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Civil Society Newsletter
June 2002

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In this issue

The food crisis in Southern Africa

IMF establishes new technical assistance centers in Africa

The HIPC Initiative—Status of implementation

Africa needs better trade opportunities to fight poverty—Köhler

Uganda: health spending, aid flows, and the IMF advice

Krueger outlines new details of the IMF's SDRM proposal

IMF co-sponsors CIS-7 Initiative

Field reports: IMF staff interaction with civil society

Bulletin Board

The food crisis in Southern Africa

The food shortages in southern Africa represent a human tragedy that calls for a committed response from the international community. One country that has already paid a heavy price is Malawi, and urgent action is still needed to prevent more starvation. The authorities are working together with the international donor community to flesh out an appropriate response and the IMF is fully supportive of these concerted efforts.

In the midst of this tragedy, Malawi has found itself at the center of a controversy because of the government's sale of almost all of the country's food reserves last year. As the issue has gained attention, several allegations have been directed at the IMF:

  • The Fund ordered, forced or advised Malawi to sell off its reserves;

  • The sales were required so that Malawi could pay off its foreign debt, or the debt of an agency that controls the food reserves; and

  • the IMF demanded that Malawi reduce spending on poverty-reduction efforts in order to buy food.

These allegations are simply wrong.

The roots of the food crisis in Malawi are very complex. The causes range from the failure of the government's early warning systems for crop shortfalls; to over-reliance on maize production; to cutbacks in farmers' plantings and harvests as government interventions pushed down the maize price; to transportation bottlenecks in Mozambique that have slowed the flow of food to Malawi's hungry; to uncooperative weather.

The food crisis should be seen in the context of the government's food security policy launched in 2000, which was based on a government-commissioned study funded by the European Commission. The policy had four main pillars: a) an early warning system to ensure timely warning of any looming shortages; b) a physical buffer stock of between 30,000 and 60,000 metric tons of maize for short-term emergencies; c) sufficient foreign exchange reserves at the central bank to ensure funding to purchase grain in the event of a larger shortfall; and d) social safety net programs to meet the food needs of the poor.

In particular, the recommendation related to the buffer stock implied a substantial reduction of the end-1999 stock of 167,000 metric tons. The study argued that such large reserves were likely to go to waste because the maize lasts only a few years in storage and is also very costly to maintain (absorbing funds equivalent to one-fifth of Malawi's annual spending on health programs). This was a particularly critical consideration for the government because a large stock would draw limited resources from other programs, including the areas that are crucial to poverty reduction programs such as health, education, and agricultural extension

What was the IMF involvement?

In December 2000, the IMF Executive Board approved a three-year Poverty Reduction and Growth Facility (PRGF) arrangement and a decision point under the enhanced HIPC Initiative, and endorsed Malawi's interim poverty reduction strategy paper. The main objective of the program with the IMF was to achieve sustainably higher economic growth to make a sizable reduction in poverty. All IMF advice has been guided by that objective.

The IMF had no role whatsoever in the government-commissioned study of food security.

In Malawi's program with the IMF, the government publicly expressed—in its Letter of Intent of December 2000 (Section F in the document) its intention to follow the buffer stock element of the food security strategy, which meant keeping up to 60,000 tons in reserve.

The IMF did not at any time insist that Malawi reduce its food stocks as a condition of Fund lending. During 2001, the government decided to sell off almost all of its maize reserves, leaving far less than the targeted level of reserves, apparently because the government assumed that it could replenish its stores from the approaching harvest. However, crop estimates were wrong, and crop production turned out to be much lower than expected. The early warning systems failed to alert the authorities or the international community to the looming shortages. The sales have been followed by media allegations of corruption.

The Fund had no role in the government's decision to sell off far more than the amount recommended in the EC-funded study and in the Letter of Intent. At no time did the IMF "pressure" Malawi in any fashion, or advise Malawi, to sell its grain reserve to pay its debts. The December 2000 Letter of Intent does not mention debt in the context of grain sales, and Fund officials have not drawn that link during meetings with Malawian officials at any level.

At no time has the IMF demanded that Malawi pay for food imports by cutting spending of any sort.

The IMF has publicly stated that any emergency funds needed to alleviate the impending food crisis should be made available through the budget without any offsetting cuts. In any case, required food imports are likely to be paid for by donors and not by the Malawi government.

