IMF macroeconomic policies and the impacts on education budgets and teacher wages

IMF civil society dialogue, spring meetings 2007 (14 April 2007)

27 April 2007 | Minutes

Summary written by Akanksha Marphatia and Rachel Moussie, ActionAid International


Tennyson Williams, Country Director ActionAid Sierra Leone
Julita Nsyanjama, Education Adviser, ActionAid Malawi
Paula Mendonça, Education Adviser, ActionAid Mozambique
Rachel Moussié, Researcher, ActionAid
Calvin McDonald, Advisor to Africa Department, IMF
Robert Prouty, Senior Education Adviser & Deputy Director of FTI-EFA, World Bank

Respondent: Anne-Marie Ainger, Economist

Moderator: Akanksha Marphatia, Senior Education Policy and Research Analyst, ActionAid


ActionAid launched the report, Confronting the Contradictions: the IMF, wage bill caps and the case for teachers at a panel discussion jointly organised by the IMF and World Bank. The report argues that IMF macroeconomic policy advice is the main driver for the low ceilings on public sector wage bills. As a result, because teachers make up the largest single group on the wage bill, governments are unable to hire all the teachers needed to ensure quality education for all.

The ActionAid panelists shared experiences in their own countries while putting forth the principle arguments in report, Tennyson made the case for education; Rachel spoke about the constraints placed on hiring new teachers as a result of the IMF’s macroeconomic policies; Julita spoke powerfully on the trade offs and sacrifices Governments are forced to make, especially when it comes to hiring teachers; and Paula’s conclusion called for a nation’s right to democracy and sovereignty.

The IMF, represented by Calvin McDonald (also the out-going Mission Chief of Malawi) assured the panel that the IMF is well aware that wage bill ceilings are only a second-best solution for controlling government expenditure on wages. Consequently he did state that the Fund would "review, on a county-by-country basis, the need for wage bill ceilings, and back away from imposing them if normal budgetary processes are working." The Fund also made this statement in the IMF newsletter, released a day before the panel discussion; an article on wage ceilings can be found on pages 90-91 ( This gives civil society organizations (CSO) a golden opportunity to follow up on this claim in country and see that wage ceilings are no longer part of PRGF agreements and that the underlying macroeconomic policies of low inflation and fiscal deficits are expanded to enable a scaling up of spending so enough teachers (and health workers) can be hired. 

Unfortunately, Calvin did not address in any detail these underlying macroeconomic policies that constrain overall government spending, including spending on the wage bill in his presentation.

Robert Prouty from the World Bank provided a good balance, agreeing with most all our education findings but did not directly mention the role of the IMF in setting wage bill ceilings. He did concede the need for better collaboration between the two institutions and the need to find a way to ensure more teachers can be hired.

In the audience the Mission chiefs from Mozambique (Jean Clement) and Sierra Leone (Norbert Toe) were present and active respondents to the presentation.  Jean Clement raised concerns regarding rising rates of inflation and debt sustainability in low-income countries, such as Mozambique. He reiterated the IMF’s stance that these cannot be sacrificed for greater expenditure on education, though he did acknowledge that education contributes significantly to economic growth.  The respondent, Anne-Marie Ainger pointed to the growing debate within economics as to what are the most appropriate inflation or deficit rates for low-income countries that must also spend on key priority sectors such as education and health for long-term development. 

One of the key things the IMF tried to bring the debate back to was their efforts to be participatory; and that the Fund, including the Mission Chiefs present at the discussion, all meet regularly with CSO when visiting countries.   In response, the ActionAid panelists directed the IMF to the new report by the Fund’s own International Evaluation Office (IEO) "The IMF and Aid in sub Saharan Africa" ( which stated that where 80% of IMF staffers interviewed believe that they are better engaging with CSO, only 20% of CSO felt the same.  ActionAid held the Fund to their word publicly by inviting them to meet with CSO in country.  Consequently, Tennyson, Julita & Paula are going to actively follow up with the IMF representatives and the Mission Chiefs present at the panel once they return to their respective countries.

Finally, the ActionAid panelists also noted that the PRGF processes are not representative of national goals nor did citizens, especially those most affected by these policies, drive them. Where they have had some success in being participatory, they have on the whole failed to enable any discussion on macroeconomic policies, one of the key drivers to determining the size of the national budget and resulting restrictions on expenditures (i.e. wage ceilings).  In their defense, the Fund stated that it is up to Finance Ministries to include CSO and parliamentarians in PRGF discussions, not them.  

Overall, the panel was instructive and a good step forward in publicly discussing these issues with the IMF. The panel however was only one part of the longer-term processes in which the real locus of change is at the country level, and how well ActionAid and other CSO are able to garner support from broader civil society on these issues.  In particular, CSO must hold the IMF to their word and ensure that unjustifiably low wage ceilings are no longer imposed through IMF loan agreements.