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Civil Society Newsletter
In this issue
The IMF continued its vigorous and productive outreach with civil society organizations in the last quarter of 2002, beginning with a major meeting with global trade union leaders in October. Over 90 labor union leaders from around the world met with IMF management and staff to discuss issues ranging from the Fund's proposal to create a new framework for sovereign debt restructuring, to improving global governance.
The meeting covered many of the themes recurring in the IMF's interaction with other civil society groups during late 2002. IMF staff participated in two conferences organized by civil society organizations that debated various aspects of global governance. At a conference organized by the Montreal International Forum, IMF representatives discussed quotas and voting systems, transparency, and the Sovereign Debt Restructuring Mechanism (SDRM). At a conference on globalization and global governance that was held in Helsinki, the Director of the IMF's European offices argued that reform of the IMF and the World Bank will not resolve all issues of global governance. This is because many emerging market crises and the growing gap between poor and rich countries can be traced to policy weaknesses and governance problems in those countries themselves. To be sure, the exchange of ideas on this important topic will continue in the future.
The IMF's work on poverty was discussed in various settings, including at a Poverty Reduction Strategy Paper (PRSP) conference in Almaty, Kazakhstan, which debated recent progress in promoting economic growth and poverty reduction in the CIS-7 countries. The Fund and the World Bank also continued their efforts to improve poverty and social impact analysis, which could become an important building block for the PRSP approach. At a conference in Copenhagen organized by the European Network on Debt and Development in November, IMF staff debated the challenges involved in reaching the Millennium Development Goals.
Finally, IMF missions and resident representatives continued their outreach efforts in various parts of world. A few examples of this work is mentioned under "Country Notes."
We would like to thank each of you for the contributions you have made to our work. We value your input and rely on your analysis. We look forward to continuing our work together during the year ahead.
IMF and World Bank management and staff met with leaders of the international labor movement in Washington, D.C. on October 21-23. The agenda focused on issues of concern to labor unions, including poverty reduction, reform of the international financial architecture, and ways to enhance the dialogue between labor unions and the Bretton Woods institutions. The delegation included over 90 labor union representatives from about 40 countries, and was headed by Guy Ryder and Willy Thys, General Secretaries of the International Confederation of Free Trade Unions (ICFTU) and the World Confederation of Labor (WCL), respectively.
The current state of IMF cooperation with labor unions
The Fund's relationship with labor unions has three elements: collaboration with the International Labour Organization (ILO); mission and resident representative contacts with country-level labor unions; and management and staff contacts with international labor federations. With regard to the last of these, in addition to the leadership meetings in Washington, IMF staff has developed worldwide links through the labor federations with national labor unions, and meets regularly with labor union leaders through the confederations in Washington. Meetings with regional labor confederations also take place, but on a more ad-hoc basis.
Prospects for the world economy and the IMF's role
In his introductory remarks, IMF Managing Director Horst Köhler briefed the delegates about his recent meeting with the ILO's World Commission on the Social Dimensions of Globalization and his contacts with labor unions in Algeria and Mauritania during his recent trip to North Africa. With regard to short-term economic prospects, he stressed the downside risks to global growth and called for a collaborative approach to help strengthen economic recovery. Such an approach ought to include the elimination of trade-distorting practices by industrial countries, he said, as these are detrimental to the growth in developing countries. Köhler also referred to key reforms underway in the Fund, including efforts to streamline Fund conditionality, strengthen the framework for crisis prevention and resolution, and promote transparency and openness on the part of both the Fund and its membership.
In their response, labor representatives emphasized the likely negative impact on workers of a downturn in the global economy. They were encouraged by the dialogue between the Fund and the ILO Commission and noted that it could help improve social peace and restore confidence in many crisis countries. They were supportive of the Fund's commitment to strengthen the dialogue with labor unions both at country and global levels.
The IMF's crisis resolution framework
Timothy Geithner, Director of the IMF Policy Development and Review Department, spoke about the IMF's crisis resolution framework. The framework was strong, he said, but to work effectively, it should be supported by appropriate national economic policies and a stable external environment. Geithner then presented his views on the Sovereign Debt Restructuring Mechanism (SDRM).
