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Civil Society Newsletter November 2004
Recent Developments in IMF-CSO Relations Feature Article: The 2004 Annual Meetings: Civil Society-IMF Dialogue: Letters from the Field: Bulletin Board: |
Recent Developments in IMF-CSO Relations The 2004 IMF-World Bank Annual Meetings were the first for the IMF's new Managing Director Rodrigo de Rato, who assumed his post in June. The meetings also marked the 60th anniversary of the Bretton Woods agreement on the founding of the IMF and World Bank. The meetings came after a period of extensive travel by de Rato, including two visits to Africa and one each to Latin America and Asia, that allowed him the opportunity to hear wide ranging views on the global economy, issues facing developing countries, and the role of the Fund. In his speech to the meetings, de Rato described his developing perspectives. On the question of how to address the needs of the low-income countries, de Rato focused on the Fund's core expertise-the provision of policy advice to achieve macroeconomic stability-and on the need for increased trade liberalization, particularly through the Doha round, and increased aid from the advanced economies: We have seen encouraging results where such stability has been complemented by structural reforms and by targeting public spending to areas of greatest benefits to people. Mozambique, Tanzania, and Uganda have seen sustained improvements in economic performance. Growth rates have also picked up in other African countries that have made progress in curbing inflation and establishing better control of the public finances. Where such improvements in policymaking are evident, developed nations should fulfill their end of the bargain by liberalizing trade and delivering aid. They should improve access to their markets for developing countries' exports and dismantle trade-distorting subsidies. There must also be increased aid, not just for the countries under the HIPC Initiative but for others as well. In some countries, we are indeed seeing larger inflows of foreign assistance, including to combat HIV / AIDS. Other ideas for increasing aid for low-income members, including deeper debt relief and increased grant financing, are needed and welcome. The Fund is ready to help design polices that would help countries make the most effective use of these increased resources. Better aid coordination among donors, and multi-year commitments, are also needed to make development assistance more effective. But, first and foremost, we need to increase aid levels The Annual Meetings also offered the opportunity for representatives of civil society organizations (CSOs) to sit down with staff members from the Bank and the Fund to discuss a range of issues of mutual concern. About 150 people from organizations in 30 countries attended the civil society dialogues, including the second annual townhall meeting with leaders of the two institutions. But recent contacts have not been confined to the Annual Meetings. Immediately after that gathering, top officials of the Fund and Bank met with representatives of the international labor movement. Later in the month leaders of the Bretton Woods organizations met with leaders of the World Council of Churches in Geneva. High-level meeting of the World Council of Churches, World Bank, and International Monetary Fund The first ever meeting of the leaders of the World Council of Churches (WCC), IMF and World Bank took place on October 22 at WCC headquarters in Geneva. The main speakers representing the three organizations were World Bank President James Wolfensohn, IMF Deputy Managing Director Agustín Carstens, and WCC General Secretary Rev. Dr. Samuel Kobia. The meeting was moderated by Cornelio Somarruga of the Caux Initiatives for Change and former President of the International Committee of the Red Cross, and also addressed by Dr. Agnes Abuom, President for Africa of the WCC. IMF Managing Director Rodrigo de Rato was unable to participate in the meeting because of an official commitment, but participated in a private meeting earlier in the day with Kobia, Abuom, Wolfensohn, and Carstens. The afternoon meeting, in which a number of other representatives of the three organizations participated, followed several preparatory meetings held since May 2002 (see Civil Society Newsletter April 2003 and February 2004). The meetings were initiated after the management of the two Bretton Woods Institutions (BWIs) expressed a wish to engage in dialogue with the WCC to improve mutual understanding of the organizations' work in development. The meeting focused on establishing common ground for efforts to address global poverty, and on exploring continuing areas of difference in approach and views on development issues. The session concluded that the areas of common ground are large and significant, and that the three institutions should find more effective ways to work together in the future. There was agreement that the dialogue process would continue, and that it would focus in the period immediately ahead on case studies that could be expected to clarify issues and specific topics that lend themselves to common action. The meeting was characterized by a frank and generally positive exchange of views. In his formal statement, Kobia stressed the issue of voice-in his view the WCC has always represented the voiceless-and the need for a world economy that places people at the center of development. Growth is not enough, he said; we must deal also with the issues of inequality. Kobia concluded by focusing on the issues of environmental protection and the democratization in the BWIs. Abuom said that poverty is caused by a failure of brotherly love in the world. The WCC is concerned with the need to