Civil Society Newsletter
IMF Managing Director Rodrigo de Rato announced on June 28 his intention to resign after the 2007 World Bank-IMF Annual Meetings. He cited family circumstances and responsibilities. The IMF Executive Board subsequently agreed on a selection process for the new Managing Director: It will accept nominations from any of the IMF's member countries until August 31. In September, the Board will consider the nominated candidates and will meet to select the next Managing Director by consensus. Two candidates have been nominated: Dominique Strauss-Kahn, a former French finance minister, and Josef Tošovský, a former Prime Minister and Central Bank Governor of the Czech Republic. De Rato's resignation prompted calls for an open and transparent selection process from civil society organizations (CSOs) and others.
The IMF has published two sets of papers clarifying its role in advising low income country members on issues related to high and volatile aid inflows, in particular how the institution can best assist low-income countries achieve the macroeconomic setting that can facilitate the most effective use of aid. The papers' recommendations will be integrated with related Fund work, including the 2006 update of the debt-sustainability framework. Additional aspects of Fund policy toward low-income countries will be considered in upcoming papers on the IMF's role in the Poverty Reduction Strategies (PRS) process and its collaboration with donors, and on the Fund's engagement in fragile states and post-conflict countries. The latest papers were discussed by the IMF Executive Board in early July. A feature article in this issue the Civil Society Newsletter offers an overview of the papers' recommendations.
As part of the effort to help countries meet the Millennium Development Goals, the international community committed to scaling up aid and improving aid delivery. Over the past year, IMF staff has been working on clarifying what the IMF's role is in this regard and particularly how the institution can best assist low-income countries achieve the macroeconomic setting that can enable the most effective use of aid. This follows the commitment of Managing Director Rodrigo de Rato in a speech last year to remain engaged in the IMF's work with low-income countries, as articulated in the Fund's Medium-Term Strategy (see Civil Society Newsletter August 2006).
The IMF Executive Board met recently to discuss the Fund's role, policy advice, and program design issues in light of these scaling-up efforts. The discussion was based on two sets of staff papers published on July 19—one on overall program design issues (Aid Inflows—The Role of the Fund and Operational Issues for Program Design) and the other on fiscal policy issues (Fiscal Policy Response to Scaled-Up Aid). The outcome of this discussion will be integrated with related Fund work, such as last year's update of the debt-sustainability framework and two upcoming papers—on the IMF's role in the Poverty Reduction Strategies (PRS) process and its collaboration with donors, and on the Fund's engagement in fragile states and post-conflict countries. IMF staff discussed the two sets of aid flow papers with civil society organizations (CSOs) in a recent conference call (for more information see transcript).
Some key recommendations in the papers are:
For more detailed discussion of the papers, see the IMF's online magazine IMF Survey that examines the issue from different angles: In IMF Moves to Clarify Aid Role, IMF staff give an overview of the recent papers and how they fit in with IMF's approach to its work in low-income countries. The articles Helping Maximize the Benefits of Aid, Managing Scaled-Up Aid, and Low-Income Countries Need Upgrades, explain in more detail the recommendations on the use of aid. In an interview, the IMF Mission Chief for Rwanda, Kristina Kostial, and the IMF Resident Representative in Kigali, Lars Engstrom, discuss what these issues mean in practice.
IMF Managing Director Rodrigo de Rato announced on June 28 his intention to leave the IMF after the 2007 Annual Meetings, citing family circumstances and responsibilities. In a press release, he said he remained committed to making further progress on the Fund's Medium-Term Strategy (MTS), including quotas and voice, Fund income, crisis prevention, and IMF-World Bank collaboration in low-income countries (see also IMF Survey article).
On July 9, 2007, the IMF Executive Board met informally to begin the process of selecting the next Managing Director. The Board issued a statement confirming that Executive Directors may submit a nomination regardless of nationality and that the selection process would be finalized to “ensure a timely decision in an open and transparent manner, consistent with” the MTS.” Subsequently, the Board issued a press release, agreeing on the selection process. The Board stated it will accept nominations from any of the IMF's 185 member countries until August 31, 2007, and that the successful candidate must have a record in economic policymaking and have managerial and diplomatic skills. In September, the Board will consider the candidates nominated on the basis of the stated profile, without regard to nationality, and then will meet to select the next Managing Director by consensus (see also IMF Survey article).
