Transcript of Questions and Answers Session with Rodrigo de Rato, Managing Director, International Monetary Fund

At the Annual Conference of the Parliamentary Network of the World Bank
Cape Town, South Africa
March 16, 2007

Yunus Carrim: A very few words of introduction because most of you I think know Mr. de Rato, but Mr. de Rato has been Managing Director of the IMF since 2004, prior to that he was a member of parliament from 1982. In 1996 he was appointed Minister for Economy in the Spanish Government and in that capacity served on the Board of Governors of the IMF, World Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, and so on. Since 1999, as Minister he has been attending the WTO Ministerial Meetings. He has several degrees including a PhD in economics. He didn't reveal to me what he thinks about the Dragonsburg Mountains, but that's presumably because he hasn't been there yet, but over to Mr. De Rato. Thank you very much. We're very pleased to have you here, very honored indeed. Can I urge also for those who are going to put the questions that we be as brisk as possible because I think we are a good 15 minutes behind time. Ten minutes will do you, ten minutes perhaps to Mr. De Rato and then we throw it open. Thank you very much.

Mr. de Rato: Even shorter than that. Well, first of all, thank you very much Mr. Carrim for your introduction. I've never been in your province. The only two places I knew in South Africa were Johannesburg and Pretoria and without any disrespect, I prefer Cape Town. I really have to say this is a very, very beautiful city.

This is a very good occasion to be in such a beautiful city with all of you. This is the first time that you meet outside Europe and I think it's a very good chance that you meet in South Africa. Also I think it's a great occasion for me as Managing Director to attend one of your conferences. My predecessor did so, and some of my management colleagues, too. The reason is that I believe, as my colleagues do, that our work can be enhanced by reaching out to you and discussing with you very important questions which don't have easy answers. I think we all realize that. As Mr. Carrim was saying, I've been a member of parliament for 25 years, I've been a finance minister for 8, and I know that many of the issues that we've discussed this morning and that probably we'll discuss this afternoon are not easy questions. So in that respect, the capacity of a multilateral organization who has a mandate to provide public goods regarding macroeconomic and financial stability, and the members of national parliament, I think is a very good occasion that I didn't want to miss.

Regarding the institution: the institution like any public institution, especially an institution regarding macroeconomic and financial issues, is facing a world that is changing. Things are not the same as they were not only 10 years ago; not only 5 years ago, not even 3 years ago, and they probably will not be the same 5 years from now. Financial markets, globalized financial markets are creating opportunities, but also creating challenges for countries. Probably one of the biggest changes we've seen in the global economy is the new role of emerging economies and I think that is something on which international institutions like the fund to reflect on and learn.

We launched in September 2005 a medium term strategy to try to address the big challenge of our shareholders, which is to cope with globalization. Again, globalization viewed from our mandate, that is macroeconomic and financial stability. I know there are many aspects of globalization, but I think a public institution has to make the effort to focus in on its mandate and that's what our medium term strategy tried to address regarding the Fund. We have been reviewing our surveillance instruments trying to make them more focused and trying to integrate into our classical macroeconomic analysis financial market issues. We have launched new initiatives to not only look at surveillance from a national point of view, but also from a global point of view, and we've been discussing for the last year a global imbalances with 5 important economies, United States, Japan, the Euro area, China, and Saudi Arabia, and we will report on the findings of those discussions to our ministers in about a month from today in Washington in the Spring Meetings of April 2007.

We've been working also on issues to make our legal framework for surveillance more up to date and more reflecting the best practices that we have achieved during the years. Together with surveillance, crisis prevention is one of the big mandates of this institution. We all know that when the fund hits the headlines it's because there is a financial problem. Financial problems have been a necessity in many countries for many years. We live now in a moment in which many countries have been able to surmount the conditions and are able to finance themselves at very low rates in the financial markets. I think that's not only a welcome condition, but it's a very good one that proves that reforms and efforts for many years have given economies a new opportunity. But financial markets can change and emerging economies can have a very strong macroeconomic position, but nevertheless, they can have a stock of vulnerabilities that can leave them in hard financial conditions. I think that it's the responsibility of the fund to be prepared for that, so crisis prevention is also high on the agenda of our medium-term strategy.