The government continues to support extensive social safety net programs, including subsidies targeted at the poor that cover food and some health, education and agricultural-input programs. The IMF supports this policy.

Malawi's Poverty Reduction and Growth Facility (PRGF) loan from the IMF was suspended during 2001 because of the government's inability to bring under control wasteful spending—especially on state-owned companies—that was causing interest rates to rise to high levels and taking resources away from the poor. The IMF's portion of the debt relief program was also suspended. However, the government now is working closely with the Fund to bring that spending under control, and it is hoped that the PRGF and debt relief will be restored soon.

What needs to be done?

A quick and coordinated response by the government and the donor community is now needed to ensure that Malawi's population will not suffer further later this year. First and foremost, the estimate of the food deficit during the 2002/03 growing season will have to be firmed up quickly to ensure that sufficient food will arrive on time; it is expected that estimates from a WFP/FAO mission and a household survey financed by CIDA will become available soon. Government interventions in the past may have contributed to the current crisis by eroding incentives for producing food. Therefore, appropriate delivery mechanisms are critical so as not to depress food production in the coming years. Food imports are likely to be financed by donors, and the IMF has indicated publicly that any emergency funds needed for food imports should be covered by the budget without any offsetting cuts.

The government has acknowledged the failure of the food security strategy and has publicly announced that it will embark on a comprehensive review to avert another food shortage in the future.

The IMF has met with NGOs, both in Washington and in Malawi, to clarify its position and to discuss its advice to the Malawian authorities. It will continue to engage with civil society on how best to serve the interests of the people of Malawi.

More documents on Malawi and the IMF

IMF establishes African Regional Technical Assistance Centers

On his third visit to Africa since becoming IMF Managing Director, Horst Köhler signed agreements to establish two African Regional Technical Assistance Centers (AFRITAC). The Center Abidjan will serve West African countries, while the Center in Dar es Salaam will meet the training needs in East Africa.

Both centers are expected to become operational later in the year and, if the concept proves successful, three more centers will be established to cover the rest of sub-Saharan Africa. Through the centers, modeled on the IMF's regional technical assistance centers in the Pacific and the Caribbean, the IMF will provide assistance with a team of resident experts, supplemented by short-term specialists, as well as through in-country workshops, professional training, and regional courses.

The Centers are part of the IMF Africa Capacity Building Initiative, whose goal is to strengthen the capacity of African countries to design and implement their poverty-reducing strategies, as well as to improve the coordination of capacity building technical assistance in the Poverty Reduction Strategy Paper (PRSP) process. It aims to increase the volume of capacity building assistance from the IMF to Africa in the IMF's core areas of expertise. The centers are also a contribution by the IMF to the New Partnership for Africa's Development (NEPAD).

The HIPC Initiative—Status of implementation

In a joint report released in April, the IMF and the World Bank laid out the accomplishments of and the challenges facing the HIPC Initiative. The report, Status of Implementation, is prepared every six months for discussion during the institutions' Spring and Annual Meetings. Since September, four countries—Mozambique, Tanzania, Burkina Faso and Mauritania have reached their completion points, while three—Ethiopia, Ghana and Sierra Leone - have reached the decision points.

But the report warned that "fewer countries than expected reached their completion points" because countries have required more time than anticipated to develop poverty reduction strategies and some countries have experienced delays in implementing key macroeconomic or structural reform policies.

The document also said that the deterioration of the global economic environment - especially slower economic growth and weaker commodity prices - has made it more difficult for countries to achieve and maintain debt sustainability, with "virtually all HIPCs being heavily dependent on primary commodities for their exports." While emphasizing the need for all HIPCs to pursue prudent debt management policies as a means of achieving long-term debt sustainability, the report also stressed that the Initiative provides for the possibility of additional debt relief at the completion point in exceptional cases where external factors have caused fundamental changes in a country's economic circumstances. Burkina Faso was the first country to be provided with such additional debt relief (see separate story).

