Conditionality

Background

Reforming IMF conditionality. Where do we stand?

22 April 2014 | Minutes

12 April 2014

Notes provided by Jeroen Kwakkenboes, Eurodad

Sponsors: Arab NGO Network for Development (ANND), EURODAD, Oxfam, ITUC

Panelists: Bodo Ellmers (Senior Policy Officer, EURODAD), Kinda Mohamadieh (Policy Advisor, ANND), Peter Bakvis (ITUC Washington Representative), Ranil Salgado (IMF), CHAIR: Nicolas Mombrial (Head  of Oxfam’s Washington Office)

Presentations

Bodo:

  • Conditionality increased in recent days
  • Includes conditions that are harmful
  • 22 of the countries assess were repeat IMF borrowers
    • Suggests IMF programs not working
  • Average of 19.5 conditions, more than previous average of 14
  • Correlation between size of loan and number of conditions
  • Increasing number of conditions in areas outside of IMF competancies
  • 5 key areas to highlight of IMF conditionality
    • Regressive taxation
    • Public sector wage freezes and cuts
    • Welfare and pensions
    • Liberalisation and privitisation conditions
    • Labour rights
  • Conclusion:
    • Conditionality in current form does not work and IMF focusing on wrong conditions
    • Conditionality in crises countries does not work
    • IMF should focus on debt relief and insolvency procedures
  • Recs:
    • IMF should focus on balance of payments
    • Need arbitration procedure that is transparent
    • Conditonality favors major IMF shareholders over clients which should stop
    • Overall need more transparency and accountability

Peter Bakvis:

  • Serious disconnect between words and actions at IMF
  • Recent speech lagarde spoke against structural adjustment but for structural reforms
  • Substantial reversal on progress in IMF conditionality
  • Regressive taxes favoured over other options
  • Diminishing TU rights (E.G. collective bargaining) in conditionality problem for ITUC
  • Conditionality enhances inequality
  • Methodological flaws in IMF research gives wrong view on labour reforms

Kinda

  • Looking at IMF activities in MENA region
  • Trend of conditionality reflects Eurodad findings
  • Conditions on loans have serious negative ramifications for post crises countries with weak institutions
  • Trend towards deepening liberalisation, dismantling tariffs, and enhancing business environment
  • Haphazard pursuit of FDI troubling
  • Need to assess impact of FDI on macroeconomic stability
  • Need better guidance to IMF staff on how to implement reforms

Runil IMF:

  • Eurodad report covers a central IMF area
  • Report should have spelled out why conditionality is there
  • IMF has 5 guiding principles on conditionality
    • National Ownership
    • Parsimony
    • Tailoring
    • Clarity
    • Coordination
  • Report needs to differentiate type of conditionality
  • Report does not understand how streamlining process works
    • Needs to be parsimonious, needs based, and macrocritical
  • Sometimes need conditionality to achieve project objectives
  • Number and types of conditions reflect needs and wishes of country
  • Case of Ivory Coast less than 1/3 of conditions were IMF conditions, rest were self imposed
  • Number of conditions for LICs has decreased
  • Focusing on Balance Of Payments would reduce resources for LICs
  • LICs with IMF involvement did better in terms of growth than those without
  • Fully agree with need to change IMF governance

Discussion

Bodo

  • Need to clearly spell out which conditions come from IMF and which from client.
  • Tailoring not always well thought out
  • Need a more inclusive process in determining client country needs

Runil IMF

  • IMF policy is to have the minimum conditions necessary.

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