[stop-imf] IMF Civil Society Letter, part 1

[Robert Weissman]

CIVIL SOCIETY NEWSLETTER

NOVEMBER 2003


This newsletter is prepared by the Policy Communication Division of the
IMF=92s External Relations Department. It is based on submissions from
staff members involved in outreach to civil society.

The newsletter is published in English, French, Spanish, and Russian and
(except the Russian version) is posted on the IMF website at
http://www.imf.org/external/np/exr/cs/eng/index.asp. If you would like
to subscribe, you may sign up through the website notification system.

We welcome your feedback. If you have comments or questions, please send
an email to ngoliaison@imf.org or contact us by phone at (202) 623-9400
or by fax at (202) 623-8769.

All documents and papers referenced in the newsletter can be printed
from the IMF website at www.imf.org.

If you have problems accessing the links or downloading the
PDF-formatted documents, contact us at the numbers listed above and we
will be happy to send you copies.

****


 IN THIS ISSUE

RECENT DEVELOPMENTS IN IMF-CSO RELATIONS

FEATURE ARTICLE:
An interview with Montek S. Ahluwalia

THE 2003 ANNUAL MEETINGS IN DUBAI:
Report from the International Monetary and Finance Committee (IMFC)
Civil society dialogues in Dubai:
The IMF in the Middle East and North Africa
The role of the IMF in low-income countries
Guide to IMF Staff Relations with CSOs =96 Public discussion begins


LETTERS FROM THE FIELD:
David Yuravlivker, Ecuador
Dennis Jones, Guinea
Jeremy Carter, Sri Lanka

BULLETIN BOARD:
Other recent meetings between IMF staff and CSOs
IMF staff news and organizational changes
Selected speeches
Selected publications
 RECENT DEVELOPMENTS IN IMF-CSO RELATIONS

This issue of the Civil Society Newsletter comes at a time of
considerable debate about economic development strategies. The effort to
achieve a new global agreement on trade encountered serious obstacles at
the World Trade Organization Ministerial in Canc=FAn, Mexico, in
September, posing a new challenge to the international community. And
recent political events in Latin America have raised again questions
about appropriate economic strategies. At the same time, some economic
gains have been made by many developing countries on all continents,
creating an opportunity for the Fund to explore how it can make the best
contribution to long term development and progress toward the Millennium
Development Goals.

Many of these issues were at the forefront of the discussions that took
place at the Annual Meetings of the IMF and World Bank in Dubai during
September. The Fund=92s ministerial-level International Monetary and
Financial Committee (IMFC) directly addressed the failure in Canc=FAn,
re-asserting a worldwide commitment to the multilateral trading system,
and also examined strategies for helping the developing world (see
article on IMFC communiqu=E9). IMF Managing Director Horst K=F6hler also
examined these issues in his keynote speech to the Annual Meetings.
Similarly, several seminars and discussions on the sidelines in Dubai
examined key questions, including the Fund=92s role in low-income
countries (see article). In a recently published paper the Fund reviews
the question of how it can best assist low-income countries while
remaining true to its mandate; on this, feedback is sought from the
public. In the closely related paper on debt sustainability discussed in
the last issue of the newsletter, the Fund has been addressing how the
international community can best help poor countries, including the most
heavily indebted, maintain a sustainable debt position in the long term.

Civil society organizations (CSOs) also were active at the Annual
Meetings, especially groups from the Middle East. CSO representatives
participated in a well-attended Townhall Meeting with Gordon Brown, U.K.
Chancellor of the Exchequer and Chairman of the IMFC; Trevor Manuel,
South Africa=92s Minister of Finance and Chairman of the World Bank=92s
Development Committee; IMF Managing Director Horst K=F6hler; and World
Bank President James Wolfensohn. It was the first time that this
high-powered quartet had appeared together in a session with CSO
representatives. The meeting addressed many issues of concern to CSOs,
including one of the issues on the Dubai agenda: "voice and
representation" of developing countries in the governance of the IMF and
World Bank.

One session with CSO representatives covered the newly issued IMF "Guide
for Staff Relations with Civil Society Organizations", prepared in close
consultation with Jan Aart Scholte of the Centre for the Study of
Globalisation and Regionalisation at the University of Warwick in the
U.K., and based on interaction with IMF staff and civil society groups.
The guide has been distributed to Fund staff and posted on the external
website along with a request for public comment. The intention is for
the guide to become a "living document" that can be reassessed as Fund
staff gain greater experience in their interaction with civil society.

