American Economic Association, January 4,
2003, Washington, D.C.
-
Sovereign Debt Restructuring Mechanism-One
Year Later, by Anne O. Krueger, First
Deputy Managing Director, International
Monetary Fund, presented at the European
Commission, Brussels, Belgium, December
10, 2002
-
Strengthening the Framework for the Global
Economy, address by Mr. Horst Köhler,
Managing Director, International Monetary
Fund, on the occasion of the Award
Ceremony of the Konrad Adenauer Foundation
Social Market Economy Prize, Berlin,
November 15, 2002
-
Sovereign Debt Restructuring Mechanism:
One Year Later, by Anne O. Krueger,
First Deputy Managing Director,
International Monetary Fund, presented at
the Banco de Mexico's Conference on
"Macroeconomic Stability, Financial
Markets and Economic, Development", Mexico
City, November 12, 2002
-
The IMF and Transparency-Moving Forward,
by Shailendra J. Anjaria
Secretary, International Monetary Fund,
Given at the Third Annual Meeting of the
Secretaries of the Multilateral
Development Banks, Washington DC, October
28, 2002
Selected Publications
-
The Design of the Sovereign Debt
Restructuring Mechanism-Further
Considerations, prepared by the Legal
and Policy Development and Review
Departments (In consultation with the
International Capital Markets and Research
Departments)
-
Poverty and Social Impact Analysis in PRGF-Supported
Programs, by Gabriela Inchauste,
Fiscal Affairs Department, Policy
Discussion Paper No. 02/11
-
The Economics of Post Conflict Aid, by
Dimitri G. Demekas, James E. McHugh,
Theodora Kosma, European I Department,
Working Paper No. 02/198
-
Modeling the Macroeconomic Impact of
HIV/AIDS, by Markus Haacker, African
Department, Working Paper No. 02/195
-
Bedfellows, Hostages, or Perfect
Strangers? Global Capital Markets and the
Catalytic Effect of IMF Crisis Lending,
by Carlo Cottarelli, Curzio Giannini,
European I Department, Working Paper No.
02/193
-
How Does Conditional Aid (Not) Work?By
Rodney Ramcharan, IMF Institute, Working
Paper No. 02/183
-
Institutions Rule: The Primacy of
Institutions over Integration and
Geography in Economic Development, by
Dani Rodrik, Arvind Subramanian, Francesco
Trebbi, African Department, Working Paper
No. 02/189
-
Expenditure Issues and Governance in
Central America, by Ana Corbacho,
Hamid R Davoodi, Fiscal Affairs
Department, Working Paper No. 02/187
-
Crisis Prevention and Crisis Management:
The Role of Regulatory Governance, by
Udaibir S Das, Marc G Quintyn, Monetary
and Exchange Affairs Department, Working
Paper No. 02/163
-
User Payments for Basic Education in
Low-Income Countries, by Arye L.
Hillman, Eva R. Jenkner, Fiscal Affairs
Department, Working Paper No. 02/182
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