Labor representatives indicated their broad support for the SDRM proposal, but raised concerns similar to those of many other civil society organizations. In particular, they noted that the initiative does not go far enough to design a comprehensive legal framework modeled on domestic insolvency regimes. They also noted that the SDRM should address the legality of contracted debt, include official multilateral debt, and limit debt repayments to a socially sustainable level. Furthermore, the IMF should play only a limited role in the decision-making process. A few representatives thought that sanctions should be included to force a return of flight capital and that CSOs should be consulted on an equal footing with the international financial community.
Geithner stressed that the IMF provides resources that reduce the strain on governments and make possible levels of social expenditure that would not otherwise be sustainable. That is one of the reasons why its preferred creditor status is central to the process. In domestic insolvency cases, companies going through a workout often need access to new funds on preferred terms so that they can maintain a minimum level of operations while they reorganize.
Geithner also warned participants about the potential impact of questioning the legality of debt contracted by previous governments, as this might affect sovereign lending in the future, including to countries that have borrowed responsibly and are servicing their debts in a timely way. He stressed that the revised framework does not anticipate a major role for the Fund in initiating negotiations or arbitration (see below under "further reading" for details). Moreover, there is no requirement for a Fund program to be in place unless requested by the country. With respect to the situation in Argentina, Geithner questioned whether sanctions would lead to financial re-flows. The authorities should instead focus on creating an economic environment that would encourage the return of funds.
Lastly, Geithner noted that outreach activities are underway to encourage further debate of the SDRM proposal. The Fund will continue to put the development of its proposal before the public and give the international community a more fully articulated SDRM design some time over the next few months.
The case for standards and codes, and against a Tobin tax
Mark Allen, Deputy Director of the Policy Development and Review Department, explained how lessons from various crises continue to shape the IMF's thinking about reforming the international financial architecture. He noted in particular efforts to strengthen surveillance of countries, including of their financial sectors, and steps to improve their transparency, such as encouraging countries to adopt internationally recognized standards and codes. Allen stressed that further work is needed to strengthen standards in corporate governance and accounting, including in the major industrial countries.
Labor representatives said that the potential for global financial instability has increased considerably with the continued world economic slowdown and the crises in South America. They favored a move toward a more regulated international financial system, including through capital controls. A currency transactions tax (often called the Tobin tax) to reduce speculative currency flows and raise money for poverty alleviation was also warranted.
In his response, Allen responded that there is no support in the Fund for a Tobin tax approach for a number of reasons, including the fact that it would not reduce the volatility of flows to emerging markets. It seemed more important to address the excessive temptation to borrow that open international capital markets can create: countries should have more effective restraints on the amount of borrowing that they permit their governments, banks and corporate sectors to undertake. Addressing the problem at the source rather than by attempting to tax international flows was more promising, Allen argued. Labor representatives indicated their willingness to continue their research on this issue and said they looked forward to close cooperation with the Fund.
Global governance issues
Reinhard Munzberg, Director of the IMF's UN Office, outlined the various mechanisms for the Fund's cooperation with UN agencies, which include the UN's Chief Executive Board for Coordination, the Social and Economic Council, the Development Committee of the IMF and the World Bank and the International Monetary and Financial Committee of the IMF. He explained how the momentum generated by the WTO conference in Doha, and the UN conferences in Monterrey and Johannesburg, has resulted in closer cooperation between the UN system and the Bretton Woods institutions. In particular, Monterrey was an example of effective multi-level cooperation in which IMF staff contributed to discussions related to debt relief, capacity building, and a "two-pillar" approach to development. Thanks to initiatives like the Monterrey conference, the Fund is now better informed about what other organizations are doing, and vice versa.
Labor representatives raised the issue of a global governance deficit that has to be tackled in order to improve transparency and provide better coherence in international policymaking. In this regard, they supported the creation of a Global Economic and Social Council to oversee the interaction of the various international institutions.
In his response, Munzberg did not discount the need to discuss appropriate global structures. However, he said the main emphasis should be for each institution to focus on its responsibilities, particularly with regard to the work needed to reach the Millennium Development Goals.
