IEO Evaluation of the IMF and Aid to Sub-Saharan Africa

Civil society dialogue, spring meetings 2007 (12 April 2007)

27 April 2007 | Minutes


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


Joanne Salop:

  • Went through the highlights of the IEO report


  • 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