Capacity building and technical assistance is a key question to strengthen macroeconomic policy. At the end of the day the difference of a macroeconomic efficiency is not between economies who are rich or are poor or between economies that have more or less commodities and natural resources, but between economies that have good or bad institutions, institutions in our case are central banks, financial regulators, tax authorities, investment authorities, custom authorities and we work with all countries, especially with medium-sized emerging economies and low-income countries to strengthen their capacity in building institutions.

Certainly low-income countries and their challenges are a key question for the fund who is a member of the Monterrey Consensus and the millennium development goals and I tried to explain some of our views this morning, but as any public institution, we are not only working on what public goods we would provide, but also how we provide them. Legitimacy is a key question for any public institution and for international public institution, more so if you want to look at it that way. So the representation, the voice, the voice and representation of our member countries has to be reviewed because the way we can be perceived as legitimate by different national opinions is to the extent that our decision making process reflects the true importance of economies in the world. I want you to remind yourselves when you think about the fund, the fund is not a development agency. We don't have a mandate to be a development agency. None of your countries has asked us to be a development agency. We're a financial institution so for us, economic size, economic weight is a key question when we consider voice and representation.

In Singapore last September we approved a very important agenda to strengthen the voice of the most dynamic economies, mostly emerging economies in the institution, but at the same time we recognized that low-income countries have to be protected and the voice of low income countries had to be enhanced and ring-fenced.

I think that is a very important step in the history of the fund, in which a financial institution recognizes that not only economic size and economic weight, but also other considerations have to be taken into place in governance. Those are the key questions regarding the institution that I wanted to mention before we get into our discussion and I want to just end my words by thanking you again for giving me this opportunity.

Yunus Carrim: Thank you very much. [Applause] Shall we take the questions in the order they appear on page 2 of the regional sessions? We'll start question one from Sub-Saharan Africa.

Speaker: Thank you Mr. Managing Director. Debt relief has raised a lot of hope at the level of poor countries. Today it's complete disillusion. Mr. Managing Director, why? Why are the debtors not choosing cancellation of the debt, unconditional cancellation? The objective of the news of the resources generated by the cancellation of debt has not been clearly dealt with, the same with the problem of renewable resources that we can expect. So what is your comment on the renewable energies? Thank you very much.

Mr. de Rato: Debt cancellation is a very important step in recognizing by the international community that some levels of debt accumulation posed an impossible limit to development and I am very glad that the world at large took some decisions. From the point of view of multilateral institutions, the decision to cancel debt was taken in by Gleneagles before and then by the board of the fund just a few weeks later. It was not conditional. It was related to the HIPC initiative and to that respect it took into account the HIPC initiative, but there is no conditionality in our 100% debt relief with the countries that are eligible. So in that respect I think there has been a recognition that there was no need for any new conditionality. The HIPC Initiative that was started at the end of the 90s and that has affected about 25 countries in Africa and overall 30 countries in the world has been a very substantial initiative too, and we're talking about 35 billion dollars in 2005-dollar values. Certainly that has produced important results, it has increased by our calculations about 5 times the capacity of many countries to service social expenditures like health, education, and others. Certainly in absolute terms, for instance, expenditures related to poverty reduction in Africa have increased, I repeat in absolute terms from about 4 billion dollars in 1999 to 12 billion dollars in 2005. That said, I really agree with you that the actual needs of low income countries, especially many countries in Sub Saharan Africa requires not only debt cancellation, but requires certainly increased levels of aid. There I want to emphasize the need for aid to be at the level that was promised, that is to double aid by 2010, but also to take into account that the predictability of harmonization of aid is a key question to make countries seize the opportunity in a more efficient way.