Poverty Reduction Strategy Papers
Union representatives were also updated on IMF/World Bank work. Brian Ames, an Advisor from the Policy Development and Review Department, and Sudhir Shetty, a Sector Manager from the Poverty Reduction Group at the World Bank, presented findings from the PRSP review and most recent progress report. In particular, they highlighted the need to further promote country ownership, increase transparency, prioritize expenditures, boost capacity building, and institutionalize civil society participation. They also noted the importance of Poverty and Social Impact Analysis (PSIA) to the PRSP process.
Labor representatives were concerned about the level of participation of local unions, and called upon the Fund to reject all PRSPs in which labor did not participate. They also emphasized the need for "alternative" approaches to macroeconomic and labor market reform policies in PRSPs.
In his response, Ames stressed that PRSPs are country-owned documents, and it is incumbent on national authorities to involve civil society in the formulation of their poverty reduction strategies. He noted that there may well be scope for alternative policy choices on issues related to the pace and prioritization of privatization and the size of fiscal deficits related to countries' unique circumstances (e.g., existing levels of debt). However, it is a responsibility of civil society to propose alternative and realistic approaches.
Looking ahead: prospects for IMF cooperation with labor unions
Deputy Division Chief Peter Fallon and Economist Nadeem Ilahi from the Policy Development and Review Department presented the results of a recent survey on consultation between the IMF and labor unions. The survey showed that more meetings between IMF staff and labor unions are taking place now than in the past at the country level, and that mission chiefs generally are positive about these contacts.
While labor representatives recognized that there has been progress, they noted that in many countries these meetings still do not take place, even when there are major labor market issues. They stressed that the nature, frequency and substance of mission contacts with labor unions will require further improvements and that staff should ensure that labor union views are reflected in country reports.
IMF staff participated in a conference on Global Governance in Montreal on October 13-16. The conference was organized by the Montreal International Forum, which is a global alliance of individuals and organizations seeking to increase the influence of civil society on the United Nations and other multilateral institutions.
The conference was attended by civil society representatives from all continents, high-level UN officials, academics and various advocacy groups. IMF staff participated as panelists in sessions devoted to "Democratizing Economic Global Governance: What Role for the UN and Civil Society vis-à-vis the IFIs?" and "The Rise of Global Indebtedness and the Need for an Insolvency Framework."
The Bretton Woods institutions and global governance
In his presentation on governance, Bassirou Sarr, Advisor in the External Relations Department, explained the workings of the IMF quota and voting systems. He stressed that the IMF's preference for consensus in its decision making actually aims to respect the interests and views of the developing world in a way that any delineation of voting rights would not be able to achieve.
Sarr also noted the various reform initiatives now underway in the Fund, in particular those related to enhancing transparency, and increasing accountability and openness. He indicated that those efforts, as part of the Monterrey process, aim to foster effective interaction with UN agencies and enhance interaction with civil society.
The IMF's proposal for a Sovereign Debt Restructuring Mechanism
Matthew Fisher, Assistant Director in the Policy Development and Review Department, participated in the panel session on the Sovereign Debt Restructuring Mechanism (SDRM).
During the discussion, civil society organizations were generally supportive of the establishment of a mechanism that could allow countries unable to service their sovereign debt to declare a temporary debt payment standstill and seek an orderly restructuring. But they also indicated that their own preferred framework for international insolvency was different from the one advocated by the IMF. They said an acceptable international insolvency framework would adopt the key legal principles underlying all insolvency resolution procedures. In addition, so-called illegitimate debt should be disqualified from the restructuring, the IMF's preferred creditor status should be abolished, and the Paris Club should be dissolved. Moreover, analysis of debt sustainability should take into account parameters such as the need to maintain social spending, and contingency clauses should be included to take into account exogenous factors such as declines in commodity prices. Finally, the UN-not the IMF-should have the central role in the SDRM, and civil society organizations should continue to be consulted while the framework is being developed.
During his intervention, Fisher noted the more limited role that the IMF is likely to play in the new version of the sovereign debt restructuring framework. Fisher also invited participants to think through the consequences of a radical change in the validity of creditor claims for the operation of capital markets. He stressed that it was necessary to trade concerns based on ethical considerations regarding certain types of debt, with the likely impact on the ability of emerging market countries to mobilize resources from private capital markets. Fisher also informed participants of the outreach effort that the Fund will undertake with civil society as it continues its work on an SDRM proposal. In the near term, the IMF is planning a workshop and conference on the SDRM on January 22 (see "current and upcoming events" for details).