De Rato's resignation made international headlines and prompted calls for an open and transparent selection process for the next Managing Director. Civil society organizations (CSOs), such as Oxfam International, urged the IMF to “open up the playing field” and consider candidates from developing countries. European CSOs called on governments in Europe to “act proactively to propose steps to empower those voices that have too long been silenced in the governance of the global economic system.” UK CSOs, including Oxfam, ActionAid, Christian Aid, the New Economics Foundation, and the Bretton Woods Project, called on the UK government and its European partners to end the tradition of European governments appointing the Managing Director of the IMF and the U.S. government appointing the President of the World Bank. The IMF Board's statement received support from the Group of 24 developing countries (G24), which includes China, India, and Brazil. The G24 called on advanced nations to respect the IMF Board's proposed approach for a transparent selection process, without bias in favor of a European candidate.
External Relations Department Director Masood Ahmed offers his perspectives on the IMF's new Communications Strategy, which was endorsed by the IMF Executive Board in June.
Q: How would you describe the overall goal of the communications strategy?
A: This strategy comes at an important time when the Fund is carrying out comprehensive reforms to better help our members meet the challenges of globalization. The overall goal of the strategy is to strengthen the Fund's effectiveness by raising understanding and support among key constituencies of the Fund's mission and reform agenda, and using communications as a tool to enhance the impact of the Fund's operational activities.
Q: What are the main elements of the strategy?
A: We see the overall goal being achieved through four main elements:
Q: How does the strategy support the Medium-Term Strategy?
A: The main focus is to highlight the progress and challenges of implementing the main elements of the strategy: strengthening surveillance, reforming quotas and voice, designing a new income model, and clarifying the Fund's role in low-income countries. One challenge is to accurately convey the state of progress on each element. For example, at the 2006 Annual Meetings, the emphasis was on reform of quotas and voice, while at the 2007 Spring Meetings, it shifted to the important outcome of the Multilateral Consultation on global imbalances. Recently, we have been focusing on the 2007 Decision on Bilateral Surveillance, which updates how the Fund interacts with each member country in policy dialogues.
Q: How does communications support operations?
A: Communication is an important tool to help deliver the Fund's operational objectives. This is especially true for surveillance, which requires informing markets and stakeholders of the results of Fund analyses and informing public debates on global and national issues within the Fund's mandate. But it is also helpful in other areas, such as publicizing standards for data dissemination or new guidelines on fiscal transparency.
At the country level, it is important to maintain open lines of communication not just with governments, but also with legislators, media, civil society, and the private sector. At the same time, we must be careful to preserve the Fund's role as confidential advisor.
Q: What has changed most from the previous approach to communications?
A: The biggest changes are in technology, ranging from revamping the IMF website to shifting more from print to web-based products (while retaining print for those who do not have web access). Another important shift is the emphasis on using languages other than English.
Q: What themes did the Executive Board emphasize when it discussed the communications strategy?
A: The Board's views were set out in a recent Public Information Notice. Board members emphasized four broad themes: First, the substance of what the IMF does is what matters most. Communication cannot be a substitute for effective operations, nor should it front-run operational work. Second, listening is key. It is equally important to listen to what others think of what we do, so we can do it better. Third, communications must be tailored to the situation at hand and to country circumstances. Finally, communications must be cost effective, and we must continually seek to measure the results of our efforts in this area.
Q: How will you judge success?
A: We have introduced new tools that can help us measure “success.” First, we are taking steps to listen very hard to what our members tell us and to bring that feedback back into the Fund. Second, we have carried out opinion research, surveys of our publications, media analysis, specific monitoring of think tank views and those of other constituencies to get user feedback, and adapt our products in response. We are also making extensive use of cost, timeliness, and other efficiency indicators to benchmark the progress in modernizing our business processes.
