Civil Society Newsletter

The IMF And Civil Society Organizations

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Civil Society Newsletter
August 2003

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In this issue

Recent Developments in IMF-CSO Relations

Feature Article:
An interview with Masood Ahmed

Poverty:
Paper on Debt Sustainability

Africa:
Managing Director Köhler meets African leaders

Technical Assistance:
AFRITAC moves West

New pamphlet explains IMF's Technical Assistance work

Letters from the Field:
Robert P. Hagemann, Cambodia
Francisco Vazquez, Honduras
Western Hemisphere Department

Bulletin Board:
Other recent meetings between IMF staff and CSOs
IMF staff news
Current and upcoming events
Selected speeches
Selected publications



Recent Developments in IMF-CSO Relations

In this issue of the Civil Society Newsletter, we offer an interview with Masood Ahmed, who recently took a two-year leave of absence from his position as Deputy Director of the IMF Policy Development and Review Department, where he had played a leading role in the development of Fund policies toward low-income countries. He has joined the U.K. Department for International Development as Director General, Policy and International. The interview makes clear Masood's role in helping to define IMF policies in a wide range of areas. But it also makes clear that the work with poor countries will continue to evolve in his absence.

One area in which this evolution is taking place involves the Fund's work on debt sustainability, the subject of a new paper on which public comment is being sought. That paper itself is part of a broader reassessment of the role of the IMF in low-income countries that will become an important part of our outreach in the coming months.

Important progress has been made in recent months in developing a guide for IMF staff relations with civil society organizations (CSOs). As reported in the last two editions of the Newsletter, Prof. Jan Aart Scholte, of the Centre for the Study of Globalization and Regionalization at the University of Warwick in the U.K., has been preparing a draft of the guide in consultation with both IMF staff and civil society representatives.

The comments from both the Fund and CSOs, as might be expected, were wide ranging and thought provoking. Scholte has incorporated these comments into a revised draft, which he has sent to the IMF. Scholte plans also to provide a copy of the revised draft to the individuals and CSOs who reviewed the first version. IMF staff expect to prepare a final draft of the guide in the next few weeks, which can then be issued to staff. At the same time, the guide will be posted on the Fund's external website, with an invitation to the public to comment. We envisage that the guide will be revised, refined, and updated after a period in which it is used by Fund staff in the field. Future issues of the Newsletter will offer updates on the topic.

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Feature Article

An interview with Masood Ahmed

Masood Ahmed, Deputy Director of the IMF Policy Development and Review Department since 2000, has been named to a two-year appointment as Director General, Policy and International of the U.K. Department for International Development. At the Fund, Ahmed has played a leading role on a range of issues related to low-income countries, including coordinating the implementation of the Poverty Reduction and Growth Facility (PRGF) and the development of the Poverty Reduction Strategy Papers (PRSP) approach. He has also been a high-profile spokesman for the Fund on matters related to poverty reduction. Before joining the IMF, Ahmed worked at the World Bank for 21 years, rising to Vice President in 1997. He spoke to the Civil Society Newsletter in late June, on his last day at the IMF.

Q: To what extent have anti-poverty objectives become part of the IMF culture?

A: Over the past three or four years there has been a much more direct focus on how the Fund can contribute to improving living standards of poor people, on how we can manage poverty and the social impact of policies that we recommend. Now most Fund mission chiefs working on low income countries think much more systematically about the impact on the poor of the policies and programs that a country is undertaking.

While the quality of the analysis is still uneven, we want to make sure also that the analysis is feeding into the dialogue about policy choices and tradeoffs—that it is not simply about how you mitigate the effect of policies on the poor. It is a tool that needs to feed back into the policy dialogue, not simply a downstream calculation and mitigation process. I think that is still at an early stage.

Q: What are the organizational results of this evolution in thinking at the IMF?

