[stop-imf] Civil Society Letter, part 2 (last)

[Robert Weissman]

The IMF in the Middle East and North Africa

Mohamad Chatah and Zubair Iqbal (of the IMF=92s External Relations and
Middle Eastern Departments, respectively) conducted a session designed
to outline the diversity of the Fund=92s work in the Middle East and North
Africa (MENA) region. This diversity reflected the wide geographic
coverage of the department, which includes not just Arabic-speaking
countries, but countries as far flung as Sudan and Pakistan. And the
coverage is about to get even wider, following a reorganization that
brings several Central Asian countries into the renamed Middle East and
Central Asia Department (effective November 1).

Questions from the 15 participants reflected many of the key concerns of
the region, most going well beyond the attainment of macroeconomic
stability. In economic policy advice, should more emphasis be placed on
achieving better income distribution than on growth? Could the Fund
support progress toward democracy? Could the Fund impose conditionality
that would promote good governance? What could the Fund do to support
Palestine? What capacity building support could the Fund give to civil
society organizations?

The Fund=92s mandate means that it cannot address all these issues
directly or on its own. Iqbal and Chatah explained that the Fund has
three main activities: policy advice and dialogue through
"surveillance", capacity building through technical assistance, and
lending. The Fund=92s mandate centers on macroeconomic and financial
policies, but advice inevitably goes well beyond a narrow focus on
macroeconomic stability. Structural change is uppermost on the agenda in
many countries: financial sector reform; strengthening public sector
finances through tax and expenditure reform; promoting transparency; and
working with countries as they attempt to diversify their economies.

In post-conflict situations=97such as Afghanistan, Iraq, or Palestine=97the
Fund=92s work emphasizes the capacity-building necessary to put in place
the rudiments of effective monetary and financial systems and public
sector management. Such technical advice and assistance is extended even
where it is not possible to provide loans. In these situations, and
indeed in most countries, the Fund works closely with other
international agencies=97the World Bank, the United Nations and bilateral
donors=97to make sure that its contribution is effective and consistent
with national objectives and international strategies.

Back to Table of Contents

The role of the IMF in low-income countries

The IMF has initiated public discussion of a paper on the role of the
IMF in low-income member countries. The Annual Meetings in Dubai
provided a good opportunity for direct dialogue on the issues. Two
seminars took place in Dubai, one for officials and visitors to the
Annual Meetings, and the other specifically for civil society
organizations. The article below combines perspectives from both sessions.

Defining the issues
Opening both sessions, Mark Plant, Advisor in the IMF Policy Development
and Review Department, argued that to improve the prospects for
low-income countries to realize the Millennium Development Goals (MDGs),
countries need to adopt policies that promote growth and poverty
reduction. But they will also need to receive much more assistance=97both
technical and financial=97with a larger proportion of grant aid. How can
the IMF assist most effectively, given that it is not primarily a
development institution and has neither the capacity nor the mandate to
contribute to substantial long-term flows of resources needed to meet
the MDGs? The Fund can support countries by helping them establish
macroeconomic stability as the foundation for sustained growth and to
deal with shocks from beyond their borders.

But how can IMF-supported programs look beyond macroeconomic stability
to promote sustained faster growth and poverty reduction?

Plant highlighted several principles that would help guide the debate.
The IMF will remain engaged with low-income countries over the long
term, by embracing the Poverty Reduction Strategy Paper (PRSP) process
as the framework for working with countries to achieve the MDGs. More
aid is desirable, but for the long term the aim should be to help
countries rely on private sources of financing. And the IMF must work
with developed countries to ensure their policies=97especially in trade
and agriculture=97support growth in low-income countries. The IMF will
focus on its core areas of competence: macroeconomic and financial
policies. Its primary assistance will be policy advice, given through
surveillance and technical assistance, and in programs supported by the
Poverty Reduction and Growth Facility (PRGF) lending.

