PHA-Exch> Global sign on: Letter to IMF re gold sales for health & education

[Sarah Rimmington]

Dear Friends,

Many of you are aware that right now global civil society has the most 
significant opportunity in at least a decade -- and for the foreseeable 
future -- to advocate for meaningful policy change at the International 
Monetary Fund (IMF). Please consider signing on to the letter below as 
well as forwarding the letter to other partner organizations around the 
world who might be interested in supporting these efforts. 

The fall meetings of the IMF and World Bank provides an important 
opportunity for us to capitalize on this historic moment by 
demonstrating broad global support for an end to harmful policies 
supported by the IMF that prevent countries from scaling up investments 
in health and education. Please send organizational sign-ons to Sarah 
Rimmington of Essential Action, <srimmington at essentialinformation.org> 
by Sunday October 5, 2008. 

We note that U.S. organizations sent a similar letter to U.S. Congress 
last spring.  We are now inviting these same groups PLUS global groups 
to join this call for bold changes in IMF policy toward developing 
countries.  We will be sending a revised draft of the April letter to 
the IMF Executive Board during its October Meetings in Washington, DC.


**Why a global sign-on letter to the IMF Executive Directors right now? **

Last April the IMF Executive Board approved a proposal to sell some of 
the gold stock it holds to create a trust fund, the proceeds of which 
will be used to pay for the IMF's administrative expenses. The IMF is 
taking this step because it is facing a budget crunch: middle-income 
countries have been paying off their debts to the IMF and deciding not 
to borrow anew. In an unusual turn of events, selling this gold requires 
authorization by United States Congress, providing a unique point of 
leverage for civil society to force changes in IMF policy. 

U.S. civil society decided to seize this opportunity to pressure our 
Congress to condition approval of gold sales on changes in the way the 
IMF operates. Last April, over 100 U.S. civil society groups kicked off 
our lobbying efforts by sending a letter to Congress to do exactly that, 
urging that gold sales be approved only if Congress first obtains policy 
changes so that the IMF:

* Stops demanding countries adopt anti-growth, restrictive deficit and 
inflation targets;
* Exempts health and education spending from government budget ceilings;
* Stops diverting foreign aid away from its intended purposes and to 
domestic debt payment or currency reserve build-up;
* De-links debt cancellation from harmful economic conditionalities; and
* Improves transparency and undertakes meaningful public consultations 
before agreeing with countries on economic policies.

Because the IMF gold sale proposal would make the agency self- 
financing, this important opportunity to leverage Congressional 
influence over the Fund is not likely to be repeated any time soon.

At this stage, some key Members of Congress have expressed interest in 
conditioning IMF gold sales on allocating some of the money to debt 
cancellation initiatives. But despite being concerned about the economic 
policy conditions the IMF imposes on developing countries and the lack 
of transparency at the institution, these Members are hesitant to push 
for bold changes unless they see broad global support for them. 

That’s why we are calling on you, our partners from across the globe, to 
support a broad call for bold policy changes at the IMF. 

Please review the sign-on letter immediately below, and send 
endorsements (organizations only please) to Sarah Rimmington of 
Essential Action, <srimmington at essentialinformation.org by Sunday 
October 5, 2008.

Thank you!

*** Global Letter to IMF Executive Board***

October xx 2008


Dear Executive Director,

Re: Preconditioning Gold Sales on Reform of IMF Policy in Developing Countries


With many countries repaying their loans to the International Monetary Fund and not seeking new lines of credit, the institution’s traditional 
means of generating income is dwindling. Facing a budget shortfall of $400 million in 2010, in April the IMF’s Executive Board approved a 
proposal to sell some of its gold reserves. The revenue will be used to create an endowment whose earnings will assist in financing the 
institution’s administrative budget. We are writing to urge that before the Executive Board implements gold sales, it insist on meaningful 
pro-development reforms in IMF policy in developing countries, and attach conditions to how gold sales will occur.

Over the last three decades, IMF policies have limited development, and denied opportunity and decent livelihoods to hundreds of millions. The 
IMF has leveraged its role as gatekeeper to international capital flows to insist that poor countries adopt a narrow set of macroeconomic 
policies. These policies have limited possibilities for more expansionary economic growth and prevented developing country 
governments from investing sufficiently in healthcare, education and other vital needs.

As proposed, sale of IMF gold would be a one-time event, with the proceeds used solely to fund IMF operations, and without any assurances 
or even promises of changes to long-standing failed and harmful IMF policies.

If the IMF Executive Board is to proceed with gold sales, it should take advantage of the opportunity to remedy these historic wrongs. The 
proceeds from gold sales must not be used exclusively to maintain IMF staff.

The gold held by the IMF is in essence a global public good. If gold sales are to be implemented, a significant portion of the proceeds 
should be devoted to the public good of alleviating global poverty. The best way to do this would be to allocate proceeds towards debt 
cancellation. Proceeds could be placed into a trust that could be used to cover protracted arrears of countries soon to be eligible for debt 
cancellation under the existing IMF/World Bank debt relief programs, or to fund future debt cancellation for additional impoverished countries.

Gold sales should not be permitted before the IMF achieves the following specific and demonstrable changes in its policy mandates and 
prescriptions for developing countries:

• The IMF must rescind the use of overly restrictive deficit-reduction and inflation-reduction targets. These contractionary targets prevent 
developing countries from boosting their economic growth by expanding long-term public investments through deficit spending in key public 
sectors, such as the critical areas of health and education. The IMF must not continue to stand in the way of policy makers in borrowing 
countries exploring and adopting more expansionary fiscal and monetary policy options.

