Examination of Witnesses (Questions 180
- 199)
THURSDAY 28 OCTOBER 1999
MR STEPHEN
PICKFORD AND
MR PAUL
SPRAY
Barbara Follett
180. That brings me on to my final question
because I want to know about local ownership of these projects
and whether people at the local level will be able to consult
other members of civic society or do they only have to go to the
Fund or to the Bank? In the development of these programmes who
are people allowed to consult?
(Mr Pickford) In the board discussions that I have
participated in it has been quite clear that we expect the Fund
and the Bank, in helping countries to put together their Poverty
Reduction Strategies, to encourage the countries to go through
a very participatory and transparent process. Indeed, one of the
elements that we will be looking for in the reports that we get
in the boards is precisely what process has been followed by the
Governments in putting their Poverty Reduction Strategies together.
I believe it comes out quite clearly from the papers that have
been produced that there is a strong expectation that governments
will consult with civil society and with other interested parties
in the country involved.
Barbara Follett: I think that will probably
help to answer some of the questions about how much local involvement,
should you establish offices there as long as you have local understanding.
That finishes my questions.
Chairman
181. Can I ask whether the World Bank and the
IMF, having received these owned programmes, programmes owned
by the countries, having looked at them, would have a veto over
them saying you do not like them and you will not accept them?
(Mr Pickford) The way in which it was expressed in
the communiques was that the Poverty Reduction Strategies would
be endorsed by the two boards of the institutions. The way I interpret
that is that because the Poverty Reduction Strategies will essentially
be developed by the governments in close co-operation with and
using the assistance of the Fund and the Bank, I would not expect
for those papers to come to the board in a form which we would
have any difficulty with.
182. I see. What I am worried about quite frankly
is if the country concerned is the subject of a HIPC initiative
or in a structural adjustment process with the Monetary Fund and
says it wishes to spend X, Y or Z on education and health areas—because
those are usually the areas which address poverty issues—and
you say "well you cannot afford this and we are simply not
going to support it". That is the likely clash, is it not,
and therefore who then owns the programme?
(Mr Pickford) I think there is always a potential
tension there. Because the PRG programmes themselves are intended
to start from the objectives of the Strategy and to take the resources
that are required to achieve those objectives into account in
putting those programmes together, I actually see relatively little
scope for this to be a real problem in practice. I stress that
in putting together in an integrated fashion the Poverty Reduction
Strategy, and the policies underlying the PRG and policies underlying
the Bank's support to that Strategy, I would expect that integration
to mean that those tensions will have been resolved before we
get to the point of reaching decisions.
183. You will remember the criticisms made in
your externally stimulated report on ESAF which said the real
problem with ESAF is the fungibility of money and that therefore
countries will say "Right, since the International Monetary
Fund is going to finance our health programme we will use the
money which we would have otherwise donated ourselves to health
for buying a few more arms to clobber a few more neighbours".
That is the problem, is it not?
(Mr Pickford) It is always a problem. Funds are always
fungible. That is why I think it is important that it is clear
that the Poverty Reduction Strategies are designed to have, as
an objective, progress on social indicators, heading towards the
2015 international development targets; and to have embedded in
the strategies measurable intermediate objectives towards that
overall objective of reducing poverty, measurable objectives that
have specific time frames attached to them so you can see whether
the money and the expertise and assistance are delivering the
right objectives.
184. Yes.
(Mr Spray) Can I add, we do not see the Poverty Reduction
Strategy as being a separate part into which debt relief goes
or IMF resources go. It should be a strategy covering the whole
of the Government's operations and in that case the debt relief
or the IMF resources operate in effect as programme aid so it
will be a view of the whole operations of the Government and not
simply of a part allowing fungibility.
185. Now you have just said you have recruited
one of the best negotiators Uganda has into your own Monetary
Fund staff which raises the whole question of whether or not the
countries you are negotiating with have the capacity, particularly
if you rob them of their decent staff.
(Mr Spray) It is only one.
