IMF Focus is to Help Nations Grow even when Aid Promises Fall Short

To the Editor:

It is easy to share Prof. Sachs' frustration at how slowly Gleneagles' promise of increased aid is being translated into money on the ground for poverty reduction. ("It is time for words to give way to meaningful action," December 26). But countries are not well served by his argument that the Millennium Development Goals (MDGs) can be achieved by policies that could compromise macroeconomic stability and undermine the interests of the poor he claims to champion.

The IMF has long called on donors to meet the internationally accepted target for ODA of 0.7 percent of GNP. The back loading of new aid promises and the limited amount of additional real cash transfers is indeed a serious concern. But we cannot pretend that these shortfalls do not exist. If the IMF has a focus on "financial realities," it is precisely because of its commitment to the MDGs, to help countries grow rather than stagnate even when external aid flows fall short of promised levels.

Prof. Sachs knows well that spending by just printing money can lead to an inflation rate that not only reduces the real incomes of the poor—who are the least able to cope with rising prices—but also jeopardizes a country's chances to mobilize and invest the resources required for rapid growth. The IMF is committed to work with countries as they seek to find the resources needed to finance poverty reduction efforts, whether through debt relief, domestic resource mobilization, increased donor assistance, cutbacks in unproductive expenditure, or sustainable use of bank credit.

The IMF did not wait for 2006 to begin a "year of action." Following the proposal by the Group of Eight at Gleneagles, we moved rapidly to make IMF debt relief a reality before the end of 2005. That same sense of urgency is present when IMF teams work with countries and development partners (including Professor Sach's Millennium Project) to consider their strategies for meeting the MDGs. We can applaud the progress made by such member countries as Uganda, Tanzania, Mozambique, Bangladesh, and Sri Lanka in both raising their growth rates and achieving progress toward the MDGs.

As developing countries around the world strive to achieve the MDGs, we hope Prof. Sachs' voice will ring out as loudly in promoting the merits of sound policies, good governance, and institution-building, as it has in criticizing the donor community and the Bretton Woods Institutions.