World Bank and IMF Spring Meetings 2004 Wrap-up
School of Law,
University of Warwick, UK.
The Joint World Bank and International Monetary Fund (IMF)'s Development Committee and the IMF's International Monetary and Financial Committee (IMFC) held their Spring Meetings in Washington DC this year from 24 - 25 April 2004. The Development Committee and the IMFC are comprised of members of the Bank and Fund's Board of Governors who provide the political oversight of the two institutions. The Board of Governors meet each autumn for their Annual Meetings.
Unlike the meetings of other global governance institutions, for example, the Ministerial Meetings of the World Trade Organisation (WTO), the Bank and Fund Spring and Annual Meetings are rarely negotiating forums at which critical decisions are undertaken. Almost all policy formulation and decision-making powers are now essentially vested in the Executive Boards of the Bank and the Fund who conduct the day-to-day business of the two institutions on behalf of the Board of Governors.
The run-up to official meetings of the Bank and Fund are is usually a time where civil society actors get together to discuss the official agenda with or without the Bank and Fund staff and meetings are also used as a campaigning platform by groups representing people affected by World Bank and IMF activities. More often than not, the issues that are most pertinent are excluded from discussion in the official agenda of the meetings and the official summariesof the Development Committee and IMFC deliberations - the final communiques and press releases - reflect only a fraction of the proceedings.
This report highlights some of the more contentious areas that have arisen during the Spring Meetings and provides links to more comprehensive analyses and reports on each area.
Spring Meeting Reports
For detailed reports on the Spring Meetings, please see:
1. The official Spring Meeting website containing links to official agendas, communiques, oress releases and speeches made during the meetings.
2. Report by the Bretton Woods Project, an independent insitutional watchdog based in London
3. The World Bank's transcripts of the Spring Meetings 2004 dialogues with civil society
Important issues highlighted during the Spring Meetings
1. Assistance to Low-Income Countries under the Framework of the Millennium Development Goals (MDGs) and the Poverty Reduction Strategy Papers (PRSPs).
This was a particularly important area considered by the Development Committee and the IMFC in their deliberations. A manual of collected Bank and Fund staff papers and Executive Board Summaries on various issues related to the World Bank and IMF financing for low-income countries was disseminated during the meetings. The Development Committee and the IMFC both called on the international community to provide additional resources and more coordinated assistance to low-income countries to help them meet the MDGs and to do so under the auspices of the PRSPs and attendant instruments.
The IMFC in particular reiterated that the IMF has an important role to play in assisting low-income countries 'with effective policy advice, financing, and technical assistance to achieve high and sustained growth and poverty reduction' (IMFC, 2004, para 13). This reaassurance comes in the wake of increasing criticism that the IMF is exceeding its original Bretton Woods mandate of maintaining financial stability by getting heavily involved in financing development in low-income countries, traditionally viewed as the purview of the Bank. The Fund's Executive Board had on 31 March this year concluded discussion on an IMF staff paper of 24 February 2004 entitled 'The Fund's Support of Low-Income Countries: Considerations on Instruments and Financing'. Here the Executive Directors had reaffirmed the need for the Fund to remain engaged in assisting low-income countries over the long term (see IMF's Public Information Notice 15 April 2004).
The Development Committee stated that priorities should be 'determined at country level in the context of country-owned and monitored development strategies, as reflected in the Poverty Reduction Strategy Papers' (Development Committee, 2004, para 4) and the IMFC reiterated that IMF assistance will be based on the framework set by the Monterrey Consensus on Financing for Development and the PRSPs and encouraged 'a further shaperning of the focus of PRSPs and PRGF-supported programs to enhance their linkage to the MDGs and their operational usefulness for policy choices and donor coordination' (IMFC, 2004, para 14).
Both Committees emphasised the need for maintaining financing levels for concessional financing to low-income countries. The IMFC underscored the need to maintain adequate financing of Poverty Reduction and Growth Facility (PRGF) and calls for further discussions on the financing of a 'self-sustained' PRGF (IMFC, 2004, para 13). A self-sustaining PRGF was proposed by IMF staff in the 24 Ferburary paper.
The Development Committee meanwhile called for more aid and for such aid to be 'predictable, timely, long-term and more effective'. The Committee reiterated calls for developed countries to meet their targets of assigning 0.7 percent of their GDP as overseas development aid (ODA). It also called for 'a substantial and timely agreement' on the financing for the 14th replenishment of the International Development Association ( IDA).
Civil society watchdogs of the Bank and Fund are however worried about the new modalities for financing to low-income countries, in particular the proposals for establishing more grant financing as opposed to concessional loans. The IMF 24 February staff paper for example proposes PRGF grants (IMF, 2004b, p 49 - 50) and there are indications that in the IDA 14 discussions, the US government will request on an increase in the proportion of financing allocated as grants (Bretton Woods Project, 2004).
