IMF Survey: IMF Opens Its Doors to Wider Dialogue
May 2, 2012
- Washington meetings offer opportunity for dialogue on world economy
- IMF listens to civil society concerns
- Calls made for greater IMF transparency and accountability
The crisis in the euro zone, natural resources management, regulation of international capital flows, inclusive growth, and poverty reduction were front and center as the IMF heard from a cross-section of society.
2012 Spring Meetings
A record number of representatives at the 2012 IMF-World Bank Spring Meetings from civil society organizations (CSOs), government officials, parliamentarians, academics, and labor representatives had the chance to exchange views with IMF staff on topics related to the global economy.
The meetings brought together more than 6,500 people from the around the world who attended some 280 official events.
Twenty-eight CSO representatives and academics from 22 countries received fellowships to attend the meetings, thus broadening the diversity of the participants in various events, particularly the CSO Policy Forum.
The Civil Society Fellowship Program has helped strengthen and deepen IMF’s interaction with civil society organizations from around the world, but especially with developing and emerging countries. The program has now been extended to academics and youth leaders.
“The fellowships are important to the Fund,” said IMF Deputy Managing Director Nemat Shafik, addressing a CSO reception on April 19. “The IMF is firmly committed to our ongoing engagement with the civil society community.”
Regulating capital flows
How emerging market countries regulate and benefit from capital flows was the subject of a panel discussion organized by the Bretton Woods Project. Vivek Arora, Assistant Director in the IMF Strategy, Policy, and Review Department participated as a discussant in the session. Peter Chowla, coordinator of the Bretton Woods Project and Kevin Gallagher, Associated Professor at Boston University appreciated the evolution in the IMF’s approach to capital flow issues in recent years.
Arora outlined the IMF’s work program so far on policies related to capital flows and welcomed the event as part of the ongoing global dialogue on the issue. He noted that a country’s appropriate degree of openness to capital flows depends on its specific circumstances, particularly its institutional and financial development, and full liberalization may not be an appropriate goal for all countries at all times.
Nonetheless, countries with extensive capital flow restrictions are likely to benefit from further liberalization.
In managing capital flows, it is important for countries to strengthen their capacity to absorb inflows and implement appropriate macroeconomic and financial sector policies. Capital flow management measures can be useful for managing inflow and outflow pressures, but they are a complement and not a substitute for more fundamental adjustment.
Renewed focus on poverty reduction and growth
At a session organized by Save the Children Norway, Development Finance International presented findings of a recent study on IMF-supported programs in low-income countries. The study suggests that there has been limited progress in enhancing the focus on poverty reduction and growth since the IMF’s lending instruments were reformed in 2009.
Hugh Bredenkamp, Deputy Director in the IMF Strategy, Policy, and Review Department, challenged the report’s analysis of health and education spending, which the evidence shows has actually risen faster in countries with IMF-backed programs than in other low-income countries.
He agreed, however, with the report’s recommendations on improving the monitoring and reporting of high-priority spending, while cautioning that the IMF should not try to micromanage member countries’ expenditure frameworks.
The IMF’s role in fighting poverty was recognized by Norwegian Finance Minister Sigbjørn Johnsen while Nuria Molina, Director of Policy and Research for Save the Children UK, remarked that the “time has passed where the Fund was saying it has nothing to do with poverty reduction.”
At a roundtable on jobs and inclusive growth, Prakash Loungani, Advisor in the IMF Research Department, provided an overview of the work of an IMF working group on the topic. The group’s initial report is expected to be released in May.
The working group is considering things like including enhanced coverage of labor market issues in IMF economic surveillance; a reassessment of the impact of policies, including labor market policies, on employment and growth; and a focus on fostering growth.
“We now know that good policies lead to inclusive growth,” Loungani said. “If growth is not inclusive, it doesn't lead to a sound macroeconomic environment.”
During the roundtable, CSOs and academics expressed approval of the IMF’s focus on these issues, but urged the working group to continue consulting with civil society from various regions on its proposals. Attendees suggested that the working group look at the role of education, productivity, and small and medium enterprises in lowering unemployment and boosting growth.
Elizabeth Stuart of Oxfam also recommended that the IMF look at policies that turn growth into inclusive growth, in particular those relating to social spending. “There is consensus in the literature that agriculture spending, subsidies, social protection, and access to services need to be in place to create growth that reduces poverty and inequality,” she said.
Eurozone debt crisis
At an event co-organized by the Center for Economic Policy Research (CEPR), Mahmood Pradhan, IMF European Department Deputy Director addressed criticism of IMF’s role in the international response to sovereign debt crisis in Greece and other Euro zone countries.
While the reforms undertaken with assistance from the European Union, European Central Bank, and IMF are not easy, the alternative, he said, would be worse. He noted that even if Greece were to exit, as CEPR’s Mark Weisbrot suggested as a potential policy alternative, the country would still have to borrow money to finance its primary deficit. Given the massive cross-border financial exposures in the euro zone, a Greek exit would almost certainly have an impact on the rest of Europe.
Managing natural resources
A discussion on the work of the IMF on natural resource management, a critical issue for many low-income countries, looked at ways to turn substantial resource assets into greater economic growth and higher living standards.
IMF Fiscal Affairs Department Deputy Division Chief Philip Daniel said the taxation of natural resources must be tailored to the unique nature of the extraction activity, with particular attention devoted to recognizing that the revenues are generated by the transformation of finite assets into financial ones.
A well-designed tax system must consider a country’s circumstances and incorporate key principles to guide public policy on extractive industries tax design. It should also include an appropriate mix between royalty-type and rent-based taxes.
A recent seminar on natural resources management organized by the IMF and the Democratic Republic of Congo in Kinshasa concluded that to seize the opportunities that natural resources wealth offers requires strong economic policies and institutions to keep governance concerns at bay.
The IMF recently concluded a consultation process with the private sector, civil society, academics, and others to gather ideas about the best use of natural resources for boosting living standards in developing countries.
Parliamentarians look beyond crisis
A diverse group of 21 Members of Parliament from 18 different countries participated in a one-day workshop, as part of a program organized with the Parliamentary Network on the World Bank and IMF.
Participants focused on the challenges for developing countries to deal effectively with the current crisis. IMF Director of External Relations Gerry Rice explained how the global financial crisis has placed the IMF at the center of the international crisis resolution effort together with the G-20. “The high degree of international collaboration has pulled the international community back from the abyss. For the IMF, the crisis has been an opportunity to change and show that it has learned from past mistakes.”
Interaction with Executive Boards
CSOs and academics also had the opportunity to have a candid exchange of views with members of the IMF and World Bank Executive Boards. Topics raised during the roundtable discussion included the European crisis; the need for jobs; social accountability; and climate change.
Executive Directors representing Africa, Greece, Germany, Nepal, Mexico, Japan, and the Nordic countries participated in the discussion.