Questions in the News
Responses to Questions About IMF Policies and Country Operations
Poverty and related issues
Last Updated: January 31, 2007| Question: On the issue of the waiver of administrative costs on the Poverty Reduction and Growth Facility, does the Report envision a reduction in the IMF's contribution to help poor economies? How does that work? |
| Answer:
MR. CROCKETT: In effect, the IMF has waived for the last several years the administrative costs that it incurs in managing the PRGF. It did not originally waive these costs; these were charged to the trust fund that administers it. At a time when the Fund had strong income, it was decided by the Executive Board of the Fund that it could shoulder these administrative burdens itself rather than charging them to the trust fund. We now face a different circumstance in that the Fund is short of income and the Committee is simply pointing out that this waiver—made in the circumstances of greater income adequacy—was not an obligation right from the beginning. The waiver can easily be changed, and in some sense it is appropriate that the donor countries should bear the burden rather than the Fund, which represents a generality of countries including poor and middle-income countries.
January 31, 2007 Press Briefing on the Final Report by the Committee to Study Sustainable Long-term Financing of the IMF (Crockett Report) by Rodrigo de Rato, Managing Director of the IMF and Andrew Crockett, Chair, Eminent Persons Committee |
| Question: What is the IMF's new Policy Support Instrument? |
| Answer:
On October 5, 2005, the IMF Executive Board approved a proposal establishing Policy Support Instruments (PSIs), which will provide policy support and signaling to low-income countries that do not want—or do not need—financial assistance from the IMF. PSIs are designed to address the needs of low-income members that may not need Fund financial assistance, but seek Fund endorsement and assessment of their economic policies. A PSI will be available only upon request of a member and will add to the toolkit of instruments from which low-income countries can choose their desired form of engagement with the Fund. The PSI will be a complement to, and not a substitute for, the Poverty Reduction and Growth Facility (PRGF), which will remain the main instrument for Fund financial support to low-income members with balance of payments needs. The nature of the Fund's engagement in low-income members will be decided on a case-by-case basis, depending on the needs and policies of the member at the time.
October 14, 2005 Public Information Notice (PIN) No. 05/145: IMF Executive Board Approves the Establishment of Policy Support Instruments for Aiding Low-Income Countries |
| Question: You speak of insufficient levels of investment in many developing countries, including sub-Saharan Africa. What changes in IMF strategy, emphasis or approach do you anticipate in order to push up levels of investment in sub-Saharan Africa? |
| Answer:
There won't necessarily be changes, but we are generally deepening our advice to African governments to help them continue achieve a more stable macroeconomic environment. In Africa, the countries that have achieved more macroeconomic stability, lower inflation, and so on, are growing more rapidly than average in Africa. As the benefits of macroeconomic stability feed through, we expect even more rapid growth than is now happening. Management of expenditures is going to be key, both under current circumstances and in the scenario of increased aid. Well-targeted social expenditures are important. It is also essential for Africa to move from a social policy based on subsidies to a social policy based on direct help to those who need it most. There is need for a more sustained effort in building infrastructure. That requires not only resources but also quality of investment. In many African countries, the quality of investment has been weak. It is also important to strengthen the environment that will help the private sector flourish in Africa, with the change of regulators, the rule of law, transparency of the markets, and intra-regional trade in Africa. We are working with the donor community, which has a very important role in Africa regarding aid and the quality of aid. We see a lot of merit in increasing aid and we have been advocating it, but we see as much merit in having predictable aid, less onerous in terms of red tape ,and better targeted to the needs of the country. September 22, 2005 Press Conference by Rodrigo de Rato, IMF Managing Director, and Anne Krueger, First Deputy Managing Director |
| Question: What is the IMF view of the effectiveness of aid to developing countries? Does the IMF believe more aid is needed to spur development? |
| Answer:
More aid is needed. I think no one disputes that. But the debate that is ongoing—and it's a very interesting debate--is how much more aid and how that aid is to be delivered. It is a debate that is not yet resolved. We know that some aid has been misused in the past, but much aid has been effective. And lots of research tells us that the environment in which aid is used--the institutions, the rules, the regulations, the coordination among donors and with the government--all make a difference. The World Bank last year had a huge conference on how to increase the scale of effective aid practices. If you will, you might think of that as the microeconomics of aid. For the Fund, the challenge is one of what is the macroeconomics of aid. The Fund is in a position to take a look at the overall macroeconomic picture and see how aid is being absorbed and used in the economy as a whole. Is aid helping to spur the growth that's critical to poverty reduction? And is it being used in a way to help countries sustain that growth over the longer term? Our unique vantage point gives the Fund a critical role in helping the donor community ensure that aid is used well. The international community, not just the IMF, benefits much from research like that done by my colleagues and other researchers around the globe in figuring out how we can get more aid delivered more efficiently, more effectively, both in a microeconomic sense and in a macroeconomic sense. All this research serves as a valuable input into setting the IMF's policies and other institutions' policies toward helping these low-income countries achieve the MDGs. And our policy remains now that substantially more aid is needed if we are to fight poverty effectively. June 30, 2005 Press Briefing by Mark Plant, Deputy Director, Policy Development and Review Department |
| Question: What is your assessment of the hopes for achieving concrete, tangible progress on increasing aid and funds for meeting the Millennium Development Goals? |
| Answer:
I do not want to anticipate what governments are going to decide in meetings this year; I think we will have to wait. However, the new proposals to raise more money for development are serious, and should be taken seriously. We have studied them and we are making governments aware of the different trade-offs and difficulties in applying each different proposal. But at the end of the day, the question is to make a decision, because technical analysis is not going to provide more aid. Whatever decision governments are willing to take, if they follow our technical advice, that decision should be for additional resources. One danger is that, if a new scheme of financing is put forward, governments will say, "well, this is going to take care of my contribution to development so I do not have to make any more contribution to development in my national budget." That will be a step back. We need to make clear that additionality of aid is essential to development. Moreover, whatever decision is taken, it must be implemented within a reasonable amount of time. To face the challenges of 2005, and probably 2006, additional resources for aid must be found in the budgets of advanced countries. The U.K. and Sweden, for example, have taken steps to increase their contributions. Many other countries are making that effort, and that is what is needed in 2005. Then if countries are able to arrive at an agreement on a new financing scheme, well, we will certainly be there to help them implement it in the most efficient way.
April 14, 2005 Press Briefing by Rodrigo de Rato, Managing Director, IMF |
| Poverty and related issues : archived questions and answers |