Countries off-track

The paper notes that in a few countries (Guyana, The Gambia, Guinea, Nicaragua, Guinea-Bissau, Malawi, Zambia) were off-track with their Fund-Bank supported programs. As of mid-June, the status of these countries was as follows:

Guyana

Authorities are making progress towards putting in place a new three-year PRGF-supported economic program covering 2002-05 that is consistent with their PRSP. A satisfactory track record of performance under the new PRGF program is one of the conditions for reaching the HIPC completion point. Progress in fulfilling most of the other floating completion point conditions is expected over the next few months. Assuming all the pending conditions are met, the completion point could be reached by end 2002.

The Gambia

With regard to The Gambia, the program was not off track as such: the main problems were the delayed preparation of the PRSP and other outstanding issues that delayed conclusion of the negotiations. The April/May 2002 mission reached understandings with the authorities on a new three-year PRGF arrangement. The PRSP was sent to the Bank and Fund in May 2002. We now expect to go to the Board on July 10, with the request for the PRGF, supported by the full PRSP and a joint staff assessment (JSA) of the latter.

The Gambia has been receiving interim debt relief under the enhanced HIPC Initiative since 2001 and has requested the Fund to continue providing such relief in 2002. Debt relief is provided through arrangements that permit a country to keep part of the debt payment due to creditors and use it for poverty-reducing expenditure.

Guinea-Bissau

The PRGF-supported arrangement for Guinea-Bissau, approved by the IMF's Executive Board on December 15, 2000, went off track at end-2000 as a result of large unauthorized expenditures and a breakdown in financial controls. The reestablishment of sustainable government finances has remained an elusive goal.

During 2001, the IMF, along with the World Bank, the EU and bilateral supporters, provided technical assistance in order to strengthen financial discipline and ensure that resources are used according to priorities. The Fund staff worked with the authorities to establish a short-term macroeconomic program for the second half of 2002, in order to help Guinea-Bissau move back towards a sustainable financial position. The short-term program introduced a treasury cash-flow plan, measures to regain control of budget implementation, strengthen tax and customs administration and avoid the further accumulation of domestic arrears.

The Guinean authorities have not found it easy to restore government finances to a sustainable position. In March 2002, the Fund staff visited Bissau to discuss economic and financial policies with the authorities and reviewed steps that could be taken to address continuing problems. As of mid-June 2002, however, the National Assembly was still debating the budget for 2002.

Honduras

The PRGF program went off track in 2001 as large fiscal slippages occurred during the transition to the new administration that took office in late January 2002. Negotiations on a PRGF program for 2002 have not been completed because of a projected deterioration in the fiscal stance for 2002-03. The authorities need to strengthen the fiscal policy stance through actions designed to revamp tax collections, reverse an upward trend in the government's wage bill relative to GDP starting this year, and establish a sustainable wage policy framework. The authorities have agreed to work out a revised fiscal strategy with a view of resuming discussions on the PRGF program possibly by July.

Malawi

The PRGF program went off track shortly after approval in December 2000. Due to fiscal slippages, in particular overspending on nonpriority items, the review could not be completed. Thus, the IMF has not credited the HIPC Trust Fund account for 2002. However, all other creditors—accounting for well over 90 percent of the total relief—continue to provide interim debt relief under the HIPC Initiative. The IMF interim debt relief will be made available upon completion of the first review and no money will be lost for Malawi.

Under the PRGF arrangement, agreement on the way forward has been reached in March 2002. Malawi has started to contain expenditure and a decisive fiscal adjustment will be implemented with the 2002/03 budget. After successfully establishing a track record of policy performance through September, the staff expects to recommend to the Executive Board before year-end completion of the first review. The authorities, the staff, and the international community are currently working on a concerted response to the impending food shortages expected for later this year

Nicaragua

After reaching the HIPC decision point in December 2000, Nicaragua's PRGF arrangement went off track. However, a mission initiated discussions on a new three-year PRGF arrangement in March 2002 and reached a preliminary agreement on the main elements of the first year program, which would cover July 2002-June 2003. Actions agreed to be taken include the approval of a modification to the 2002 budget, a tax reform aimed at improving the efficiency and equity of the tax system, and a recovery plan for assets acquired from intervened banks. The authorities have begun to prepare a progress report on their PRSP, which was originally presented to the Boards of the Fund and the Bank in September 2001.

Discussions are expected to continue in the weeks ahead and the new program is expected to be presented to the IMF Board during the third quarter of 2002. Nicaragua has begun to receive interim HIPC assistance form the World Bank, IDB and CABEI. Following the approval of a program with the IMF, it would be expected to receive interim assistance from the Fund and Paris Club members.