For more information on the IMF and the global governance debate, see the recent pamphlet by the IMF's former Secretary Leo Van Houtven entitled "Governance of the IMF-Decision Making, Institutional Oversight, Transparency, and Accountability". You may also refer to the transcript from a recent Economic Forum debate entitled "Governing the IMF".
For more information on the SDRM, please refer to the pamphlet by the IMF's Deputy Managing Director Anne Krueger entitled "A New Approach to Sovereign Debt Restructuring". See also the factsheet entitled "Proposals for a Sovereign Debt Restructuring Mechanism", the paper "The Design of the Sovereign Debt Restructuring Mechanism-Further Considerations", and the summing up from the most recent meeting of the IMF Executive Board on the SDRM.
Flemming Larsen, Director of the IMF's European offices, attended a conference on globalization and global governance in Helsinki, Finland on December 2-4, 2002. Larsen participated in a panel discussion entitled "How to Govern the Global Economy?" Other panelists included Ann Pettifor, Director, Jubilee Research at the New Economics Foundation; Nitin Desai, Under-Secretary-General for Economic and Social Affairs at the United Nations; and Datuk Seri Syed Hamid Albar, Minister for Foreign Affairs, Malaysia.
The IMF and global governance
The conference topics reflected concerns expressed by civil society representatives at other recent conferences on global governance, including the perceived unilateralist attitude of the United States. Of more direct relevance to the IMF, speakers also addressed the perceived need for better management of global economic and financial crises. A prevalent view seemed to be that if only the IMF (like the World Bank and the WTO) were governed better, and more democratically, it would not commit all the mistakes it is alleged to commit, and the many crises could be either prevented or at least resolved without the social costs that they currently entail.
Larsen argued in his presentation that although there are certainly also global governance problems (including for instance agricultural subsidies and the failure to put into force the OECD's anti-bribery convention), a key reason for the many emerging market crises and the growing gap between poor and rich countries could be traced to policy weaknesses and governance problems in those countries themselves. It was therefore hard to imagine that any new global governance structure, or even a "democratization" of the IMF along the lines proposed by some civil society representatives, would obviate the need for countries to strengthen their fundamentals.
The need for regulation of financial markets
Larsen also responded to criticism by his co-panelist, Ann Pettifor. He agreed with Pettifor that everything was not perfect and that markets, and especially financial markets, needed to be regulated, as the Enron scandal had demonstrated. However, he also noted that adopting Pettifor's views in their totality would amount to a return to the government-dominated economic and financial model and high inflation era of the 1970s-an economic model that had been rejected in the vast majority of the world's democracies, starting in her own country, the United Kingdom, and culminating with the collapse of communism. Pettifor responded by acknowledging that markets were necessary, but that governments needed to take control of the markets rather than the other way round as at present. The two agreed on the need for NGOs to work with national governments-as the debt reduction campaign had so successfully demonstrated-rather than trying to bypass national parliaments and governments.
Larsen's intervention is available on the IMF website.
Andrew Puddephatt, Executive Director of the London-based NGO "Article XIX" met with IMF staff on November 27 to discuss transparency at the IMF. The IMF was represented by Deputy General Counsel William Holder of the Legal Department, Deputy Division Chief Przemek Gajdeczka and Senior Economist Robert Price of the Policy Development and Review Department, and Advisor Roger Nord and Senior Public Affairs Officer Sabina Bhatia of the External Relations Department.
Article XIX has assisted several countries with the introduction of "transparency laws." However, it also focuses on international organizations, and provided input to the World Bank's Policy on Information Disclosure in 2001.
Puddephatt criticized the IMF's transparency policy for "failing to fully guarantee the public's right to know in accordance with international standards." In particular, he said that the Fund does not have an independent review process that would allow the public to appeal against an unfavorable decision regarding the release of information. He also argued that the Fund should have process guarantees on its transparency policy, e.g. time-bound decisions and written explanations for any refusal to release information.