change the market system, and has not succeeded in persuading the BWIs of this need. Increased trade alone does not reduce poverty or improve equity, she said; there is a need for redistributive measures, and the world needs just, participatory, and sustainable communities. She criticized the BWIs as undemocratic: with Africa having only two Executive Directors, the institutions are essentially a platform for the industrial countries. Highlighting the issues of human rights, she called on the BWIs to look more to their work through a rights-based framework. In sum, she said, the dialogue must continue. Wolfensohn reiterated his deep conviction about the critical role of religions in the issues of development. He said he has spent eight years trying to build bridges with faith-based institutions. He highlighted his concerns regarding the role of youth, gaps between rich and poor, and too much focus on the short-term concerns of security versus the long-term problems of poverty. We are, he stressed, facing a serious crisis of inaction after so many promises and commitments. Wolfensohn said he was deeply troubled by the WCC's 2002 publication "Lead us not into Temptation", which he said presented an inaccurate picture of the World Bank and its mission, work and staff. He focused also on how the Bank approaches issues of human rights-largely through its actions. He noted that the issues of governance-representation and voice-in the BWIs were issues for the shareholders, not for management. In concluding, he called for a two-year amnesty between the WCC and the BWIs and a determination to work together on the issues of poverty. Carstens reviewed the mandate and role of the IMF, describing its work in surveillance-the regular monitoring and consultation of each member country's economy-and in managing crises. The IMF is charged partly with helping governments to make difficult decisions in difficult times. He noted misconceptions about its role and work. He discussed the Poverty Reduction Strategy process and its origins. He emphasized the progress made through the dialogue process as a result of the hard work of the staffs of the three institutions. He saw much to be hoped for in the common ground identified. The ensuing discussion included some frank exchanges on governance of the IFIs; the "disciplinary role" of the IMF; the role of the Bank and Fund in dealing with indigenous peoples; and on innovative sources of development financing. The conclusions focused on the importance of using the MDG framework as a vehicle for mobilization and action. There was also discussion of equity issues. Kobia and Abuom focused in their concluding comments on the path traveled together and on the common cause that linked the three institutions. After the meeting, the leaders of the three organizations issued a joint statement, calling the discussions significant and useful. The statement links to a more detailed paper on Common Ground and Differences of View between the Bretton Woods Institutions (IMF and World Bank) and the World Council of Churches, prepared by the staff involved in the discussions. This innovative paper aims to set out clearly areas of agreement and disagreement between the BWIs and the WCC. Civil society dialogues at the Annual Meetings The civil society dialogues at the 2004 IMF/World Bank Annual Meetings focused on the role of the Bretton Woods Institutions (BWIs) in low-income countries-in particular in facilitating debt relief and promoting debt sustainability-and the status of the Poverty Reduction Strategy Papers (PRSP) process. Many of the meetings were organized by the IMF and World Bank, but several events were sponsored by CSOs. The highlight was a CSO townhall meeting that brought together the heads of the IMF and World Bank as well as the Chairmen of the Development Committee and the IMFC. Participating were nearly 150 representatives of NGOs, labor unions, faith-based groups, and foundations from over 30 countries, all of whom were accredited to the 2004 Annual Meetings. The full list of dialogues as well as minutes of most sessions will be available at http://www.worldbank.org/civilsociety. Most of the accredited CSO representatives participated in the September 30 townhall meeting with Gordon Brown, U.K. Chancellor of the Exchequer and Chairman of the IMFC; Trevor Manuel, South Africa's Minister of Finance and Chairman of the Development Committee; IMF Managing Director Rodrigo de Rato; and World Bank President James Wolfensohn. This was de Rato's first meeting with global CSOs, after meeting local CSOs on recent trips to Africa and Asia. At last year's Annual Meetings in Dubai former Managing Director Horst Köhler participated in a similar session. This year's meeting was chaired by Aruna Rao, Director of Gender at Work, and Chair of the Board of Directors of CIVICUS. Speaking first, Chancellor Brown said that if the Millennium Development Goals (MDGs) are to be met, the international community will have to dramatically increase the amount of development aid that is available in the next few years. He said that on present trends, countries in sub-Saharan Africa will achieve the MDGs only by the year 2130-115 years late. "We must find better methods of financing development aid so that the great combination of economic development, trade, and development aid make it possible to have a world economy working for all of the people all of the time," Brown said. If multilateral debt relief is to match bilateral debt relief, additional money will have to be generated, he said, noting that the UK has suggested that a revaluation of IMF gold reserves could take place again. He said there is undoubtedly scope for action without affecting the integrity of the IMF's reserves or the gold market. There