The debate: an overview
Participants welcomed the IMF=92s willingness to undertake the review.
Most discussants called for the increased emphasis on country ownership
to be matched by greater flexibility on the part of the IMF. Lucie
Kasanga of Jubilee Zambia stressed how important it was that the Fund
should undertake more country-level assessments, arguing that it needs
to focus more on the social and political setting in which economic
policy and poverty reduction strategies are being designed. She also
thought it unfortunate that the IMF had ruled out a broader review of PRSPs=
.

Saifur Rahman, Minister of Finance and Planning of Bangladesh, argued,
that the IMF and World Bank need to achieve a higher degree of
coordination if their advice to countries is to become more effective.
Rahman also stressed that private capital flows would come only after
developing countries establish an environment conducive to private
sector development=97truly a long-term process. Ulan Sarbanov, Chairman of
the National Bank of the Kyrgyz Republic, argued that the IMF still
needs to pay attention to issues outside of its core areas. For example,
if a country has a large public sector, the IMF must look not only at
tax policy but also at the energy sector or the financial sector if that
is where macroeconomic problems are rooted.

Paul Ladd of Christian Aid argued that the Fund=92s advice should be
firmly rooted in the MDGs, and use poverty and social impact analyses.
He also felt that the Fund=92s "gatekeeping" role=97the reliance by donors
and investors on IMF-supported lending as the trigger for their own
lending=97needs to be reduced.

Discussion was wide ranging. A recurring theme was the need to base the
Fund=92s work on the MDGs, and related to that, the critical importance of
being able to contribute to reducing the impact of HIV/AIDS on Africa=92s
economies. Others called for closer links between the programs supported
by IMF lending to poor countries and their poverty-reduction strategies
to ensure that the conditions of the former do not hinder the goals of
the latter.

Participants also questioned aspects of IMF-supported polices,
particularly privatization=97whose benefits, they argued, have not been
proved=97and what they alleged to be the mechanistic approach to the
formulation of stabilization programs. One participant argued that it
would be better to concentrate on income distribution rather than
growth, which is skewed toward the rich. Other speakers commented on the
important role that technical assistance can play, and many echoed the
call for greater flexibility and sensitivity in policy advice.

Readers are invited to contribute to this debate by reviewing and
commenting upon the paper "The Role of the International Monetary Fund
in Low-Income Member Countries", which is available for comment on the
IMF website through December 31, 2003. Please send your comments by
December 31, 2003 to licfundrole@imf.org.

Back to Table of Contents

Guide to IMF Staff Relations with CSOs =96 Public discussion begins

CSO representatives in Dubai gave a qualified welcome to the IMF=92s
proposed "Guide for Staff Relations with Civil Society Organizations"
shortly before it was launched. The Guide has now been issued to the IMF
staff, and has been published with an invitation to comment. In Dubai, a
panel discussion on the Guide included Michael Bell of the IMF External
Relations Department; Alan Whaites, Director of International Policy and
Advocacy for World Vision International; and Wahyu Widiarto, Director of
the Institute of Development and Economic Analysis in Indonesia.
Altogether there were about 25 participants at the session.

Bell outlined the consultative process that had led to the draft: (i) a
first draft prepared by Jan Aart Scholte, professor at the Centre for
the Study of Globalisaton and Regionalisation at the University of
Warwick in the U.K., based on consultations with IMF staff; (ii) a
second draft prepared after an extensive process of comment coordinated
by Scholte in which a panel of about 30 CSO representatives reviewed the
document in parallel with an internal IMF review; and (iii) a final
draft after a last round of Fund staff review. Bell said that the
process had revealed a surprising amount of outreach already being
undertaken by staff throughout the Fund. But he also noted that an
almost universal concern on the part of staff had been about the
"resource implications" of more extensive outreach. Striking the right
balance had been one important factor addressed in the final round of revie=
ws.

Whaites recalled an earlier World Vision paper that had identified three
essential areas=97capacity, culture, and process=97in which the Fund would
have to act if it was improve its relations with civil society. He said
the draft guide addressed only one of these: process. Based on World
Vision=92s experience, relations in the field with Fund staff were often
difficult. There is still much to be done, especially in terms of
enhancing the Fund=92s capacity to undertake effective outreach
in-country. He also regretted the "indeterminate state" of the note: an
indicative guide rather than a more prescriptive guidance note, which
had been the earlier proposal.