A: The basic difference is that we have much greater clarity about what is expected of the Fund in this area. We have clearer expectations of what the key features of the PRGF ought to be. We have clearer rules on what the Fund's involvement in the PRSP process ought to be. We have a clearer sense of how the Fund should be working on conditionality in terms of streamlining and focusing that conditionality on our core areas. We have a clearer sense of how the Fund should be working with the World Bank. We have a better sense of how the Fund and the UN should support the Millennium Development Goals process. We have built a much stronger community of mission chiefs working on low-income countries. They meet regularly; they interact with each other to look at common issues. With partners outside the Fund, issues being discussed include: how does the focus on poverty and on the Millennium Development Goals change the way we do macroeconomic analysis? The Fund has been working on the latter issue with the World Bank, with the U.K. Department for International Development, with the Dutch government and others. We recently hosted a conference at the Fund of people working on this issue in different agencies, including academic institutions and civil society organizations.

Q: What are some of the key tasks that remain?

A: The challenge is to implement change at the country level, in the basic design of our programs, in the way in which those programs are developed and negotiated with our interlocutors in country authorities, in the way in which our mission chiefs and our resident representatives interact with other donor agencies and with civil society. We have the institutional policies and expectations; now we have to apply them systematically in our everyday work with member countries.

Q: Are there new gauges by which progress in the struggle against poverty can be measured?

A: We are working much more closely with the UN now on trying to define the indicators which will enable monitoring of progress toward the MDGs. We are working to define how the Fund can specifically contribute to this process and what should be the indicators by which we measure our own effectiveness.

Q: In what part of the world is the redefinition of IMF anti-poverty policy most advanced?

A: Africa is very much the center of all of this work. There is a lot of effort in the African Department of the IMF to build on the framework that has been developed over the last few years and to use it as an organizing mechanism for our work in countries. Obviously, in some cases it adds to the burden on already-strapped resources in the departments. But I don't think there is an alternative, because this is now the internationally accepted framework. The Fund is very much part of having helped to define it.

Q: To what extent is the new doctrine of focusing on poverty institutionalized at other multilateral organizations?

A: Over the past 10 years there has been a progressive increase in the focus on poverty issues in the work that multilateral organizations do. Specifically over the past four to five years, there has been a much greater attempt at organizing the assistance by multilateral institutions around the core objective of reducing poverty and meeting the Millennium Development Goals. Some instruments have helped increase the operational focus on the antipoverty goals in the multilateral institutions. These instruments are, at the national level, the concept of the Poverty Reduction Strategy Paper, which serves as a framework for organizing the country's own efforts around poverty reduction, and organizing donor assistance and development support around the same objective. The second instrument is, at the international level, the agreement around the Millennium Development Goals as reflected in the Monterrey Consensus.

Q: In a global climate in which uncertainty dominates the economies of the big industrialized countries—is this uncertainty running stronger than commitments to support anti-poverty work?

A: I'm heartened by what I see happening in a number of countries in following through on the commitment to increase aid. In the post-Monterrey period aid flows are supposed to increase substantially by 2006. The United States has come through with a big increase in aid, and also more of a renewed focus on how to make that aid more effective. The European Commission has made a commitment to increase aid. Individual countries within that community are taking action to deliver on that. I am also quite heartened by what I see happening on aid delivery mechanisms, which reflect a commitment to harmonize efforts, and reduce the costs of doing business for poor countries.

Q: The issue of protectionism by industrialized countries has not been resolved.

A: But you see a growing awareness of the link between trade and agricultural issues and their impact on the poor. There is now far more press coverage of how subsidies for cotton farmers in the U.S. force West African cotton farmers—who are competitive—out of a job. The fact that these issues are being given the prominence that they are is important. The fact that so many people now can cite statistics about the one billion dollars a day in agricultural subsidies; about the fact that a European cow receives a larger daily contribution from European consumers—$2 a day—than the income of half the world's people. The fact that all of this is playing in the media means that people are becoming aware. That creates an inevitable process that leads to change. These changes are not going to be easy. They are not simply about handing out money. They are about structural changes, and structural changes in economies and societies are difficult, as developing countries have been trying to say for a long time.