(Mr Pickford) I think that is a real issue. In this
particular case the individual has been very much involved in
driving through the process within Uganda. There is always a tension
there. On the one hand do you want that experience to remain in
Uganda and help the country or do you want to use that experience,
for a period at any rate, to help the Fund learn better how to
put its assistance together? I do not know the answer to that
one but I do recognise that it is crucial to do what we can to
help build up capacity in these countries. Certainly it is an
issue that comes up all the time in the Fund and in the Bank:
have these countries got sufficient capacity? There are strong
programmes for capacity building in the Bank, in particular in
relation to Africa. DFID have also put a lot of resources into
capacity building and they will be concentrating on some of these
early HIPC cases, doing precisely what you are suggesting which
is to provide government and NGOs in these countries with the
capacity they need to be able to develop their own strategies
and therefore benefit from the HIPC possibilities that we are
providing.
Mr Worthington
186. I am struggling to work out just how significant
a change there has been. I think that is the crucial question.
With ESAFs you felt that there was a particular model, an economic
model that was being operated. I do not know what you would call
it—monetarist, Reagan-omics—a particular perception
of what was good for a country that was applied. With what we
have got now, I do not know what we have got. Have we got the
old International Monetary Fund attitude to economics with the
word "poverty" going at the front or has the economic
model changed in a significant way? Those people who are interested
in debt relief, that is the essential question they have got.
Is this a root and branch change, the IMF realises it got it wrong
and it is changing, or is this because of the pressure from governments
saying: "Look the IMF is not working very well" and
that has been imposed on the IMF and underneath it is still kicking
and struggling to be what it was. What is it?
(Mr Pickford) I would characterise it best as an evolution
over time. I do not think it was probably ever true that Fund
programmes were as ideological as some people have made them out
to be. Certainly I do not think it is true of ESAFs in recent
years. They do have monetary and fiscal elements to the programmes,
because macro economic stabilisation is going to be part of any
solution in a country, but also they put much more emphasis on
the structural reforms that are needed to produce sustainable
growth. I think economic thinking has changed over the last 20
years away from saying that if you have got the macro economics
right everything will be okay, to saying that especially in developing
countries, but also in industrialised countries, there are structural
problems which prevent countries from growing faster. The extra
element that has come into the thinking over the last few years
is the importance of making sure that the social aspects are incorporated
into the programmes, partly because it is right and proper that
they should be but also because better social policies are likely
to produce better ownership of programmes at the country level
and also better results in terms of poverty reduction. I see the
move towards Poverty Reduction Strategies and the role which the
PRG facility will play in supporting them as another step in that
evolution. As to whether the Fund is capable of changing, I would
argue that the Fund has changed an awful lot, especially in recent
years. They have had to learn many new skills, for instance in
the financial sector, and in a whole range of structural areas.
I believe from what I have seen of the institution that it is
capable of very rapid change when the direction is clear.
Chairman: Now, transparency, Mrs Clwyd.
Ann Clwyd
187. I am going to ask a number of short sharp
questions and I would be glad if you could give short sharp answers.
(Mr Pickford) I will try.
188. The IMF is looked on by a lot of people
as being secretive and unaccountable and while some things have
been done to improve its accountability, I think there remains
a lot to be done. While you talk about good governance in the
countries to which you lend, the feeling is you have not done
all that much to ensure your own good governance and accountability
is made transparent. I know the Treasury Committee has recommended
that an annual report be made available to Parliament both on
your work in the IMF and the World Bank. When can we expect to
see that first report?
(Mr Pickford) I think that report is intended to be
specifically on the IMF. DFID's annual report already incorporates
a section on its role in World Bank activities and therefore my
office's role in that as well. As you know, on the Treasury Committee's
recommendation the Government has accepted the principle of an
annual report and it said in its response that it was looking
at the modalities and the precise timing. I said to the Treasury
Committee that I thought the best time of year for such a report
to be produced was soon after the annual meetings because that
is when a lot of the business of the Fund comes to fruition. I
do not think I can go any further than that at this stage.
189. When can we expect to see it? Can you give
us a date?
(Mr Pickford) I am afraid I cannot give you a date.
Chairman
190. Does this mean that I will not now have
to apply to US Congressmen to get papers presented to the IMF
Board and the World Bank board from them through the Library of
Congress because I cannot obtain them in Britain because the Ministers
block them or have done in the past and we cannot find out how
you vote, if you vote, sometimes you do not vote, most often times
you do not vote because you know what the outcome of the vote
would be. Are we going to be permitted to know these things?
(Mr Pickford) Again I think that is an issue that
Ministers should take a position on.
Chairman: I think the answer is no.
