Meeting between UK civil society and Alex Gibbs, UK IMF Executive Director
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Participants
NGO Attendees: Peter Chowla (Bretton Woods Project), Anna Thomas (ActionAid UK), David Archer (ActionAid International), Erica Carroll (Christian Aid), Jasmine Burnley (Oxfam GB), Sarah Edwards (Health Poverty Action), Jonathan Stevenson (Jubilee Debt Campaign)
Officials: Alex Gibbs (UK ED to the IMF), Dominic Curran (HMT debt team), Ed Wilson (HMT debt team), Claire Wren (HMT development policy team), Keith Wood (DfID – IFID), Britta Moeller (HMT IMF team), Ben Cropper (HMT IMF team), Timo Del-Carpio (HMT IMF team)
Financial Transaction Tax and IMF study
NGO points (Jasmine)
- Report needs to include that the FTT is technically feasible and compare FTT to other taxes;
- Report should reflect true costs of the crisis, not just narrow costs to government of bank bailouts;
- FTT is the only option to compensate for full losses, meet development and climate finance needs;
- Report should recognise the moral hazard problem of the proposed bank levies.
Alex Gibbs response:
- Haven’t seen the paper yet but talked to IMF staff working on it; it is on-track for April;
- At the Board, UK argued strongly for IMF staff to look at all options, FTT will definitely be compared to other taxes;
- The paper will be rooted in economic analysis of tax – assume it will look at criteria well known in literature like incentives and distortions, revenue potential, administration issues; will probably look at moral hazard
- Expect IMF staff will set out pros and cons of all options to provide a framework for decision making; but probably not make a recommendation in favour of a single best option;
- Expect that the IMF board will see the paper before it goes to the G20.
IMF Mandate
Surveillance
NGO points (Peter):
- Mandate discussion needs to be tied to governance reform;
- Rich country policies need to be the focus, their spillovers to other countries need to be addressed – this is the value added of a multilateral agency;
- As the IMF takes on more work in this area, they should shed work where they have less value added – ie interfering in LIC policies.
Alex Gibbs response:
- This is a question about “traction” for the Fund, we want to increase Fund’s traction, we want spillovers at the heart of the IMF’s surveillance work (not just exchange rates), that was our view of the 2007 Decision;
- Surveillance should focus on inward and outward spillovers; but implementation of 2007 Decision has been patchy;
- The bilateral surveillance route is problematic because there is a structural problem – the IMF is organised under powerful regional departments with surveillance led by country experts, not by cross-country issue experts; the analysis on spillovers can sometimes be pretty basic;
- The mandate paper takes a systemic approach; it suggests groups of countries, regional surveillance, thematic reports etc. The Fund does face legal restrictions on making recommendations about spillovers – with political support from others we can address this either through workarounds or an amendment to the Articles;
- In the past the UK has supported greater Ministerial engagement in the Fund’s strategic decision-making perhaps through an IMF Council and we will continue to push for progress with these wider governance reforms that have been proposed in the Manuel Report and elsewhere; the IMF recognises the need to align governance and mandate discussions – they are on similar timetable and will be progressed in parallel;
- The G20 mutual assessment process, with IMF involvement, is the most important and critical process for developing multilateral surveillance; there is a sense of ownership from G20 countries and high levels of involvement from country authorities;
- Don’t rule out continuing role of board discussions – third country views on Article IVs are important and taken into consideration; though EDs don’t go to their own Article IV discussion to make new policy commitments.
Follow-up point from Peter Chowla:
- Key point is that small middle-income countries and LICs have no voice at the G20, and without governance reform their voice is limited at the IMF board too; but they are heavily effected and need a say; this is why NGOs have recommended that such discussions happen either under a radically reformed IMF with equitable governance or at the UN.
Alex: What constituency system would you envision at the IMF?
Peter: for example – no single-seat constituencies, all elected constituencies, cap on constituency size, transparency on constituency issues, accountability to parliaments within constituencies, ability to recall EDs, European EDs to sit together in fewer seats, UK to sit with other European countries – all ideas in the various reports (Manuel committee, IEO, New Rules).
Crisis facilities and international monetary system/SDRs
NGO points (Peter):
- Need Flexible Credit Line (FCL)-like facility for low-income countries; and wider access to FCL;
- Want SDRs issued more regularly and not on basis of quota formula but on basis of need as most SDRs went unused in the crisis;
- Want the discussion on replacing the dollar now, think we need more international policy; coordination over exchange rates.
Alex Gibbs response:
- Wider access to FCL might load stigma onto countries that use it; so maybe a facility between FCL and SBA would be a good idea;
- We can’t be sure US Fed will be there with swap lines next time so need a multilateral solution.
Follow-up from Peter Chowla: Fed swap lines didn’t have stigma attached, so no evidence that an FCL with wider access would bring stigma
Alex Gibbs response:
- We can conjecture what would have happened if no Fed swap lines had been available, maybe more countries would have used the FCL;
- On international monetary system – this is a medium term discussion, agree we need to start the debate now; we are looking for multilateral solutions.
Follow-up from Anna Thomas: we believe repeated issuance of SDRs can be used for climate finance as well, as long as the funds are managed by a UN institution, not the IMF.
