Select Committee on Treasury Appendices to the Minutes of Evidence


Memorandum by Alison Marshall, World Development Movement

  Below, the White Paper on International Development of December 2000 "Eliminating World Poverty: Making Globalisation Work for the Poor" is referred to simply as the White Paper with the paragraph number following.


  WDM notes with pride that the UK was one of the first lenders to agree to write off 100 per cent of the bilateral debts it was owed by countries as they progressed through the HIPC Initiative. Most other G7 lenders have followed suit in agreeing to 100 per cent write-offs. The result is that as countries progress through the HIPC Initiative an increasing proportion of their debt service payments are to the multilateral lenders. These debt service payments to the IMF and World Bank are still very high relative to the levels of poverty in the countries concerned and relative to the amounts that the governments are able to spend on health. However, the IMF could afford to write off 100 per cent of the debt it is owned by HIPC countries, by using its gold reserves.

  Question: what action will the UK take to encourage the IMF to follow the lead of the bilateral lenders in recognising the blight of debt service payments on the lives of the poor, and therefore agreeing to write off 100 per cent of the debts it is owed by the HIPC countries as they progress through the HIPC Initiative?


  WDM joins with the Government in welcoming the endorsement of the International Development Targets by the World Bank and IMF (White Paper paragraph 170).

  However, WDM does not agree with the Government's assessment that the IMF is "uniquely placed to offer the technical advice and support for countries to maintain the macro-economic foundations required for successful growth and poverty reduction" (White Paper paragraph 168). The IMF certainly has a unique role, but the past experience of countries implementing IMF designed Structural Adjustment Programmes does not give WDM confidence that IMF advice on macro-economic policies results in successful poverty reduction.

  (The number of people living on less than $1 a day is rising in Sub-Saharan Africa, Latin America and South Asia. The number living on less than $2 a day has risen from 2.55 to 2.8 billion since 1990.)

  The White Paper recommends that the IMF and World Band should "support open and broad debate within countries about the design of their policies, and encourage independent assessment of the impact of these policies on the poor and on the environment". (paragraph 171)

  Question: how will UK Government encourage the IMF to institute independent assessments of the impact of their policies on the poor, particularly ex-ante impact assessments?

  Given that the PRSP "approach will be applied not only to the Heavily Indebted Poor Countries, but is intended also to become the basis for all concessional resource flows from the World Bank and the IMF and other development agencies". (White Paper paragraph 307) it is all the more important that the PRSP approach is efficacious.

  A concern for many commentators has been the IMF's "one-size-fits-all" approach to country strategies. In this context we welcome the Government's recognition "that the approach will need to vary according to national circumstances" (paragraph 307).

  Question: how will the UK Government act to ensure that the IMF is more sensitive to the different circumstances of countries with which it works?

  Bearing in mind that the IMF has to endorse or approve PRSPs, another key concern has been that the IMF does not demonstrate flexibility over the macro-economic strategies that it deems acceptable, despite asserting that a key characteristic of PRSPs is that they should be country owned. While recognising the importance of sound macro-economic management, WDM believes that governments should be able to choose policies which have positive distributional impacts.

  Question: how can the Government encourage the IMF to extend its menu of acceptable macro-economic policy options to include more of those developed by individual Heavily Indebted Poor Countries?

  In order to reach International Development Targets sufficient resources must be available within countries for the effective implementation of PRSPs. WDM believes that the IMF is continuing to prioritise neo-liberal macro-economic policies which do not necessarily deliver these resources, and which, indeed, frequently have a detrimental effect on the poor.

  Question: how can the Government ensure that the sequencing of macro-economic policies recommended by the IMF prioritises the allocation of resources for poverty reduction?

  In this respect it is interesting to note that, to date, the requirement for civil society participation in the preparation of PRSPs, or I-PRSPs, has not generally been extended into governments' decision-making on macro-economic policy (eg in Kenya, Ghana and Uganda). Civil Society Organisations are consulted on spending priorities (eg on health and education), but complain of having no part in decisions on the financial programming that sets the context and resource levels for that spending.

  Question: how can the Government encourage the IMF to ensure that civil society is able to contribute to all parts of the PRSP design processes?


  The White Paper clearly identifies areas where the IMF could improve its operations so as to be more effective in achieving poverty reduction.

  For example in paragraph 169 "We believe that IMF programmes should take better account of their impact on the lives of the poor".

  Paragraph 171 "We will encourage the IMF to take greater account of the relationship between stabilisation, structural issues, poverty and growth in programme design" . . . "and encourage independent assessment of the impact of these policies on the poor and on the environment".

  The White Paper (paragraph 311) asserts that the Government "will continue to encourage the World Bank and IMF to make the necessary changes to their own structures and working methods in a way that is consistent with their commitment to the Poverty Reduction Strategy process".

  Question: what specific proposals will the UK Government be taking to the IMF to encourage it to change its structures and methods?

17 January 2001

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