At the same time, I think we all have to agree that debt relief and even increased aid is not the only answer. We need to strengthen economies, the capacity to absorb new resources, and especially some of the issues that were mentioned this morning like for instance, trade integration to the global economy and the enhanced role of private sector development in low-income countries, especially in Sub-Saharan Africa.

Yunus Carrim: Next is Middle East and North Africa, please?

Yassin Jaber: I'm asking that question, again. I'm Yassin Jaber from Lebanese Parliament, Mr. de Rato. My question would be mostly concerned by the so-called Paris 3 Conference, but for those of my colleagues that do not follow that information to conference, donor countries in Lebanon, particularly in reconstruction and debt rescheduling, I would probably put that question more in the context of your role as crisis prevention mechanism. I would be interested to hear your comments about the usefulness, the assessment and the usefulness of such meeting and such conferences that include both multilateral organizations, bilateral arrangements, and local commitments at a political and international environment. So I would be interested to hear from you general comments about your assessment globally of the process, if it's applicable, and I know that Iraq could benefit from something similar, if it's a replicable process that's very unique, or more specifically how to assess the future of these meetings in terms of Lebanese debt assessment and rescheduling.

Mr. de Rato: Thank you, Paris 3 came after Paris 2, and I think we all learned some lessons from Paris 2. I think the lessons are that there is the need for a substantial aid package for Lebanon because of sensibility reasons and also because recently as we all know, Lebanon has gone through a very dramatic circumstances in terms of conflict. At the same time what is needed also is for the Lebanese government to put into place a reform program that will address mainly two issues, one is the debt sustainability of the country, and that has to have a substantial effort in fiscal policy, and second a structural reform package that will make the Lebanese economy more able to grow.

With addressing some of the important problems regarding for instance the energy sector, the electricity sector and others there is a need for the international community to act, but also a need for the government of Lebanon to learn from the past and put forward a strong package. Paris 3 was preceded by a very important economic package designed by the Lebanese government and I think that was a very important step. The fact that the Lebanese government put in place an important reform package that contained these two alternatives, these two issues, fiscal restraint and structural reform in my opinion was key for the success of Paris 3.

I think in Paris 3 there were important commitments by many countries to help Lebanon in terms of self-lending and some aid. I think those commitments were also enhanced by the fact the World Bank and the fund participated in the conference and also the fact the fund has received a demand by the Lebanese authorities to engage in negotiation for a post conflict program, and that the first reaction of our Board although it was an informal reaction, was a positive one, especially knowing as we knew then what was the economic program the Lebanese government has designed for itself.

We have a mission now or immediately a few days ago. The mission is currently in Beirut so we have a mission now in Beirut discussing this post conflict program and we will put it into practice I hope soon because there is some details to be negotiated. As experience has shown us in countries like you mentioned, Iraq, but also other countries, some in Sub Saharan Africa, post conflict problems can be very helpful for a country, it can trigger the possibility of the country to recover normality and then move into a normal standby and by then addressing it's main vulnerabilities. The case of Lebanon is maybe a special one, although every case is special. I think our knowledge and interaction with the Lebanese authorities is quite deep and I am encouraged by the attitude the Lebanese authorities have taken in looking at their own problem. At the end of the day there is so much international community can do and in the case of Lebanon it's clear that a substantial finance package was needed, but there is a very important step that the national consensus it has to create. As I had the occasion of saying this morning there is no alternative to ownership of economic policy and I think that the fact that the Lebanese authorities put forward a very important economic package is very reassuring.

Yunus Carrim: Europe and Central Asia please. Where are the Europe and Central Asia please. No questions I'll move on. South Asia, South Asia?