The key question or test was whether ownership was being promoted, Wahyu
argued. The Guide seemed to confirm the remoteness between the
elites=97the decision makers=97and the people. For instance he asked how in
a huge country like Indonesia, ownership can be advanced through the
CSOs. The barriers are enormous: the CSOs have little access to
information, to the decision-making processes, or the decision-makers.
How can real progress be made?

These concerns were amplified in a lively discussion that followed:
* The approach is too cautious; there is too much sensitivity to the
interests of the governments;
* The Guide seems incomplete, missing many institutional details, in
particular what role civil society itself plays in the country;
* Expecting staff to assess the "legal status" of CSOs is a concern in
countries where civil society has limited rights or standing;
* In assessing the legitimacy of CSOs, staff should be aware that
governments sometimes create artificial CSOs;
* Fund staff should not let concerns about resource costs overwhelm
their intention to pursue dialogue; staff need to find ways of making
the time, giving up other activities if necessary;
* Dialogue often simply does not exist. People still have the sense that
nobody is listening to their concerns, for example in the recent
controversy over electricity prices in Argentina.
* The Fund should not reinvent the wheel; it should draw on the
experience and expertise of other international organizations, in
particular, the World Bank and the United Nations.

Back to Table of Contents

 LETTERS FROM THE FIELD

A Visit to Southern Ecuador
David Yuravlivker, Resident Representative, Ecuador

I joined Mac Benjamin, the World Bank representative in Ecuador, for a
half-day meeting with civil society and local authorities in the
southern province of Loja. This was one of a series of meetings
organized as a follow-up to the consultations with civil society that
took place in preparation for the recent Country Strategy Paper.

The first part of the discussion focused on World Bank strategy in
Ecuador, and the second part on the economic situation and prospects.
Some 30 people attended, among them representatives of indigenous
communities in the province.

Issues raised by the audience included: the social costs of migration to
other countries; the lack of access to credit by communities and
businesses; the increase in poverty and its relationship to
dollarization; the apparent conflict between multilateral financial
institutions and the social movements; the perceived failure of the
multilaterals to listen to citizens at the grass roots; and the need to
ensure that the poor do not always bear the weight of adjustment programs.

I described the numerous discussions we had had with indigenous leaders
at the national level, and pointed out that we are open to views at the
local level. Then I outlined our program and stressed that most of its
components addressed their very concerns head-on, including
anti-corruption measures aimed at the Customs Office and the Agencia de
Garantia de Depositos (Deposit Guarantee Agency). There was also a
question about the cooking gas subsidy, which prompted an explanation of
our argument in favor of transparent subsidies to people rather than
regressive subsidies targeted at commodities. The audience showed great
interest in our approach.

In the evening, we had dinner with the Mayor of Loja and with the Rector
of the Universidad T=E9cnica Particular de Loja. The Mayor is very
dynamic, has a nationwide reputation, and has been re-elected several
times. He puts great stock in environmental protection, an approach
reflected in the clean and well-kept appearance of the town. Roughly
speaking, one third of city=92s revenues come from local taxes, one-third
from central government transfers, and the rest from external sources.
His main complaints are that the central government is behind in
transfer payments, and that the major cities, Quito and Guayaquil, take
what they want, leaving the rest of the cities to struggle for what is
left.

All in all, the visit was productive. In particular, it was very useful
to participate in the forum organized by the World Bank, which has an
ongoing dialogue with civil society, to have the opportunity to explain
our program and to hear directly from people at the local level.
Townspeople appreciated the Fund visiting the city to hear from them and
hoped to have other opportunities to continue the dialogue with us.

