Date and Location: 4 April 2011, London
Officials: Alex Gibbs (IMF), Huw Talbot (UK Treasury), Oliver Haydon (UK Treasury)
Civil society groups:Julie Juma (Action Aid), Rachel Sharpe (Action Aid), Joanna Rea (Bond), Peter Chowla (Bretton Woods Project), Henrike Allendorf (Bretton Woods Project), Tim Jones (JDC), Tom Wallace (ONE), Richard Gower (Oxfam GB), Bandula Kothalawala (TUC)
IMF and G20
Civil society groups worried that the G20 is bypassing governance structures of the IMF. By commissioning the IMF to give policy advice, then deciding within the G20, without any meaningful discussion within the IMF, Fund legitimacy is undermined.
Alex Gibbs replied that the IMF provided technical assistance to the G20 which is indeed country-led, but provided an opportunity for the Fund to play an important role in directing global economic policy. Through the G20, Fund policy could thus also influence countries like Argentina which had not taken part in Article IV surveillance for some time. He noted that the Triennial Surveillance Review will examine whether such reports should go through the board, and may consider a WEO-type model of board consultation.
2. ILO and MAP
Civil society groups stressed the importance of considering employment and social protection effects of policies recommended under the G20 commissioned Mutual Assessment Process.
Alex Gibbs replied that this was not the comparative advantage of the IMF and expected that the ILO would handle these issues. He would be interested to know more from civil society about our perspective on the follow up from the IMF-ILO joint conference in Norway in 2010.
Capital account management
Civil society groups expressed concerns about the change in tenor on capital accounts, especially with regard to the G20 discussions and the option of the IMF extending its mandate over capital accounts and favouring liberalisation.
Alex Gibbs responded that the IMF discussed guidelines for its policy advice on capital account management two weeks ago. The policy paper assessed a number of case studies which provided mixed evidence and didn’t draw hard edged conclusions. There was agreement that capital controls can be part of a toolkit under certain circumstances. We should recognise that the Fund has come a long way on this topic. The paper and discussions focused on guidelines for policy advice and not on changes to the Fund’s mandate. Gibbs stressed that no amendment to the IMF articles of agreement was on the cards and they are not pursuing a mandate for liberalisation at the IMF. The bigger worry of some developing countries was about process, and a worry that the guidelines could harden into rules. Gibbs was sceptical that this would happen.
Civil society groups were worried about the equity impact of IMF tax advice, work on MNC transfer pricing problems and how the IMF can help with country-by-country reporting.
Alex Gibbs replied that the board had a long discussion on the equity impact of tax policy when discussing the recent policy paper. The staff argued that the proper assessment should be on a package of tax and spending measures together. Gibbs indicated that there was strong push back, including from the UK, that because of the potential quick changes in spending patterns, it was important for the staff to have a stand-alone look at equity impacts of tax policy.
Civil society groups were worried about the rising fiscal gap in Greece and questioned whether missing that target was an indication of the EU-IMF programme failing. Second, concern was expressed about unmanageable debt-to-GDP ratio and the IMF position on debt restructuring or debt default. Third, with eurozone countries programmes were more difficult to design, because macroeconomic policies could not target the exchange rate, and what the IMF was considering about this.
Alex Gibbs replied that according to the third review, Greece’s programme with the EU and the IMF was on track and proceeding as anticipated by the Fund, but more structural reforms still needed to be put in place. As the IMF board comes to the Greek government request to extend the terms of repayment the board will look again at the overall structure of the programme. Regarding the second question, Alex Gibbs replied that Greece does not want to restructure debt, and the IMF had supported that and designed the programme accordingly. Alex Gibbs agreed that adjustment in Greece is more difficult, because the option of currency devaluation does not exist, but that this was not a surprising element and was expected.
2. Conditionality overall
Civil society groups also worried about national ownership and public consultation to agree conditionality of IMF programmes.
Alex Gibbs replied that the board doesn’t see the processes through which programmes get developed. He also admitted that sometimes he wonders about the origin of language in letters of intent, but the letter of intent is formed through a process of discussion between the Fund staff and country authorities. The UK input into the conditionality review included the request for wide public consultation.
Action: Bandula Kothalawala will send TUC’s recent report on IMF conditionality to Alex Gibbs.
Civil society groups raised worries about IMF conditionality impacts on education, especially in low-income countries. Although the IMF removed the wage bill from its conditionality, tight budget restraints under IMF programmes continue to have negative effects on the education sector.
Alex Gibbs replied that the Fund is more sensitised to protecting social expenditure than it has been in the past. In 2009 almost 90 per cent of countries with Fund programmes increased social expenditure. He acknowledged that if in country IMF-CSO consultations were seen as mere window dressing this is a problem. UK is keen to hear of examples where this is the case.
Finance for development
1. Gold sales
Civil society groups asked for the Fund plans to use the $2.8 billion in excess windfall profits it is making from gold sales to fund debt relief.
Alex Gibbs replied that preliminary discussions will take place later this week and consider three broad options: (1) Poverty Reduction and Growth Trust, (2) Fund investment account, (3) precautionary reserves to secure the Fund from credit risks. He indicated that the decision might be influenced by the Fund’s increased credit risk and by the fact that the investment account might not generate as much return as expected given low interest rates. He asked back why NGOs prefer debt relief for a few cases rather than increasing subsidies for more low-income countries.
2. Financial transaction tax
Civil society groups pointed out that Bill Gates has been commissioned to undertake work on finance for the G20 and asked whether the IMF had any plans of engagement.
Action: Alex Gibbs’ staff will look into the IMF plans and get back to Richard Gower.
Civil society groups asked the IMF to stick to their agreement about leadership selection when managing director Strauss-Kahn resigns.
Alex Gibbs replied that a new managing director is not due to be appointed before 2012.