Responses: Introduction to the consultation: The adaptability and responsiveness of the International Monetary Fund

The global financial and economic crisis is hitting low income countries (LICs) hard. LICs are facing several balance of payments shocks including reduced capital inflows, reduced exports, fewer remittances and pressures on aid. Development prospects of LICs are severely weakened. As a result, LICs are increasingly looking towards World Bank programmes to meet development goals and towards IMF programmes to play the counter-cyclical financing role. This consultation blog investigates how well the IMF is responding to these concerns.

Dealing with shocks and crises is central to the IMF’s core competence and mission and as a result LICs are looking for IMF programmes to play a counter-cyclical role in reaction to the crisis. In response to the increased demand for IMF programmes, this blog examines the adaptability and responsiveness of the IMF to crises and asks for your feedback on how the IMF can promote stronger and sustainable economic growth for low-income countries, and protect them better against future financial and economic shocks.
The IMF has responded to the global downturn and recent fuel/food shocks through (inter alia):

• Additional financial assistance for LICs – doubling of access limits to IMF Exogenous Shocks Facility (ESF) has helped new LIC commitments rise to $2.5bn, which is more than five times the rate of lending over 2005-07. IMF lending to the poorest countries since the beginning of the crisis (September 2008) now exceeds its total lending over the three years before the crisis by 45%. At the London summit, G20 leaders committed to: increase the IMF’s resources to $750bn and undertake a $250bn allocation of Special Drawing Rights ($19bn of which will go to Low Income Countries).
• Reformed and tailored conditionality – use of structural measures as binding conditions has been abolished (in both MICs and LICs); conditionality has been tailored to measures which are essential to ensure that the effects of shocks on budgets, balance of payments and inflation don’t undermine stability.
• Analysis and forecasting – of the fiscal and external effects of the financial crisis and food/fuel shocks, and policy responses;
• Policy advice – e.g. on the global downturn, it has eased its policy stance where possible, relaxing fiscal targets in 80% of African Programmes, by an average 2% of GDP since the crisis, and advised on appropriate counter cyclical policies and measures to protect the poor from price hikes;

This blog aims to solicit views from stakeholders in low income countries (including business, academia, NGOs, government) on the following issues (see consultation brief):

• Has the IMF reacted in an effective and timely manner to address the challenges facing LICs as a result of the current crisis and the food and fuel price shocks?
•  Have recent reforms to conditionality and increased flexibility on policy stance been experienced at the level of LIC country programmes?
• Does the proposed reform of Fund concessional facilities better meet the diverse needs of LICs (from fragile/ post-conflict states to mature stabilisers) under different circumstances?
• What more could the IMF do to promote strong and sustainable growth in low income countries?

There are a number of ways you can respond – you can post a blog with your thoughts on the IMF  or the World Bank, or comment on the views of someone else. You can use the response template  or just send an email to us at g20.consultation@odi.org.uk.

Your thoughts and views will be greatly appreciated and will encourage and facilitate an insightful debate on how the WB and IMF can promote stronger and sustainable economic growth in LICs and, protect them better against future shocks and crises.