[stop-imf] IMF Policy Reform Before Gold Sales, US Groups Say

[robert weissman]

April 7, 2008


Dear Senators and Representatives,

Re: U.S. Civil society letter to Members of U.S. Congress on IMF gold
sales and scaling up investments in health and education

The International Monetary Fund (IMF) is seeking authorization from U.S.
Congress to sell some of its gold reserves for the purpose of funding
the institution's future operations. The Bush administration has
tentatively indicated its support for IMF gold sales. We are writing to
urge that before authorizing gold sales, Congress insist on meaningful
reforms in IMF policy in developing countries and attach conditions to
how gold sales will occur.

Over the last three decades, IMF policies have limited development
opportunities, and denied opportunity and decent livelihoods to hundreds
of millions. Instead, the IMF has leveraged its role as gatekeeper to
international capital flows to insist that poor countries adopt a narrow
set of policies that have limited possibilities for more expansionary
economic growth and prevented developing country governments from
investing sufficiently in healthcare, education and other vital needs.

As proposed, sale of IMF gold would be a one-time event, with the
proceeds used solely for funding of IMF operations and done in such a
manner as to likely preclude any future Congressional leverage over Fund
activities, and without any assurances or even promises of changes to
long-standing failed and harmful IMF policies.

If Congress is to authorize IMF gold sales, it should take advantage of
the opportunity to remedy these historic wrongs. Before Congress
approves IMF gold sales, it must ensure that proceeds are not used
exclusively for maintaining IMF staff. The gold held by the IMF is in
essence a global public good.

If gold sales are to be approved, a significant portion of the proceeds
should therefore be devoted to the public good of alleviating global
poverty. The best way to do this would be to allocate proceeds towards
debt cancellation. Proceeds could be placed into a trust that could be
used to cover protracted arrears of countries soon to be eligible for
debt cancellation under the existing IMF/World Bank debt relief
programs, or to fund future debt cancellation for additional
impoverished countries.

Congress should also condition its authorization of gold sales on
whether or not the IMF achieves the following specific and demonstrable
changes in its policy mandates and prescriptions for developing countries:

* The IMF must rescind the use of overly restrictive deficit-reduction
and inflation-reduction targets. Such targets prevent developing
countries from growing their economies and expanding public spending,
including in the critical areas of health and education. The IMF must
not stand in the way of policy makers in borrowing countries exploring
and adopting more expansionary fiscal and monetary policy options.

* Expanded health and education spending must be exempt from budget
ceilings. Budget and wage bill ceilings can undermine impoverished
countries' ability to provide adequate salaries for health and education
workers, hire additional needed health workers and teachers and scale up
and improve the quality of the health and education sectors. The IMF has
made some moves toward eliminating wage bill ceilings, but maintains
budget caps that limit overall government spending flexibility. Expanded
spending in the crucial areas of health and education must not be
subjected to these overall budget caps.

* Developing countries must be permitted to spend foreign aid for its
intended purposes. The IMF's own Independent Evaluation Office (IEO)
finds as much as 74% of additional foreign aid to 29 countries in
sub-Saharan Africa between 1999-2005 has been diverted from its intended
purposes. Instead of being spent on health, HIV/AIDS, and education, it
has been allocated to domestic debt payment and international currency
reserves because of IMF policies regulating monetary policies. While we
understand that the establishment of strong reserves can be a priority
for a country, the decision of whether to use foreign aid to build up
reserves should be the government's, made after public discussion of the
implications with civil society, the legislature, and other
stakeholders, with a clear analysis of the trade-offs involved.

* Debt cancellation must be de-linked from harmful economic policy
conditions, including overly restrictive deficit-reduction and
inflation-reduction targets, wage and budget caps that limit spending on
health and education; policies that lead to diversion of foreign aid
from its intended purposes.

* Transparency and the right to access information must be strengthened
at the IMF. Disclosure of IMF draft policy papers, technical assistance
reports, and Executive Board documents -- such as the minutes on Board
meetings -- is imperative to facilitating informed participation by
external stakeholders in national economic decision-making and to
ensuring citizens' ability to hold their governments accountable.