Finally, this issue features an extended interview with Montek Singh
Ahluwalia, Director of the IMF Independent Evaluation Office (IEO),
which is charged with conducting assessments of the Fund=92s work. The IEO
has become a key intermediate point of contact between the IMF and civil
society, and Mr. Ahluwalia in his interview offers perspectives on that
interaction.

As always, the staff of the Civil Society Newsletter welcomes
suggestions on coverage from our readers around the world.

Back to Table of Contents

FEATURE ARTICLE

An interview with Montek S. Ahluwalia

Montek Singh Ahluwalia, 60, is the first director of the IMF=92s
Independent Evaluation Office. The IEO was established in 2001 to
provide objective assessments of the Fund=92s work. In keeping with that
objective, the IEO decides its own work program independently of the IMF
Executive Board and management, and Mr. Ahluwalia and his successors are
barred from future employment at the IMF. An economist, Mr. Ahluwalia
began his career in the World Bank in 1968, returning 11 years later to
his native India, where he served as Finance Secretary in the Ministry
of Finance; Secretary in the Department of Economic Affairs; Commerce
Secretary; Special Secretary to the Prime Minister; and Economic Advisor
in the Ministry of Finance. Mr. Ahluwalia was educated at Delhi
University and at Oxford University. He took over the IEO on July 9, 2001.

Q: To what extent do you see CSOs as part of the IEO constituency?

A: They are definitely an important part. The IEO was set up in part
because of the very strong perception on the part of CSOs that the Fund
was inadequately transparent. As our Annual Report notes, CSO inputs
were prominent in the period when the Board was discussing the need to
set up this office. Our terms of reference also make it clear that one
of our responsibilities is to create a better understanding of Fund
activities among a broader group of stakeholders. Any CSO concerned
about issues that the Fund is concerned about is therefore a natural consti=
tuency.

Q: What are the methods that the IEO has developed to interact with
civil society?

A: We have developed mechanisms for interaction at several stages.
First, at the stage of defining the work program, we have made provision
for lateral inputs. Before defining the work program, we first prepare a
discussion paper which outlines a menu of possibilities, and put it on
the Web and invite comments from all concerned, including CSOs. We give
them six weeks to convey their views on which of the proposed topics is
more important, or even suggesting topics we may have missed. We have
also organized discussions with civil society groups interested in
interacting with us. This input is taken into account in determining the
work program.

Having chosen a topic, we try to ensure that the terms of reference of
the study do not prejudge critical issues or fail to reflect legitimate
concerns. We follow a two-stage method for defining the terms of
reference. First, we put an issues paper on the website indicating our
perception of the main issues to be addressed and invite comments. After
considering the comments received we put a final terms of reference on
the web.

Finally, we then invite all concerned, including CSOs, to contribute
substantive inputs on the issues identified in the terms of reference as
relevant to the study.

Q: Is the aim that CSOs decide on the themes and methods of your work?

A: Not to decide=97that is for us to do=97but certainly to give them an
opportunity to participate. In the end, the responsibility for
evaluations rests with the IEO, but by consulting extensively we give
them an opportunity to be heard. They could fairly criticize us if they
feel their views have not been given fair consideration.

Q: How do CSOs participate in the actual evaluation process?

A: As I said, we invite CSOs to make submissions to us on issues covered
in the terms of reference. If some CSO has done a lot of work in a
particular country or issue, they could send their material to us and
expect us to take it into account. The final report is our
responsibility. We don=92t delegate or subcontract evaluations to CSOs,
but we are willing to hear their views.

In the ongoing study we=92re doing of Argentina, we have received a huge
amount of input, not from traditional CSOs, with whom we are in regular
contact, but from small groups of Argentine bank depositors complaining
about what they considered abuse of property rights, as they saw it,
reflected in asymmetric conversion of dollar bank deposits into pesos. I
quote this only as an example of how issues surface in many different
sorts of ways.

Q: Is the Web the IEO=92s only means for interacting with far-flung civil
society organizations?

A: No; a pure Web-based interaction cannot possibly reach all relevant
NGOs so we do resort to direct interaction. In a consultation in Africa
in 2001, when some of our people met with many country delegations, they
made us very aware of the fact that just because something is on the Web
does not mean it is easily accessible. Access is a problem in many
countries, downloading is not easy and there are language problems. We
are actively trying to make our material more accessible to a non
technical audience and to regional language groups that may not be
familiar with English, which is the language of the Fund. In the case of
the capital-account crisis project, for example, parts of the report
will be translated and available in the local language.

Q: Your office has released three reports to date. What are the themes
common to them all?