Eva Sundari: Thank you my name is Eva, I am from Indonesia, and I just want to raise one question about the effort of IMF in reforms itself so that can increase the accountability of IMF. And I do believe and also I am happy when you mentioned that beside a financial institution IMF also is a public institution, and as a public institution how IMF has gone into the reform itself, so the implementation of good governance principles also being implemented on the internal management, so that not only you impose debtor countries to implement the good governance principle, but also on the inter-managements of the IMF. And second, how -- this is also my suggestions, how about through your technical assistance you also promote the implementations of pro-poor budgeting process. So, you will be also accountable for your commitments in the pro-poor -- more commitments through the programs of PRSP. If you do so then it will be easier for MPs to have indicators and measure how to measure the commitments for the pro-poor developments in developing countries, especially some of the technical assistance from the IMF, thank you.

Mr. de Rato: Thank you very much. A public institution of course faces issues of production and of public goods that are important for the community whether being local, national, or international. We were founded in 1944 at the end of World War II. On the basis that macroeconomic and financial stability were an international public good, that means that macroeconomic and financial stability are not only an issue for the country itself, but also for it's neighbors and the international community. I think the lessons of the 1930s was very heavy on the minds of the people who created the Bretton Woods institutions and specifically the IMF.

Things have changed a lot since 1944 and I am not going to bore you with all the changes that you know very well, and we have to adapt to be able to fulfill our mandate. As I said before, we live in a time of very quick changes in the macroeconomic and financial scene the role of private financial markets, the globalization of financial markets, the implications in macroeconomic decisions of the new financial conditions in monetary policy and exchange rate policy etc., all that are questions that all your countries are facing, and if we want to be relevant to the discussions we have with governments, we will have to be on top of things. So, that requires for us to address important changes in our work, at the same time legitimacy is a key question for any public institution. You are parliamentarians you know that very well, without legitimacy it's very difficult to be able to provide pubic goods because people just will not believe in you. An international institution doesn't acquire legitimacy in the same way as other institutions. We don't run elections, so you could ask that how we fulfill our democratic deficit - if there is such a thing. Well, I think there is many ways to respond to that; transparency is one of them - we need to be a transparent institution; we need to explain to people why we take decisions, why we took decisions, and we need to look at our work, not only from our own point of view, but from an independent view. The Fund is quite a unique institution in that respect, and many of these changes were implemented - were put in practice by my predecessors. But we have a very strong internal audit and external audit, but also we have an independent evaluation office that regularly evaluates us. From an outsider point of view and a critical point of view, you could claim that we get our own medicine once in a while - and I think that's healthy. And recently, there was a very important report on our work in low-income countries, and we have had different reports regarding our work in financial crisis in Indonesia, in Asia, in Argentina, and all those reports are public. And I think transparency and accountability are key for a public institution. At the same time, representation and voice is key; in a world that is changing so quickly, in which countries play a different role in the world economy that they played only ten years ago, and South Africa is a very good example, but you have many other examples in the world. Well, if we want to be legitimate, we have to give voice to the countries that have increased their responsibilities and their role in the world economy; and that of course requires changes. Changes of voice in a multilateral body of 185 countries are not easy because, well, everybody has to feel comfortable. So, changes have to be measured and have to be acceptable for all. I think the role that we started in Singapore to give more voice to most dynamic economies of the last fifteen years, especially to emerging economies, is the right approach. There is an important change in the world economy together with the financial market innovation is certainly the new role of emerging economies in the world. We all have in mind China or India as angels of growth of the world economy, but also countries like South Africa or Brazil or Indonesia or Korea or Turkey or others are playing today a very important role in the world economy - and they will play an even more important role in the future. So, if we want to be legitimate, we have to listen to those voices with bigger voice, with bigger strength than before. At the same time -- and I think this is -- I want to emphasize this - for a financial institution, to recognize that not only economic weight, but also low-income countries per se, have to have a protected voice, I think is a big step in the right direction. And I want you to realize that the fund is a financial institution; it's not a political institution, it's not a development institution, it's not a security institution, it's a financial institution; and at the end of the day, a financial institution is about money. And that's why you want us to be; because you have all the institutions to do all the things. So I think it's very important that in a financial institution, the world economy -- the world countries as large, 185 countries, recognize that low-income countries have to have a protected and increased voice; I think that is a very important step - that is also part of our agenda. I think that agendas have to be also focused; we need to have agendas that we can accomplish, and we need to have agendas that will help to build on the next agenda. I think the actual agenda of the IMF in terms of surveillance, crisis prevention, capacity building, governance, is a possible agenda, and we have implemented it.