• Expanded health and education spending must be exempt from policies that unduly constrain overall government spending. Budget and wage bill 
ceilings have undermined 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 
has made some progress toward eliminating wage bill ceilings, but it still maintains budget caps that limit overall government spending 
flexibility.

• Developing countries must be permitted to spend foreign aid for its intended purposes. Instead of being spent on health, HIV/AIDS, and 
education, large percentages of foreign aid have been allocated to domestic debt payment and international currency reserves because of IMF 
policies regulating monetary policies. While we understand that the establishment of strong reserves can be a priority for a country, the 
decision of whether to use foreign aid to build up reserves should be the government’s, made after public discussion of the implications with 
the legislature, civil society, and other stakeholders, with a clear analysis of the trade-offs involved.

• Debt cancellation must be de-linked from harmful economic policy conditions, including overly restrictive deficit-reduction and 
inflation-reduction targets, wage and budget caps that limit spending on health and education; and policies that lead to diversion of foreign aid
from its intended purposes.

• Transparency and the right to access information must be strengthened at the IMF. Disclosure of IMF draft policy papers, technical assistance 
reports, and Executive Board documents—such as the minutes on Board meetings—is imperative to facilitating informed participation by 
external stakeholders in national economic decision-making and to ensuring citizens’ ability to hold their governments accountable.

• IMF practices must change to ensure national, democratic decision-making over policy-making. The operational process of IMF 
Mission Teams that visit countries to review loan agreements or conduct annual surveillance (Article IV reports) must facilitate open and 
informed consultations with a wide range of external stakeholders, not just with the Ministry of Finance and the Central Bank. Stakeholders 
should include other relevant government ministries (including health and education), independent economists and academic specialists, 
national civil society and labor unions. These broad and meaningful consultations should occur before a country’s macroeconomic policies are 
set.

Finally, we note that the IMF’s gold sales plan indicates there will be no subsequent sale of gold. Given skyrocketing costs for food and oil 
and the current global financial turmoil, redressing developing country debt problems and meeting Millennium Development Goal (MDG) objectives 
may require new sources of funding in the future. There is no reason to preemptively commit to not deploying the global public good of IMF gold 
for this purpose in the future.

Sincerely,

[List in Formation]

Action Aid International USA

Bank Information Center
Washington, DC, USA

Essential Action
Washington, DC, USA

Gender Action
Washington, DC, USA

Global Campaign for Education
Washington, DC USA

Health GAP (Global Access Project)
Philadelphia, PA, USA

Jubilee USA Network

RESULTS, USA

Treatment Action Group (TAG)
New York, NY, USA



****

NOTE: For background information on these issues, see:

RESULTS Educational Fund, "The Budget Ceiling: Why Countries Can’t Adequately Invest in Health Care and Education," updated May10, 2006, <http://www.results.org/website/article.asp?id=2208>

ActionAid International USA, Global AIDS Alliance, Student Global AIDS Campaign, and RESULTS Educational Fund, "Blocking Progress: How the Fight Against HIV/AIDS is Being Undermined by the World Bank and International Monetary Fund," September 2004, <http://www.results.org/website/article.asp?id=1212>

Jubilee USA Network, "Recent Developments On IMF Gold Sales & Debt Cancellation," February 2008, <http://www.jubileeusa.org/fileadmin/user_upload/Resources/Policy_Archive/208imfgold.pdf>

Action Aid International, "Confronting the Contradictions: The IMF, wage bill caps
and the case for teachers," April 2007, <http://www.actionaidusa.org/imf_africa.php>

Action Aid International, "Changing Course: Alternative Approaches to Achieve the Millennium Development Goals and Fight HIV/AIDS,” November 2005, <http://www.actionaidusa.org/pdf/Changing Course Report.pdf>

Gerald Epstein, "Too much, too soon: IMF conditionality and inflation targeting," University of Massachusetts, September 2006, <http://www.brettonwoodsproject.org/art-542599>

Global Transparency Initiative, "Transparency at the IMF: A guide for civil society on getting access to information from the IMF," October 2007, <http://www.ifitransparency.org/doc/Transparency_IMF_GTI.pdf>

United Nations Development Program (UNDP), "Pro-Growth Alternatives for Monetary and Financial Policies in Sub-Saharan Africa," Policy Research Brief No.5, January 2008, <http://www.undp-povertycentre.org/pub/IPCPolicyResearchBrief6.pdf>

European Network on Debt and Development (Eurodad), "World Bank and IMF conditionality: a development injustice," June, 2006, <http://www.eurodad.org/aid/report.aspx?id=130&item=0454>

Center for Global Development (CGD), "Does the IMF Constrain Health Spending
in Poor Countries? Evidence and an Agenda For Action," July 2007, <http://www.cgdev.org/content/publications/detail/14103>

Independent Evaluation Office (IEO) of the IMF, "An Evaluation of The IMF and Aid to Sub-Saharan Africa," 2007,
<http://www.ieo-imf.org/eval/complete/eval_03122007.html>




-- 
Sarah Rimmington
Attorney
Essential Action, Access to Medicines Project
Washington, DC
Tel: (202) 387-8030
Cell: (202) 422-2687
www.essentialaction.org/access/