Civil Society Newsletter
The IMF And Civil Society Organizations
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Civil Society Newsletter
In this issue of the Civil Society Newsletter, we offer an interview with Masood Ahmed, who recently took a two-year leave of absence from his position as Deputy Director of the IMF Policy Development and Review Department, where he had played a leading role in the development of Fund policies toward low-income countries. He has joined the U.K. Department for International Development as Director General, Policy and International. The interview makes clear Masood's role in helping to define IMF policies in a wide range of areas. But it also makes clear that the work with poor countries will continue to evolve in his absence.
One area in which this evolution is taking place involves the Fund's work on debt sustainability, the subject of a new paper on which public comment is being sought. That paper itself is part of a broader reassessment of the role of the IMF in low-income countries that will become an important part of our outreach in the coming months.
Important progress has been made in recent months in developing a guide for IMF staff relations with civil society organizations (CSOs). As reported in the last two editions of the Newsletter, Prof. Jan Aart Scholte, of the Centre for the Study of Globalization and Regionalization at the University of Warwick in the U.K., has been preparing a draft of the guide in consultation with both IMF staff and civil society representatives.
The comments from both the Fund and CSOs, as might be expected, were wide ranging and thought provoking. Scholte has incorporated these comments into a revised draft, which he has sent to the IMF. Scholte plans also to provide a copy of the revised draft to the individuals and CSOs who reviewed the first version. IMF staff expect to prepare a final draft of the guide in the next few weeks, which can then be issued to staff. At the same time, the guide will be posted on the Fund's external website, with an invitation to the public to comment. We envisage that the guide will be revised, refined, and updated after a period in which it is used by Fund staff in the field. Future issues of the Newsletter will offer updates on the topic.
Masood Ahmed, Deputy Director of the IMF Policy Development and Review Department since 2000, has been named to a two-year appointment as Director General, Policy and International of the U.K. Department for International Development. At the Fund, Ahmed has played a leading role on a range of issues related to low-income countries, including coordinating the implementation of the Poverty Reduction and Growth Facility (PRGF) and the development of the Poverty Reduction Strategy Papers (PRSP) approach. He has also been a high-profile spokesman for the Fund on matters related to poverty reduction. Before joining the IMF, Ahmed worked at the World Bank for 21 years, rising to Vice President in 1997. He spoke to the Civil Society Newsletter in late June, on his last day at the IMF.
The IMF has invited public comment on a paper about debt sustainability in low-income countries. The paper is intended to help in devising a policy framework—under development in close consultation with the World Bank, official creditors and debtors—that would guide low-income countries in their borrowing practices.
The debt-sustainability paper—and request for public comment—is part of a broader effort to define a policy framework for the Fund's work in low-income countries for the long-term. In the coming weeks, the IMF Board also will consider an issues paper on "The Role of the Fund in Low-Income Countries Over the Medium Term" that will begin to address many of the key issues related to how the Fund can support low-income countries and contribute to the global effort to achieve the Millennium Development Goals. That paper will be accompanied by a separate paper examining the impact of exogenous shocks (natural disasters, commodity price fluctuations etc.) on low-income countries. A major outreach effort that will include consultations with civil society is anticipated.
The issuance of the debt sustainability paper was preceded by three workshops on debt sustainability and development financing attended by IMF staff. The workshops were organized by the Agence Française de Développement in Paris on May 14, by InWent, Capacity Building International of Germany in Berlin on May 19-20, and by the Commonwealth Secretariat and the World Bank in Accra, Ghana, on June 9-10. Besides Fund and Bank staff, participants included government officials and representatives from civil society.
The debt sustainability paper was discussed by the Executive Board of the IMF in an informal seminar on July 11. Comments on the paper are invited by September 30, and should be sent by email to LICDebtSust@imf.org.
IMF Managing Director Horst Köhler conducted a four-country tour of Africa July 6-11 as part of his ongoing effort to consult actively with key policymakers in the region on issues related to poverty reduction and the promotion of long-term economic growth.
The Managing Director's visit took him to Ethiopia, Kenya, Madagascar and Mozambique, where he also participated in the summit of the Heads of State of the African Union. It was Mr. Köhler's fourth trip to sub-Saharan Africa since assuming office in 2000.
In his address to the Heads of State, the Managing Director offered a firm commitment to provide Africa with the expertise and financing to help make significant progress toward meeting the Millennium Development Goals, which call for a halving of poverty between 1990 and 2015. He restated his call for the developed countries to meet their commitments to offer aid and trade opportunities to Africa, and he encouraged African leaders to take steps to enhance governance, sustain growth, encourage private investment, and promote regional cooperation.