Zambia

On May 29, the IMF completed the fourth review of Zambia's performance under an economic program supported by the Poverty Reduction and Growth Facility (PRGF), and agreed to increase the amount of potential access to IMF resources over the remainder of the program. As a result, Zambia will be able to draw up to US$64 million from the facility immediately, and have potential access to US$159.8 million in the course of subsequent program reviews scheduled into February 2003, an increase of about US$31 million.

The IMF also approved the release of US$150.7 million in 2002 as additional interim assistance under the enhanced HIPC Initiative. This assistance represents nearly 70 percent of Zambia's principal obligations to the IMF in 2002, and brings total assistance by the IMF under the Initiative to about US$301.5 million.

Other HIPC news:

Burkina Faso to receive additional debt relief

The IMF and the World Bank agreed last April to award additional debt relief to Burkina Faso under the HIPC Initiative in light of external factors that negatively affected the country's exports.

The Boards of the IMF and Bank agreed that Burkina Faso would require exceptional debt relief, or "topping-up", to achieve debt sustainability, and endorsed an additional US$129 million in net present value terms of debt relief.

The Bank and the Fund said that the external factors included falling world cotton prices—resulting in part from heavy subsidies in industrialized country markets—political and economic events in neighboring countries, and crop damage due to agricultural parasites.

With this additional treatment, the total nominal debt service relief provided under the HIPC Initiative is about US$930 million.

Mauritania becomes sixth country to reach completion point

On June 19, the IMF and the World Bank announced that Mauritania had reached its completion point under the Enhanced HIPC Initiative. Mauritania thus became the sixth country to reach this point, joining Bolivia, Burkina Faso, Mozambique, Tanzania and Uganda.

Debt service relief under the enhanced HIPC Initiative from all of Mauritania's creditors will amount to approximately US$1.1 billion over time (US$622 million in net present value [NPV] terms).As a result of HIPC assistance, the net present value of Mauritania's total external debt is reduced by some 50 percent, providing a good basis for long-term debt sustainability. This, however, will require continued efforts to monitor the debt level and to apply prudent debt management policies, the IMF and the Bank said in a statement.

Also available on the IMF's website:

The Enhanced HIPC Initiative and the Achievement of Long-Term External Debt Sustainability

Africa needs better trade opportunities to fight poverty—Köhler

During his visit to Africa, IMF Managing Director Horst Köhler repeated a message that rich countries have heard from him often in recent months: open your markets to the products of Africa and other developing nations. In particular, he emphasized the need to increase access to developing countries' agricultural exports, including through reduction in industrial country subsidies.

"It is no longer possible to sustain the agricultural policy in the advanced countries, which de facto means closed markets and $300 billion of trade-distorting policies," Mr. Köhler told a news briefing upon a day of meetings in his first stop, Dar es Salaam. "If this is not going to change, all our efforts against poverty will remain not satisfactory," he added.

In Ouagadougou, Köhler told cotton producers and business leaders: "I know that the United States alone is spending $2 billion (annually) for its cotton subsidies, more than the total production of sub-Saharan Africa of cotton and the same goes for sugar in the European Union—they are spending more than €2 billion in Europe for sugar subsidies. I think this is something perverse and we need to change it. If we are not able to give you better trade opportunities then maybe the fight against poverty is lost from the beginning."

Köhler said developed countries should also cut tariffs on finished goods such as clothing, or processed foods like chocolate. Only then, he said, could poor countries really improve their own economies and become less dependent on outside help.

In Ghana, Köhler said in a speech that the recently passed U.S. farm bill, which increases domestic subsidies for the agricultural sector, was a setback to the battle against poverty.

The message was also delivered to the OECD agricultural ministers meeting in Paris in mid-May. In a joint statement with the heads of the WTO and the World Bank, Köhler asked how leaders "in developing countries or in any capital could argue for more open economies if leadership in this area is not forthcoming from wealthy nations."

Köhler, Moore and Wolfensohn said that "any increase in protectionism by any country is damaging. Such actions will hurt growth prospects where fostering growth is most essential. And they are sending the wrong signal, threatening to undermine the ability of governments everywhere to build support for market-oriented reforms ... Prospects for reform of agricultural support policies and textiles regimes, toward interventions that are less damaging to the economic opportunities of the poor, are particularly important."

