IMF ESAF External REview (fwd)

[Robert Weissman <rob@essential.org>]

IMF urged to "humanize" its image
Date: Sun Mar 15 15:03:51 CST 1998
                                         
   WASHINGTON, March 15 (AFP) - A panel of independent experts has 
urged the IMF to "humanize" its image, pay more attention to the 
needs of the vulnerable and show greater flexibility in negotiating 
with governments. 
   The report, commissioned by the International Monetary Fund and  
released Sunday, was drafted by four university professors who 
visited eight countries. 
   Their mission was to assess the IMF's Enhanced Structural  
Adjustment Facility (ESAF), the mechanism by which the Fund makes 
low interest loans to impoverished countries that agree to implement 
reforms. 
   IMF executive directors said in a statement they endorsed "the  
fundamental view" of the evaluators that while the ESAF was a 
valuable means of helping low-income countries with balance of 
payments difficulties, its operation "could be improved." 
   The exprts found that IMF assistance has "a highly diverse"  
social impact, with certain sectors suffering income declines while 
others improve their lot. 
   They found that in general those who suffer from IMF reforms,  
which often entail budget cuts, reductions in social spending and 
subsidies and market-oriented employment policies, are not 
necessarily among the poor. 
   In Ivory Coast, for example, IMF programs sharply lowered the  
real wages of civil service employees. 
   But the team did identify three instances in which the poor saw  
a deterioration in their living standards as a result of IMF-induced 
income redistribution -- maize (corn) growers in Zambia, estate 
workers in Malawi and urban day laborers in Ivory Coast. 
   The evaluators urged the IMF to work with the World Bank to  
identify sectors likely to lose from the proposed reforms and to 
make sure that sufficient social services remained in place to 
assist them. 
   The Fund was also urged to continue providing financial aid to  
countries even after they have managed to stabilize their economies, 
as such sustained support would encourage outside investment. 
   At present, investment rates in countries that have faithfully  
carryied out reforms and showing solid growth remains low, as they 
continue to be perceived as "highly risky." 
   The team warned that the "conjunction of high growth and low  
investment is not sustainable: either investment must rise or growth 
will decelerate." 
   To combat widespread concerns that the IMF is inflexible when it  
negotiates with recipient governments, the evaluators said the Fund 
could "formulate alternative program paths" to reach IMF 
objectives. 
   The idea would be to "leave it to the country to decide, with  
the advice of the (IMF) staff, what best (or better) suits its 
particular circumstances." 
   In another recommendation, the team urged that "ways be found to  
both humanize and de-mystify the Fund's image, so as to assuage the 
political hazzard that countries perceive to be associated with 
dealing with the Fund." 
   In a gentle swipe at the World Bank the evaluators said they did  
not have in mind a Bank initiative "to send staff members on 
missions to villages (presumbably with with knapsacks containing 
bottled water and frozen food on their backs!)." 
   Instead, they said, the IMF should explore "simpler ways"  
through which it can sound out the priorities of "a broad 
cross-section of stakeholders." 
   The four experts, who began their investigation in April 1997,  
are Kwesi Botchwey of Harvard University, Paul Collier of Oxford 
University, Jan Willem Grunning of The Free University of Amsterdam 
and Koichi Hamada of Yale University. 
                
 
Experts seek more flexible, poverty-focused IMF
Date: Sun Mar 15 16:56:24 CST 1998
                                         
         WASHINGTON,  (Reuters) - Outside experts looking at the  
International Monetary Fund's main lending program for poor 
countries have urged the fund to look harder at the problems of 
the poor and do more to make its staff accessible. 
         An outside review of the IMF's Enhanced Structural  
Adjustment Facility (ESAF), released on Sunday, said IMF staff 
should work more closely with their counterparts at the World 
Bank. 
         ``We recommend that steps be taken to relieve the widespread  
concerns about the fund's perceived inflexibility in negotiations,'' 
said the report, compiled by professors working in Britain, the 
Netherlands and the United States. 
         ``We recommend that ways be found to both humanize and  
demystify the fund's image, so as to assuage the political 
hazard that countries perceive to be associated with dealing 
with the fund.'' 
         IMF documents reacting to the report said the fund accepted  
some of the criticisms and rejected others. 
         The IMF, set up after the Second World War to promote stable  
currencies and open markets, uses its ESAF loan program to 
foster market-oriented reforms in low-income countries. By last 
month the program had disbursed over $8 billion in loans to 48 
developing countries, 22 of them in Africa. 
         ``This is the first time that a complete external body has  
evaluated thoroughly a Fund instrument, based on open Fund books 
and their own independent sources,'' one IMF official said. 
         Bernd Esdar, the IMF board member who presented the report,  
said the next assessment by an external group would deal with 
surveillance: How the IMF monitors the world economy and the 
economies of its member states. 
         The IMF has come under increasingly strong criticism in  
recent months. It has been accused of failing to warn the rest 
of the world about problems it spotted in Asia's tiger economies 
and being too secretive in the way it goes about its work. 
         Some critics in Congress say IMF policies ignore the needs  
of the poor, while others say big IMF-sponsored rescue packages 
encourage countries to adopt reckless policies because they know 
someone will be there to bail them out. 
         The experts looking at the ESAF programs said the IMF should  
do more to work out which social groups would be affected by its 
reform proposals. 
         IMF experts also need to ensure that governments are  
committed to IMF-sponsored reforms, while the IMF should be more 
aware of the political constraints facing member governments, 
the review said.