Research and Publications on Issues of The IMF Project

November 2007

The House Financial Services Committee of the US Congress expressed its concerns on the issue of unnecessarily restrictive fiscal and monetary policies in a letter to the IMF.

October 2007

Over 120 civil society advocacy organizations voiced their concerns on the issue of unnecessarily restrictive fiscal and monetary policies in an open-letter to the new Managing Director of the IMF, Mr. Dominique Strauss-Kahn, calling on him to address this urgent matter. They acknowledged the steps taken by IMF in the June/July papers and board response (see below), but still called on the IMF to take 9 further steps. To see this letter, along with a short background memo, click here:

September 2007: The Macroeconomic Framework and the fight against HIV/AIDS in Africa: The cases of Ghana and Malawi

Policy Briefing by African Forum and Network on Debt and Development (AFRODAD), 2007.

June/July 2007: The IMF Responds to its Critics

The IMF staff responded to the concerns raized in the IEO Report, as well as by outside critics, in 2 new policy papers published in June 2007, "Aid Inflows-The Role of the Fund and Operational Issues for Program Design," and "Fiscal Policy Response to Scaled-Up Aid," and the IMF Executive Board responded to these new papers at a July 6, 2007 meeting.

June 2007 : Scaling-up HIV/AIDS Financing and the Role of Macroeconomic Policies in Kenya

By Degol Hailu. Advisor, UNDP/BDP Caribbean SURF. International Poverty Centre. Prepared for the Global Conference on Gearing Macroeconomic Policies to Reverse the HIV/AIDS Epidemic, Brasilia, 20-21 November 2006. Jointly Sponsored by the International Poverty Centre and the HIV/AIDS Group of UNDP

April 2007: Medicines without Doctors: Why the Global Fund Must Fund Salaries of Health Workers to Expand AIDS Treatment

By Gorik Ooms, Wim Van Damme, and Marleen Temmerman. Shows how overly cautious and restrictive policies of the IMF/World Bank prevent foreign aid from being used to hire health workers.

April 2007: A new report by the IMF’s Independent Evaluation Office (IEO) on “The IMF and Aid to Sub-Saharan Africa”

Examined IMF loan programs to 29 Sub-Saharan African countries between 1999-2005. On page 9 was a finding that has alarmed aid advocates: Significant percentages of foreign aid to these countries during these years were not programmed to be spent because of 2 particular IMF policies on currency reserve levels and inflation rates. The report noted that about 37 percent of all annual aid increases to these countries in these years was diverted into building internationally currency reserve levels (see Figure 2.2, p.9). The report also found that, among countries perceived to already have sufficient currency reserves, only about $3 of every $10 in annual aid increases was programmed to be spent, and up to $7 out of every $10 was redirected and diverted by IMF into either paying down domestic debt, building up international currency reserves, or both (see Figure 2.3 on p. 9, with a further elaboration of this data on Pages 42-44). In both cases, having so much of the new aid increases not being spent was certainly not the intention of the donors, or citizens in donor countries.

According to the IEO report, the “main driver” here in decisions to curtail spending of the aid was the IMF’s insistence on very low levels for inflation. Countries who had failed to comply with the IMF’s instance on getting inflation down to 5-7 percent a year were only allowed to spend 15 percent of their annual aid increases, or just $1.50 of every $10 in annual aid increases by donors. As part of the larger context for the IMF’s tight monetary policies, one of the major overarching findings of the IEO report was that the IMF Executive Board and senior management were never really enthusiastic about the emphasis placed by donors on “poverty reduction” or the new efforts to scale-up aid and spending for the MDGs. Although the IMF’s old ESAF loans we renamed PRGF loans in 1999, without strong leadership directing any real policy changes in this regard, the IEO report found that staff simply reverted to prioritizing macroeconomic stability over other goals. The important implication of this finding for aid advocates is that there is a contradiction happening within the leading donor governments between enabling a “scaling up environment” on the one hand while enforcing rigid macroeconomic stability and spending restraint on the other hand.

April 2007: The CGD Report “Does The IMF Constrain Health Spending in Poor Countries?"

Evidence and an Agenda for Action, April 2007. Report of the Working Group on IMF Programs and Health Spending, Center for Global Development (CGD), Washington DC. The working group included 15 experts drawn from policy-making positions in developing countries, academia, civil society, and multilateral organizations. The study explored criticisms of the IMF’s macroeconomic policies and the impact they actually have on health spending in low-income countries, supported by in-depth case studies from Mozambique, Rwanda, and Zambia. On fiscal policy (deficit-reduction targets), the report found: “The evidence suggests that IMF-supported fiscal programs have often been too conservative or risk-averse. In particular, the IMF has not done enough to explore more expansionary, but still feasible, options for higher public spending.” On monetary policy (inflation-reduction targets), the report noted: “Empirical evidence does not justify pushing inflation to these levels in low-income countries.” Among its many recommendations, the CGD report called on the IMF to “help countries explore a broader range of feasible options,” and with “less emphasis on negotiating short-term program conditionality.”