* Too often, poor borrower countries' macroeconomic policies are
established through secretive deliberations by the IMF, and the Central
Bank and the Ministry of Finance. IMF practices must change to restore
national, democratic decision-making over policy-making. IMF Mission
Teams that visit countries to review loan agreements or conduct annual
surveillance (Article IV reports) must participate in explicit and open
consultations with a wide range of external stakeholders, not just with
the Ministry of Finance and the Central Bank. Stakeholders should
include other relevant government ministries (including health and
education), independent economists and academic specialists, national
civil society and labor unions. These broad and meaningful consultations
should occur before a country's macroeconomic policies are set.

Finally, we note that the IMF's gold sales proposal suggests there would
be no subsequent sale of gold, and that the proceeds from this sale
would enable the Fund to be self-financing. Both of these matters
require careful Congressional review.

Given skyrocketing costs for oil, redressing developing country debt
problems and meeting Millennium Development Goal (MDG) objectives may
require new sources of funding in the future. There is no reason to
preemptively commit to not deploying the global public good of IMF gold
for this purpose in the future.

One consequence of the IMF becoming self-financing is that Congress
would no longer have meaningful leverage over its policies. Given the
Fund's record, and the importance of Congressional intervention to
advance development objectives in the past, we believe this arrangement
merits, at least, very careful review before it is put into place.

Sincerely,

ACT UP New York

ACT UP Philadelphia

ActionAid International USA

AFL-CIO

Africa Action

Africa Faith and Justice Network

African Services Committee

AIDS Project Los Angeles

American Friends Service Committee

American Jewish World Service

American Medical Student Association (AMSA)

American Public Health Association, International Health Section

Americans for Informed Democracy

Artists for a New South Africa

Bank Information Center

Center of Concern

Columban Justice, Peace and Integrity of Creation Office (USA)

Community HIV/AIDS Mobilization Project (CHAMP)

Dominican Sisters of Hope

East Timor and Indonesia Action Network (ETAN)

Essential Action

50 Years is Enough: U.S. Network for Global Economic Justice

Foreign Policy in Focus

Gender Action

Global AIDS Alliance

Global Action for Children

Global Exchange

Global Youth Coalition on HIV/AIDS (GYCA)

Haiti Reborn/Quixote Center

Harm Reduction Coalition

Health Alliance International

Health GAP (Global Access Project)

HIVictorious, Inc.

Holy Cross International Justice Office

Institute for Policy Studies, Global Economy Project

International Accountability Project

International Labor Rights Forum

InterReligious Task Force on Central America

Jubilee Montana Network

Jubilee Northwest Coalition

Jubilee Oregon

Jubilee San Diego

Jubilee USA Network

Jubilee Virginia

L.A. Gay & Lesbian Center

Leadership Conference of Women Religious

Maryknoll Global Concerns

Mennonite Central Committee U.S., Washington Office

Mercy Investment Program

Missionary Oblates of Mary Immaculate, Justice Peace/Integrity of
Creation Office

National Women's Health Network

Nicaragua Center for Community Action (NICCA)

Nicaragua Network

North to South Aid

Northwest International Health Action Coalition (NIHAC)

The ONE Campaign (Make Poverty History)

Oxfam America

Partners in Health

People's Health Movement

Physicians for Human Rights

RESULTS, USA

San Francisco Bay Area Jubilee Coalition

School Sisters of Notre Dame =96 Global Justice & Peace Commission

School Sisters of Notre Dame =96 Milwaukee Provincial Council

Service Employees International Union (SEIU)

Sisters of Mercy Regional Community of Detroit

Sisters of the Holy Cross, Congregation Justice Committee

Sojourners-Call to Renewal

Stop HIV/AIDS in India Initiative (SHAII)

Student Campaign for Child Survival (SCCS)

Student Global AIDS Campaign (SGAC)

Student Trade Justice Campaign (STJC)

TransAfrica Forum

Treatment Action Group (TAG)

Unitarian Universalist Association of Congregations

United Methodist Church, General Board of Church and Society

Ursuline Sisters of Tildonk-U.S. Province

Vermont Global Health Coalition

WingSpan International USA

Witness for Peace