But the developing countries can also do much to help themselves. The heads of the international financial institutions also added that "south-south trade in the 1990s grew faster than world trade and now accounts for more than a third of developing country exports. Yet the barriers to this trade are higher still than to trade with industrial countries. Most of the benefits of liberalization derive from action at home. Sound trade policies are rarely contingent on the policies of others."

Uganda: health spending, aid flows, and the IMF advice

The recent public debate on aid flows to Uganda has focused on speculation about the advice offered by the IMF to the government. In an open letter to the authorities, Professor Jeffery Sachs wrote that he had heard, but had not verified, that the Fund warned against accepting new donor grants for health expenditures, supposedly arguing that to do so would lead to an undue appreciation of the currency.

In a letter to Eurodad's PRS-Watch dated June 7, the IMF denied this rumor, stating that it is not true that Uganda may have to refuse aid for health or any other poverty-eradication programs in order to adhere to IMF-imposed guidelines.

"The government's priority—a priority that is shared by the IMF—is to increase the availability of domestic and foreign resources to reduce poverty. Indeed, IMF staff have suggested restructuring public spending so as to accommodate higher expenditures for important social and economic sectors," External Relations Department Director Thomas Dawson said.

"In the specific case of Uganda, given that the aid flows in question are to be used for top priority spending such as imports of life-saving drugs and other essential medical supplies, we do not see any adverse effects on the macro economy. Moreover, even if these aid flows placed pressure on the exchange rate and the competitiveness of the economy, these effects could be minimized through monetary and exchange rate policies."

In a meeting with NGOs in Washington on June 18, IMF mission chief Godfrey Kalinga again stated that the amounts of aid and increases in health spending currently under discussion in Uganda would have minimal macroeconomic impact. He said there is a level at which the management of aid flows, and their impact on the economy, needs to be monitored, and the current mission to the country is working very hard at trying to fixing that limit with the government. The impact of the flows would depend. Among other things, on the size of the flows, the import composition of the use of these flows, and whether these flows are spent effectively and productively.

The broad discussion on these issues, which is closely linked to the issue of fiscal flexibility in PRGF-supported programs, will undoubtedly continue, and the Fund will continue to meet and discuss its policy with civil society representatives.

Krueger outlines new details of IMF's proposal for a sovereign debt restructuring mechanism

In a speech in Washington on June 6, IMF First Deputy Managing Director Ann Krueger detailed the progress made by the IMF on a two-track approach to improve sovereign debt restructuring. The approach was endorsed by the International Monetary and Financial Committee at its April Meetings.

The first track involves more ambitious use of collective action clauses in sovereign bond contracts. The second - and complementary - track involves creating a statutory mechanism that can help secure more orderly and timely restructuring of unsustainable sovereign debts.

Ms. Krueger went on to clarify one important issue that has stirred much debate since her first speech on the issue last November: the role of the IMF. Many commentators, while welcoming the discussion around the need for an orderly and fair process to restructure debts, have strongly objected to a central role for the IMF in the whole mechanism.

Ms. Krueger said that a treaty obligation - probably achieved through an Amendment of the IMF's Articles of Agreement (the IMF's "constitution") - would empower a super-majority of creditors to reach agreement with the debtor and bind in the rest. But, she emphasized, the amendment would be used only as a tool to empower the creditors and debtor, not as a way to extend the IMF's legal authority. The Fund would only influence the process as it does now, through its normal lending decisions.

She also outlined what shape a dispute resolution forum could take.

She went on to conclude: "In a world in which sovereign borrowers have diffuse and diverse creditor bases, we need a way to overcome the coordination and collective action problems that stand in the way of timely and efficient restructuring. For both the contractual and statutory approaches, that means addressing the problems created by the diversity of legal jurisdictions in which creditors can seek repayment. We believe that a dispute settlement forum - small in size, limited in role, and demonstrably independent in its membership and operation - is the best way to achieve this. To help avoid chaotic defaults or expensive bailouts in the future, that is surely a price worth paying"

IMF staff have met with NGOs on several occasions to discuss Ms. Krueger's proposal. Public debates were organized in New York and Monterrey, Mexico, in the context of the Financing for Development Conference, while in Washington DC meetings took place at the time of the Spring Meetings and on May 13. The discussion focused mainly on the role of the Fund and on the so-called Chapter 9 proposition—the chapter in the U.S. bankruptcy code that applies to governmental organizations like municipalities and that seeks to protect the rights of taxpayers and employees to participate in the insolvency process.

