Speakers

Joanne Salop, Independent Evaluation Office (IEO)
Benedicte Christensen, IMF Africa Department
Mark Plant, IMF PDR
Peter Chowla, Bretton Woods Project, UK
Nuria Molina, Eurodad
Moderator: Jo-Marie Griesgraber, New Rules For Global Finance

Presentations

Joanne Salop:

• Went through the highlights of the IEO report

Benedicte:

• Important to consider what is the IMF’s mandate
• Africa saw significant improvement of its economic performance, especially inflation which has a huge impact on the poor
• We agree with the recommendations of report; but communications work is very difficult

Nuria Molina:

• We need an open discussion outside the board of these topics
• WB-IMF coordination is a serious problem; it can happen but it is not
• Progress is needed on many fronts: aid accommodation, inflexible macroeconomic frameworks, over-conservative role in aid mobilisation, and PSIA

Peter Chowla:

• Participation is still a central problem
• The failures of the IMF at this stage mean we need to rethink the role of the IMF – should it be involved in LICs at all, should it be lending?

Mark Plant:

• It is a good report but we also need to step back and think about IMF successes
• Process points on participation and consultation
  • Initially the approach was very open, this meant it was an ad hoc approach
  • PRGFs are progressing, they are more growth oriented now
  • The Fund underestimated the complexity of PRSP process, so the flow of information took macro stuff from PRGF into the PRSP
  • Now the flow is more complicated
  • HIPC intervened in the middle and complicated things, creating the need for iterim PRSPs which were problematic
• On substance of IMF programmes
  • Macro-stabilisation is the IMF focus, how to narrow current account imbalances
  • The question is after stabilisation how do you grow? Must then widen the current account imbalance, and fill the gap with donor aid
  • Growth and poverty reduction are complex – but the Fund can not do it alone, we must improve collaboration
• On financing questions, maybe the IMF does not need to provide financing as the PSI shows

Responses and Discussion

• Steven (Uganda Development Bank) – dishonesty about the consultation process – this is not real participation.
  • Quality of date in the PRGF is also an issue – national versus local data are very different
  • Poverty levels are not going down despite the “improvement”
  • IMF has been pushing the elimination of public institutions, when the real solution is to strengthen them
• Rick Rowden (ActionAid USA) – The question on inflation thresholds for aid spending is key, but the board ducked answering the question of whether it really does support low single-digit inflation
• Benedicte – We don’t have an inflation magic number, we decide on a case-by-case basis; countries with high inflation also have low reserves making them subject to exogenous shocks; you must have a minimum level of reserves
  • Aid is lumpy, so it has to go to reserves first, then you can spend it
  • There are limits to absorption capacity – you can’t double spending overnight
  • Dutch Disease is also a factor – countries prefer not to have Dutch disease, these are negotiated programmes reflecting country desires
• Mark Plant – Andy Berg’s paper shows that post-stabilisation countries need more flexible inflation targets; spelling out the case-by-case reasoning could be useful; the IMF has a policy paper in progress: “Aid & Macro-economic Programming”
• Joanne – we looked at programme design which comes from the IMF, programme outcome is different
• Mark (IEO) – we also controlled for reserves when assessing the inflation threshold that determined aid spending, there was no Dutch disease as a factor because all the aid was absorbed
• Anne-Marie Ainger (consultant economist) – countries need options because of a lack of knowledge; the IMF staff still use a “rule of thumb” this is what country authorities told us when we did research
• Baledzi Gaolathe (Botswanan Minister of Finance) – for poverty reduction we must first grow the cake and then divide it equally; the IMF has a complementary role to play; for absorptive capacity problems – we need cooperation, to create ownership and stick to the Paris declaration;
  • The World Bank and IMF need to complement each other
  • Fopreign exchange constraints are a long-term problem for developing countries
  • PRGF resources should be available long-term, and recyclable
  • The IMF should go forward with its role in low-income countries
• Tennyson Williams (ActionAid Sierra Leone) – people in Sierra Leone don’t know what the IMF is; spending on people is an investment in the country and is necessary for growth; we need human capital – like doctors and nurses – so need to facilitate spending in these sectors
• Anne-Marie – need to consider what could cause absorptive capacity to expand
• Someone asked how much of African growth was from IMF policies and how much from high commodity prices
• Benedicte – We can’t attribute the growth in Africa to IMF policies or commodities – can’t separate it out;
  • The IMF limits overall spending but we don’t influence the priorities of spending
  • Internal process for deciding spending allocation are weak – they should be built
  • Availability of donor financing is not as predictable as it should be