Back to Table of Contents

A Meeting with Guinea=92s Private Sector
Dennis Jones, Resident Representative, Guinea

I met the Conseil National du Secteur Priv=E9 en Guin=E9e (National Council
of the Private Sector in Guinea) on August 21, together with the
Canadian Ambassador, to explain in general terms the role of the IMF and
to discuss the Fund's current relationship with Guinea and recent policy
recommendations. The main issue was the fact that the current economic
program is off-track. The exchange was lively and open and the
executives gave many examples of the difficulties they face. We, in
turn, had the opportunity to clarify important aspects of the IMF's
role, such as the fact that we do not give direct budget support to
governments or lend money directly to private enterprises, and to make
the distinction between the IMF and the World Bank. This meeting will be
followed by regular meetings of a similar kind, perhaps every three
months. To help get a better understanding of the IMF's activities, I
also held a roundtable meeting with the local and international press in
Guinea on August 12.

The meetings with the press and with the industrialists were fully and
fairly reported in the local media. Visiting IMF missions usually meet a
range of civil groups, most recently during the Article IV consultation
in May 2003. My intention is to meet with a broad range of civil groups
in the coming months.

In an effort to make material about the IMF and Guinea more accessible,
the resident mission in Guinea has launched a new web site
(www.imf.org/conakry). It contains some IMF documents and other
information in both English and French. The existence of the web site
has been made known to a wide range of groups (donors, government
agencies, civil organizations). The feedback so far has been positive.

Back to Table of Contents

Sri Lankan Civil Society Speaks Out
Jeremy Carter, Senior Resident Representative, Sri Lanka

As part of the office dialogue with civil society, I met 16
representatives from local community groups on July 29 in Colombo in
advance of the Article IV mission in August. The civil society
representatives raised questions about the way Fund programs are
designed and carried out, and about their own government=92s handling of
economic policy. These are politically charged issues, but the
discussion was friendly.

Among the participants were critics of the government=92s development
strategy, as laid out in "Regaining Sri Lanka", which has been endorsed
by the IMF and World Bank as an appropriate basis for Fund/Bank lending
operations. In particular, Sarath Fernando of the Movement for National
Land and Agricultural Reform argued that the plan would widen the gap
between rich and poor, and promote migration to cities by the rural
poor. He added that the strategy=92s authors had not been responsive to
suggestions from critics.

>From the Fund side, I explained that Fund support for the strategy as a
whole did not imply agreement with every word. I also noted that
previous anti-poverty strategies adopted by both the current and
previous governments and endorsed by the Fund had achieved positive
results. To a related point raised by Sarath Iddamalgoda of Janawa Bode
Kundara (Public Awareness), who criticized working and living conditions
in free trade zones, I noted that the IMF disapproved of labor
violations and was encouraging the government to work with the unions in
their plans to revise the labor market legislation.

Gloria De Silva of the Center for Family Services criticized
parliamentary oversight of economic policy as weak. I said the Fund
welcomes greater participation by Members of Parliament, but agreed that
currently there was only limited interaction. Responding to related
questions about conditionality in IMF-supported programs, and about the
quality of government data, I said I was reasonably assured that
government figures are accurate. I noted that CSOs are encouraged to
contact the IMF if they have any questions about the data being used to
monitor the Fund-supported program. As for loan conditions, I noted that
all governments that borrow from the Fund commit themselves to achieving
certain numerical targets and to adopting policies that are key to
achieving the overall objectives of their economic program.
Nevertheless, these targets were more signals than strict unbending
tests and were aimed at allowing the country government and the Fund to
monitor and, if necessary, adjust policies.

I welcomed the continued flow of ideas from civil society, stressing
that the Fund is willing to incorporate civil society=92s ideas in future
lending programs, although there would be no guarantee of blanket
acceptance of such proposals. But even those that are rejected enrich
the policy debate. In that vein, the participants were invited to meet
the IMF mission in August to continue the dialogue (a meeting did take
place), noting that similar meetings were also being arranged with the
unions.
Back to Table of Contents
Bulletin Board

If you want to be notified when new documents are published on the IMF
website, please sign up for email notification through our website
notification system.