A: I can think of several common themes. One relates to the tradeoff
between candor and transparency. The Fund has to play a major role in
surveillance, making people aware of issues and problems in their
countries. To the extent that this work is confidential, there is no
problem=97you can be as candid as you like in private. However, the extent
to which countries will be willing to be candid with the Fund is a
function of how transparent the Fund is going to be. It is not easy to
strike the right balance.

Excessive optimism at the stage of program formulation is another common
theme from many country experiences. Yet another issue is the time
mismatch between the duration of an IMF program and the time period
needed for longer-term policies to have an impact. A program has a span,
at most, of three years. But for many structural problems, the time
frame in which corrective policies can have an effect is several years.
If you design conditionality to focus on generating an effect within
three years, you=92re likely to be concentrating on things that have a
short-term effect and giving less importance to measures that have
long-term effect. Yet it is the latter that are actually more important.

Q: With tension between candor and transparency built into the process,
to which approach is the IEO inclined?

A: We are in favor of the Fund tilting in favor of greater importance
given to transparency. We recognize that full transparency may not be
possible on all issues. There are situations where transparency can be
unduly disruptive and this must be a matter of concern, especially where
judgments have to be made in the face of uncertainty and the
probabilistic nature of judgments may not be fully recognized. The issue
has become accentuated because of the perception, after the crises of
the 1990s, that the Fund must play an important role in keeping markets
informed. The belief is that better-informed markets will behave better
and will be more stable. Hence the perception that Fund surveillance can
play a critical role. If that is to be the Fund=92s role, surveillance has
to be more transparent=97telling markets what the Fund really thinks. This
can be problematic. The desire to retain influence in the advisory role
can lead to moderation of concerns on policy, but beyond a point this
can reduce the effectiveness of surveillance.

Q: Concerning the time mismatch you spoke of, the irony is that it
encourages an emphasis on short-term results that multilateral
organizations like the IMF tend to advise against.

A: That is true. Consider a country that has problems of fiscal
sustainability because its tax base is too narrow. To have an impact in
the next two or three years, the simplest thing to do may be to take an
existing tax and increase the rate. However what may be more important
in the longer run is to broaden the tax base and improve the efficiency
of the revenue administration. However, it is not very clear that the
results would become evident in three years. Restructuring a revenue
service is simply not something that can be done in three years.

So how do you handle the fiscal balance in the short run? Do you cut
some expenditures somewhere or just live with a bigger fiscal deficit?
The solution one of our studies has proposed is that the Fund should use
surveillance to develop an understanding of the road map for reform,
which is actually owned by the country. When programs have to be
designed, the Fund could use the road map to look for workable solutions
drawn from it. Presently, only the low-income countries have such a
mechanism=97the Poverty Reduction Strategy Paper=97which spells out a road
map. We don=92t think that non-low-income countries should be made to have
PRSPs. But we think we should explore the possibility of using
surveillance to encourage a dialogue with countries in nonprogram years
and develop their own road map. This may make surveillance appear too
intrusive, and that is a concern that has to be dealt with.

Q: The IEO report on fiscal adjustment concluded that social spending is
not reduced overall as a result of Fund programs=97which would seem to
uphold the position of the IMF rather than its critics.

A: The study found mixed results. It does establish that some of the
common criticisms of Fund programs are not valid and aggregate social
sector expenditures are not necessarily squeezed. On the other hand it
also points out that, very often, while total social sector expenditures
may not be squeezed, many critical components do get squeezed when
fiscal difficulties arise. If demands for real wage increase and the
like can=92t be resisted, you might find a situation where wages and
salaries in the health service go up, but money for medicines goes down.

What should the Fund do? You can=92t have a Fund program that goes into
this level of micro-detail. Our recommendation is to encourage countries
to come forward in normal times with their ideas on how they would
protect critical programs. The Fund could provide a forum through its
surveillance mechanism where these ideas get discussed. Countries
wanting technical assistance to develop such mechanisms could get it
from the World Bank.

Q: Much of what you recommend might be considered intrusive. How have
governments reacted?

A: From our point of view, we must judge the governmental response on
the basis of the responses in the Executive Board. We are gratified that
the thrust of our recommendations has received broad Board
endorsement=97both from the borrowing countries as well the countries that
typically do not borrow. Sometimes there are mixed views, but you expect
that. It is true that what we propose often goes beyond what the Fund
has done traditionally, but we can only add value if we push the
envelope and see how to take care of legitimate concerns that arise.