can be a move forward under the leadership of the World Bank and the IMF, if the member countries have the will to do so, Brown concluded. De Rato told CSOs that the IMF's gold reserves have been used as recently as five years ago to generate funds, and that repeating that exercise depends on the will of the IMF Executive Board and not of IMF management. If the political will exists to use the gold, he said, the Fund would find the technical means to achieve the objective. He told CSOs the IMF has a close relationship with civil society and that the Fund needs a regular exchange of views with CSOs to perform its responsibilities. Discussing the IMF's involvement in poverty-reduction efforts and debt relief, de Rato said one of the major challenges from the 2004 IMF-World Bank Annual Meetings was for countries to step forward to increase aid-through some of the new mechanisms that are being discussed, but also through traditional channels. Manuel told the meeting that South Africa's gold mining industry employs tens of thousands of workers from South Africa and neighboring countries, and it has experienced significant job losses. He insisted that South Africa needs to be heard in any discussions on the sale or revaluation of gold reserves. He said his concerns center less on prices than on volatility that could cause job losses affecting poor countries. Answering a question from Jubilee Iraq on the cancellation of odious debt, Manuel said the issue is a very tough call. He asked who would make the determination of whether debt is odious: if Iraq's debt is deemed odious, why would that decision not apply also to the Democratic Republic of Congo? Manuel said there should be rules on the issue that apply equally to all aspects of the work of the Bank and the Fund and that do not create moral hazard. James Wolfensohn said any fair assessment of the Bank's reaction to the Extractive Industries Review of World Bank investments in oil, gas, and mining will conclude that the Bank has come a very long way. He said a campaign launched against the Bank has claimed that "if you don't do 100 percent, you're doing nothing" and this is not right. The Bank believes it would be wrong for the institution to withdraw from coal, oil, and gas investments and has made a significant contribution to cleaning up such projects. The Bank has an important influence on the projects' environmental standards. In response to a statement from the floor on voice and representation in the BWIs, Manuel said the issue is "an ongoing battle" that addresses a "deficit of democracy" in the institutions. Poor countries are inadequately represented, and it has to be asked whether the Bank and the Fund are part of the multilateral system or merely arrangements between debtors and creditors. Other topics raised in the Q&A session included women's participation and visibility in the MDGs; World Bank conditionality; CSO accreditation to the Annual Meetings; corruption; and Argentine debt. An update on the IMF's role in low-income countries At a September 30 meeting on the IMF's role in low-income countries (LICs), Policy Development and Review Department (PDR) Assistant Director Mark Plant told CSOs that the right place to have a conversation between CSOs and the government is in the participatory Poverty Reduction Strategy Paper (PRSP) process. Plant said that a PRSP process ideally would lead to a policy program supported by the Poverty Reduction and Growth Facility (PRGF)-the IMF's low-interest lending facility for LICs- but that in reality this sequence does not always occur. The goal remains, however, of better aligning the two processes. Participants in PRGF program negotiations (the IMF and the government), he said, need a system under which discussions on the PRSP can inform the preparation of the PRGF, which in turn can come back and inform subsequent discussions on the PRSP. The Fund and Bank hope to make a move in that direction, Plant said, by transforming the Joint Staff Assessment (JSA) into the new Joint Staff Advisory Note (JSAN). The JSAN is intended to provide advice and feedback from the Boards of the Bank and Fund to the authorities on a country's poverty reduction strategy, rather than making a snap judgment on whether or not PRSP was a sound basis for offering concessional support. Plant stressed that the Fund would now make its assessment of a country's macroeconomic framework public, instead of making implicit criticism. A country's proposed macro framework might be aspirational, but the Fund could observe that, in its view, the framework was unattainable in, say the next two or three years, and explain why. This would stimulate a debate that should be more fruitful for all participants in the process. People on each side of the debate would know exactly what the other side was thinking. The Fund's intention is to put the participatory process where it belongs-in the PRSP-and at the same time ensure the PRGF is sensitive to the agreements reached in the participatory process. A questioner from the floor noted that exactly five years have passed since former Fund Managing Director Michel Camdessus said in a speech at the 1999 Annual Meetings that it was time to respond to "the cries of the poor." The panel was asked whether the Fund has indeed responded to such pleas. Another questioner asked whether the IMF is really a pro-poor institution if it took the Fund five years to make statements of commitment to LICs and to include poverty and social impact assessments (PSIAs) in the Fund's work. Staff at the meeting noted that programs supported by the IMF now include such pro-poor elements as specified levels of social or health spending; social components in national budgets; poverty targets; and social goals. Also, the Fund now publicly counsels against wasteful spending such as purchases of presidential jetliners. Fiscal Affairs Department Deputy Director Peter Heller stressed that although the IMF has been criticized as being overconcerned about inflation, it is the poor who bear the worst effects of runaway price increases. He said the IMF would not agree to 20 percent inflation, which would mean prices doubling every three years. This is because the poor would be the most affected, while those with assets or good incomes usually have hedges against inflation.