Holder disagreed with the contention that the public's right to access information is based on a principle of international law, extending to information held by international organizations, and that the Fund's policies breached such a principle. He said the IMF is an international institution that is governed by its Articles of Agreement, which have the status of an international treaty, i.e. of international law. With respect to the criticism that there was no independent review of refusals to disclose information, the Fund was open to suggestions. He said there might be merit in having an appeal process for cases where access to the IMF's archives was denied. However, while the staff and management could make recommendations, authority ultimately rests with the Executive Board.
Puddephatt also expressed interest in proposals made in the most recent staff paper on IMF transparency, but not adopted by the Executive Board. These included a proposed move to presumed publication of Article IV staff reports. At present, the decision whether to publish such reports rests with the member country.
In response, Holder explained that the IMF is trying to strike a balance between the legitimate interest of the public for access to information and the legitimate interest of Fund members for confidentiality. According to its Articles of Agreement, the Fund can publicly express its views on a member's policies only with the consent of the member (barring the rarely used exception of Article XII, Section 8). Furthermore, the voluntary system of encouraging publication through peer pressure has worked well in making countries more transparent.
See Managing Director Horst Köhler's statement on "The Fund's Transparency Policy" to the International Monetary and Financial Committee, as well as the most recent Board paper on the IMF's transparency policy, entitled "The Fund's Transparency Policy-Review of the Experience and Next Steps". You may also want to refer to a recent speech by the Secretary of the Fund, entitled "The IMF and Transparency-Moving Forward".
Many countries-including those preparing Poverty Reduction Strategy Papers (PRSPs)-are grappling with the need to evaluate the impact of key policy reforms on the poor. Poverty and Social Impact Analysis (PSIA) is intended to help policy makers and analysts in developing countries, as well as representatives of donor agencies and civil society organizations make better policy choices.
Even though there is a long history of work in the area of social impact analysis, there have been-and still are-weaknesses in its application to government policy. These weaknesses reflect in large part the challenges involved in conducting PSIA, which include data constraints (in many instances, the data required to do a comprehensive analysis are not readily available); analytical constraints (the impact of macroeconomic and structural reforms cannot easily be analyzed at the microeconomic or household level); capacity constraints (in poor countries, capacity to analyze policy is weak); and time constraints (while the analyst may face difficult data and analytical challenges, the policy maker is often under pressure to make fast policy decisions).
With the advent of the PRSP approach, the World Bank and the Fund have intensified efforts to help countries improve their analysis of the impact of proposed policies. As part of these efforts, the Fund, the World Bank, and the U.K. Department for International Development (DFID) held a PSIA workshop in Washington, D.C., on October 15-17. The purpose of the workshop was to discuss early experiences with a series of World Bank/DFID-sponsored pilot studies. The findings will hopefully contribute to a more informed dialogue on the impact of various policies on poverty and social conditions.
The pilot studies included Armenia (water tariff reform); Chad (cotton sector reform); Guyana (sugar, water, and bauxite sector reforms); Honduras (electricity privatization); Indonesia (rice tariff reform); Malawi (agriculture marketing reform); Mongolia (cashmere tariff reform); Mozambique (fuel tax); Rwanda (the fiscal deficit); Pakistan (energy tariff reform); and Uganda (export initiative).
Seventy country representatives, and researchers and staff from the Fund, Bank, and DFID attended the workshop. On the final day, many CSO representatives attended an open forum organized to brief the public about the outcome of the workshop.
The PRSP process in the CIS-7 countries is at a crossroads, participants concluded at a CIS-7 poverty reduction strategies forum in Almaty, Kazakhstan on December 9-13. Over 200 public officials and CSO representatives, as well as donor representatives, attended the forum, the third in an annual series organized as part of the CIS-7 Initiative, launched in February 2002.
The forum heard that all the CIS-7 countries-Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Tajikistan, and Uzbekistan-are now growing after a decade of decline and stagnation. Several countries, like the Kyrgyz Republic, have begun to see substantial poverty reduction, especially in rural areas.
Most of the countries are well on the way to formulating full Poverty Reduction Strategy Papers (PRSPs) or have already completed them. Economic growth provides an opportunity to reduce poverty, but it should be ensured that growth reaches the majority of the population. In this connection, delegates called for measures to encourage social inclusion, with policies aimed at the needs of disadvantaged groups, including many children, women, internally-displaced persons, and migrant workers.