Q: Will your departure weaken the new emphasis on anti-poverty work at the Fund?

A: Individuals make a difference, but institutions are much bigger than individuals. I hope that in the time that I have been here I have been able to contribute to providing some impetus to the way in which the Fund has developed. There are many people in the Fund who are now ready to take on this role. It is not a role that can or should be thought of as synonymous with an individual. In particular (Policy Development and Review Department Deputy Director) Mark Allen will bring new energy, new ideas, new perspectives for taking work on development issues forward. And I also look to coming back in two years time and seeing how, with this additional experience, I can contribute to the Fund's mission.

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Poverty

Paper on Debt Sustainability

The IMF has invited public comment on a paper about debt sustainability in low-income countries. The paper is intended to help in devising a policy framework—under development in close consultation with the World Bank, official creditors and debtors—that would guide low-income countries in their borrowing practices.

The debt-sustainability paper—and request for public comment—is part of a broader effort to define a policy framework for the Fund's work in low-income countries for the long-term. In the coming weeks, the IMF Board also will consider an issues paper on "The Role of the Fund in Low-Income Countries Over the Medium Term" that will begin to address many of the key issues related to how the Fund can support low-income countries and contribute to the global effort to achieve the Millennium Development Goals. That paper will be accompanied by a separate paper examining the impact of exogenous shocks (natural disasters, commodity price fluctuations etc.) on low-income countries. A major outreach effort that will include consultations with civil society is anticipated.

The issuance of the debt sustainability paper was preceded by three workshops on debt sustainability and development financing attended by IMF staff. The workshops were organized by the Agence Française de Développement in Paris on May 14, by InWent, Capacity Building International of Germany in Berlin on May 19-20, and by the Commonwealth Secretariat and the World Bank in Accra, Ghana, on June 9-10. Besides Fund and Bank staff, participants included government officials and representatives from civil society.

The debt sustainability paper was discussed by the Executive Board of the IMF in an informal seminar on July 11. Comments on the paper are invited by September 30, and should be sent by email to LICDebtSust@imf.org.

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Africa

Managing Director Köhler meets African leaders

IMF Managing Director Horst Köhler conducted a four-country tour of Africa July 6-11 as part of his ongoing effort to consult actively with key policymakers in the region on issues related to poverty reduction and the promotion of long-term economic growth.

The Managing Director's visit took him to Ethiopia, Kenya, Madagascar and Mozambique, where he also participated in the summit of the Heads of State of the African Union. It was Mr. Köhler's fourth trip to sub-Saharan Africa since assuming office in 2000.

In his address to the Heads of State, the Managing Director offered a firm commitment to provide Africa with the expertise and financing to help make significant progress toward meeting the Millennium Development Goals, which call for a halving of poverty between 1990 and 2015. He restated his call for the developed countries to meet their commitments to offer aid and trade opportunities to Africa, and he encouraged African leaders to take steps to enhance governance, sustain growth, encourage private investment, and promote regional cooperation.

In Ethiopia, he reiterated Fund support for the government's economic policies and was able to obtain a first-hand view of the responses to the economic and social challenges created by the current drought, which has made food insecurity the Ethiopian government's top priority. He also met with about 140 members of civil society, including representatives of NGOs, labor unions and the private sector. Two topics figured in all meetings—the country's Sustainable Development and Poverty Reduction Program, and the role of the private sector in economic development. The Ethiopian news agency ENA reported that Prime Minister Meles Zenawi said after his meeting with the Managing Director that Ethiopia and the IMF are working together "with a great sense of cooperation and understanding on various issues." Mr. Meles said that while there are points of divergence on some issues, Ethiopia has forged a sound relationship with international financial institutions.

In Kenya, Mr. Köhler met President Mwai Kibaki, his finance and economy team, and the leader of the parliamentary opposition. The Managing Director expressed his support for the government's strategy. He cited its fiscal prudence, its expenditure restructuring in favor of health and education programs, and its anticorruption measures.