IMF and World Bank meet with union leaders IMF and World Bank management, Executive Directors and staff met with leaders of the international labor movement on October 6-8 to discuss a range of issues. The meeting in Washington, D.C. focused on efforts to reduce poverty and achieve the Millennium Development Goals (MDGs); there was also discussion of ways to enhance employment opportunities and social inclusion, and reduce inequalities. The gathering was the second in a biennial series instituted in 2002 (see Civil Society Newsletter January 2003), and built upon a dialogue begun more than a decade ago by the IMF's then Managing Director Michel Camdessus. The labor union delegation included over 80 representatives of national and international labor federations, which have nearly 200 million members. It was headed by Guy Ryder, General Secretary of the International Confederation of Free Trade Unions (ICFTU), and Willy Thys, General Secretary of the World Confederation of Labor (WCL). Representatives from Global Unions Federations and the OECD's Trade Union Advisory Committee also attended. Willy Kiekens, IMF Executive Director from Belgium, whose constituency includes several European countries, as well as Turkey and Kazakhstan, chaired the main session held at IMF headquarters on October 7. The AFL/CIO hosted the sessions held on October 6, and the World Bank those on October 8. In his introductory remarks for the session at IMF headquarters, IMF Managing Director Rodrigo de Rato welcomed the dialogue, noting that in many countries organized labor is an important and sometimes indispensable instrument for social change. In a world characterized by fast-moving transformation, countries must adapt, he said. This often requires dealing with such challenges as aging populations, the need to modernize labor markets, and the liberalization of trading systems. The participation of civil society-including labor unions, which are among the oldest and most experienced contributors to the civic process-in these economic and social debates can strengthen the consensus on difficult policy choices; and the IMF has become increasingly aware of the importance of ownership of economic policies. De Rato also observed that strong global expansions such as the current one provide a timely opportunity to undertake reforms, since changes in behavior are easier to bring about during economic recoveries. The trade union delegation said that despite the IMF's upbeat assessment of the global economy, most developing countries will fail to achieve the MDGs by a wide margin. If progress toward these goals is to be accelerated, the international community must take more ambitious steps on debt relief and consider the various initiatives being proposed-including some form of global taxation-to raise extra funding. They took note, however, of de Rato's observation that the problem with obtaining new resources is political, not technical. The labor union leaders also stressed that poverty reduction depends on implementing the right policies. In their view, the Bretton Woods Institutions' emphasis on pro-growth, market-oriented economic liberalization is inadequate "because growth is not enough." They argued that too little attention is paid to employment, wages, and social protection; growth must be accompanied by "decent" job creation and an increase in social security and justice. The union representatives welcomed the more systematic consultations taking place with local unions during the IMF's annual Article IV consultations with individual countries, and on other missions. But they called for greater involvement of local unions in the development of poverty reduction strategies in low-income countries. IMF representatives pointed out that the decision on whom to consult is made chiefly by governments. Many union representatives said the Fund's recommendations to countries on labor market reform remained a point of contention. They expressed concern that the IMF calls for greater labor market flexibility regardless of a country's circumstances. This, they said, tends to result simply in deregulation and increased social insecurity. The union leaders urged greater consultation with unions to promote a less disruptive restructuring of the labor market. The union leaders also met with World Bank president James Wolfensohn, who emphasized that labor issues were central to development. He said, for example, that the demographic challenge posed by one billion young people worldwide entering the work force in the near future presents a monumental opportunity-or risk of crisis. Creating productive employment for this generation was key not only to growth, but also to stability and hope, and thus ultimately to peace. On more specific points, Wolfensohn reported that recent World Bank reports promote job creation above all as the key to improving the business climate; and that core labor standards (CLS) are now being promoted by the Bank, though not yet as conditions in its lending. He also welcomed the report of the International Labour Organization's (ILO) World Commission on the Social Dimension of Globalization for its contribution to global policy discussions, noting the Bank's involvement in the