Other recent meetings between IMF staff and CSOs

=DF On August 19, Mark Plant, Advisor, Policy Development and Review
Department (PDR), attended an international PRSP-civil society seminar
in Copenhagen. The seminar was sponsored by the North-South Coalition of
Denmark and brought together representatives of Nordic CSOs and their
partners/affiliates in Africa, Asia and Latin America. The seminar
participants exhibited a growing impatience with the PRSP process and
IFI promises of "eventual change": CSOs claimed they had heard such
refrains for three years, but in fact saw little change.
=DF On August 28, Godfrey Kalinga, Division Chief, African Department
(AFR) and the World Bank HIPC manager, Vikram Nehru, participated in a
debate on Africa's debt with Njoki Njehu of 50 Years is Enough Network
and Albert Gyan Jr., a consultant on economic and international
development issues. The event was organized by afrikaf=E9, a
Washington-based organization of African professionals and expatriates.
=DF On September 5, 2003, the New Rules for Global Finance Coalition and
the Friedrich Ebert Foundation organized a panel discussion Democracy
and Development: Proposals for IMF and World Bank Governance Reform,
held at the World Bank. The debate was a follow-up to a discussion in
March, which the IMF hosted. IMF Executive Director Guillermo Le Fort
(Chile) was among the speakers.
=DF On September 9-10, Kristin Roesser, EXR, and Axel Palmason, UN Office,
attended the UN=92s 56th Annual Department of Public Information/NGO
Conference entitled Human Security and Dignity: Fulfilling the Promise
of the United Nations in New York. The gathering attracted over 2000
representatives from more than 700 NGOs.
=DF On September 11-12, the IMF and the World Bank organized a Workshop on
Debt Sustainability in Low-Income Countries at IMF headquarters in
Washington. Participants included policy makers from donor and recipient
countries and multilateral institutions, as well as CSOs, academia, and
think tanks. The discussion=97as well as earlier sessions held in Paris,
Berlin, and Accra during May-June=97informed the joint Bank-Fund paper on
the policy implications of debt sustainability in low-income countries.
=DF Axel Palmason, UN Office participated in a September 18 roundtable
discussion with UN-NGOs in New York on ways to finance the Millennium
Development Goals (MDG) entitled Feasible Additional Sources of Finance
for Development. The specific issues under discussion included the
proposed International Finance Facility, SDRs, and international
taxation and tax cooperation. Mr. Palmason tried to frame the issue in
the context of the broader two-pillar approach from Monterrey,
highlighting the need for an underlying balance between domestic
policies, aid, trade, and debt relief. He also participated in a
conference on the role of CSOs in conflict prevention, which considered
the role of development assistance, and a briefing on the political
economy of armed conflict.
Back to Table of Contents
 IMF Staff News and Organizational Changes
=DF Timothy Geithner, Director, PDR will leave the IMF in November to
become President of the Federal Reserve Bank of New York. Mr. Geithner
joined the IMF in 2001 from the U.S. Treasury Department, where he had
served in various positions, including as Undersecretary for
International Affairs. IMF Managing Director Horst K=F6hler said that an
appointment to fill Mr. Geithner's position will be made in due course.
=DF Shigemitsu Sugisaki, Deputy Managing Director of the IMF, will leave
his position around the beginning of 2004. Mr. Sugisaki joined the Fund
as Special Advisor to the Managing Director in August 1994 and was
appointed Deputy Managing Director in February 1997 for an initial term
of five years. He was appointed to a second term in February 2002.
Takatoshi Kato, a Japanese national, has been announced as his
successor. The former Japanese Vice Minister of Finance for
International Affairs is currently Advisor to the President of Bank of
Tokyo-Mitsubishi and a Visiting Professor at Waseda University.
=DF Effective November 1, the IMF has undertaken a consolidation of its
area departments, reducing the number from six to five. The