In Madagascar, Mr. Köhler met with President Marc Ravalomanana, Prime Minister Jacques Sylla, and members of the government. The Managing Director said he was pleased with the recent completion of Madagascar's Poverty Reduction Strategy Paper, which benefited from wide consultation among different groups, including civil society.

In Mozambique, he met with President Joachim Chissano, several key members of the government and representatives of the private sector. He commended President Chissano on Mozambique's progress in improving economic policies and social conditions.

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Technical Assistance

AFRITAC moves West

The IMF has expanded the territory covered by its centers to promote capacity-building in Africa. The West Africa Regional Technical Assistance Center (West AFRITAC) was opened in May in Bamako, Mali, to cover ten francophone countries in sub-Saharan Africa. Its inauguration follows the opening of an East Africa counterpart, which began operations last year in Dar es Salaam, Tanzania

Technical Assistance is a familiar part of the development lexicon. But in the AFRITAC context, the term has a particular meaning. The centers' basic mission is to strengthen the ability of governments to design and carry out their own pro-growth poverty-reduction plans. These are set out in Poverty Reduction Strategy Papers, which have become the basic tool by which countries set out their development ideas.

Through the AFRITACs, teams of resident experts, supplemented by short-term specialists, provide assistance in the core specialties of the IMF. Among the topics: macroeconomic policy, microfinancing, financial sector policies, tax policy and revenue administration, exchange rate administration, public spending management and macroeconomics statistics.

The West AFRITAC is part of the IMF's response to calls by African leaders, including those expressed under the New Partnership for Africa's Development (NEPAD). The initiative builds on efforts by officials of the countries in its territory, the African Capacity Building Foundation, the African Development Bank and the Banque Centrale des États de L'Afrique de l'Ouest (Central Bank of West African States).

Many AFRITAC projects will strengthen capacity-building programs already under way. Among the examples: In Mali, the authorities are fortifying tax administration and public spending management, as well as employing a new budget classification system to monitor poverty-reducing spending. Benin and Niger are building capacity in tax administration and public expenditure management. And Guinea is showing progress in improving the country's statistical database and setting up a computerized budget monitoring system.

If the two centers establish successful track records, three more centers could be established, which would allow all sub-Saharan countries to participate in the most up-to-date form of technical assistance available in the developing world.

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New pamphlet explains IMF's Technical Assistance work

The IMF's work in the area of technical assistance is explained in a new publication, "IMF Technical Assistance: Transferring Knowledge and Best Practice. The 56-page pamphlet explains technical assistance partly through case studies from around the world.

Examples include capacity building in Africa; the fight against money laundering; assistance to central banks in Lithuania and Poland; advice on tax reform; the strengthening of trade policy; and assistance in setting up treasuries in transition economies. The IMF's work in post-conflict situations is highlighted with a first-person account of the rebuilding of economic institutions in Bosnia and Kosovo, as well as examples from Afghanistan and Timor Leste.

The pamphlet also explains how the training programs of the IMF Institute complement technical assistance work. "Providing technical assistance to member countries—particularly developing countries and countries in transition—is among the IMF's most important jobs. Yet this major component of our work is relatively unknown to the public at large," Eduardo Aninat, former IMF Deputy Managing Director responsible for technical assistance, writes in a forward. "It plays a vital role in laying foundations for stronger economies and for a better future for the people of many countries of the world."

Aimed at the general public, the pamphlet is free. The English and French versions have recently been published, and versions in Spanish and Arabic will be available shortly. Russian and Chinese versions are expected in September.

It is available on the web at http://www.imf.org/External/pubs/ft/exrp/techass/techass.htm

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Letters from the Field

Putting NGOs in the mix

Robert P. Hagemann, Resident Representative, Cambodia

I recently launched an initiative to spark dialogue with the NGO community in Cambodia through a series of roundtable discussions. The interaction grew out of the Fund's interest, in the context of PRSP discussions, to hear civil society's views of policies to speed up and sustain poverty reduction in Cambodia.