Back to Table of Contents

THE 2003 ANNUAL MEETINGS IN DUBAI:

Report from the International Monetary and Finance Committee (IMFC)

Senior government officials from around the world traveled to the
Persian Gulf this year for the Annual Meetings of the IMF and World
Bank. The Boards of Governors of the two institutions, made up of
ministers and central bank governors from the 184 member countries,
gathered in plenary session September 23-24 in the United Arab Emirates
state of Dubai. As usual, the gathering was preceded by a separate
meeting of the International Monetary and Financial Committee (IMFC) of
the IMF=92s governors.

The IMFC communiqu=E9 surveyed the global economic climate and welcomed
the increasing signs of global recovery. However, the committee also
pointed to the risks faced by many countries and highlighted the
importance for rich and poor countries alike of sustained and vigorous
reforms to underpin balanced growth.

In addition, the IMFC pointed to a worldwide risk: a threat to the
growth of international trade. In its communiqu=E9, the committee called
urgently for resumption of trade and development negotiations, known as
the Doha Round, which broke down earlier in September in Canc=FAn, Mexico.
Once the talks are back on track, the ministers said, governments should
focus on the importance of opening markets, providing fair access, and
reducing trade-distorting subsidies in all areas=97especially agriculture.
They said trade expansion is essential for vigorous global growth as
well as the achievement of internationally recognized development goals.
The IMFC supported a Fund initiative to provide assistance to countries
to help them adjust to the impact of trade reforms.

Addressing the challenges faced by the industrial countries, the IMFC
recommended that monetary policies should continue to support demand in
the context of low inflation, and that fiscal policies should aim to
deliver a reduction of deficits in the medium term, while allowing
short-term flexibility if activity weakens. The IMFC referred to the
vigorous pursuit of structural reforms, and enhanced corporate
governance and transparency as key to stronger, globally balanced
growth. Among specific recommendations: the United States should aim
fiscal policy toward strengthening sustainability in the medium term;
Europe should continue structural reforms aimed at boosting employment
and investment; and Japan should strengthen its banking and corporate secto=
rs.

Turning to low-income countries, the committee noted that many have
strengthened macroeconomic policies and have undertaken policy reforms,
which have improved the prospects for growth. But the ministers also
said that growth will have to accelerate significantly in order to
reduce poverty and meet the Millennium Development Goals. Stronger
policy frameworks and institutions, better governance, improved market
access, and larger and more effective aid flows are all needed, the IMFC sa=
id.

The communiqu=E9 pledged continued IMF support for low-income countries.
Initiatives are needed to enhance that support, the IMFC said. These
should take the form of such measures as ensuring that macroeconomic
policy frameworks support higher and sustained growth and poverty
reduction, and reducing vulnerability to shocks. In addition, the IMF
should help countries move beyond sustained reliance on IMF financial
arrangements. Focusing attention on Africa, the IMFC said African
countries should move forward with regionwide implementation of the New
Partnership for Africa=92s Development (NEPAD), especially to strengthen
the foundations for investment and private sector-led growth.

Furthermore, the IMFC called on the IMF, in collaboration with the World
Bank, to develop strategies to help countries implement the policies
needed to obtain the debt relief under the Heavily Indebted Poor
Countries (HIPC) Initiative that would achieve a lasting exit from
unsustainable debt. All creditors that have not yet granted full debt
relief were urged to do so, with the IMF asked to report on the extent
of compliance. The communiqu=E9 also recognized the importance of
providing "topping-up" assistance to HIPC recipients as appropriate, and
cited the on-going discussions on the topping-up methodology and
financial implications.

The IMFC expressed support for a multilateral effort to rebuild Iraq,
and approved the idea of the Fund providing financial and other
assistance to that country.

The IMFC reaffirmed that strengthened IMF surveillance is essential to
enhancing crisis prevention and promoting stability and sustainable and
effective growth. The Committee said it would discuss in 2004 progress
in improving the quality, effectiveness and persuasiveness of IMF
surveillance. The communiqu=E9 emphasized the importance of greater
transparency and candor in IMF advice to member countries. The Committee
also welcomed the work of the two-year-old Independent Evaluation Office
(see related story in this issue) in enhancing the learning culture,
effectiveness and accountability of the IMF.

Back to Table of Contents

Civil society dialogues in Dubai

The Annual Meetings provide extensive opportunities for consultations
and seminars alongside the formal meetings. The Dubai authorities made
excellent provision for CSO representatives attending the meetings,
which facilitated a program of civil society dialogues that extended
over the better part of a week. Some sessions were organized by CSOs
themselves, while others were arranged by officials of the two
institutions. Given that these were the first Annual Meetings in the
Middle East, and that many CSO representatives from the region had not
attended previous meetings, the discussions included an overview of work
in the Middle East and North Africa. Other sessions focused on
low-income countries and Fund outreach to CSOs.