April 2007: The ActionAid International Education Team Report

Wage bill ceilings and their impacts on blocking the hiring of more teachers. “Confronting the Contradictions: The IMF, wage bill caps and the case for teachers.” A report by ActionAid’s multi-country International Education Team builds on previous research and new in-depth country case studies from Malawi, Mozambique and Sierra Leone, found that a major factor behind the chronic and severe shortage of public school teachers is that IMF policies have required many poor countries to freeze or curtail teacher recruitment. The IMF may have varying degrees of influence in directly setting the level of funds available for wages of public sector employees, or the “wage bill ceilings.” However, by insisting on overly-restrictive macroeconomic policies that unnecessarily constrain overall government spending in national budgets, and thus constrain sector budgets and public employees’ wages, the IMF is in part responsible for the persisting teacher shortage. In all three countries examined, the wage bill ceiling is too low to allow the governments to hire the teachers they need to achieve the pupil-teacher ratio (PTR) of 40:1 recommended by the Education for All - Fast-Track Initiative (EFA-FTI). There is considerable evidence that the current ceilings compromise the quality of education in each of these countries. However, because the specific inflation-reduction and deficit reduction targets in the IMF loan programs are already constraining the size of the overall national budgets at unnecessarily low levels, even if the formal wage bill ceilings are removed, money available for the public sector wages is still effectively constrained. The wage bill ceiling is only a symptom of a deeper problem: it’s the inflation and deficit targets that must be changed. Led by Akanksha A. Marphatia, the ActionAid International Education Team report highlighted that there is a growing policy contradiction at work in the foreign aid system and it is undermining education goals around the world: At the same time as the richest donor countries are trying to scale-up spending and foreign aid for education with one hand, they are also blocking the ability of many poor countries to spend that aid because of IMF loan programs they’re approving with the other hand. This presents a contradictory set of policies that are working at cross-purposes. The ActionAid report called on education advocates and donors to deal with resolving the contradiction. The IMF issued a public response to the report on its website, and ActionAid’s Education Team responded.

November 2006: Cancelling the Caps: Why the EFA movement must confront wage bill caps now

By ActionAid International Education Team, November 2006: Background briefing for delegates of the Fast Track Initiative meeting in Cairo.

September 2006 : IMF Macroeconomic Policies and Health Sector Budgets

Wemos, The Netherlands.

Case studies for Kenya, Uganda, Zambia and Ghana:

September 2006: Does Debt Relief Increase Fiscal Space in Zambia?

By UNDP's Terry McKinley and SOAS' John Weeks. This is a case study of a situation in which, e.ven after debt relief, Zambia will still have problems scaling-up spending under the currently restrictive fiscal and monetary policies of its IMF loan program. McKinley & Weeks offer examples of more expansionary policies.

July 2006: A Case Study on the Impact of International Monetary Fund Policies on the Achievement of the Education Millennium Development Goals i

By ActionAid International The Gambia.

June 2006: Monetary Policy and Financial Sector Reform for Employment Creation and Poverty Reduction in Ghana

By Gerald Epstein and James Heintz. Country Study # 2. June 2006.

May 2006: Policies & Priorities

Newsletter of ActionAid International USA, Spring 2006.

September 2005: Changing Course: Alternative Approaches to Achieve the Millennium Development Goals and Fight HIV/AIDS

ActionAid International USA , September 2005. In-depth desk research and work with economists conducting interviews with finance ministries and central bank officials and others in 5 Southern countries.

September 2005: Contradicting Commitments: How the Achievement of Education For All is Being Undermined by the International Monetary Fund

By the ActionAid International Education Team, which focused on the impacts of IMF loans on the size of education budgets:

March 2005: Square Pegs, Round Holes and Why You Can’t Fight HIV/AIDS with Monetarism

Policy Briefing by ActionAid International USA, March 2005.

2005: The MDG Process

By Fernando Cardim de Carvalho, Institute of Economics, Federal University of Rio de Janeiro, 2005

September 2004: Blocking Progress: How the Fight against HIIV//AIIDS is Being Undermined by the World Bank and International Monetary Fund

By ActionAid International USA, Global AIDS Alliance (GAA), RESULTS, and Student Global AIDS Campaign (SGAC). September 2004.

September 2003: The IMF and the Millennium Goals: Failing to deliver for low income countries

Oxfam International. September 2003. Briefing Paper No. 54. See pp. 8-13 on the IMF’s inflexible fiscal and monetary policies.