The first roundtable was held on June 19, 2003, in Phnom Penh, with representatives from international and Cambodian NGOs who had been invited to discuss revenue policies. The session began with a presentation on Cambodia's fiscal situation, the scale of the revenue challenge and, in particular, the policy and administrative reforms to boost revenue performance. The subsequent discussion brought a surprise: despite the availability of documentation on the program in Cambodia, participants knew little about extensive efforts to broaden the country's revenue base.

They welcomed the initiative. Representatives seemed especially pleased about the "fairness" aspect of revenue work—that improving compliance and broadening coverage is aimed at improving equity. Specific proposals made by the NGO representatives included introduction of a progressive land tax to discourage land speculation; tax reductions on agricultural inputs to improve agricultural competitiveness and help diversify production; and the reduction or elimination of various fees collected at the provincial level (which by one estimate reach 70 percent of the price of products at delivery) to reduce disincentives to rural entrepreneurship.

Several topics for future discussion were identified: the budget formulation process; expenditure policies; conditionality under the PRGF; trade policy and WTO accession; and governance. The next roundtable was scheduled for July 16, 2003, for a discussion of governance and corruption.

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Honduras: Macro lessons from Microfinance

Francisco Vazquez, Economist, Monetary and Financial Systems Department

Can a microfinance experiment provide lessons for macroeconomic and financial stability? For Honduras, the answer is a yes. Fund staff had the chance to hear directly from farmers about the benefits of "Monedero Banadesa", a new microfinance project that provides credit to the owners of small farms. The meetings were held last February as part of a Financial System Assessment Program (FSAP) that gauged the soundness of the country's financial system.

Monedero Banadesa is a successful approach to agricultural credit. The program, targeted at the smallest farmers, not only provides financing but, most importantly, also offers mandatory crop insurance. In an economy that depends on a few agricultural commodities, crop insurance is a major public policy issue. Falling farm commodity prices hit all farmers, causing problems throughout the economy and financial system. Knowing this, no individual farmer has an incentive to obtain insurance, anticipating that a mass of claims could cause insolvency throughout the insurance industry, which would require a government bailout. Therefore, policymakers are looking for alternative ways to ensure that individual farmers are properly protected against shocks.

The Monedero Banadesa experiment is still in its early stages, and time will reveal aspects that need improvement. But the mission from the Monetary and Financial Systems Department learned from Hondurans how grassroots solutions can be applied at the macroeconomic level.

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A roundup of recent Western Hemisphere Department contacts with civil society

Edited by Leonardo Cardemil, Advisor, Western Hemisphere Department

In Dominica, staff met with news media and with a wide range of civil society representatives, including labor union officials, to gauge public support for a Fund-supported program that is being negotiated. Discussions centered on how to design policies that would move the economy forward. Civil society members consulted included staff of the "Integrated Development Plan," an organization with civil society representation.

An Article IV mission to the Dominican Republic to evaluate and discuss the state of the economy and financial system in February included discussions with key business and labor groupings. Meeting with members the National Council of Private Enterprises (CONEP) and the National Council of Labor Unions, staff explained the aims of IMF surveillance. Specific issues included the role of fiscal discipline in limiting inflation, the power of free trade to produce more jobs and lower prices; and the need to avoid over-reliance on public sector employment, which can divert resources from priority social spending. Union activists agreed that public sector employment was inflated, though they were skeptical of the promised benefits of free trade, putting more emphasis on the potential for job loss. Private sector representatives urged staff to advise the government to tighten fiscal controls. They also advocated a Fund program.

In Ecuador, a staff visit undertaken for a one-year review of the Stand-By Arrangement included meetings with national and foreign CSOs. These included representatives of the indigenous community, Jubilee 2000, a UN-sponsored Fiscal Transparency Forum, and private sector associations. Talks centered on economic and social policies aimed at establishing sustainable economic growth and poverty reduction, as well as the impact of debt obligations. First Deputy Managing Director Anne Krueger joined staff for part of the trip, visiting Quito and Guayaquil for discussions with indigenous and business-sector associations. Follow-up discussions included talks with academics and religious leaders on environmental concerns and debt problems in light of Ecuador's high poverty rate.