Now let me move into the question of technical assistance and capacity-building; this is a crucial element; and although many among us will believe that capacity-building and technical assistance is a question for emerging economies and especially for low-income countries, I have to tell you from my experience of the last three years, that capacity-building is a never ending need, and that very advanced economies need capacity building because -- well, things change and regulations have to adapt and we live that everyday and I think we provide and we are providing that type of capacity building in our different discussions with countries, but certainly we devote about one-third of our resources to technical assistance a lot of it is certainly related to low-income countries and emerging economies. We work with countries from post-conflict situations as we have mentioned before to the development of tax, regimes, regulations of financial markets, monetary questions, inflationary frameworks and deflationary frameworks. I mean, of course, fiscal policy, absorption capacity etc. We pride ourselves and I believe to a lot of extent true that we are focused. We have a very focused mandate and we try to stay within that mandate. That is not to realize that the world is much more complex than macro-economic and financial stability. So, if we want to fulfill we have -- to have a cooperative approach. For instance, in poverty reduction and now I move to the question of poverty reduction. In 1999, we launched together with the World Bank the poverty reduction strategy.

I think this is important, in 1999, the World Bank and the Fund redefined their strategy for poverty reduction and based on homegrown strategies. I think that was a big, big asset and the people who decided were right. of course, one thing is to have the right approach if something is to be successful and this is a very difficult issue as you all know, but I think to start by recognizing that when you are aiming at poverty reduction, it should be the country and the society who design their strategies I think is key. There is no substitute for that. Of course, international agencies like the Bank and ourselves can provide guidance, can provide signaling, can provide technical assistance, can provide financial resources, they cannot provide the willingness and the decision making and the design. So, in that respect the process of poverty reduction strategy I think has been enhanced by this approach of homegrown national plans of poverty reduction. The last paper of our -- independent evaluation office reflects on our role in the last five years and is a critical one. It recognizes this is the right approach but it says well there are more things to be done and we will implement them as much as we can, but is clearly that in general and in macro-economic policy in particular in poverty reduction strategies, there is no substitute for national consensus.

Yunus Carrim: Okay next is East-Asia please. East-Asia.

Yunus Carrim: South Asia is fine; East Asia answered on behalf of South Asia, now South Asia you answered, that's fine. Can I draw you attention to Latin America being next, following which the donor countries okay, thank you.

Sabrina Saqib: Good afternoon to everybody my name is Sabrina Saqib. I am one of the youngest parliamentarians from Afghanistan. I would like to tell you everybody which is here that all we knows that insecurity, immigration, violence all are related somehow to unemployment and increasing of unemployment. I would like to ask you Mr. De Rato that is there any plan to explain the IMF budget to address the increasing of unemployment especially on the women's issue? For instance, in Afghanistan we have the local and national resources and despite of the Afghan government that they promised to the international community to increase the gender equality, but we have only the 12% of the women who are in the employment of the government, so I would like to know that is there any program or plan for the IMF budget regarding this matter or not? Thank you.

Mr. de Rato: As I said before, we are a - we have a very focused mandate and is not directly related to unemployment, but at the same time there is no question that macroeconomic stability is related to many reforms that do have to do with unemployment. We see the need and we discuss that in some cases with many countries to change the labor laws as to promote more official participation of workers in the economic life and that has very important consequences in terms of fiscal policy and other aspects, apart from the importance of the well being of citizens, as I said before and I say Sub-Saharan Africa is a good example of that. Private sector development is key for poverty reduction and private sector development is key for employment. In that respect, I think the World Bank has very good publications regarding business environment that I really recommend those of you who don't know it to really look at it. I think that with all the limits that an analysis of the world business conditions country by country have and you can all imagine is not an easy job, I think is an standard publication that gives us a very clear picture of country by country how easy or difficult it is to do business and not strange, there is clear correlation between the well-being of countries and the capacity of the private sector to develop with those countries. So we truly believe that business environment is a key question. There is another question that I would like to mention to you that I wanted to raise this morning but I did not have the occasion, which is financial sector evolution.