Participants stressed that the PRSP needs to become part of the regular business of government in the region and should not be seen as a document prepared just to satisfy the demands of international donors. Civil society representatives also urged that their specialized knowledge about local conditions be used by governments and international institutions in policy design.
The CIS-7 Initiative is sponsored by the IMF, the Asian Development Bank, the European Bank for Reconstruction and Development, and the World Bank. It aims to reduce poverty, promote economic growth, and reduce debt to sustainable levels in the seven low-income countries of the Commonwealth of Independent States. The CIS-7 Initiative was officially endorsed at a ministerial meeting in Washington, D.C. in April 2002, when ministers adopted a statement of principles and objectives.
The forum was organized by the World Bank, the IMF, and the UNDP, with financial support from the Swiss government. Previous forums in the series were held in Moscow in 2000 and in Budapest in 2001. Organizers said regional partnership events were also being developed, with the aim of improving donor coordination and offering forums to resolve trade and other cross-border disputes.
Fund staff participated in the 13th Annual Eurodad Conference entitled "Empowering the Poor and Delivering the Millennium Development Goals (MDGs): The Coming Reality Check" held in Denmark on November 2-3, 2002. The conference, which involved over 100 representatives from Northern and Southern NGOs, was organized around two topics-one on "pro-poor economic policy" and the other on "The Millennium Development Goals: how can donors deliver on their promises."
Brian Ames, Advisor in the IMF's Policy Development and Review Department, participated on a panel discussion on the MDGs. Among other things, Ames stressed that the key challenges that lie ahead include the need to further open up the policy dialogue to alternative macro-economic scenarios and policy choices and to ensure that the Poverty Reduction Strategy Paper (PRSP) process drives the Poverty Reduction and Growth Facility (PRGF) rather than the other way around.
Wayne Camard, Senior Economist in the External Relations Department, served as "resource person" for a workshop on how to make private flows to developing countries more pro-poor, especially as official flows seem unlikely to reach the levels needed to achieve the MDGs. Camard noted that rapid employment growth, though not explicit in the MDGs, was needed to achieve them. He warned that policies would need to be carefully formulated to ensure that doors were not slammed on the poorest in order to protect the urban middle classes in developing countries. This provoked a lively discussion over how to strike a balance between the goals of promoting employment and of protecting workers (and in some cases the state) from the excesses of investors.
The IMF held a discussion in its Economic Forum series on November 8, entitled "Promoting Better National Institutions: The Role of the IMF". The panelists were Guillermo Ortiz (Governor, Bank of Mexico), Nancy Birdsall (President, Center for Global Development), Jeffrey Frankel (Professor of Economics, Harvard University) and Jeffrey Sachs (Professor of Economics, Columbia University). Eduardo Aninat (Deputy Managing Director, IMF) was the chairman.
In his presentation, Sachs said that macroeconomic policy will not be sufficient to address the problems of "dying societies" in Southern Africa. These countries need a much larger infusion of outside help than is currently on offer. Sachs acknowledged that IMF Managing Director Horst Köhler is delivering this message constantly, but said it was not being acted upon. Nowhere was there a realistic assessment of what is needed to make these countries' societies function.
Sachs also said the IMF has a "dismal" track record of promoting economic progress in the world's poorest countries. If the IMF wants to remain active in Africa it has to understand that macroeconomic policy goals such as achieving fiscal balance and maintaining monetary discipline are not the essence of the problems there. If the Fund tries to force the issue of macroeconomics it will "continue to fail" in the continent.
Up to now, Sachs said, the IMF's approach to the economic problems of African countries has been to add up the contributions of a country's donors, establish the total available, and then advise the country on how to live within its means. Sachs said the international community should take a different approach: it should determine what a country needs to spend in order to reach the Millennium Development Goals. If the country has insufficient resources, it should be the IMF's responsibility to inform donors of the amounts they need to provide to close the financing gap.
Birdsall spoke about the importance of the social contract in open economies, and the role of fiscal policy in affecting income distribution. She also told the forum she was a member of a commission that called for the Poverty Reduction and Growth Facility (PRGF) to be moved from the IMF to the World Bank. She said it is "completely wacky" for the Fund to run the PRGF. The IMF's role toward national institutions should be to "first, do no harm," to intervene with transparency, and to link its actions to effects.