Recently published:

A New Approach to Sovereign Debt Restructuring

Communiqué of the International Monetary and Financial Committee, April 20, 2002

IMF co-sponsors CIS-7 Initiative

The IMF is co-sponsoring an international initiative aimed at reducing poverty, promoting economic growth, and reducing debt to sustainable levels in seven countries of the Commonwealth of Independent States (CIS). Other sponsors include the World Bank, the Asian Development Bank, and the European Bank for Reconstruction and Development. Assistance under the CIS-7 initiative will be provided through loans, grants, debt restructuring, and debt relief. Support will be conditional on the seven countries adopting sound economic policies.

The CIS-7 Initiative was prompted by the realization that the challenges posed by transition in Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Tajikistan, and Uzbekistan have been underestimated. Also, while the CIS-7 countries have made good progress toward establishing democracies and market economies, reforms have not always been effectively implemented. As a result, living standards have declined sharply in all seven countries, with nearly 20 million people now living in extreme poverty.

In recognition of this situation, representatives of the CIS-7 governments, creditor countries, and four international financial institutions agreed, at a seminar in London in February 2002, to make new efforts to increase economic growth and reduce poverty in the CIS-7 countries. The CIS-7 Initiative was officially endorsed at a ministerial meeting in Washington, D.C. on April 20, 2002.

Assistance under the initiative will be provided under existing policies and frameworks. In particular,

  • the Paris Club countries will consider requests for debt relief as needed;

  • debt relief under the HIPC Initiative might also be a possibility, although only one or two of the CIS-7 countries presently appear to qualify, and only for small benefits;

  • consultative group meetings will be organized to mobilize donor support;

  • Aid effectiveness should be enhanced, possibly by making use of the PRSP framework to ensure greater coordination among donors;

  • existing IFI programs with CIS-7 countries should continue, both as a means for the countries to demonstrate greater ownership of reforms and to facilitate a greater flow of IFI resources in the future;

  • major trading partners should remove barriers to exports from the CIS-7 countries.

Field reports: IMF staff interaction with civil society

Nicaragua—Dialogue on the new PRGF

In Nicaragua, the government, National Assembly, civil society, syndicates and political parties maintain frequent and visible contact with the Fund office. The press provides an aggressive coverage of the meetings with the various stakeholders.

Given that the Fund is currently negotiating a new 3-year PRGF with the new government that took office in January 2002, public interest is high in all aspects of economic decision-making. The former president of the Central bank, Dr. Noël Ramirez, who is now president of the Economic Commission (EC) of the National Assembly, has encouraged a constructive dialog not only with the Fund office, but also with the opposition parties and civil society. The EC itself includes deputies with strong links to the syndicates, civil society and the church. During a meeting at the end of May, at the request of the government, the IMF Resident Representative, Joachim Harnack, presented to the EC the status of the negotiations with the Fund, highlighting the need for tax reform, alignment of expenditures with available resources, and the systematic recovery of assets of four banks that had failed during 2000-01.

Mr. Harnack also gave the first in a series of lectures to the National Council for Economic and Social Planning (CONPES), informing the gathering of broad aspects of the PRGF negotiations. Composed of some 50 high-level representatives from civil society, syndicates, and political parties, the council is actively engaged in the country's poverty alleviation strategy. The series is financed by the World Bank and draws speakers from various economic areas, including government institutions.

Serbia—Improved dialogue with the trade unions; corruption issues

The Office of the Resident Representative is committed to improving dialogue with trade unions through more systematic and regular meetings with trade unions (so far, several have been held) and by participating in trade union conferences and meetings

To this end, IMF Resident Representative Joshua Charap participated in the labor union conference "Trade Union Strategies in the Process of Transition", held in Belgrade on 24 January 2002, where he made a presentation on the impact of IMF programs on social dialogue.

