[stop-imf] Oxfam: The IMF and the Millennium Goals - Failing to deliver for low income countries

[Robert Weissman]

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[ Picked text/plain from multipart/alternative ]
Please find below the executive summary of Oxfam International's most
recent briefing paper entitled The IMF and the Millennium Goals -
Failing to deliver for low income countries. The paper's main focus is
on how the IMF needs to change the way it does business in low income
countries. It recommends that the IMF stops focusing exclusively on
short-term macroeconomic stability and negative impacts of aid. Instead
the institution should focus on the long-term poverty needs and its
shared responsibility for achieving the MDGs. The paper builds on
research carried out jointly with Eurodad on the IMF's Poverty Reduction
Growth Facility which is available at www.eurodad.org Oxfam's paper is
also made available in full at
http://www.eurodad.org/uploadstore/cms/docs/TheIMFandtheMDGsfailingtodelive=
r.doc
Kind regards, S=F8ren Jensen
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Executive summary of The IMF and the Millennium Goals - Failing to
deliver for low income countries
The International Monetary Fund (IMF) plays a key role in defining how
much governments can spend. The Fund=EDs view of what defines the macro
economic stability of a country is the authoritative one for all
development partners.Given this, the Fund could and should be playing a
dynamic, proactive role in establishing the financing conditions for
achieving the Millennium Development Goals.

The (MDGs) have been endorsed by the UN, world leaders, the World Bank,
regional development banks, developing country governments and the IMF.
They set minimum standards to combat poverty, hunger, disease,
illiteracy, environmental degradation and discrimination against women.
With aid at current levels however, many countries will not even meet
these minimum standards.If present trends continue there will be 10
million child deaths in 2015, compared to half that if the target is
met.Countries have massive financial gaps standing between them and
achieving the MDGs.Women continue to bear the majority of the burden
this lack of financing entails.At the Monterrey Financing for
Development (FFD) conference in 2002, donors pledged an extra $16
billion dollars in aid. This falls far short of what is needed, but at
least it does signal the willingness of donors to halt the drastic
decline in aid flows that occurred in the 1990s.

Against this background it is critical that poor countries have as much
support as possible from the international community to absorb and
manage rising aid flows as they increasingly become available.The IMF
has a crucial role to play.Unfortunately, there are 3 main areas where
the IMF is failing to play this role, and where a radically new approach
is needed:

1) The Fund needs to show greater flexibility in its economic targets,
demonstrating a longer-term focus on poverty reduction and analysing the
trade-offs this entails for short-term economic policy.

2) The Fund needs to end its pessimism towards increasing aid flows to
poor countries and stop designing economic policy around this view.
Instead it should play a dynamic role, working with others to measure
the financing needs to achieve the MDGs, and proactively mobilising
higher aid flows. It should use its technical expertise working with
Governments to design macroeconomic frameworks that can accommodate
these increased resources.

3) The influence of the Fund as =EBgatekeeper=ED for poverty focussed aid
needs to be decreased.The IMF has a key role in achieving the MDGs, but
as one partner in a broad alliance for poverty reduction, and not as the
all powerful on/off switch for aid and debt relief.

A survey of IMF programmes in 20 countries by Oxfam and Eurodad shows
that for the IMF financial inflexibility and aid pessimism are still the
norm.For example, The IMF requires Cameroon to achieve a fiscal surplus
by 2005.At the same time the Cameroon Poverty Reduction Strategy Paper
(PRSP) shows that under current expenditure ceilings infant mortality in
2015 will be 44% higher than required in the MDGs.The targeted reduction
in the deficit would be enough to double the health budget.

In Mozambique the IMF is predicting declining aid flows despite rising
donor support and evidence that more aid can be productively
absorbed.These spending and aid projections became the basis of the
PRSP, sending out negative signals to donors about the financing
required to tackle poverty and deliver the MDGs.Instead of the poverty
needs driving the macroeconomic framework, the opposite was the case.

The negative impact of this inflexibility and conservatism is compounded
by the continued role of the IMF as gatekeeper for donor aid and debt
relief.For example, disputes with the IMF over teachers=ED salary
increases have cost Honduras $194 million dollars in delayed debt relief
and donor aid cuts.Ironically this money could fill the financing gap in
the programme to educate all children in Honduras three times over.

Over the next six months the IMF is seeking to review its role in poor
countries.At the same time, the IMF=EDs Independent Evaluation Office
(IEO) is currently evaluating the role of the IMF in the PRSP process.

As such the time is ripe for the IMF to redouble its commitment to
poverty reduction and the MDGs. The Fund needs to radically change its
role and the way it works in poor countries and truly deliver on its
previous commitments to poverty reduction made when introducing the
Poverty Reduction and Growth Facility (PRGF).It must finally move on
from an outdated focus on exclusively short-term macro-stability to one
based on long-term poverty needs and the MDGs.If it does this it can
play a vital, proactive and dynamic role in achieving poverty reduction.
If it does not, the new poverty focus of IMF programmes in poor
countries risks being largely discredited.

To ensure the IMF really contributes to the achievement of poverty
reduction and the MDGs, Oxfam recommends the following:

1) A new approach to designing IMF programmes

- In designing their new programme in poor countries, the IMF should
take 12 months to work with partners identifying the optimal financing
package for achieving the MDGs, and the ideal level of aid. The IMF
should actively engage with donors and support the Government in
lobbying for optimum levels of donor assistance

- As part of this process the Fund should also open up the debate on
what the optimal macroeconomic framework would be to enable rapid
progress for a country towards the MDGs.This debate should be based on
an independent poverty and social impact analysis (PSIA) of alternative
macroeconomic scenarios and the different trade offs involved, how
resources can be maximised, and what options are available. PSIA must be
carried out on every IMF macroeconomic framework as a matter of due
diligence, in line with the key features of the PRGF

- At the end of the 12 month period the IMF and other PRSP stakeholders
should seek broad agreement on an optimum macroeconomic framework.This
scenario, rather than a conservative =EBbaseline=ED scenario, would then
become the basis of the IMF programme, fully aligned with the PRSP and
the country budget

- Any prediction of declining aid flows in IMF programme targets should
be fully justified based on clear and transparent analysis and evidence
from donors

- Fiscal deficit targets and inflation targets should be backed up by
independent analysis and broad agreement that this is the best option
for poverty reduction. No IMF programme should aim at inflation below 5%
without an independent analysis and broad agreement that this is the
best option for poverty reduction.

2) Limiting the IMF=EDs gatekeeper role for aid and debt relief

- Aid and Debt relief should be de-linked from the IMF programme and
should instead be based on the implementation of the PRSP and the PRSP
progress report.The PRSP progress report should be discussed at the
annual Consultative Group meeting of all donors in a country and this
should be open to all stakeholders.
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S=F8ren Jensen
Poverty and Structural Adjustment Analyst
EURODAD
European Network on Debt and DevelopmentAve Louise 176, 8th Floor1050
BrusselsBelgium+ 32 2 543 90 66
soren@eurodad.org
www.eurodad.org
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