Ortiz said it was as important to preserve institutions as it was to create them, and the Fund should avoid any breakdown of institutions. Ortiz said a tragedy of Argentina's situation was its institutional breakdown.
During an October-November 2002 mission to Georgia, IMF staff met with representatives of civil society.
In one session involving ten different CSOs, the goal was to get a sense of how civil society views have been solicited by the drafters of Georgia's poverty reduction strategy paper (PRSP), entitled the "Poverty Reduction and Economic Growth Program", and whether they thought the document adequately reflected these inputs.
In another session, the mission team met with the PRSP drafting committee, which consisted entirely of representatives of various Georgian NGOs and think tanks. The committee members described their public outreach and information efforts, as well as the process by which they came to agreement on the content of the PRSP.
An IMF mission met with several labor union leaders in Islamabad in mid-November 2002, who expressed interest in being involved in the preparation of Pakistan's PRSP. To this effect, they provided the mission with background material on labor issues and the observance of labor standards. The union leaders called for economic reforms that would stimulate growth and job creation and underscored the need for effective consultation with social partners in formulating reforms, including privatization. The mission briefed the labor union leaders on certain aspects of the PRSP process, and highlighted the concessional terms attached to the Fund's financial assistance to Pakistan under the PRGF.
In mid-November, an IMF staff team met CSO representatives in Bolivia for a wide-ranging discussion of economic policy issues, framed in the context of the Article IV discussions. The representatives were from the Catholic Church (CARITAS), an organization of small producers, a social action group (UNITAS), and the organization for social oversight over government-financed anti-poverty programs.
The CSOs are seeking to provide effective input into the design of public policies for the poverty reduction strategy. In their view, this policy dialogue can help avoid social unrest. They expressed interest in learning more about the government's plans for a new national dialogue and revision of the poverty reduction strategy in the course of 2003. (In early December, these issues were discussed in a government-sponsored seminar.)
The CSO representatives also stressed the need for adequate information to carry out social oversight of local anti-poverty programs, as envisaged in the National Dialogue Law of 2001. Some representatives also expressed concern that large fiscal deficits over the last two years have caused resources to be diverted to meet a rising debt service burden. Furthermore, inefficient spending and governance problems are seen as obstacles to fighting poverty.
Deputy Division Chief Marco Piñón of the Western Hemisphere Department briefed seven NGOs on Nicaragua on November 20.
Piñón explained that Nicaragua became eligible for assistance under the Enhanced HIPC Initiative in December 2000, but has not yet reached the completion point. To do so, it must implement the floating completion point conditions, and its IMF program needs to be on track. He said that Nicaragua could reach the HIPC completion point during the second half of 2003.
Piñón noted that debt-related problems include: i) external debt, currently $6.4 billion, and ii) internal debt, which is growing rapidly. Some of the increase is due to a recent banking crisis. He said significant fiscal adjustment is required to put Nicaragua on a path to sustainable economic growth.
A participant asked whether the IMF believes debt relief will be sufficient to alleviate the plight of the poor. Piñón said the agreed program assumes that debt relief will result in additional poverty-related spending. He added that NGOs can play a role in ensuring that the savings go to poverty programs.
Asked about privatization, Piñón said that the decision to privatize lies with Nicaragua. The IMF supports privatization if it will help attract private capital, technology, and other important resources. Another participant suggested corruption is a problem, because privatization would make it more difficult to hold country officials accountable. Piñón acknowledged the concern and urged NGOs to continue highlighting cases of corruption. A third participant asked for the IMF's view on tax reform. Piñón said that the IMF is not proposing new taxes. Rather, it has advised the authorities that the best approach would be to expand the tax base and eliminate loopholes.
With respect to Nicaragua's PRSP, participants were concerned that not enough outreach to CSOs is underway, and asked what the Fund is doing to encourage more outreach. Piñón said the Fund has been urging Nicaragua to broaden civil society's role.
The IMF's Executive Board approved a new three-year PRGF program for Nicaragua on December 5. Nicaragua was also granted about US$ 2.5 million in additional interim assistance under the HIPC Initiative. On December 12, the staffs of the World Bank and the IMF published their assessment of the government's annual PRSP progress report, which reviews progress in implementing Nicaragua's poverty reduction strategy.
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