Have decades of engagement between civil society organizations (CSOs) and international financial institutions enhanced IFI accountability? That was the question addressed by academics and CSO representatives at a June 13-15 workshop organized by the School of Global Studies at the University of Gothenburg and the Center for the Study of Globalization and Regionalization of the University of Warwick. The workshop was structured around 12 case studies that, once finalized, will be part of a book on global governance.
The panel discussion on the IMF examined a draft paper on "Civil Society and IMF Accountability" by Professor Jan Aart Scholte of the University of Warwick. Scholte argues that the current accountability framework in the Fund's Articles of Agreement defining the accountability to nation-state shareholders, who are in turn accountable to their own citizens, is no longer a valid notion in today's world. He believes that contemporary standards of accountability justify the extension of this accountability to nongovernment stakeholders, especially those more directly affected by the policies and decisions of the institution. This definition is justified, the paper says, because most governments in developing countries lack the capacity to exercise control or hold global institutions accountable on behalf of all affected constituencies.
In the discussion that followed, IMF discussant Bassirou Sarr of the IMF External Relations Department emphasized that many dimensions of Fund governance and accountability were not captured in the paper, including greater interactions with stakeholders, regular reviews of operations and research papers by independent outsiders, and the ongoing efforts to enhance effective representation and participation of low income countries.
The main conclusion of the meeting was that CSOs believe that global institutions should be held accountable to stakeholders on grounds of both legitimacy and efficiency. Continued efforts by CSOs can serve to reinforce and complement states in inducing global institutions to be more answerable to various stakeholders.
Fiscal transparency can function as an “instrument of reform” by increasing accountability. That was the premise of a panel discussion at a recent Transparency International (TI) USA event on the IMF's revised Code of Good Practices on Fiscal Transparency. Representatives of civil society, think tanks, IMF and WB staff, and Executive Directors, U.S. congressional staff, and the private sector heard TI USA Managing Director Nancy Boswell say that such a dialogue would have unlikely taken place at the time when TI was founded in 1993. In her welcoming remarks, Boswell stressed three challenges for civil society organizations (CSOs) working on transparency issues: Donors should come together with a consistent approach to transparency and CSO participation; legal frameworks need to be in place, and civil society requires capacity and political space for participation.
The panel included speakers from civil society and IMF and World Bank staff, and was chaired by David de Ferranti of the Brookings Institution. Jon Shields of the IMF Fiscal Affairs Department offered a short overview of why fiscal transparency is important and, explained the roles of the IMF's three fiscal transparency publications—the Code of Good Practices on Fiscal Transparency, the Manual on Fiscal Transparency, and the Guide on Resource Revenue Transparency. The revised Code, launched on May 15 (see Civil Society Newsletter May 2007), serves as a guide for governments as they craft fiscal policies and as a benchmark for CSOs and members of the public seeking to hold governments accountable. The Code underpins fiscal Reports on Standards and Codes (ROSCs) and is an important tool for IMF staff in their country work. Shields gave an overview of the revisions that have been incorporated, in part inspired by input from CSOs and other organizations in a consultation process. He also highlighted various other instruments to promote fiscal transparency, including civil society initiatives.
Oby Ezekwesili, Vice President for Africa at the World Bank (who previously served as Nigerian Minister of Solid Minerals Development, Education, and head of the Nigerian Extractive Industry Transparency Initiative) stressed that nothing is more important than getting countries into the habit of wanting good governance. The Fiscal Transparency Code has a vital role in clarifying what should be done. But it is not, in itself, a "silver bullet". The hardest part is to transform rules into self-sustaining practices.
Warren Krafchik and Pamela Gomez of the International Budget Project made three recommendations for the Fund: It should expand coverage of ROSCs and publish their "production schedules"; publish all ROSCs, with or without a country's permission; and expand outreach efforts to CSOs, parliamentarians, and the media. ROSCs should be written in more accessible language and meetings with stakeholders should be held during the preparation of ROSCs and after their publication.