Alex Gibbs response:
- Not sure climate finance is an issue for the IMF, the IMF work is to start thinking about financing and how SDRs can contribute; the Fund will not be organising global climate finance;
- SDRs raise issues – there are infrastructure problems, creaking systems for SDR use; SDRs are not really new resources, they are only IOUs for countries with hard currencies; there is a cost to the country borrowing the hard currency and to the supplier.
IMF policy around taxation
NGO points (Anna):
- Is IMF changing its approach to revenue mobilisation?
- Is the IMF going to play a bigger role in analysing data on financial flows to/from off-shore centres in order to assist international crack down on tax havens?
Alex Gibbs response:
- Not sure on either question; lets follow-up later.
Exit strategies in low-income countries and conditionality
NGO points (Sarah and David):
- Action for Global Health report shows some flexibility from IMF, but this appears to be short-term; overall we find IMF flexibility to be reactive rather than proactive;
- LICs will see impacts of crisis lagged compared to rich countries, especially aid falls may hit in 2010-2012; but the moderate flexibility is coming to an end now;
- The level of reserves has stayed constant through the crisis, but we were told (pre-crisis) that they were there for times of crisis – this is the best time to draw them down; the IMF needs to be proactively suggesting their use.
Alex Gibbs response:
- Fund believes its programmes have been less pro-cyclical; they have adjusted programmes on a country-by-country basis; a country’s starting point is the key;
- I hope and expect that the approach to flexibility will continue as long as the crisis conditions persist;
- The IMF is sensitive to timing issues of the crisis impact, we are all questioning about the right time to exit, and want to avoid too early or too late exits.
NGO follow-ups:
- David Archer: the IMF is sending the message that there will be a “V” shaped recovery and not a “U” shaped one – this is very dangerous view, especially since the impact on citizens is expected now and later; we need proactive engagement from the MIF, especially with a potential MDG recue package to be announced later this year.
- Peter Chowla: The IMF fiscal targets are already showing less spending, this puts pressure on finance ministries already even if IMF claims it will be flexible.
HM Treasury: A key question is if oil and food prices keep rising this year; subsidies on these products could potentially have a greater fiscal impact than overall fiscal deficit targets.
David Archer: We need a strong positive message from IMF headquarters in Washington on the proactive use of reserves to meet spending needs.
Debt relief
NGO questions (Jonathan):
- Update on Haiti’s debt relief? What is timetable, sources of finance?
- DRC schedule? Anything holding up debt relief?
- Approach to Zimbabwe’s arrears? What has been learned from Liberia?
Alex Gibbs response:
- Staff are still working on the options paper, not seen it yet; we might get it just before Spring Meetings; we will let you know who is leading on the paper;
- DRC is on track and going through the process.
HM Treasury:
- We expect DRC process in the middle of the year, DRC is broadly its on course;
- Zimbabwe voting rights have been restored, it is clear that eventually they will need debt cancellation; but Zimbabwe has a long way to go before it is on the agenda;
- We need an indication from the Zimbabwean authorities before we can proceed;
- We can use the models developed for Liberia so that the process won’t take too long;
- Zimbabwe’s arrears are smaller than Liberia’s.
IMF governance
NGO points (Jasmine):
- You promised a reformed quota formula before it was used again but the G20 agreed to use the same formula for this years’ review;
- You also promised open merit based selection for all senior leadership at the IMF, but now a new Japanese deputy MD has been appointed without such a process.
Alex Gibbs response:
- You are right about the promise on the formula; but that was before we brought the next review forward by two years compressing the timetable. Countries haven’t even enacted the 2008 quota review and we are starting a new round;
- There are strong views from countries on the formula components, we just don’t have enough time to debate this before the deadline of January 2011, so the G20 simply recognised the reality of the situation in agreeing to use the current formula.
Jasmine follow-up: So what is the timeframe for changing the formula? Are going to wait until 2016?
Alex Gibbs response:
- It can only be handled as part of the next quota review now, I won’t commit to anything on the timeframe for the next review given we are just starting on the current review; the data to be used in the formula for this review will not be available to the second half of 2010 anyway;
- Early indications are that economic trends mean the current formula is doing its job and delivering a shift in quota to dynamic emerging markets as updated data are included;
- I believe we can deliver the G20 commitment on time; would help if we had CSO pressure on emerging markets that have not yet enacted 2008 review.
Peter Chowla follow-up: Don’t expect CSO pressure in the South for reform that they disagree with.
Alex Gibbs response:
- On management selection – there is internal work on setting up the process, the paper on this is on its way forward;
- The UK is clear that this has been a priority for us, we have stressed this at the IMF and at the World Bank.
Peter Chowla follow-up: Have you brought this up in the board? Are you using the past work done in 2000/1? Have you held the managing director accountable for his failure to live up to his own promise and that of the shareholders? The performance on this is just not good enough.
Alex Gibbs: A vacancy needed to be filled, the board is working on a procedure to enable the MD and governments to fulfil their promises. I would be surprised if they are not building on past work. I am not on the board subcommittee, will follow up with you on who is the chair.
