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IMF Survey: Watchdog Urges Clearer IMF role in Aid to Africa
March 19, 2007
- IEO calls for more clarity, candor in IMF's Africa work
- Report looked at 29 sub-Saharan countries
- De Rato welcomes report
The IMF's Independent Evaluation Office (IEO) released a report on March 12 assessing the IMF's role in aid to sub-Saharan Africa (SSA).
Bernes: Fund communications oversold what the institution committed to do—and did—on aid and poverty reduction in Africa. (Photo: Thomas Dooley/IMF)
Evaluation report
The report presented evidence from 29 SSA countries that had borrowed from the IMF through the Poverty Reduction and Growth Facility (PRGF)—the concessional lending window for low-income countries—between 1999 and 2005. It found that macroeconomic performance in these countries had improved, partly because of the advice and actions of the Fund. But it also found "ambiguity and confusion" about the IMF's policies and practices in important aid-related areas and "miscommunications to external audiences."
What is the IEO?
The Independent Evaluation Office (IEO) was established in 2001 to conduct objective and independent evaluations on issues relevant to the mandate of the Fund. It operates independently of IMF management and at arm's length from the IMF's Executive Board.
IEO Director Tom Bernes said that the "the overarching message of the evaluation is that the Fund should be clearer and more candid about what it has undertaken to do on aid and poverty reduction, and more assiduous, transparent, and accountable in implementing its undertakings." The report had unearthed considerable lack of clarity about Fund policy, both inside and outside the institution, which past communications failures had aggravated.
In a statement, IMF Managing Director Rodrigo de Rato welcomed the IEO report, noting that it is an important contribution to making the Fund's engagement with low-income countries more effective. "The report should be considered," he said, "in the context of the Fund's Medium-Term Strategy (MTS), which reiterates the Fund's commitment to low-income countries and sets the framework for more focused engagement in those countries." This strategy was formulated in 2006, after the period covered by the IEO report. He also noted that the report's "candid assessments and useful recommendations will help management and the Board clarify further the institution's mandate and policies to help sub-Saharan Africa achieve growth and reduce poverty."
Main recommendations
The report made several recommendations about how, in the future, the IMF could improve the coherence—actual and perceived—of its policies and actions relating to aid to SSA:
• The Executive Board should clarify IMF policies on macroeconomic performance thresholds for the spending and absorption of additional aid, the mobilization of aid, alternative scenarios, poverty and social impact analysis, and pro-poor and pro-growth budget frameworks.
• IMF management should establish transparent mechanisms for monitoring and evaluating the implementation of the clarified policy guidance, including with respect to the necessary collaboration with World Bank staff, and ensure that institutional communications are consistent with Fund policies and operations.
• Management should clarify expectations and resource availabilities for resident representatives' and mission chiefs' interactions with local donor groups and civil society. It should monitor trends in the institution's country-level operating environment, including for aid, periodically assessing the cross-country implications for Fund policies and strategies.
Key report findings
What are the report's key findings? Bernes and lead author Joanne Salop point to three.
• First, there has been considerable ambiguity and confusion about key aspects of Fund policy and practice on aid and poverty reduction. Affected areas include the Fund's role in the mobilization of aid, the analysis of alternative aid scenarios, poverty and social impact assessments of macroeconomic policies, and pro-poor and pro-growth budget frameworks. Salop noted that "the IMF's Executive Board remains divided on some of these issues, and as a result, IMF policy is unclear."
• Second, lacking clear policies and guidance on these areas, Fund staff have tended to limit their focus to macroeconomic stability, in line with the institution's core mandate and deeply ingrained professional culture. When the Fund's policy and guidance were clear, such as on the accommodation of aid, staff implemented them—albeit without communicating the rationale to aid providers and other partners.
• Third, there has been a major disconnect between the Fund's public communications on aid and poverty reduction and its policies and practices. Fund communications oversold what the institution committed to do—and did—on aid and poverty reduction, and undersold the institution's contribution through its support for enhanced macroeconomic stability, fiscal governance, and debt relief.
On the macroeconomic front, the report acknowledged that PRGF programs catalyzed available aid—through the Fund's policy advice and support for country efforts and PRGF leveraging effects on donor resources, including for debt relief. It found that when country and donor performance improved, PRGF-supported macroeconomic programs eased and became more accommodative of aid. "The combination of improved country and donor performance and the associated adaptation of PRGF program design have materially improved SSA's prospects for growth and poverty reduction," it noted.
The IEO report follows publication of a separate report examining the working relationship between the IMF and the World Bank (see pages 74-76). Asked how the IEO findings related to IMF-World Bank collaboration, Bernes said: "The Fund should have been a more proactive and engaged partner with the Bank—and user and requestor of the Bank's analysis—in areas of material importance to its work. More generally, on Bank-led mandates, we believe the Fund should strive for the middle ground—neither passively waiting for analysis by the Bank nor aggressively taking over the production of that analysis—given the resource constraints the Fund faces and the agreed division of labor with the Bank."
The IMF's response
In response to the report, IMF management said that it agreed with the thrust of the IEO's specific recommendations (see box), including the call for further clarification by the Executive Board on several aid-related issues (such as the role of the Fund in aid mobilization) and the need to better align its communications with its delivery.
Abdoulaye Bio-Tchané, Director of the African Department, welcomed the report's finding that the Fund had supported countries' spending on health and education, especially out of savings from debt relief. He pointed to the fact that the IMF was the first institution to implement the Multilateral Debt Relief Initiative, which eliminated the debt owed to the IMF by 20 poor countries, with more countries poised to benefit from this relief. He said that for SSA to reach the Millennium Development Goals for health and education "its budgets must become more pro-poor and pro-growth, and it must use additional aid flows effectively."
IMF-World Bank collaboration
As for Bank-Fund collaboration and the Fund's involvement with other partners, including donors, Mark Plant, Senior Advisor in the IMF's Policy Development and Review Department, observed that "the Poverty Reduction Strategy process, the move by donors from project to program support, and the emergence of new lenders have all reinforced the interdependence of our work with others. And we must develop more effective ways of engaging in the global effort to turn macroeconomic stability into sustained growth high enough to make a real dent in poverty."
The IMF's Executive Board, which discussed the report on March 5, supported the report's recommendation on the need for further clarification of Fund policy on several aid-related issues, including the mobilization of aid, alternative scenarios, poverty and social impact assessments of macroeconomic policies, and pro-poor and pro-growth budget frameworks. It asked the staff to come back with specific and costed proposals.
It also welcomed the report's recommendation to establish transparent mechanisms for monitoring and evaluating the implementation of the clarified policy guidance. And it welcomed the recommendation to clarify expectations under Fund policies—and resource availabilities—for resident representatives' and mission chiefs' interactions with local donors and civil society groups. Regarding communications, the Board supported the call for greater clarity on what the Fund can and cannot do in its low-income members, but it emphasized that, given budgetary constraints, improvements would need to be implemented in a strategic manner.
Going forward
Over the next few months, the Board will be considering several staff papers that will look at some of the issues raised in the IEO report—including the role of the Fund in the poverty reduction strategy process, donor collaboration and management of aid flows, and issues relating to program design.