The Resident Representative Office also discussed issues relating to corruption with Transparency International. A "box" (brief report) on progress in fighting corruption in Serbia was included in an IMF staff report submitted to the IMF's Executive Board in late April 2002.

Tajikistan: Economic policy issues and the PRSP

During an April visit to Dushanbe, Mr. John Odling-Smee, Director of the European II Department met with representatives of local and international NGOs, including Save the Children, Aga Khan Foundation, Médecins sans Frontières, the National Association of Business Women and CARE International. On the consultation process used for the preparation of the Poverty Reduction Strategy Paper (PRSP), the consensus view among NGOs was that participation in the preparation process was extremely valuable. For many of them it was the first opportunity to interact with government officials on policy issues. They also noted that the final version of the PRSP would be carefully examined to see if their views were fully reflected.

NGOs urged the Fund to support policies that could strengthen governance, reduce corruption, and provide resources directly to the NGOs. Mr. Odling-Smee explained that Fund-supported programs would address governance and corruption, but were unable to provide direct support to their organizations.

Mr. Odling-Smee noted that future missions would meet with NGO representatives on a regular basis.

Turkey—Dialogue on the economic program

The missions and the resident Representative office have active contacts with a range of CSOs, including in some cases regular meetings and participation in seminars sponsored by these organizations. The key CSO contacts include the main public sector labor union (TURK-IS), the two business organizations (TUSIAD, representing large- scale industrialists, and TOBB, representing SMEs), the bankers' association, the foreign investors' association (YASED), and the exporters' association (TIM).

A range of issues are important both to these organizations and to the Fund. These issues include the economic program generally (including the political support from CSOs), labor market issues (wages and job security), banking reform, taxation, and the business environment (removing red tape, fighting corruption, improving the FDI framework).

Ukraine - How to achieve the Millennium Development Goals

In Ukraine, the interaction between the Resident Representative office and civil society organizations has concentrated mainly on the issues of poverty alleviation, agricultural policy, human development, the impact of the Chernobyl nuclear accident, the ecological dimensions of sustainable development and their interaction with economic policy, as well as on problems of transparency and fairness related to the recent parliamentary elections.

Specifically, discussion has focused on how the policies of the government, under the Fund-supported program, could better contribute toward achieving the Millennium Goals. Inter alia, the priorities thus identified have led to the recommendations that: (i) the tax system be streamlined, eliminating a myriad of economically unjustifiable exemptions and privileges for some economic sectors, thereby broadening the tax base, permitting a reduction in tax rates, and leading to a more equitable tax burden; and (ii) priority expenditures in health and education be protected, despite the significant spending cuts that are necessary in order to preserve macroeconomic stability.

At headquarters in Washington

Some 12 NGO representatives from eight different countries visited the Fund on June 12 as part of an international program sponsored by the School for International Training (Vermont, USA). NGO representative visit Washington and New York for meetings with NGOs, Congress, and international organizations. At the IMF, they met with several staff members to discuss the Fund role in poverty reduction, the role of the Independent Evaluation Office, and the Fund outreach to civil society. They also met with economists who work on their countries of origin.

A preparatory meeting held on June 19 discussed the details of a high-level meeting between the IMF, the World Bank and the labor unions (ICFTU, WCL, AFL-CIO) that will take place in Washington in October.

Since the Spring Meetings in April, IMF staff met with NGOs to discuss various topics, including the IMF proposal for a sovereign debt restructuring mechanism; the Independent Evaluation Office's reports; the PRSP and the status of implementation of the HIPC Initiative; country-specific issues on Uganda, Malawi, and The Gambia.

Bulletin Board

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IMF Staff News

  • On July 1, George Abed will succeed Paul Chabrier as Director of the Middle Eastern Department. Mr. Abed, a Jordanian national, has more than 20 years of experience in the IMF, including senior positions in the Middle Eastern Department, and most recently as Deputy Director in the Fiscal Affairs Department

  • Anoop Singh will succeed Claudio Loser as Director of the Western Hemisphere Department. Mr. Singh, who is currently Director for Special Operations, will assume the position of Director-designate until Mr. Loser's retirement, later this year. Mr. Singh, an Indian national, has more than 25 years experience at the IMF. Prior to his appointment as Director for Special Operations in February 2002, he was Deputy Director of the Asia and Pacific Department.

Speeches

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