IMF role in low-income countries

Meeting with civil society at the annual meetings 2004

4 October 2004

Peter Heller, deputy director of the fiscal affairs department of the IMF and Mark Plan, assistant director of policy development and review met with CSOs to discuss the role of the Fund in low-income countries.

Plant explained the Fund position on a number of issues:

HIPC: the original net present value of debt to export ratio was a political compromise. The new indicators based on policy performance will end the predominance of a single, arbitrary indicator and will consider country contexts.

PRSP: As the IEO/OED evaluations found the PRSP has not lived fully up to its promise. They have asked for better discussion in the Fund on macro-frameworks. Joint staff assessments (JSAs) will be replaced by a joint staff advisory note. Importantly, this will eliminate the need for a Bank board meeting specifically for approval of the PRSP, with the decision now to be made “in the lending process”. Parliamentary oversight of agreements is “good practice” but the Board does not want technical staff to evaluate the quality of participation.

PRGF: The right place to have CSO-government discussion is in the PRSP. The PRGF is between the Fund and the government. Each discussion should inform the other however. Countries in the past have felt compelled to align the PRSP to the PRGF macro framework. Now countries should be free to set optimistic projections in the PRSP to attract greater donor support, and the Fund will openly criticise. This will generate transparent, public discussion.

Policy monitoring: A new tool is to be developed. In the past, after discussions with the Fund, countries were usually given some space to get policies back on-track. This led to a ‘fuzzy’ signal. Benchmarks will now be set at six month intervals with an on/off signal given in each of a,b,c areas. Donors will be free to judge this signals for themselves. A paper will be prepared for the next annual meetings on the purposes of Fund signals.

PSIA: Impact assessment is complicated and the Fund will have to rely on PSIAs from other donors, governments and civil society.

Innovative sources: Aid should not have unwanted financial effects. Care is needed that transaction taxes do not damage economic growth. The UK’s international financing facility proposal is feasible but technical details remain. Needs more transparency in commitments and how the proceeds will be disbursed.