[stop-imf] IMF planning new monitoring facility

[robert weissman]

5/18/05
 From Soren Ambrose, 50 Years is Enough:

The Reuters article below, on IMF head Rodrigo Rato's visit to Nigeria
during the annual meetings of the African Development Bank is, so far as
I can tell, the first instance of someone talking about a practical
application of the IMF's new "facility" -- basically a program for
monitoring (read overseeing/supervising) economic policies in countries
that do not need or want a more formal IMF program. Nigerian government
officials are quoted saying that the difference from other sorts of IMF
arrangements would be that the policies would be designed and "owned" by
the government. Those are promises we've heard before (e.g. with the
PRSP), but I'm not sure they've ever come true, and I wouldn't hold my
breath expecting it to happen now.

This idea was first broached in the lead-up to the October '04 IMF/WB
annual meetings. In addressing plans for reducing or canceling debts
claimed by the IMF, both Canadian Finance Minister Ralph Goodale and
U.S. Treasury Secretary John Snow alluded to a new facility that would
essentially provide the IMF a formal way of continuing to impose its
conditions on countries even if they were no longer officially indebted
to the IMF or taking loans from it. (If you accept that the primary
function of debt in the global economy is to allow powerful countries to
maintain control of weaker countries' economies -- with the IMF and
World Bank's primary purpose being to serve as the tools for doing that
-- an obvious question when a debt cancellation program is proposed
would be "how will they continue to maintain that control?")

As Rato mentions in this article, the implementation of this new
arrangement, called a "Policy Support Agreement," would represent little
change from the monitoring the IMF is already doing in Nigeria. In fact
the IMF has monitoring programs with a number of countries that are not
borrowing money (with the motivation being, as this article also says,
assuring donors that they're adhering to the IMF's view of the world).
So why create a new name and make new announcements as if something new
were happening? In a way something new IS happening -- by giving these
programs a formal name and definition, and by publicizing them with
supporting papers and press conferences (apparently to come in July),
the IMF is making a political point: it is saying more straightforwardly
than before that it will be "available" to impose its views on Southern
countries even if they manage to extricate themselves from both
multilateral debt and IMF programs.

If this Policy Support Agreement facility comes into common usage, it
could effectively make official what has until now been an "unwritten
agreement" whereby donors and creditors all defer to the IMF in
determining which countries are creditworthy. When the IMF cuts off its
loan program to a country for non-compliance with its policies, the
World Bank, regional development banks, and bilateral agencies generally
follow suit. It is now more likely that they will make an explicit
condition of loans or grants to any developing country adherence to a "PSA."

The PSA has the potential to sharply minimize the potential benefits of
new debt cancellation agreements, since they might be far less likely to
free countries from IMF conditions.

In other words, this is potentially a significant expansion of the IMF's
power, in both middle-income and low-income countries. The other
alternative is that it will be another flash-in-the-pan program from the
IMF that never gets off the ground. The fact that Rato doesn't exactly
sound enthusiastic about it suggests there may be a chance this thing
will just die. Let's hope.

Soren Ambrose - 50 Years Is Enough Network - Washington, DC USA


Nigeria set to christen new IMF agreement - finmin
Wed May 18, 2005 8:20 AM GMT+02:00

By Tom Ashby

ABUJA (Reuters) - Nigeria is set to become one of the first countries to
sign up to a new IMF programme which could open the way for debt
reduction talks with the Paris Club, Nigeria's Finance Minister told
Reuters on Tuesday.

Africa's top oil producer has so far failed to agree a reduction in its
$28 billion debt to the Paris Club of sovereign lenders because some of
them insist that any talks should be preceded by a formal IMF programme.

The new arrangement, to be known as the Policy Support Agreement, is
still being formulated by IMF officials and is expected to be approved
by the executive board in July, fund officials said.

"We are the pilot for the programme," Finance Minister Ngozi
Okonjo-Iweala told Reuters at the presidential villa in Abuja. "The IMF
makes sure it is as stringent as an upper credit tranche programme and
then monitors it like a regular programme, but the difference is that
you develop it and you own it."

Asked whether the programme could lead to a breakthrough in its campaign
for debt cancellation, she said: "Absolutely."

Creditors have yet to say whether the new arrangement, which will also
be used to measure the policy performance of poor countries receiving
Western aid, would meet their criteria for engaging in talks on debt
cancellation.

SURVEILLANCE

The IMF has been doing "intensified surveillance" of the Nigerian
economy since last year when the government imposed spending curbs and
structural reforms to restore some order and efficiency to its bloated
and costly bureaucracy.

In the first year of implementation last year, Nigeria's inflation
halved to 10 percent and its foreign reserves ballooned to an
unprecedented $20 billion.

IMF Managing Director Rodrigo Rato said he was "impressed" by Nigeria's
achievements so far.

"The board is discussing the possibility of having a new instrument,
which would be a monitoring agreement, but the fact is that if it is
decided, and I think it will be, it is very similar to what we are
already doing in Nigeria," Rato told a press conference after meeting
top Nigerian officials.

"It would be formally defined, but it will not require any changes in
our relationship with Nigeria," he added.

Nigeria's long-standing campaign for debt reduction received a setback
last month when the IMF said that at current high oil prices Nigeria's
$35 billion debt stockpile was sustainable and called on the government
to normalise payments with creditors.

Nigeria has paid $1 billion a year for the past two years to its Paris
Club lenders, less than half what is due.

Rato said the debt was viewed as sustainable based on current government
policies. He also said that judgement could change if the analysis were
to include spending required to reduce poverty and improve social
services as envisaged under the United Nations Millennium Development Goals,

"If there are new policies, like for instance the Millennium Development
Goals, the decision of the creditors has to take into consideration
those new policies... that is not up to us to decide, that's up to the
Paris Club," Rato said.

Britain has proposed that the Group of Seven rich nations, which are
also the main members of the Paris Club, start to transfer greater funds
to Africa, including debt relief, to help it meet the ambitious
development goals.

The new agreement was originally conceived as a tool for donor nations
to ensure that beneficiaries were using resources wisely, but Nigeria,
which receives very little aid, could become the most high-profile
country to sign up.