IMF supports government efforts to reach MDGs

By Erik Offerdal
Resident Representative in the Dominican Republic
International Monetary Fund
Published in Hoy (Dominican Republic)
September 20, 2006

In the September 16 article "IMF accused of obstructing Dominican progress", which summarized some of the conclusions of a document released by the Presidential Commission on the Millennium Development Goals, it was argued that the IMF was "taking drastic action against the country's development by blocking the way towards the Millennium Development Goals (MDGs)."

This and other observations made in the article are based on a misunderstanding of the IMF's role in supporting the stability and sustained development of the Dominican Republic. The purpose of my letter is to explain the true role of the IMF in relation to the MDGs, in both the Dominican Republic and other countries.

First, the work of the IMF should be examined in a global context. Given the pressure to achieve the MDGs by 2015, the IMF has redoubled its efforts to assist countries, including the Dominican Republic, in evaluating the macroeconomic impact of stepping up their policy initiatives and seeking increased external financial support. In this regard, the IMF has encouraged countries to formulate and analyze various policy frameworks for achieving the MDGs and using these frameworks to sustain their poverty reduction strategies. Moreover, through its efforts to secure increases in external assistance, open up markets to developing country exports, and maintain a healthy and favorable international economic environment, the IMF strives to ensure that the policies of developed countries support the development efforts of low-income countries.

In the Dominican Republic, a core objective of the recent financing agreements has been to help the country achieve the MDGs through increased macroeconomic stability, more and better economic growth, and less poverty. In fact, the Letter of Intent for the current agreement explicitly states that "The key elements of the new program are (...) macroeconomic and structural policies aimed at solidifying price stability and ensuring the resumption of sustained growth" and that "the budget envisages a considerable increase in social expenditures and a reduction in arrears to avoid disruption in the provision of public services." Although the words "Millennium Development Goals" do not appear as such in the Letter of Intent, the government is committed to the MDGs, and the IMF is supporting it through policies that will help the country achieve those goals. To accurately illustrate this point, according to our discussions with the government on the 2006 budget, the fiscal program includes expenditures of around 1 percent of GDP (some RD$10 billion) earmarked for achieving the MDGs.

Finally, it is worth mentioning that the IMF has taken similar action in other countries. In Guatemala, a case with which I am quite familiar, having served as the IMF Resident Representative in that country only a short time ago, the main topic of conversation with the Guatemalan authorities over several years was the formulation of a tax reform package to increase social spending and, specifically, to achieve the MDGs. In fact, wrapping up a visit to the country last February, IMF Managing Director Rodrigo de Rato stated: "My discussions focused on the core challenge Guatemala faces to alleviate poverty by raising medium-term growth to create jobs. Meeting this challenge will require policies with a strong consensus across the social and political spectrum. The agenda includes (...) implementing tax reform that will allow increased targeted spending in key social and poverty reduction areas."

In conclusion, the IMF is helping its member countries achieve the MDGs and is prepared to pursue productive dialogue with the Dominican authorities, and Dominican society in general, on the necessary policies and measures to reach these goals. Although the article appears to suggest otherwise, it also states that "governments must support one another so that they can use macroeconomic stability as a means of paving the way to attainment of the Millennium Development Goals, which must be their overarching goal." The IMF could not agree more!



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