4 October 2010
Participants
- Officials: Alex Gibbs (UK Executive Director to the IMF), Ben Cropper (HMT), Britta Moeller (HMT), David Fairbrother (HMT), Gillian Hood (HMT), Helen Walton (HMT), Jessica Smith (HMT), Lindsey Whyte (HMT), Rob Elder (IMF, Alternate Executive Director UK), Bob Hills (IMF, Advisor UK), Rob Ward (IMF, Advisor UK)
- Civil society: Ben Moxham (Trades Union Congress), Henrike Allendorf (Bretton Woods Project), Jasmine Burnley (Oxfam GB), Jesse Griffiths (Bretton Woods Project), Jonathan Stevenson (Jubilee Debt Campaign), Peter Chowla (Bretton Woods Project)
- Chair: Peter Chowla (Bretton Woods Project)
1. Financial sector taxation and FTT
Ben Moxham raised the following points:
- The Robin Hood Tax campaign is widely supported and has a long term commitment to seeing a global FTT implemented. Welcomed Andrew Mitchell saying he is open to the idea of an FTT in the context of international development.
- The IMF working paper on financial sector taxation is welcomed. It has come a long way. Does the UK see any prospects for consensus?
Alex Gibbs replies:
- IMF work indicates that FTT might be feasible but does not target systemic risk and rents.
- The IMF has an analytical role to play in this process.
- Not sure, if the IMF is working on different yields.
- There is no consensus on a single model within the G20 and no active debate on the IMF board.
Officials added:
- The UK is exploring the FAT and willing to continue discussing FTTs internationally.
- FTT is not the only possible solution for development and financial sector stability.
- Challenging discussions at the G20 on these issues highlight the difficulties there would be in making any progress at an international level.
2. IMF governance
Jesse Griffiths made the following points:
- Board seats: Europe currently holds 9 seats at the IMF board with 8 held by EU states. To open space for emerging markets and developing countries, Europe should reduce its chairs to 3-4. For example, one seat for the Eurozone, one seat for other EU members, and one seat for non-EU European members. The current EU proposals to rotate mean a reduction of only one seat. It is a long way from what is required and may not be regarded as a good faith offer. We are very disappointed that the EU appears to be using its previous privilege of appointing the IMF head as a bargaining chip. Do you share our concern?
- Leadership selection: Repeated and documented promises to put a merit-based selection process in place have not been followed by action: one IMF deputy managing director and three World Bank managing directors have been appointed since the last Annual Meetings.
Alex Gibbs replies:
Board seats:
- Europe has made a fair proposal to reduce their seats by two.
- Three to four seats does not appear an appropriate representation for Europe at the moment, given that Europe accounts for one third of global GDP.
- Europe also agreed to quota reforms that will benefit underrepresented emerging markets and developing countries and protect the voting share of the poorest: this is part of package.
- UK tries to promote voting reform and is open to the idea of a double majority system.
Leadership selection:
- You are right to keep pressing and holding G20 and IMF and WB members to account for their promises.
- It is wrong to interpret selection process as a means to hold on to board seats. Rather there has been no explicit commitment on the part of the US and Europe to give up the “gentlemen’s agreement” that they appoint IFI heads – until this agreement is made explicit by both sides, there will always be scepticism.
3. Debt cancellation, arbitration, including Pakistan
Jonathan Stevenson raised two issues:
- Debt moratorium for Pakistan: As a middle-income country Pakistan does not qualify for the IMF’s Post-Catastrophe Debt Relief Fund. There is an international campaign supporting an immediate moratorium for Pakistan’s debt servicing which reached $3 Billion last year. Does the UK support this?
- Debt sustainability in a broader sense: Recent records show that more countries in Africa face risks of debt distress in the wake of the crisis than did in 2005. It is time for a comprehensive debt workout mechanism. Will the UK support this?
Alex Gibbs:
- IMF and World Bank conclude a damage assessment that will feed into the Stand-By Agreement.
- The IMF has agreed a $451 million package for Pakistan.
- Debt moratorium may not be in Pakistan’s interest at the moment, because it would not provide sufficient or targeted resources for recovery and also harm the investment climate in the country and Pakistan’s future credit-worthiness.