Many people might think that financial sector is a rich country question but unless you have some thousand dollars per capita, well financial sector is nothing for you. Well, that is wrong, financial sector and banking conditions are key for development and for growth. Without a minimum efficiency of the financial and banking sector there is no credit, there is no investment, there is no use of savings, there is very difficult private sector development. So, Africa again is good example but Asia too in this respect. The countries that do have a more efficient financial sector and a bigger balkanization of society do respond to challenges of integration into the global economy much better and that has been true for many years but there is two circumstances that you have to take into account now, that I think make financial sector development even more important. One is financial markets. The opportunity that financial markets are today providing to countries cannot be fully absorbed unless financial sector is developed. So, in that respect middle-income countries and low-income countries have to evolve into more financial sector efficiency and the other is remittances. Remittances are changing the scope of many low-income countries. Remittances, the last figures out of 2005 are around $250 billion a year. 2005 you can expect that it is probably much higher by today. There is no development figure that can compete with that, and I think that we all realize that the efficiency of those remittances, which is private money, will be very much enhanced in countries that have a good financial sector. It is true that remittances are a very healthy element today of economies, but it is not less true that in many cases people are paying incredible amounts for sending remittances home. That change could have very important impact on income and unemployment. So, although we do not have a direct responsibility on labor markets, I think that part of our work on financial issues and on macro-economic policy does have a clear impact on the conditions for employment in countries.

Speaker: Thank you. Latin America please and Caribbean.

Bernardo Montenegro: Thank you. Bernardo Montenegro from Bolivia. Latin American parliamentarians believe in the necessity of having clear and balanced ways of reviewing the performance of different governments and their policies by the International Financial Institutions. This evaluation should take into consideration not only call numbers or economical ratios, but also take into account the compromise of countries in poverty reduction, transparency and especially, respect to democracy and human rights. Even you said that you are not a development agency, we strongly believe that International Financial Institutions have a key role in promoting the development of different governments. The question is how -- if we review the evaluation process by the International Financial Institutions to decide eligibility of countries for new loans and also to monitor and evaluate current loans?

Mr. de Rato: One thing is that our mandate is very focused on macro-economic and financial issues and something else is that it doesn't have impact on other questions. It does. Let me put you some examples, the Fund is probably the most important international agency in the quality of international data. Our dissemination of economic data has helped the world to have harmonized statistics of most countries and that is extremely important for many things, not least accountability. It is impossible to have accountability of governments if your data are not accurate. I think the fact that we are helping governments not only elaborate efficient macro and financial data but to make them public and that they are made public following international standards might not seem a glamorous contribution, but I can assure you that it changes the way everybody market, citizens, parliamentarians can judge a macro economic policy.

At the same time, the Fund has a unique feature that I do not think any other international agency of any type has which is that our members have the obligation to submit themselves to surveillance. So, that means that every country of the 185 countries has the obligation to submit itself to the surveillance of the global community because our article IV consultations are not just a discussion between the staff of the fund and the government but is a discussion that is brought to the board of the fund, so, the whole of the international community gives a judgment, gives an opinion about every economy; from the most - from the biggest ones to the smallest ones. In many cases -- and this is a decision of each government, in many cases in - around 60-70% of the cases, those judgments are made public and they are one more ingredient for public opinion and for political opinion like parliament to have a outside independent high quality view of a country's main challenges in a given moment of time. In this new medium-term strategy we are trying to focus surveillance. It's clear that to be able to attract your attention and certainly the attention of your governments. We cannot have an analysis of a country's challenges that is a phonebook in which we put everything on the table. No, we have to take some judgment and focus on what we believe are the big challenges of an immediate moment and maybe have a medium term view. So, that why we are evolving to a much more streamlined surveillance and focused surveillance and have also a mid-term three year view of a country's macroeconomic realities.

