Responses: Owen Tudor - Head of EU and International Relations, Trades Union Congress (IMF)

1.
While appreciating the belated efforts by the IMF to deal with the consequences of the financial crisis, the TUC wishes to emphasize that the IMF did not have adequate resources to cope with a crisis of this magnitude. As at 31 March 2009, the IMF had some USD 325bn at its disposal. The international trade union movement had, in the past, stressed the need for augmenting the IMF resource base on a number of occasions.

While welcoming the outcomes of the G20 Summit, the TUC calls upon the G20 governments to seek expeditious implementation of credible measures to “promote global trade and investment and reject protectionism”, as set out in the Global Plan for Recovery and Reform adopted in April 2009. Although USD 250bn was pledged as additional trade finance, there is no indication yet as to how this measure is to be funded or when it will come into effect. Exports – textiles, raw materials, minerals etc - from developing countries need to be sustained through appropriate and adequate measures. A drop in the demand for developing countries’ exports will inevitably translate into a slackening of demand for developed countries’ exports with a time lag, which will, in turn, add to the consequences of the current recession.

The agreement to the addition of USD 250bn to international liquidity in the form of SDRs in July 2009 by the IMF Executive Board is appreciated and will, if approved by the Board of Governors, ease the balance of payments difficulties of developing nations and spur trade. The G8 nations who will receive the lion’s share (some 48% or USD 120bn) of the new allocation should consider “donating” them to developing nations if they do not wish to use them. The TUC hopes that the UK will take the lead in accelerating the progress towards the adoption of the Fourth Amendment and any necessary subsequent amendments to the Articles of Agreement.

The TUC also welcomes the Interest relief granted on the IMF’s concessional facilities to help low-income countries to cope with the consequence of the crisis and hopes that it will be extended beyond the end of 2011.

The IMF is mandated with the surveillance of the international financial system. However, in reality, it is not a position to make effective interventions in crises originating in G8 countries, especially, when they involve them all at the same time. In the past, the IMF only managed to formalise the informally agreed arrangements more or less already in place following financial crises involving major industrialised nations. One may recall the events in the aftermath of the collapse of the Britton Woods arrangements for the stability of exchange rates. In this regard, the TUC joins the international trade union movement in its demand for fundamental reforms to governing structures of the IMF and other international financial institutions.   

2.
In essence, the reformed conditions are not radically different from those which came into force following the previous review in 2000. Although there is renewed interest in, and emphasis on, national ownership, parsimony, criticality and co-ordination and clarity, it is their interpretation and application in the design, implementation and monitoring of new programmes that need to be examined in depth. The new Guidelines to IMF staff were published only in July 2008. It is therefore premature to study their impact on individual LIC programmes. While it is true that some flexibility has been introduced, it is not clear whether many low-income counties, except, perhaps for a limited number of countries including Zambia and Senegal, have benefitted from it yet. It needs to be pointed out that conditionality involves not only the design of a programme, but also its implementation and monitoring.

3.
The renewed emphasis on the concept of national ownership is welcome. It will, theoretically enable the IMF to tailor its assistance programmes to the specific needs and circumstances of a particular country. The Poverty Reduction and Growth Facility Trust has three windows targeted on the needs of LICs with more flexibility. They are

• The Extended Credit Facility (ECF), which is due to replace the Poverty Reduction and Growth Facility (PRGF).

Our understanding is that the ECF will have some of the objectives of the PRGF and be available to countries without Poverty Reduction Strategies. Therefore, it may be more difficult to retain their focus exclusively on poverty reduction. Nevertheless, due to the commitment to poverty reduction through the achievement of Millennium Development Goals in most development strategies, there may be some scope for retaining the focus.  

• The Stand By Credit Facility (SCF), which will also replace some of the lending available to members under the Exogenous Shocks Facility’s High Access Component.

This is considered to be similar to the Stand-By Arrangements available for middle-income countries, but with less stringent conditions attached to them.  

• The Rapid Credit Facility (RCF), which would address the emergency financial needs of members.

The recent reforms to the conditionality may enable the IMF to be more responsive to the demands from LICs. However, not all the reforms are geared to assist LICs developing countries or tailored to the needs of LICs. The Flexible Credit Line is designed to support countries with a strong record on economic fundamentals, which automatically keeps most vulnerable developing nations out of its reach. Mexico, Colombia and Poland have received loans worth USD 78bn in total under FCL, which, if used extensively for middle-income countries could well have the effect of crowding out LICs. Although structural performance criteria are said to have been discontinued as from 1st May 2009, there are indications that they are still in force under different guises. 

The IMFstaff are supposed to engage civil society in broadening support for its programmes in line with government’s Poverty Reduction Strategies. Although trade unions are not explicitly mentioned, the need for consultation with civil society has been underlined in the new Guidelines to IMF staff.
It is important to point out that, on the one hand, not all these facilities are fully operational yet, and, on the other, it is not clear how some of them are to be financed.