- Much of Pakistan’s debt is domestic.
Officials added:
- Existing mechanisms, including the Paris Club, have proved effective in delivering debt relief.
- Fund analysis suggests that overall there has not been a serious deterioration of debt indicators for low-income countries during the crisis, although some countries have seen a deterioration.
- Share concern on future debt sustainability – need to consider the risks of re-accumulating debt alongside calls for greater fiscal space in low-income countries.
4. IMF mandate review
Peter Chowla says:
- Final IMF discussion on capital controls is pending, when can it be expected?
- IMF should advance a more robust approach to capital controls: The IMF should act in the interest of the country and give advice on how to best achieve their objectives, this includes technical advice on how to construct capital controls, including when these are long-term in character.
- There are concerns the IMF adopts a sceptical approach, opposing capital controls rather than advising on a country-by-country basis.
Alex Gibbs replies:
- Final discussion on capital controls will take place after the Annual Meetings.
- Don’t think the IMF or the UK are in favour of long-term capital controls. The IMF approach to capital controls is more pragmatic than NGOs envision it.
- Capital controls can be part of a tool-kit, but they are clearly not the first tool to reach for, and not a substitute for solid macro-economic policies.
- The Fund can give advice and will be responsive to what members want, but as a multilateral institution, the Fund should advocate its own view. It is part of the Fund’s mandate to ensure that spill-overs of single countries’ capital controls do not have negative implications for other countries.
5. G20 framework and IMF-produced MAP
Ben Moxham raised concerns about the global job crisis and risks of a double dip recession:
- The G20 framework is important to address these concerns, yet in Toronto fiscal consolidation set the tone and the key issue of jobs was missing. The IMF paper to the G20 stresses labour market flexibility to address risks of recession.
- Joint IMF and ILO conference was a significant event and the spirit should be carried forward. It is good to see the IMF recognising the importance of the impact of wages and social protection on aggregate demand, and the benefits of collective bargaining in retaining jobs.
- These issues should be included in the G20 work on coming up with national action plans under the G20 framework exercise. To facilitate this, the ILO should have a stronger formal role inputting to the G20.
Alex Gibbs:
- Agree that the IMF/ILO joint work is a positive development.
- The IMF’s policy advice is based on achieving macroeconomic stability. It has been clear that unemployment is a key indicator of the crisis.
- MAP is a country-led process in an early stage where the IMF’s role is to give technical support: outputs are G20 owned.
- ILO is able to input into the MAP process.
Official confirms:
- ILO attended the recent G20 Summit and has been able to feed into MAP throughout. It is important to remember that countries are considering a wider policy mix, including employment, to ensure that the necessary actions are taken to achieve strong, sustainable and balanced growth.
ACTION: Ben to send letter on ILO role in the MAP to Alex Gibbs.
6. “Post crisis” fiscal and monetary policies
Jasmine Burnley made the following point:
- Have heard of a new report looking at growth prospects for LICs, do you know more details?
- Attention to development issues on the G20 is welcomed. We they will adopt a balanced approach, focussed on issues in addition to growth.
- The IMF has said, for example, that Africa needs $ 90 billion more to spend on infrastructure alone. It is therefore important that fiscal space for LICs to continue spending to support recovery and meet MDGs.
- To what extent can fiscal space for LICs be maintained?
Peter Chowla adds:
- Timing is crucial. The IMF was already pushing spending cuts this Spring before evidence of a recovery.
Alex Gibbs replies:
- Not aware of the report.
- The IMF has overhauled its LICs lending facilities and framework and has a strong commitment to carry this forward; however, with regard to fiscal space there is often limited choice, because countries approaching the IMF face serious balance of payment problems.
- Debate between the ‘bad old IMF’ and the ‘good new IMF’ is overstated; there has not been a radical departure in IMF policies.
- To ensure macroeconomic sustainability, exit strategies need be thought about carefully.
- Appropriateness of spending cuts can only be judged by each specific case.
Officials add:
- African growth has been stronger than expected. This has influenced the IMF’s approach to low-income countries’ exit strategies.
ACTIONS:
- HMT: investigate about the report on growth prospects for LICs
- Jasmine Burnley: send Oxfam paper on this topic when it is produced next week.
