Structural conditionalities in the IMF: A discussion between the IMF, IEO, and CSOs

Participants

Juan Zalguendo

Ruben Lamdany

Lucy Hayes

Peter Chowla

Jenny Bisping

Pol Vandervoot

Rick Rowden

Fraser Reilly-King

Derrick McCuish

Andrew - Malawi Economic Justice Network

Christoff - GCAP Africa

William Lockhart - Puerto Rica

Per Kurowski

Elena Gerebizza

Presentation by Ruben Lamdany of IEO

Main findings:

• Still 17 conditions on average - same as before streamlining

• Most conditions would have limited impact (with little follow-up)

• Only half are met as agreed

• 1/3 of conditions in areas where the IMF has no expertise (down from half)

Recommendations:

• Need changes in the framework

• Administrative rule to cap number of conditions

• Need clear ownership of programmes

• Need to keep conditions in areas of Fund expertise

Other points

• Using same incentives since 2002 is not sufficient to achieve objectives, but the board seemed to think that it can work

• IEO feels you need some new mechanism to force criticality and parsimony

• In programmes going to the board since IEO - EDs still found many conditions in programmes, outside core areas

Methodology

• 7,140 conditions studies in DB

• 1,567 looked at structural depth and effectiveness/durability

• In depth case studies

Structural depth

• We gave benefit of the doubt to depth of conditions - little, limited, high

• For High SD conditions, less than half implemented, 10% reversed within one year

• SD more intense in core sectors

Compliance - 54% of conditions complied; only 1/3 of High SD complied

• Another 25% late or partially complied

• 60% compliance in core sectors, 37% outside core

• Compliance lowest in privatisation

Reforms - weak link between conditionality and subsequent reform

• Broader government ownership is key for sustainability of reform - not just econ policy making team

• Ownership must include implementing bodies (line ministries, agencies)

Presentation: Lucy Hayes of Eurodad

Review of conditionality guidelines

Reviews and evaluations

Main findings:

Distribution of conditions - privatization and liberalisation conditions

Cross- conditionality is still a problem

• Mali as an example

Sensitive economic policy conditions

• Zambia as an example

Recommendations

• Set targets and reduce number of conditions

• Stop attaching sensitive economic policy reform

• End practice of cross-conditionality

• Revisit the definition of ownership

• Explicitly assess all new PRGF along lines of new guidelines and staff incentives

Presentation: Juan Zalduendo of IMF

Purpose of conditionality

1. Safeguard Fund resources - make sure we get paid

2. Provide assurances to members - if they do this, they get money

What is a Fund programme about?

• Member comes to Fund to get help to fix imbalances

• What are the problems and what are the solutions - alternatives and give and take

• It is more involved and open than it is depicted

• Line ministers sit at the table as well

• IMF programme does not cover everything the authorities have to do - should be focussed on a subset of things the authorities wish to do

• Conditionality is a monitoring mechanism

Concerns on conditionality in 2000

• Too many conditions was problematic

• Main emphasis on parsimony and criticality

• Including all programme goals - even if measure is outside Fund core expertise - maybe need to collaborate with authorities

Review - conditionality is here to stay!

• We need to improve implementation and application

• It is much more of a partnership

Response to IEO report

• New data through 2006 - condy is not decreasing

• Counting conditions is not a very relevant measure

• Unbundling ideas proves that this is not a very relevant measure

• Conditions are steps in a process - particular structural benchmarks

• Sectoral shift to areas of IMF expertise - a great development

• We agreed need to change on the idea of conditions that we do not stick to (as in they are dropped in later reviews)

• Lapse rate - many conditions are met late - but that is better than not met at all

• Follow-up needed

  • Parsimony and criticality need to strengthened

  • Programme documents need to be better on justification

  • Better monitoring and tracking of relation to conditions and goals and strategies

Board endorsed recommendations/management implementation plan (sent to board this week)

• Board did not support: cap on number of conditions; elimination of SBs; subsidiary role to the WB in non-core areas

• Greater emphasis on parsimony and criticality needed

• Better documentation

Main elements of Management Implementation Plan

• Contact group with PDR/functional/regional/area departments to make recommendations

• Review and propose revisions to the Operational Guidance Note on SC

• Enhance MONA database to enable monitoring

• Make MONA database public on IMF website

Reactions and comments

• SBs will by definition have low SD - may be part of critical reform - a step to monitor progress

• Comparing to before CG - a dramatic change in privatisation and liberalisation

• Fund must be very selective in noncore areas

• We negotiate with different ministries

Response from Peter CHowla of the Bretton Woods Project

• Need to separate issues of low-income countries from MICs - they face fundamentally different problems. But the IEO report shows that they are treated the same
• Eurodad report shows focus on low-income countries - the problem is not short-term balance of payments need, it is a question of growth ande development. The IMF does not have expertise to deal with these topics
• The details of all this are important - counting conditions and categorising them - but the bigger picture is a question of why the Fund keeps getting involved in these places.

Per K what is "expertise"; is it real?

- Risk is oxygen of development, but IMF is completely anti-risk

Rick R - conditionality is not here to stay: countries are getting away from the IMF

• imbalances of power in negotiations - so this isn't really a partnership

Andrew - we are very worried that "conditionality" is here to stay

Fraser - absence of ownership in IMF talk, we can think everything is "critical"

• it isn't about better dialogue and communication to the IMF board - we need real ownership

Derrick - We wouldn't criticise you for limiting conditionality

• focussing of thought is very important

• Look at Liberia completion point documents - 12 conditions of which 2 are PRSP and PRGF - that is huge

• Different between ex-post assessment and ongoing evaluations

Juan on PRGF vs SBA

• PRGF has a longer outlook, you have to go beyond "external viability"

• Fund is not an institution that knows about development

• We will need to rely on others like WB, but for fiduciary reasons conditionality must be there

• On ownership - we know documentation is the solution; the point is that the country has invited us, we go with a preliminary assessment and have discussion of the challenges going forward. Things do get changed on missions and in the field - process of improvement and exchange of ideas

• On unequal powers - it is an issue that each mission chief must decide how to handle, this is part of the business, something we have to handle

• On crazy conditions - critical for our programme is key, these were probably for outside donors or others

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Published: 10 April 2008 , last edited: 15 April 2008

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