In Ethiopia, he reiterated Fund support for the government's economic policies and was able to obtain a first-hand view of the responses to the economic and social challenges created by the current drought, which has made food insecurity the Ethiopian government's top priority. He also met with about 140 members of civil society, including representatives of NGOs, labor unions and the private sector. Two topics figured in all meetings—the country's Sustainable Development and Poverty Reduction Program, and the role of the private sector in economic development. The Ethiopian news agency ENA reported that Prime Minister Meles Zenawi said after his meeting with the Managing Director that Ethiopia and the IMF are working together "with a great sense of cooperation and understanding on various issues." Mr. Meles said that while there are points of divergence on some issues, Ethiopia has forged a sound relationship with international financial institutions.
In Kenya, Mr. Köhler met President Mwai Kibaki, his finance and economy team, and the leader of the parliamentary opposition. The Managing Director expressed his support for the government's strategy. He cited its fiscal prudence, its expenditure restructuring in favor of health and education programs, and its anticorruption measures.
In Madagascar, Mr. Köhler met with President Marc Ravalomanana, Prime Minister Jacques Sylla, and members of the government. The Managing Director said he was pleased with the recent completion of Madagascar's Poverty Reduction Strategy Paper, which benefited from wide consultation among different groups, including civil society.
In Mozambique, he met with President Joachim Chissano, several key members of the government and representatives of the private sector. He commended President Chissano on Mozambique's progress in improving economic policies and social conditions.
The IMF has expanded the territory covered by its centers to promote capacity-building in Africa. The West Africa Regional Technical Assistance Center (West AFRITAC) was opened in May in Bamako, Mali, to cover ten francophone countries in sub-Saharan Africa. Its inauguration follows the opening of an East Africa counterpart, which began operations last year in Dar es Salaam, Tanzania
Technical Assistance is a familiar part of the development lexicon. But in the AFRITAC context, the term has a particular meaning. The centers' basic mission is to strengthen the ability of governments to design and carry out their own pro-growth poverty-reduction plans. These are set out in Poverty Reduction Strategy Papers, which have become the basic tool by which countries set out their development ideas.
Through the AFRITACs, teams of resident experts, supplemented by short-term specialists, provide assistance in the core specialties of the IMF. Among the topics: macroeconomic policy, microfinancing, financial sector policies, tax policy and revenue administration, exchange rate administration, public spending management and macroeconomics statistics.
The West AFRITAC is part of the IMF's response to calls by African leaders, including those expressed under the New Partnership for Africa's Development (NEPAD). The initiative builds on efforts by officials of the countries in its territory, the African Capacity Building Foundation, the African Development Bank and the Banque Centrale des États de L'Afrique de l'Ouest (Central Bank of West African States).
Many AFRITAC projects will strengthen capacity-building programs already under way. Among the examples: In Mali, the authorities are fortifying tax administration and public spending management, as well as employing a new budget classification system to monitor poverty-reducing spending. Benin and Niger are building capacity in tax administration and public expenditure management. And Guinea is showing progress in improving the country's statistical database and setting up a computerized budget monitoring system.
If the two centers establish successful track records, three more centers could be established, which would allow all sub-Saharan countries to participate in the most up-to-date form of technical assistance available in the developing world.
The IMF's work in the area of technical assistance is explained in a new publication, "IMF Technical Assistance: Transferring Knowledge and Best Practice. The 56-page pamphlet explains technical assistance partly through case studies from around the world.
Examples include capacity building in Africa; the fight against money laundering; assistance to central banks in Lithuania and Poland; advice on tax reform; the strengthening of trade policy; and assistance in setting up treasuries in transition economies. The IMF's work in post-conflict situations is highlighted with a first-person account of the rebuilding of economic institutions in Bosnia and Kosovo, as well as examples from Afghanistan and Timor Leste.
The pamphlet also explains how the training programs of the IMF Institute complement technical assistance work. "Providing technical assistance to member countries—particularly developing countries and countries in transition—is among the IMF's most important jobs. Yet this major component of our work is relatively unknown to the public at large," Eduardo Aninat, former IMF Deputy Managing Director responsible for technical assistance, writes in a forward. "It plays a vital role in laying foundations for stronger economies and for a better future for the people of many countries of the world."
Aimed at the general public, the pamphlet is free. The English and French versions have recently been published, and versions in Spanish and Arabic will be available shortly. Russian and Chinese versions are expected in September.
It is available on the web at http://www.imf.org/External/pubs/ft/exrp/techass/techass.htm
Robert P. Hagemann, Resident Representative, Cambodia
I recently launched an initiative to spark dialogue with the NGO community in Cambodia through a series of roundtable discussions. The interaction grew out of the Fund's interest, in the context of PRSP discussions, to hear civil society's views of policies to speed up and sustain poverty reduction in Cambodia.