I think all those are strengthening our role that not only is helpful for the government who is our partner but it's certainly helpful for the rest of society, especially when governments make their article IV's public. And I encourage you to ask your governments to make them public because it's up to them. So, in any of your cases your governments are not making that article IV public, nobody better than you to ask them to do it because, well, you are the representatives of your people. On the last part of your question regarding lending - I didn't got what -- sorry -- I didn't I am...

Bernardo Montenegro: How can we review the evaluation process used by the international financial institutions to decide the eligibility of countries for new loans and also to monitor and evaluate current loans?

Mr. de Rato: Well, in our case -- and I can only talk about our case, we provide financing for capital account crisis or external account crisis. That means that our member countries have the right to ask for financing when they are facing an external shock or a financial crisis and we provide that financing. The conditions are not the one imposed by the staff, the conditions are the ones that the board decides and you are the board, not you but your governments the board. It's the international community that provides financing. You should remember that our financing is not private financing - it's public financing. So, it's the money of international community that goes to country A at a moment in which country A doesn't have access to any other financing because we not only provide financing but we provide financing in critical conditions. And it makes - in my opinion, it makes sense and is rational that international community that provides public money expects from the country to change the conditions that have taken the country to a crisis. It could be a post conflict, it could be external shock, it could be a consequence of a natural disaster or it could be the consequence of mistakes, but at the end of the day you are facing a crisis and you need two things; money to get out the crisis and policy to get out the crisis.

The international community can provide the money to get out the crisis, but the policies is to get out of the crisis have to be provided by the government, which is the only institution that can change policies in a country and I think we all have enough experience to know that. So, the conditionality is the one that the international community as a whole decides in our board in which all 185 countries are represented and is related to, not to impose in a country any conditions but to impose or to negotiate conditions with the country that will allow the country to get on its feet to be able to have access to international markets like any normal economy.

Yunus Carrim: Thanks. Donor countries please, representatives of donor countries. Is there no question? Oh there we are.

Pierre Lano: Pierre Lano from Belgium, it's a very simple question about more things to be done especially on the performance of the coordination between the financial partners; especially Bank and Fund.

Mr. de Rato: I hope I'll give you more or less the same answer. There will be a first step of coordination. First of all, I want to say the coordination between the Fund and all the international institution is key, but especially with development agencies. We are not the development agency, but a lot of our work ends or starts where the other ends. So, we need to coordinate ourselves the sustainability frameworks, poverty reduction strategy, capacity building many, many issues are faced by both institutions. That of course includes regional development banks and we have a very close relationship with all of them, but especially we have a very close relationship with the Bank. We were created at the same time and we are in the same street, so, that should help the coordination.

I think that coordination requires many things, requires first of all a high degree of trust and that is built through the organization by -- and that is one of the recommendations of the Malan Report that you refer by a clear attitude of the leadership. And I think that both Paul and myself, I have to say following the example of our predecessors because we are very, very aware that coordination is key for the success of both institutions. To that extent we were the ones who commenced that, that report. It was our own idea that it will be good to have -- if you want to call it a fresh pair of eyes to look at our coordination challenges and the report is a critical one. We didn't want your report to tell us everything is fine, we wanted your report to tell us what you're doing well, but you should do more.

Those sixty pages are right now an object of discussion. In fact, we have already had a meeting with the writers of the report about two or three weeks ago, it was a joint meeting of both boards. This second time in history that we, the both, the both boards met and it was an informal seminar. In the next few weeks and now separately both boards will discuss the Malan Report. Malan, Pedro Malan is the ex-finance minister of Brazil, together with a group of people he wrote that report. In the case of the Fund, we will have a working session with him and then during the Spring I will propose a specific measure following the report.