organizational changes follow an internal review of how best to
structure and manage the Fund's area departments. In particular, in
light of the changing nature of its work, the European II Department
(EU2), which comprised countries of the former Soviet Union, has been
dissolved. Seven countries in EU2 have moved to the European I
Department, which has been renamed the European Department (EUR). The
other eight EU2 countries have moved to the Middle Eastern Department
(MED), which has been renamed the Middle East and Central Asia
Department (MCD). Michael Deppler, who previously headed EU1, is now
Director of EUR. On September 1, Mohsin Khan, former Director of the IMF
Institute, moved to MED as Associate Director, and will assume the title
of Director, MCD, upon the retirement in December of the present
Director, George Abed. John Odling-Smee, who has led EU2 since its
inception, has announced his intention to retire in early 2004.
Back to Table of Contents
Selected Speeches
=DF Address to the Board of Governors of the Fund by Horst K=F6hler,
Chairman of the Executive Board and, Managing Director of the
International Monetary Fund, Dubai, September 23, 2003
=DF Can the IMF Contribute to the Promotion of the MDGs Relating to Gender
Equality? By Peter S. Heller, Deputy Director, Fiscal Affairs
Department, Meeting of High-Level Women in International Finance,
Economics, and Development, Dubai, September 20, 2003
=DF The IMF's Views and Actions in Dealing with its Poorest Member
Countries, by Flemming Larsen, Director of IMF's Offices in Europe,
Introductory Remarks at World Council of Churches-World Bank-IMF
Meeting, Geneva, September 11, 2003
=DF Address at the Fifth WTO Ministerial Conference, by Anne Krueger,
First Deputy Managing Director, Canc=FAn, Mexico, September 10, 2003
=DF Dismantling Barriers and Building Safeguards: Achieving Prosperity in
an Age of Globalization, Heinz Arndt Memorial Lecture, by Anne O.
Krueger, First Deputy Managing Director, Canberra, Australia, August 13, 20=
03
Back to Table of Contents
Selected Publications
=DF Report of the IMF Managing Director to the International Monetary and
Financial Committee on the IMF's Policy Agenda, September 16, 2003
=DF Poverty Reduction Strategy Papers=97Progress in Implementation, prepare=
d
by the Staffs of the IMF and the World Bank, September 12, 2003
=DF Poverty Reduction Strategy Papers=97Detailed Analysis of Progress in
Implementation, prepared by the Staffs of the IMF and the World Bank,
September 15, 2003
=DF Update on the Financing of PRGF and HIPC Operations and the
Subsidization of Post-Conflict Emergency Assistance, prepared by the
Finance Department (in consultation with the Legal and Policy
Development and Review Departments), August 18, 2003
=DF Heavily Indebted Poor Countries (HIPC) Initiative=97Status of
Implementation, prepared by the Staffs of the IMF and World Bank,
September 12, 2003
=DF Role of the Fund in Low-Income Member Countries over the Medium
Term=97Issues Paper for Discussion, Prepared by the Staff of the Policy
Development and Review Department, July 21, 2003
=DF Fiscal Sustainability in African HIPC Countries: A Policy Dilemma? By
Annalisa Fedelino, Alina Kudina, Fiscal Affairs Department, Working
Paper No. 03/187
=DF The WTO Promotes Trade, Strongly but Unevenly, by Arvind Subramanian,
Shang-Jin Wei, Research Department, Working Paper No. 03/185
=DF Debt Relief, Additionality, and Aid Allocation in Low Income
Countries, by Robert K Powell, African Department, Working Paper No. 03/175
=DF Reviewing the Process for Sovereign Debt Restructuring within the
Existing Legal Framework, prepared by Policy Development and Review,
International Capital Markets, and Legal Departments (in consultation
with other Departments), August 1, 2003
=DF Hierarchy and Authority in a Dynamic Perspective: A Model Applied to
Donor Financing of NGO Proposals, by Boriana Yontcheva, IMF Institute,
Working Paper 03/157
=DF What Would a Development-Friendly WTO Architecture Really Look Like?
By Aaditya Mattoo, Arvind Subramanian, Research Department, Working
Paper 03/153
=DF Addressing the Natural Resource Curse: An Illustration from Nigeria,
by Xavier Sala-i- Martin, Arvind Subramanian, Research Department,
Working Paper No. 03/139