Ann Clwyd
191. Do you not believe that in the interests
of transparency the voting procedures should be formalised and
the results made public?
(Mr Pickford) If you apply that to the executive board
and the Board of Governors as a whole I think that is a change
that you would have to get a high degree of commitment to from
the membership as a whole, and there are 182 members of the IMF.
I do not think the UK Government could responsibly take a unilateral
decision that it would publish the way in which all the board
members voted.
192. Yes but you could be actively encouraging
other members of the board to support that idea. Does that mean
you are completely passive on it or you do not want to see it
happen?
(Mr Pickford) I think you need to take this in two
steps. I think Ministers here should take a view on publishing
the way in which the UK votes first and then we can move on to
the second question.
193. We will have to ask Ministers. Do you have
any views, or again would you prefer us to ask Ministers, on the
publication of board minutes and the agendas?
(Mr Pickford) Board minutes and agendas are already
published. The question of votes I think is an issue for ministers.
194. You are supposed to be supporting the introduction
of a dedicated monitoring unit. Can you tell us what steps you
have taken to persuade your colleagues it is a good idea?
(Mr Pickford) We have a review coming up in the next
couple of months of the role of evaluation in the Fund and we
expect to be pushing very hard the idea of an independent evaluation
unit within the Fund. I think a fairly good model for this would
be the Operations' Evaluation Department in the Bank which has
this role within the Bank, but independent within it, and reporting
publicly. I think that is a rather good model and that is one
we will be pushing.
195. Finally there has been no external evaluation
of the IMF's role and response to the financial crisis which affected
Asia, Russia and Brazil. Do you think this should be the subject
on a new unit's first evaluation?
(Mr Pickford) I think there are a whole range of issues
which will be on the list of priorities for evaluations. I do
not have a particular view on whether those aspects should be
at the top of the list.
Chairman
196. Could I just ask quickly about the floating
completion points. HIPC reached the decision point after the completion
of a maximum three year's structural adjustment programme, as
we understand it. Under the enhanced HIPC initiative agreed at
the autumn meeting the progress to the completion point would
depend on meeting specific reform targets rather than a further
period of the programme. What are the advantages of the floating
completion point? Who will set the reform targets and how will
they be set? How will this process relate to the PRGF lending
facility? Can you provide examples of the types of targets that
will be set, for example, revenue raising, poverty reduction,
growth rates? Will it be possible for decision and completion
points to be reached at the same time for good HIPC as was originally
planned for Uganda?
(Mr Pickford) The advantages of a floating completion
point are that countries can benefit from debt relief more quickly
if they are making faster progress on their own Poverty Reduction
Strategies. I think some of the questions you have asked are still
being worked out. Essentially we introduced the concept of Poverty
Reduction Strategy about two months ago and there is a lot of
work that needs to be done to flesh out—
197. Perhaps the answer then is really for us
to write to you, and perhaps when they have been worked out you
can write back and tell us what you have done.
(Mr Pickford) Indeed.
198. Lastly, can I ask, we have had an urgent
letter from the Jubilee 2000 Coalition and they say that they
have received this morning from the IMF—which you have been
away from for some time, I know, so you may not be able to answer
this—which confirms for the first time that despite the
widely publicised moratorium on debt payments for Honduras and
Nicaragua after Hurricane Mitch the multilateral institutions,
by which I think is meant IMF and the World Bank, are taking at
least 334 million dollars from the two countries in debt service
this year. The first anniversary of Hurricane Mitch of course
is tomorrow.
(Mr Pickford) As you say, Chairman, I have been away
from Washington for a few days.
199. Yes.
(Mr Pickford) I was aware of this but I have not got
details of the Jubilee 2000 letter. I understand also that the
IMF has written to them disputing the figures that they have produced.
If you will permit me, I will see if the IMF can provide a copy
of their letter if that would be helpful.
Chairman: I would be very grateful. Can I thank
you on behalf of the Committee very much indeed for answering
our questions which I know are very difficult for you in many
ways but thank you very much indeed. It has certainly illustrated
for us the work you are doing on our behalf in Washington, for
which the Committee would like to thank you very much and for
your hospitality in Washington when we were there last year. This
has been a most useful session and I am very grateful to you for
making the time to come and see us. I hope you will repeat it
next year. Thank you very much.
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