production of the report and its continued commitment to following up on its recommendations. Topics discussed at sessions with staff included IFI policies and programs on trade; Bank-Fund work in low-income countries; labor and employment issues in PRSPs; incorporation of core labor standards into World Bank lending; the report on the Social Dimension of Globalization; the World Bank's approach to social protection; and trade union contributions to meeting the MDGs. Union leaders also met separately with IMF and World Bank Executive Directors. A more complete summary record of the discussion will be released in the coming months. Saturday with the survivors It was a sunny Saturday morning when we left Kigali's asphalt avenues, and bounced for a few minutes across bone-dry, dirt roads to our destination. Waiting for us was Jean Marie, the Secretary of the Fund for the Needy Victims of Genocide and Massacres, with two young men and a young woman. Our first stop was a settlement of 84 "families" (totaling some 400 young men and women) whose relatives, nuclear and extended, had been destroyed in Rwanda's 1994 genocide, as had their hopes for a normal life. The families were groupings of 6 to 8 teenagers, generally aged 15 to 18. Some of the families consisted of relatives (brothers, sisters and cousins), while others had come together with necessity as the only guide. We walked down the road to one of the houses. We were greeted by a young girl sitting on a step, washing a blouse in a plastic bowl. Another housemate joined us, then a few more, and we entered their home. It was sparse: cinderblock walls, no lights (not even a candle), no curtains, and one rudimentary chair. The two bedrooms were similarly spare-just a mattress on the floor. We were told that this room could sleep five people, sleeping waist up across the mattress. Jean Marie told us that this family was lucky. They at least had a place to call home, a place where they belonged. Ten years after catastrophe struck Rwanda 40,000 genocide survivors still are living day to day with no permanent dwelling. We spoke briefly with the head of the household that we were visiting. He had finished a vocational training program but had been unable to find work in the past year. When we asked how the family was able to feed itself, we were told, "with the help of God." It seemed that there was a limit to their luck. We stepped outside and talked with some of the neighboring families about their hopes. "We hope to finish school, to get professional training, to enter the university, if it is possible," one person said. We learned that for those lacking an education, there is little hope. Yet, completing school is no easy task. Without electricity or a candle, the children cannot study after nightfall. Since Kigali is at the Equator, darkness arrives around 6:30 each evening. The teenage family heads do their best, but life is hard for everyone, and the idea of a parent helping the younger children with their homework was far removed from their experience. There are no guarantees for those who do manage to graduate. We were introduced to a young woman with a radiant smile who had recently received a degree from a university in India. She said that she was worried. She had no job prospects. Would she be able to find work? We all assured her that she would succeed. No guarantees. We said goodbye and set off to a block of buildings further down the road. Here the Fund for Genocide Survivors had built simple homes for widows of the 1994 killings. Some 800 widows and their children (some natural and others acquired out of the moment's necessity) had been settled here. The cinderblock homes, we were told, were put up quickly, and with little supervision. Some of them appeared to be in poor condition; occupants had obviously made improvements to others. We walked up to one of the more attractive dwellings-the windows were curtained and its walls had been painted-and were greeted by a mother. Unlike our previous encounter, there was no warmth in this meeting. Civil, but with a stony stare, she motioned to the small refuge that she had managed to put together. It seemed clear that the dark nights of her past had stolen away more of her life than she could bear. A small room had been turned into simple store, selling soap and other sundries. The store also contained a water tap, firmly secured by a lock. In this parched quarter piped water is for those who can pay. An older widow whom we met on the road, leaning wearily on a staff, explained that she had no family, and the walk to the public water source, a kilometer away, had become a great strain. We had entered the purgatory of the innocent. The paralyzing spell of the moment was broken by the laughter of children. Mostly ragged, they were, nonetheless, radiant. They spoke the universal language of karate motions and happy cries. A discreet wave to a beaming young boy was returned, timidly, in kind. The IMF mission team members were an exciting curiosity. In this mostly barren world, novelty is entertainment. When we retraced our steps back to Kigali later in the day, we carried a new window onto a painful piece of humanity. In parting, Jean Marie thanked us. Ten years on, he noted, the outside world had come to see the survivors of the genocide as just another wave in the broad sea of the disadvantaged. "Please," he asked, "help us to be remembered." Editor's Note: In the period following the 1994 genocide, the IMF actively supported Rwanda in restoring macroeconomic stability and the foundations for economic growth and poverty reduction, including through financial assistance, debt relief, and technical assistance to reestablish its macroeconomic institutions. 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