PHA-Exchange> Civil Society letter to the International Monetary Fund

[Claudio Schuftan]

>
>  **
> The PHM is strongly supporting a letter opposing the policies of the
> International Monetary Fund (IMF) that continues to have a harmful role in
> hindering countries' efforts to increase investments in life-saving health,
> education, HIV/AIDS and other social programs.
>
> To send organizational endorsements to this letter, please contact Marie
> Clarke Brill at marie at africaaction.org by *September 21, 2007*. Please
> include the name of your organization and the country where it is located.
>


Dear Managing Director,

 In the context of the significant global campaign to increase foreign aid
to achieve the Millennium
Development Goals (MDGs), and achieve universal access to HIV treatment,
care and prevention, the
undersigned civil society organizations were alarmed to find that the April
2007 report by the International
Monetary Fund's Independent Evaluation Office (IEO), "The IMF and Aid to
Sub-Saharan Africa," confirms
the long standing claims that IMF policies undermine developing nations'
ability to increase health and
education spending. To date the IMF's response to this finding has not been
satisfactory.

 During the first 100 days of your leadership at the IMF, we call on you to
take the following steps to enable
impoverished nations to direct sufficient resources to meet pressing human
needs.

 1. The IEO report finds as much as 74% of additional foreign aid to 29
countries in sub-Saharan Africa
between 1999-2005 has been diverted from its intended purposes and allocated
to domestic debt payment and
international currency reserves because of IMF policies regulating
macroeconomic and monetary policies.
Citizens in donor and recipient countries never meant for so much of the
annual aid increases to go unspent.
The IMF must change these policies and must not stand in the way of
increased spending on health,
HIV/AIDS and education.

2. The IEO report concluded that aid spending was curtailed due to IMF
insistence on specific deficit-
reduction and inflation-reduction targets which impact the size of the
overall national budget. These IMF
policies are unnecessarily restrictive and prevent increased public
spending, particularly for health and
education. The IMF must not stand in the way of policy makers in borrowing
countries exploring and
adopting more expansive fiscal and monetary policy options.

3. Budget and wage bill ceilings undermine impoverished countries' ability
to provide adequate salaries for
health and education workers, hire additional needed health workers and
teachers and scale up and improve
the quality of the health and education sectors. The IMF must publicly state
that it will cease and desist
with its demands for wage bill ceilings.

4. Impoverished countries that have benefited from initial debt cancellation
are challenged to make use of the
savings because restrictive IMF policies limit spending. Further, countries
that continue to strive towards
debt cancellation are compelled to implement these harmful policies in order
to complete the Heavily
Indebted Poor Country (HIPC) initiative. The IMF must provide immediate debt
cancellation for all
impoverished nations without harmful and unnecessarily restrictive policy
conditions attached.

 We note that IMF staff have responded to some of these concerns in two
policy papers from June 2007
(available at http://www.imf.org/external/np/pp/2007/eng/071907.htm), and
that the IMF Executive Board
has responded to these papers. In these documents, the IMF commits to some
changes, including increased
fiscal and monetary flexibility with an overarching purpose of maintaining
macroeconomic stability.
However, this response is unsatisfactory; the IMF does not address either
the parameters of alternative
policies or how "stability" will be defined.

 In the preparation, presentation, and democratic discussion of alternative
pro-health, pro-education, and pro-
development scenarios, the IMF must ensure that there is broad consultation
and public debate among all
stakeholders, including key legislative committees, civil society, health
and education officials, and
independent economists, in which the short and long term impacts of more
expansionary fiscal and monetary
options are weighed before official decisions are taken.

 We look forward to your reply to this request, and to further discussion on
these issues.

 Sincerely,
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