In Nicaragua, Resident Representative Luis Breuer held a series of meetings with civil society organizations. Participants included the Papal Nuncio, Cardinal Miguel Obando y Bravo, as well as members of Quakers International (QI) and of the Civil Society Coordinating Council (CC—Coordinadora Civil), an umbrella organization. Discussions focused on the Poverty Reduction Growth Facility (PRGF), as well as CC complaints about perceived lack of transparency in the government's negotiating practices. QI members argued for assignment of debt relief gains to domestic social programs. Mr. Breuer responded that a large part of the debt relief is associated with only nominal (legal) debt reduction and does not represent cash savings that could be channeled to social programs. However, savings derived from the interim assistance that Nicaragua currently receives under the Heavily Indebted Poor Countries (HIPC) Initiative—which represents reductions in actual service payments to the IFIs and other donors—were being channeled into social programs, under Fund and World Bank monitoring.

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Bulletin Board

If you want to be notified when new documents are published on the IMF website, please sign up for email notification through our website notification system.

Other recent meetings between IMF staff and CSOs

  • On May 5, Hans Peter Lankes, Chief of the Trade Policy Division of the Policy Development and Review Department (PDR) and World Bank staff met a small group of civil society representatives at IMF headquarters in Washington to discuss questions concerning the IMF's role in the WTO, and other trade-related issues.

  • On May 22, Mario Garza and Michael Papaioannou from the Honduras mission met with three Honduras and Washington NGO representatives at IMF headquarters. Topics included Poverty and Social Impact Analysis (PSIAs), privatization, trade liberalization, the global coffee market, financing the PRSP and fiscal policies.

  • At the request of a group of NGOs, PDR Director Timothy Geithner, met with three NGO representatives at IMF headquarters on June 16 to discuss the status of the paper on the role of the Fund in low-income countries; the Independent Evaluation Office review of prolonged use of Fund resources; and Masood Ahmed's departure from the Fund. PDR Deputy Director Mark Allen and Advisor Brian Ames also attended.

  • On June 18, External Relations Department Director Thomas Dawson hosted a reception for CSOs and other organizations to bid farewell to Masood Ahmed at IMF headquarters in Washington.

  • On June 20, APD economist Enric Fernandez, and Wayne Camard of EXR participated in a meeting at the World Bank in Washington with Amnesty International (AI) USA representatives on Sri Lanka. Topics discussed were the current work of the Bank and the Fund in Sri Lanka, the Tokyo donor conference and the relevance of AI's current human rights concerns to that.

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IMF Staff News

  • Mexico's Deputy Secretary of Finance and former IMF Executive Director Agustín Carstens will succeed Eduardo Aninat as Deputy Managing Director of the IMF on August 1. Aninat, a Chilean national and former Finance Minister of Chile, announced his departure in March. He had joined the IMF in December 1999. In his farewell interview in the IMF Survey, Aninat stressed Africa's need for capacity building.

  • IMF Managing Director Horst Köhler notified the IMF Executive Board of his intention to appoint Professor Raghuram Rajan, a distinguished economist at the University of Chicago Graduate School of Business, to the position of Economic Counsellor and Director of the Research Department at the IMF. He will succeed Kenneth Rogoff, who earlier announced his decision to return to academia in the Fall of 2003.

Current and Upcoming Events

  • The Annual Meetings of the Governors of the IMF and the World Bank will take place in Dubai, United Arab Emirates on September 23-24, 2003 with a number of other official meetings taking place in the preceding days. A number of dialogues for interested civil society representatives will be organized by the World Bank and IMF during the week of the September 18-24, 2003. Registration information for CSOs can be found on the Annual Meetings website.

  • The Fourth Annual Research Conference will take place in Washington, DC on November 6-7, 2003. This year's conference will be devoted to Capital Flows and Macroeconomic Cycles. More detailed information will be posted closer to the conference.

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Selected Speeches

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Selected Publications

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