2. New Debt Sustainability Assessment Framework
The World Bank and the IMF proposed a new operational framework for debt sustainability assessments in their staff paper of 3 February 2004 entitled 'Debt Sustainability in Low-Income Countries - Proposal for an Operational Framework and Policy Implications' which was discussed at the Executive Board of the IMF on 23 February 2004 (see IMF's Public Information Notice 5 April 2004). The proposed framework is based on two pillars: 1) indicative country-specific external debt-burden thresholds related to the quality of the country's policies and institutions; and 2) an analysis and careful interpretation of actual and projected debt-burden indicators under a baseline scenario and in the face of plausible shocks (IMF, PIN of 5 April 2004).
Civil society groups have been critical of the proposed framework. A joint paper prepared by the Catholic Agency for Overseas Development (CAFOD), Trocaire, Oxfam,and ActionAid UK - ' To Lend or Grant ? A Critical View of the IMF and the World Bank's Proposed Approach to Debt Sustainability Analyses for Low-Income Countries' - says the weaknesses of the new approach to debt sustainability 'stem from the lack of serious treatment it gives to recasting financial instruments and debt sustainability around the acheivement of the MDGs' and ignores the role that 'debt relief can play in accessing new financial flows and finance' (Cafod et al, 2004, p 3).
There is also significant discomfort as to the proposal to use the World Bank's Country Policy and Institutional Assessment (CPIA) index as a means of measuring the quality of a country's policies and institutions with regards to assessing the country's debt sustainability. At the civil society meeting on the new DSA organised by the Bank and Fund on 22 April, Henry Northover, Cafod policy advisor and author of the CSO paper expressed concern that 'there is an over reliance on the Country Policy and Institutional Assessment (CPIA) which is heavily subject to the judgment of the country staff and which has too narrow criteria or standards of measure by which to judge a sort of pervasive and persistent influence of debt distress' (World Bank, 2004). NGOs, such as the Citizens Network on Essential Services (CNES), have already criticised the CPIA for its arbitrariness among others and the inappropriateness of the index as an instrument for assessing development finance (see Alexander, 2004).
The IMF Executive Directors themselves have expressed doubts about the CPIA and its use in assessing policies and institutions underlying the debt thresholds and have asked IMF and Bank staff to explore these issues further before applying them to lending decisions (IMF, PIN of 5 April 2004). The Development Committee at the Spring Meetings reiterated this concern and stated that while they supported the principles underlying the proposed DSA framework, the 'modalities and operational implications remained to be clarified' (Development Committee, 2004, para 11).
3. Poverty Reduction Strategy Papers Evaluation
The Poverty Reduction Strategy Paper (PRSP) process is up for review as the World Bank's Operations Evaluation Department (OED) and the IMF's Independent Evaluation Office (IEO) conclude their respective evaluations on the process and the impact of the PRSP on the Bank and Fund operations. The Bank's evaluation focused on 'changes in country processes from the design and implementation of PRSPs and the effectiveness of the World Bank's support' (World Bank OED website) while the IMF's IEO concentrated 'on the role of the IMF in the PRSP process and on those dimensions of the PRSP initiative that are directly relevant to the IMF's mandate' (IMF IEO website). Both evaluations were carried out seperately, although the Bank and Fund carried out a number of joint country assessments, and are expected to be presented to the respective Executive Boards in late July/early August.
The PRSP approach has been criticised by NGOs who are awaiting the results of the evaluations which some view as constructive as the OED and IEO act independently of the Bank and the Fund management and report directly to the Boards. In the interim, NGOs have come out with their own assessments of the PRSP framework.
ActionAid has issued a policy paper aimed at generating discussion among civil society groups, as to the impact of their participation in the process. Rick Rowden of ActionAid USA and Jane Ochaya-Irama of ActionAid Uganda co-authors of the paper ' Rethinking Participation: Questions for Civil Society About the Limits of Participation in PRSPs' highlight the continued exclusion of macroeconomic policies from the PRSP consultation process and questions what this means for effective civil society participation. The paper formed the basis for a panel discussion between the authors and Linda Van Gelder, PRSP Task Team Leader, and Reiner Forster, Social Development Specialist in the Social Development Department, at the World Bank on 20 April.
4. Infrastructure Action Plan and Watering-Down of Safeguard Policies
The World Bank has introduced a new Infrastructure Action Plan which was approved by the Executive Board in July last year, signalling a renewed drive towards financing infrastructure projects in developing countries. The World Bank states that this Action Plan 'emphasizes the delivery of infrastructure services along the entire spectrum of public and private involvement. It envisages the financing of projects at regional, national and sub-national levels' (World Bank, undated).
The Development Committee at the Spring Meetings supported the renewed emphasis on infrastructure by the Bank, welcoming efforts by the Bank 'to support stronger investment climates in developing countries' and noting that 'infrastructure investment within the right policy environment makes a fundamental contribution to economic growth and achivement of the MDGs' (Development Committee, 2004, para 4).
However, NGOs have been critical of the renewed focus on infrastructure, with many critics believing that the Bank's efforts are driven not only by corporate interest lobbying but also as a result of the Bank's net negative flow of equity to developing countries, namely middle-income countries who borrow from the IBRD. Middle-income countries are moving away from Bank financing and infrastructure lending, including lending for large-scale projects, such as dams, are seen as a means of luring customers back to the Bank. This is in spite of the fact that large infrastructural projects have been proven to be very 'high-risk, low-reward' and have serious environmental and social impacts.