Of course, when you ask if an outside report, you get a fresh pair of eyes, but you might not agree with everything in it. And I think that is my duty to listen to my board to see to what extent the board sees 100% equal to the report. I think there are many issues in the report that are clear for us; the need for us to be focused, the need for us to concentrate on our mandate I think is the key question, the report express it very clearly. I think if you put together the last two -- that last report of our Independent Evaluation Office regarding our work in sub-Saharan Africa together with the Malan report, I think our agenda moving forward regarding low-income countries is very clear. I think we have to have to build on the experience we had in previous years that is related to focus on macroeconomic and financial issues, no mission creep, not trying to do what others are supposed to be doing; capacity building and technical assistance key questions for helping low-income countries, coordination with the donor community and the development agencies. We should be a focused institution, but a complementary institution, a cooperative institution. We don't live in a world that ends with macroeconomic issues. I think those syntheticize very well. The work on the field is key for the coordination. It's true and I think the Malan report says that very clearly that leadership of the President of the Bank and the Managing Director of the Fund and their immediate colleagues is key for this, but at the end of the day you need to work to your best.

And I think that philosophy is already there. I think most if not all of our representatives in countries are aware of that and they do it, but donor coordination by itself is becoming a very challenging question, and I think that although we are not the ones to take all the responsibility for coordination of donors, because there are many areas in which we are not experts, labor market reform maybe, health, education.

We are helping governments to find a fiscal space to do that, but we cannot design the specific programs to implement health or education reforms, but it is clear that to create the fiscal space is key to be able to be implement the reform. So, I think that cooperative approach at the field level is also a key question. I can assure you that you will see that we will implement this -- the calendar of implementation to me should be more or less and it's always dangerous to give calendars, but more or less should be, once we listen to the board's views on the report -- I think during the spring and the summer we will be able to propose measures that should be in place around the fall that is in the annual meetings of our institutions in Washington in October. Thank you.

Yunus Carrim: I've noticed that we have used up our full hour, I am afraid - I have consulted with the powers that be, what has been suggested is that every region has posed a question in fact to be fair, each of the questions is multifaceted. So, can we after discussion with PNoWB executive members, can we ask that regions give us their second question in writing, we can pass it on to one of the PNoWB officials or organizes and then we will refer it to your office and you will get a written reply -- thank you very much for that.

I will spare you a summary except to make two quick points; one is that we have heard both in the earlier session and now the stress and the willingness of the World Bank and the IMF to be transparent. And as PNoWB we need to ask ourselves whether we're exploiting that space that's opening up adequately enough. Secondly, while it's crucial to engage with the representatives, senior representatives and leaders of the World Bank and the IMF, we also have to ask ourselves whether in our respective parliaments we are engaging rigorously enough with our own respective executives. On that note, I thank you very much Mr. de Rato, I am sorry that we couldn't engage more. I know there are people who were meant to ask questions haven't got round to asking them, I apologize but I am at the mercy of the officials.

Suresh Keshwani: I have a suggestion to make, one suggestion. Several years ago, when we started our relationship both to the World Bank and IMF, the IMF began program of capacity building by holding seminars at various locations all over the world, would you consider restarting those sessions which have been stopped? The capacity building in parliamentarians, inviting group of parliamentarians...

Mr. de Rato: I think we're doing that. I don't know to the extent of what we all wish, but of course we have budgetary constraints like everybody else, but we are doing that and we have seminars in Washington and elsewhere and we do our effort to outreach and I would be more than glad to coordinate it with your services to guarantee that well there is as much information as possible and I think the new technologies, Internet providers us with a unique instrument to enhance outreach and interaction that we didn't have - a few years ago and I think you and us should use those a new instruments to really give us a more broader view of our respective responsibility.

Yunus Carrim: The next session starts immediately with the African Development Bank, thanks once again for your kind cooperation, thank you.

Mr. de Rato: Thank you.



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