[stop-imf] UK Comm on Africa Calls for looser IMF monetary & fiscal policies

[robert weissman]

and Rick Rowden forwards this excerpt from the UK Commission report:


Commission for Africa, p.365:

"Create more fiscal space for developing countries: Developing-country
governments must have room in their budgets to make investments
necessary for development, and they must have the room to adjust to
shocks. Reality places some constraints on what governments can do: over
the long run, governments cannot spend much more than they are taking in
(including aid). But the IMF should not tighten this common-sense,
indeed fundamental, constraint further by applying analytically
unfounded fiscal rules. Changes are needed in two key areas. First, the
IMF should treat current and capital expenditures differently: capital
expenditures are an investment that should yield future payoffs, and
hence offset indebtedness taken on to finance them. Second, the IMF
should adjust its permitted deficit limits for shocks and business-cycle
effects. Deficit ceilings that are perfectly sensible when an economy is
growing well cause unnecessary pain when they are applied rigidly in the
midst of a cyclical recession or after a temporary shock. The IMF should
allow for shocks and use cyclically adjusted budgets when it makes its
assessment of country fiscal performance."

http://www.commissionforafrica.org/english/report/thereport/18chap10.pdf