Sponsor: ActionAid International
Speakers: Soren Ambrose, Specioza Kiwanuka
Chair: Jesse Griffiths, ActionAid

Presentations

Soren Ambrose – on the PSI

• Basics on the PSI
• Nigeria first in 2005
• Defined as instrument for LICs, no loans, designed for “mature stabilisers”, still sends signals
• No money -> symbolic of new role of the IMF, advisor more than lender or disciplinarian; emphasises gate-keeper role and public credit rating agency
• PSI is linked to MDRI
• What is a “mature stabiliser”?
• Countries that had gone through macro-instability
• Now with internal macro balance and fiscal stability
• Indicators, GDP growth, inflation < 10%, domestic debt , 1% of GDP
• In effect the PSI does not differ from the PRGF
• Even IMF called it a PSI without money
• If countries are stabilizers – shouldn’t the programme be different than a crisis programme; should be able to pursue more development goals
• Descriptors – flexible, home-grown, country dialogue; though not officially described as flexible
• Mozambique and wage bill ceilings – constricted hiring of wage bill ceilings
• Uganda – ‘directed lending’ programme opposed by the Fund.
• Conclusions and recommendations
• IMF has opportunity to take a bold step on signalling
• Can be proactive in positive signal on governments tackling MDGs and human development goals, allow fiscal space while not violating macro stability
• Need to approve programmes that are not similar or identical to IMF programmes
• There should be questions on the credit rating agency function of the IMF – maybe there are other options for this
• Conflict of interest in both designing and evaluating programmes
• Countries need fiscal space and policy space to make own decisions – the PSI could do that, but it is not now

Specioza on Uganda PSI programme

• Bonna Bangawala programme – this was a domestic priority that was challenged by the IMF through the PSI
• IMF has rhetoric on supporting policies, but this is not happening in practice
• Credit in Uganda
• SACCOs are the method by which the scheme was supposed to help low-income people get credit
• Borrowing costs are high, credit availability is low – only large companies and government
• Microfinance has not filled the gap – they only reach a small proportion of the population, their credit is not very affordable
• In election campaign – rural voters demanded credit programmes, the president made a promise in the campaign
• December 2006 – the IMF communication called it directed lending and essentially wants the programme stopped
• Clear popular support
• Government trying to address needs
• Filling gaps to solve market failure of rural credit
• Government later included in its programme and defended the idea
• Unclear what the IMF response will be
• No conditions in Dec 2006 to stop the programme
• Maybe the IMF wants to avoid criticism
• Earlier IMF statements maybe undercut ability to raise funds from donors

General Discussion

Robert – civil society for poverty reduction in Zambia

• How does parliament oversee government loans in Uganda
• What about two-way monitoring from Paris Declaration? Do we have a tool for monitoring the IMF and is fulfilling its promises?

Vasuki Shastri – IMF

• Where exactly PSI should head? Greater role or less?
• In Uganda, this is the wrong impression. Rural credit schemes don’t work – ie evidence in Asia. This isn’t national sovereignty, it is a leakage and targeting

Peter Chowla

• What about Korean rural credit schemes?
• What about Uganda Development Bank and privatisation – has this effected credit provision?

Grenada’s ambassador to UN

• Did the IMF come up with any alternatives when they criticised the Bonna B programme?

Specioza

• In Uganda – the parliament does approve loans, but PSI has no loan – parliament is not involved in the contract or the review process
• This is a ‘directed lending’ programme – only IMF called it this

Eric Gutierrez

• There is an urgent need of credit in the rural sector, WB/IMF has over 20 years of SAP destroyed credit access to rural small landholders
• Yes rural credit scheme have had problems – this requires good design and good management of the programme
• Small holder agriculture needs credit to be viable
• IMF needs to help design the programme well

Specioza

• IMF gave no alternatives – only to rely on private markets
• On UDB – not really linked to the past experience

Soren

• Do we want IMF out of the PSI business? – no clear answer
• Depends on the design. If same as PRGF then it is not useful
• If the IMF were to take on role of promoting development, and depart from rigid guidelines, and promote expansionary policies – then it can be useful
• If IMF can not be persuaded to go in that direction – then we must question IMF’s status as the signaller, donors should be looking elsewhere at more objective institutions

Amy Gray

• Grameen Bank as a positive example of micro lending in Bangladesh
• Bangladesh said it doesn’t want PSI – clearly something in Asia is happening differently
• Clearly a problem between calling it home-grown programme when the IMF might be curtailing the programme

Eric Gutierrez

• How do you manage the trade-offs between inflation and growth. When it isn’t a crisis anymore, then these trade-offs are really important
• Now these countries are not in crisis – IMF does not have expertise to deal with long-term development problems

Saviour (CSPR Zambia)

• The question of ownership – different definitions from IMF point of view and the public
• IMF thinks finance ministry officials bought-in is ownership
• But ownership must be broader – CSOs, parliaments, etc
• Narrow view of ownership will distort things
• Executives and civil servants have different interests
• IMF should promote real ownership, not rely on fin min
• On relevance of IMF and alternatives
• Perception studies on multilateral agencies
• ODI study on aid effectiveness and other rankings
• UN agencies always preferred over IFIs – even among the government officials

Colins M from ActionAid

• IMF programmes and conditions have led to crash of political systems
• We had a similar situation in Malawi – fertiliser subsidies
• Political agreement in the country to increase subsidies but the World Bank completely opposed
• Government will have choice to either go against the IMF or the people
• Fund claims to have promoted more fiscal space in Africa
• But this doesn’t match with what we see in the PSI
• We have had enough of untested programmes and policies
• Practice on the ground has not changed, business as usual

Rick Rowden from ActionAid

• Definitional problem of what is ‘macro stability’
• What level of interest rates and fiscal deficits means macrostability
• On interest rates
• In Malawi – who buys the bonds, only commercial banks
• Banks buy the T-bills, and enjoy the high interest rates

Akanksha Marphatia from ActionAid International

• In Mozambique – there was demand by donors on why wage bill ceiling is there, still can’t hire enough teachers
• Some donors (UK, DFID, Nordics) are questioning the role of IMF in mature stabilizers

Jan Kees

• We get accused of both one-size-fits-all policies and for being incoherent
• Country executive branches oppose the IMF reaching out to parliaments and citizens; plus the Articles of Agreement don’t allow this
• We did lift the wage bill ceiling in Moz., that shows we are flexible
• Of course ownership doesn’t come from just a few finance ministry officials; we would like to see counter examples where it is just a few people in the finance ministry

Specioza

• Government of Uganda would write the PSI itself if it were really home grown
• Mature stabilizers should be trusted to write their own policies

Soren

• Reiterated the points about the IMF potentially having a new more constructive role to play. The IMF could signal that countries are running “good” but expansionary programmes that meet domestic development priorities
• European donors don’t match their rhetoric to their reality on whether they want a signal from the IMF or not, this should be fixed
• The IMF is running out of willing takers for its standard advice, plus advocacy is increasing.