Accountability

Analysis

UK and the IMF 2003- 5th annual report to parliament

4 June 2004 | Review

“Growth for all: towards a stable and fairer world” – the UK and the IMF 2003

Published and laid before Parliament on the 24th March 2004, this is the 5th annual report to parliament on UK operations at the IMF.

In the Foreword by the chancellor:

  • Notes steady recovery in the world economy but acknowledges global growth remains uneven
  • Sets out UK priorities to ensure globalisation works for the poorest- availing resources for investment, successful completion of the Doha trade round – with a focus on fair access to markets and the reduction of trade distorting subsidies especially in agriculture – UK suggests that “trade conditionality should reflect the new country led approach” based on PRSPs.

Calling for IMF reform in terms of

  • Stronger and independent surveillance – independent from lending and political influence
  • Enhanced Fund tools for crisis prevention and measured and orderly responses
  • Fairer terms in the world economy

Report identifies 3 challenges

  • good policies for sustained economic growth
  • world trade that benefits all
  • fairer economic system that results in poverty reducing growth

Fund functions

CRISIS PREVENTION

Surveillance – macroeconomic policy analysis and advice

  • UK will continue to push for greater independence and transparency of this function
  • Credible policies – sound policy advise (macro and micro economic)
  • UK supports highest levels of transparency in Fund surveillance as through the publication of reports. In this regard UK welcomes the new guidelines on transparency- see page 30 of the report
  • Appropriate facilities – UK will explore with others possible models for independent surveillance system.

For IMF in low income countries, UK urges:

  • Realistic assumptions on growth and exports
  • Assessment of macro economic framework’s support for the PRSP and the MDGs targets
  • Open discussion of alternative macro economic frameworks
  • Use of PSIAs for poverty focused dialogue on policy choices and trade offs associated with reforms
  • Flexibility in Fund programs including accommodation of higher aid flows.

CRISIS RESOLUTION

  • Effective framework – UK supports consultative approaches to crisis resolution
  • Trade and growth – UK supports Fund and Bank’s initiative to help developing countries deal with the short term adjustment problems of trade liberalisation. Will work for a domestic environment conducive for growth through infrastructure and human capital investment, including in IMF activities.
  • Financing the MDGs – UK proposes the IFF (page 43) matched by reforms in developing countries and aided by the IMF – but that countries “have an effective voice within the Fund” – additional development finance needed and enhanced aid effectiveness

Fund in low income countries – review of Fund programs and policy advice planned in 2004. In this regard it will be critical to address the tension between short term stabilisation measures and long term efforts for growth and poverty reduction.

Voice for all in IFI’s – “UK will continue to push for effective voice of developing and transition economies within the IFI’s including increasing the capacities of executive directors representing developing countries”. The executive board endorsed the IMF’s Africa Capacity Building Initiative – page 48 – issues of staff diversity, transparency and decentralisation. UK will continue to work to generate the requisite political consensus on the “more challenging issue of structural reform to the governance structure of the IMF”.

Learning and responding – the UK will continue to support a responsive and collaborative Fund with a strong learning culture. In this regard the UK supports the IEO’s work which in 2004 includes Fund experience with PRGF / PRSP approach; a case study of Fund involvement in Argentina and the role of the IMF in providing technical assistance.

UK Support for “Evian approach” to the Paris Club’s approach to debt resolution – page 36

On the SDRM UK supports “orderly restructuring of sovereign debt” given the “institutional challenges needed to establish and SDRM”

Working with others – UK supports steps towards improved collaboration between Bank and Fund and others; noting that collaboration is clearer within PRGF programs with low income countries than with the Stand by arrangements in middle income countries where no formal framework exists. UK will use its presence at the Executive boards to push for enhanced coordination and effectiveness of bank and Fund

UK keen on further work on PSIAs.

Surveillance of the UK

The UK’s Article 4 consultation was conducted in December 2003 and discussed by the executive board in March 2003 – directors commended “the continued strong performance of the UK economy” the full UK Article IV report is available on the IMF website.

To obtain copies of the report or for general inquiries please contact Correspondence and Enquiry Unit, HM Treasury public.enquiries@hm-treasury.gov.uk