Policy Space in Historical Perspective, with Special Reference to Trade and Industrial Policies

By Ha-Joon Chang, University of Cambridge. A paper presented at the Queen Elizabeth House 50th Anniversary Conference, “The Development Threats and Promises”, Queen Elizabeth House, University of Oxford, 4-5 July, 2005.

Macroeconomic and Growth Policies

By Shari Spiegel, Executive Director, Initiative for Policy Dialogue (IPD), at Columbia University, New York

This is from the UN DESA’s “Development Strategies Policy Notes” series. The United Nations Department of Economic and Social Affairs (DESA) commissioned six notes for policy-makers and policy-shapers both in the government and civil society, in major and interconnected areas relevant to the formulation of national development strategies: macroeconomic and growth policy, trade policy, investment and technology policy, financing development, social policy and state-owned enterprise reform: read the article. 

Background Note: Macroeconomic and Growth Policies

By Jayati Ghosh, Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi, India, 2007. From the UN DESA’s “Development Strategies Policy Notes” series.

UNDP IPC's Introductory Training Program

UNDP’s International Poverty Centre (IPC) in Brasilia Develops Modules for Introductory Training on Alternative Macroeconomic Policies

3 Training Modules from IPC on Economic Policies, MDGs and Poverty, from June 2007:

Module 1 --Fiscal Policies, by John Weeks and Shruti Patel:

Module 2 --Monetary Policies, by Alfedo Saad-Filho:

Module 3 --Financial Policies, by Gerald Epstein & Ilene Grabel:

Full National Reports on Economic Strategies for Growth, Employment and Poverty Reduction.

Conference Papers from the 2006 Global IPC conference on “Gearing Macroeconomic Policies to Reverse the HIV/AIDS Epidemic".

An Employment-Targeted Economic Program for Kenya

By Robert Pollin Mwangi wa Gıthınji, and James Heintz, 2007. A project of the International Poverty Centre in Brasilia (IPC), United Nations Development Programme (UNDP).

Alterntative Fiscal Policies

By Ilene Grabel, University of Denver, 2005 See pp. 228-243 on Fiscal Policy; pp. 219-228 on Central Banks and Monetary Policy; and pp. 200-219 on Exchange Rates and Currency Policy. Taken from Chapter 11 of “Reclaiming Development: An alternative economic policy manual, authors: Ha-Joon Chang and Ilene Grabel, London/NY: Zed Books, 2004 (first printing), 2005 (second printing). Section 11.3 (below) deals with fiscal policy.

Financial Policies

By C.P. Chandrasekhar, Centre for Economic Studies and Planning School of Social Sciences, Jawaharlal Nehru University, New Delhi, India

Gender Bias and Central Bank Policy: Employment and Inflation Reduction

By Elissa Braunstein & James Heintz, September 2006

Feminist-Kaleckian Macroeconomic Policy for Developing Countries

By Stephanie Seguino, Department of Economics, University of Vermont, and Prof. Caren Grown, now at American University in Washington DC:

Why is 'The Dutch Disease' Always A Disease? The Macroeconomic Consequences of Scaling Up ODA

,By UNDP, Terry McKinley Senior Adviser, Economic Policies and Poverty Reduction, Bureau for Development Policy,

United Nations Development Programme, New York.

Explains the “spending but not absorbing” or “absorbing but not spending” consequences when the fiscal and monetary policies are not properly aligned:

Gearing Macroeconomic Policies to Manage Large Inflows of ODA: The Implications for HIV/AIDS Programmes

By Chowdhury, A. and McKinley, T. (2006) UNDP International Poverty Center, Working Paper No. 17, May 2006.

“The Scorecard on Development: 25 Years of Diminished Progress.”

Center for Economic and Policy Research, September 2005. Shows failure of last 25 years (under neoliberalism) to generate higher economic growth rates than had been the case under more expansionary policies in the 1960-1980 period.

Fiscal Space for Public Investment: Towards a Human Development Approach

By Rathin Roy, Antoine Heuty and Emmanuel Letouze. United Nations Development Programme Paper Prepared for the G-24 Technical Meeting, Singapore, September 13-14, 2006. This does a good job of contrasting the IMF’s constant fixation on maintaining short-term balanced budgets without considering the long-term benefits (multiplier effects) that may accrue from careful and strategic up-front investments in health & education over the long run but require higher budget deficits and maintaining moderate inflation in the short-term.

Too much, too soon: IMF conditionality and inflation targeting

By Gerald Epstein, University of Massachusetts. Bretton Woods Project Update 52. 11th September 2006.

Real Exchange Rate, Monetary Policy and Employment: Economic Development in a Garden of Forking Paths

By Roberto Frenkel and Lance Taylor. This is an explanation of the inherently contractionary nature of monetary policies in the PRGFs and Jerry also describes more expansionary and other alternative monetary policies.