Ian Gary of Oxfam America welcomed the revisions to the Guide on Resource Revenue Transparency and said he had already used it as lobbying tool. He stressed the importance to translate ROSCs and other documents into local languages and said that the fiscal transparency initiatives "need teeth", referring to incentive structures.
In the ensuing discussion, Nancy Alexander of Citizens' Network On Essential Services congratulated the IMF on the Code's revisions. Ted Truman of the Peterson Institute thought that there are limits to the IMF's efforts on fiscal transparency because there are limited resources available and there wasn't enough support by the IMF Executive Board. Canadian Executive Director (ED) Jonathan Fried (who also represents Ireland and several Caribbean countries) pointed out that the Fund cannot stand above governments. The vast majority of EDs, he said, are in favor of the fiscal transparency as well as communications and outreach efforts. He added that the Fund provides training to journalists, parliamentarians and others, and stressed the new communications strategy and the initiative to publish more documents in languages other than English (see interview on the Communications Strategy.)
The Fund's Haiti team continues to deepen its regular dialogue with members of Haiti's civil society. As part of a staff visit in early May to hold the 2007 Article IV consultation and conclude the first review under the Poverty Reduction and Growth Facility (PRGF) program, the Fund mission team engaged in several outreach activities to discuss the recent performance of the economy and the challenges the country is facing to promote growth and reduce poverty.
In the discussions, representatives of civil society organizations (CSOs) gave the government credit for the significant improvement in the macroeconomic environment and the security situation in the country, but remained concerned about the slow pace at which economic activity is recovering and the limited progress so far in improving the delivery of essential public services. CSO representatives highlighted the slow decision-making process in the public sector, which has contributed to a slow execution of the budget, and the weak legal framework that hinders credit expansion and significantly raises operational risks for banks. Moreover, they stressed the need to ensure a truly participative process to complete the Poverty Reduction Strategy Paper (PRSP). During the visit, the mission also met with key donors, and visited a social project for street children in Port-au-Prince.
In follow-up meetings, I discussed with CSO representatives fiscal policy, the efficiency of government spending for reducing poverty and promoting growth, and better ways to monitor the government's efforts in these areas. Some CSOs felt that the Fund was mainly looking at the government's budget in financial terms, without taking sufficient interest in whether the proposed budget is pro-poor and pro-growth. I explained that the sustainability of the fiscal position is very important to consolidate stabilization. But in our discussions with the authorities, we stress the need to increase social and infrastructure investment to boost growth and reduce poverty. I also pointed out that the authorities have started to post on the Ministry of the Economy and Finance's website a table that monitors poverty-related spending in the execution of the budget.
Finally, in July, I participated—together with representatives of the private sector, political parties, and civil society—in a meeting called by President René Préval to discuss the appreciation of the exchange rate and its impact on economic activity, stressing the importance to boost Haiti's competitiveness by addressing widespread structural constraints.
During a July 28-August 2 trip to Asia to discuss key issues facing the global and regional economies, Managing Director Rodrigo de Rato also spent time visiting charitable organizations.
In the Philippines, de Rato visited newly constructed homes for the very poor provided by Gawad Kalinga, an urban development agency working to alleviate poverty and homelessness. He met with families benefiting from the agency's program to enable homeownership and presented a donation in support of education and health services within the village. The Gawad Kalinga project has provided a water system, a health clinic and a library, as well as housing. The agency encourages resident participation and has created a “homeowner's association.” De Rato met with leaders of the project as well as residents and children of the Villa Paraiso village, a community built by Gawad Kalinga..
In Cambodia, he met with young volunteers from Youth Star Cambodia and listened to their views on grassroots community development, citizen service, and civic leadership. Youth Star helps Cambodian youths acquire basic life skills so that they can contribute to their community and lead productive lives. They also promote a culture of volunteerism and civic participation. The IMF has an ongoing relationship with the organization through the work of the Resident Representative John Nelmes who donated office equipment to the agency.
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