The International Rivers Network (IRN) has produced a good analysis of the Bank's infrastructure revival entitled 'The World Bank at 60: A Case of Institutional Amnesia' and the Citizens Network on Essential Services (CNES) has also written a critique of the Action Plan - ' The Expansion of the World Bank Group’s Infrastructure Agenda' in October last year.
Civil society groups are also worried that the new infrastructure agenda will also lead to the watering of environmental and social safeguard policies adopted by the World Bank after years of hard-fought battles by CSOs. The IRN's paper on the Action Plan highlights the operation of the Action Plan in India and observes that the Bank has already begun to disregard safeguards such as disregarding current best practices, 'such as the recommendations of the World Commission on Dams, and a new World Bank Sourcebook on Options Assessment, both of which recommend involving all relevant stakeholders in development decisions, and assessing all options 'strategically and comprehensively'' ( IRN Press Release, 22 April 2004).
Both the IMFC and the Development Committee reiterated the importance of trade in economic development and poverty reduction, calling for a speedy implementation of the World Trade Organisation (WTO)'s Doha Round. The Development Committee stressed the on the need 'for developed countries to do more to liberalize their markets and eliminate trade distorting subsidies, including in the areas of agriculture, textiles and clothing' (Development Committee, 2004, para 5) while the IMFC called for more open markets, fair access and 'the reduction of trade-distorting subsidies in all areas, notably in agriculture (IMFC, 2004, para 7).
Both Commitees welcomed the IMF's establishment of the Trade Intergration Mechanism (TIM) which was approved by the IMF Executive Board in April this year (IMF Public Information Notice, 13 April 2004). The TIM is aimed at providing temporary financial assistance to developing countries which suffer balance-of-payments problems as a result of trade liberalisation measures undertaken by other countries or under a multilateral trading framework, including 'concerns is that broad-based tariff liberalization might erode the value of their preferential access to important export markets; that the phasing-out of quotas in world textiles trade at the end of 2004 would expose them to greater competition; or that the reduction in agricultural subsidies might result in adverse changes in their food terms of trade' (IMF, PIN of 13 April 2004).
However, the TIM does not cover shocks experienced as a result of a country's own trade liberalisation measures and this has been criticised by civil society groups, along with the fact that the TIM does not provide additional resources or create an additional financing facility under the IMF but represent a policy that will enable easier access to funds for countries under existing arrangements with the Fund.
Alexander, Nancy (2004). 'Judge and Jury: The World Bank's Scorecard for Borrowing Governments'. April 2004. Citizens netwrok on essential Services: Washington DC. <http://www.servicesforall.org/html/otherpubs/judge_jury_scorecard.shtml>
Bretton Woods Project (2004). 'World Bank and IMF Spring Meetings Round Up'. 7 May 2004. <http://www.brettonwoodsproject.org/article.shtml?cmd=x-126-46339>
Cafod, Trocaire, Oxfam and ActionAid UK (2004) 'To Lend or Grant ? A Critical View of the IMG and the World Bank's Proposed Approach to debt Sustainability Analyses for Low-Income Countries'. Working Paper prepared by Henry Northover, April 2004. <http://www.cafod.org.uk/policy_and_analysis/policy_papers/debt/lend_or_grant>
Development Committee (2004). 'Development Committee Communique'. 25 April 2004. Washington DC. <http://siteresources.worldbank.org/DEVCOMMINT/NewsAndEvents/20195333/APRIL_2004_
International Monetary and Financial Committee (2004). 'Communique of the International Monetary and Financial Committee of the Board of Governors of the International Moneatry Fund'. 24 April 2004. Washington DC. <http://www.imf.org/external/np/cm/2004/042404.htm>
IMF (2004a). 'Debt Sustainability in Low-Income Countries - Proposal for an Operational Framework and Policy Implications'. Prepared by the Staffs of the IMF and the World Bank. 3 February 2004. <http://www.imf.org/external/np/pdr/sustain/2004/020304.htm>
IMF (2004b). 'The Fund's Support of Low-Income member Countries: Considerations on Instruments and Financing'. Staff Paper prepared by the Finance and Policy Development and Review Departments. 24 february 2004. IMF: Washington DC. <http://www.imf.org/external/np/pdr/lic/2004/eng/022404.htm>
World Bank (2004). 'Spring Meetings 2004 Dialogues: Meeting on the New IMF/World Bank Debt Sustainability Framework for Low-Income Countries, Thursday April 22, 2004'. < http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/CSO/0,,contentMDK:20204638~pagePK:220503
World Bank (undated). 'A Revitalized Drive on Infrastructure'. <http://www.worldbank.org/infrastructure/
This is a report published on 4 June 2004.
Citation: Tan, C, 'World Bank and IMF Spring Meetings 2004 Wrap Up', Law, Social Justice & Global Development Journal (LGD) 2004 (1), <http://elj.warwick.ac.uk/global/04-1/springmeetings.html>. New citation as at 15/07/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/lgd/2004_1/tan1/>.