Finally in mid-2009, the UK issued a report on its relationship with the IMF for 2007-2008, covering two years instead of the normal one to rectify the complete failure to issue an ‘annual’ report for 2007. It lacks ambition for further reform at the Fund, and because so little was achieved in the two years it covers, the report mostly hails agreements that were achieved in 2009 to strengthen the IMF.
At end June, HM Treasury released its ‘annual’ report to parliament on the UK’s relationship with the IMF, The UK and the IMF 2007 and 2008: Responding to global economic challenges. The annual report is usually due in the spring to report on activities of the previous year. On top of missing the 2007 report entirely, the Treasury released this report late in the year. The more-than-40-page report lauds many supposed achievements of the past two years, but spends less than one page discussing the UK’s priorities for the future.
The priorities outlined for the future in the final chapter are unspecific and lack timetables or indicators for assessing progress. Governance reform, transparency, surveillance, and the low-income country lending framework are merely mentioned without a shred of detail. The only issue that gets more than passing reference is “ensuring that the resources already committed to the IMF are delivered,” but without any discussion of need for complementary reforms such as ending the IMF’s economic policy conditionality, which falls foul of the UK’s bilateral conditionality policy for its own aid.
Some admissions of guilt
The report admits that the Fund has serious problems with its surveillance role: “the current crisis has demonstrated the Fund’s shortcomings” and “it is commonly perceived to have little traction in advanced countries.” Despite continued failing by the IMF to better integrate macroeconomic and financial sector linkages over the last decade, the refrain is issued again that “it is vital that the Fund’s approach to surveillance places much greater emphasis on assessing macro-linkages and spillovers.”
On governance issues, the report blandly states that “some changes have taken place during the last two years,” raising false hopes that the UK might set out its stall for greater reform. In the end the report says nothing about the government’s future goals on quota reform, sticking instead to a long discussion about “ensuring a stronger ministerial role in strategic oversight and decision-making.” It skips discussion of the Fund’s transparency policy in the section on governance, leaving it to the section on surveillance where it only concerns itself with the publishing of Article IV reports. So while the UK repeats the right promises on the selection process for IMF senior management, it fails to tackle institutional transparency or issues of representation at the board.
Claims of success on conditionality
Finally in the important area of conditionality reform, the UK report says little beyond describing the reforms taken largely in 2009 in response to the crisis. In approaching crisis lending requests, “The UK has also emphasized the need to tailor conditionality to the minimum adjustment necessary to get countries back on a sustainable path” and “reiterated the need for programmes to … avoid unnecessary and pro-cyclical fiscal policy corrections.” However “the UK has supported all requests for IMF programmes,” leaving questions about how strenuously the British executive director has objected to counter-cyclical conditions in IMF programmes over the last two and a half years, such as those used in the Hungarian or Latvian programmes.
The report even fails to provide the exact commitment of the UK to the increase in IMF resources agreed at the April G20 summit, only saying the UK “will contribute as part of the collective EU commitment announced by EU leaders at the spring Economic Council.” A draft parliamentary instrument published on an obscure government website revealed the amount to be £10 billion ($15 billion).
In the crucial area of low-income country relations with the IMF, the paper ignores most of the strenuous debate that occurred in 2007 and into 2008 over the conditionality of the Fund in a situation of improving macroeconomic balances of low-income countries. The report claims “we monitor progress on the key targets that [Poverty Reduction and Growth Facility] programmes are expected to meet in developing countries through reporting on pro-poor budgets and Poverty and Social Impact Analysis (PSIA).” It fails to note that the IMF has conducted just a handful of PSIA in its entire history and has decided to leave this up to the World Bank (see Update 58, 55). The Bank does not even conduct PSIA for all of its own lending conditionality (see Update 66), let alone do them in time for IMF programme negotiations.