The first roundtable was held on June 19, 2003, in Phnom Penh, with representatives from international and Cambodian NGOs who had been invited to discuss revenue policies. The session began with a presentation on Cambodia's fiscal situation, the scale of the revenue challenge and, in particular, the policy and administrative reforms to boost revenue performance. The subsequent discussion brought a surprise: despite the availability of documentation on the program in Cambodia, participants knew little about extensive efforts to broaden the country's revenue base.
They welcomed the initiative. Representatives seemed especially pleased about the "fairness" aspect of revenue work—that improving compliance and broadening coverage is aimed at improving equity. Specific proposals made by the NGO representatives included introduction of a progressive land tax to discourage land speculation; tax reductions on agricultural inputs to improve agricultural competitiveness and help diversify production; and the reduction or elimination of various fees collected at the provincial level (which by one estimate reach 70 percent of the price of products at delivery) to reduce disincentives to rural entrepreneurship.
Several topics for future discussion were identified: the budget formulation process; expenditure policies; conditionality under the PRGF; trade policy and WTO accession; and governance. The next roundtable was scheduled for July 16, 2003, for a discussion of governance and corruption.
Francisco Vazquez, Economist, Monetary and Financial Systems Department
Can a microfinance experiment provide lessons for macroeconomic and financial stability? For Honduras, the answer is a yes. Fund staff had the chance to hear directly from farmers about the benefits of "Monedero Banadesa", a new microfinance project that provides credit to the owners of small farms. The meetings were held last February as part of a Financial System Assessment Program (FSAP) that gauged the soundness of the country's financial system.
Monedero Banadesa is a successful approach to agricultural credit. The program, targeted at the smallest farmers, not only provides financing but, most importantly, also offers mandatory crop insurance. In an economy that depends on a few agricultural commodities, crop insurance is a major public policy issue. Falling farm commodity prices hit all farmers, causing problems throughout the economy and financial system. Knowing this, no individual farmer has an incentive to obtain insurance, anticipating that a mass of claims could cause insolvency throughout the insurance industry, which would require a government bailout. Therefore, policymakers are looking for alternative ways to ensure that individual farmers are properly protected against shocks.
The Monedero Banadesa experiment is still in its early stages, and time will reveal aspects that need improvement. But the mission from the Monetary and Financial Systems Department learned from Hondurans how grassroots solutions can be applied at the macroeconomic level.
Edited by Leonardo Cardemil, Advisor, Western Hemisphere Department
In Dominica, staff met with news media and with a wide range of civil society representatives, including labor union officials, to gauge public support for a Fund-supported program that is being negotiated. Discussions centered on how to design policies that would move the economy forward. Civil society members consulted included staff of the "Integrated Development Plan," an organization with civil society representation.
An Article IV mission to the Dominican Republic to evaluate and discuss the state of the economy and financial system in February included discussions with key business and labor groupings. Meeting with members the National Council of Private Enterprises (CONEP) and the National Council of Labor Unions, staff explained the aims of IMF surveillance. Specific issues included the role of fiscal discipline in limiting inflation, the power of free trade to produce more jobs and lower prices; and the need to avoid over-reliance on public sector employment, which can divert resources from priority social spending. Union activists agreed that public sector employment was inflated, though they were skeptical of the promised benefits of free trade, putting more emphasis on the potential for job loss. Private sector representatives urged staff to advise the government to tighten fiscal controls. They also advocated a Fund program.
In Ecuador, a staff visit undertaken for a one-year review of the Stand-By Arrangement included meetings with national and foreign CSOs. These included representatives of the indigenous community, Jubilee 2000, a UN-sponsored Fiscal Transparency Forum, and private sector associations. Talks centered on economic and social policies aimed at establishing sustainable economic growth and poverty reduction, as well as the impact of debt obligations. First Deputy Managing Director Anne Krueger joined staff for part of the trip, visiting Quito and Guayaquil for discussions with indigenous and business-sector associations. Follow-up discussions included talks with academics and religious leaders on environmental concerns and debt problems in light of Ecuador's high poverty rate.
In Nicaragua, Resident Representative Luis Breuer held a series of meetings with civil society organizations. Participants included the Papal Nuncio, Cardinal Miguel Obando y Bravo, as well as members of Quakers International (QI) and of the Civil Society Coordinating Council (CC—Coordinadora Civil), an umbrella organization. Discussions focused on the Poverty Reduction Growth Facility (PRGF), as well as CC complaints about perceived lack of transparency in the government's negotiating practices. QI members argued for assignment of debt relief gains to domestic social programs. Mr. Breuer responded that a large part of the debt relief is associated with only nominal (legal) debt reduction and does not represent cash savings that could be channeled to social programs. However, savings derived from the interim assistance that Nicaragua currently receives under the Heavily Indebted Poor Countries (HIPC) Initiative—which represents reductions in actual service payments to the IFIs and other donors—were being channeled into social programs, under Fund and World Bank monitoring.
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