Inner City Press: Investigative Reporting from the United Nations

IMF Answers ICP on Malawi Retrenchment, Global Fund Steps In

By Matthew Russell Lee

UNITED NATIONS, December 7 -- When the International Monetary Fund held is biweekly briefing on December 3, Inner City Press submitted a number of questions, including about Malawi but also on Burundi and how much the IMF projects the economy will contract, given the crisis triggered by Pierre Nkurunziza's third term, see below.

   Inner City Press asked, "On Malawi, it is reported that the IMF''s 'recent decision to withhold its latest loan money to the Malawian gov''t could have dire implications for health care. Malawi has put on hold the hiring of 51 medical graduates and a host of health professionals.' What is the IMF''s response?"

On December 7, an IMF Spokesperson returned with this:

"Currently, the high rate of inflation is eroding living standards of the most vulnerable segments of the Malawian population, and is also dampening private sector confidence, reducing investment demand, and curtailing the economic growth needed to reduce poverty. IMF staff policy advice therefore recommends a certain amount of fiscal retrenchment, combined with tight monetary policy over the short term, as these are necessary to the disinflation process. During this period, IMF staff recommend that Government carefully prioritizes expenditure so as to protect both vulnerable groups and social spending. In this respect, IMF staff are pleased to note that Government is proceeding with the hiring of the graduating medical students and other health care workers, and has arranged for the Global Fund to pay the associated costs up to the end of the 2016/17 fiscal year."

   During the December 3 briefing, IMF spokesperson Gerry Rice read out Inner City Press's Burundi question (and its question on Zambia, below), then said the following as to Burundi, audio here:

“In terms of the outlook in Burundi, it's effected by the decline in economic activity there and the . withdrawal of donor support. Confidence in the economy has been weakened by the political climate and adverse security developments. The growth rate in Burundi, which we had initially projected 5% in 2015, is now estimated at minus 4.1% in real terms.... In the current environment, completion of the 7th and the 8th review under our program there is not possible and as such, Burundi's program with the IMF, which is an ECF arrangement, is now off track.”

Inner City Press had also asked, on Zambia, it is reported that the IMF “proposed a $1 billion facility which the president had turned down. A sticking point for the president was the insistence by the IMF that government commit to drastic reductions in expenditure, particularly on road construction.” What is the IMF's response?

   Rice said that no program has been “formally” requested, but that the Zambian authorities committed to “internal consultations.” Inner City Press had asked about Sri Lanka, and the same “no formal request yet” answer was given. Audio here.
Inner City Press also asked about Malawi and, lastly, Ghana; more on this to follow.

On October 29, Inner City Press asked IMF spokesperson Rice “in Jamaica, the National Democratic Movement has blamed the IMF for the country's 'health-care system becoming a national disgrace.' What is the IMF's response?”

Rice during the IMF's embargoed briefing read out this question, audio here, and said he does not agree, that Jamaica's 2015-16 budget includes an increase for the Ministry of Health. Audio of full answer here.

The IMF left unanswered, for then, Inner City Press' question about Antigua and Barbuda, below, then later sent this: "With regards to your question on Antigua Barbuda, I am afraid we won’t be able to help. I checked with Mr. McIntyre and he tells me that he does not recall making any comments on the issue you referred."

Inner City Press has replied: "Thanks for getting back to me. I should have been clearer - it wasn't that he'd commented directly on the Antigua and Barbuda scandal; he was quoted about “concessions.” See, e.g., http://antiguaobserver.com/imf-advises-cut-concessions/ and compared to the lobbying for concessions detailed in the U.S. government charge sheet. The request is for some IMF comment on this, including given the IMF's oft-expressed anti-corruption concerns."

The IMF, it seems, should be more responsive: the Gleaner for example opines that “in 2014, Jamaica paid $138 million more to the IMF than it received from it. We are constantly being told Jamaica passed the IMF test. Look at the punitive primary surplus imposed on Jamaica. At 7.5%, it is way above what is being asked of any other country in the IMF program. It is 4% for Cyprus, 3% for Ireland, 3% for Greece, 3% for Portugal and a puny 1% for Ukraine. One has to wonder why Jamaica is being treated this way.”

Here is another question Inner City Press submitted on October 29, still without answer:

In light of the UN Special Rapporteur's report on human rights (non) compliance by the World Bank, presented this week at the UN, please summarize how the IMF considers the human rights impacts on its decisions.

We'll have more on this.

Back on July 8 when the International Monetary Fund released reviews and papers about the United States, complete with support of the Dodd Frank Act and mentions of anti money laundering protection Inner City Press asked about the proposal to raise the definition of Systemically Important Financial Institution from $50 billion up to $500 billion and if tight AML strictures are to blame for cutting off remittances to Somalia.

Aditya Narain, IMF mission chief for the Financial Sector Assessment Program and deputy director, Monetary and Capital Markets department, told Inner City Press that the IMF believes such definition should give predictability, but should be based on risk and not necessarily only asset size.

Narain told Inner City Press, "On the first one, our general belief is that supervisory approaches should be risk based, and therefore the materiality and proportionality of institutions should be taken into account for to develop supervisory frameworks. At the same time, we also recognize that it’s important to have some clear rules, regarding a unit, in this case size of institutions, because not only does it set a baseline of expectations, but it also provides a useful framework for people to anchor their expectations on. So that’s why, in a sense we would agree that it’s important to make these approaches risk based and therefore not dependent on size alone. I should add also, that our only political ideology is financial stability, for the purpose of this exercise.

But will this be used FOR the Senator Richard Shelby draft bill?

On remittances, Aditya Narain said it is an important question but one that the IMF is dealing with in other venues; it apparently wasn't raised to the US during this process. Why not?

Narain told Inner City Press, "On the regulatory question, this is an issue which is being discussed in several forums where the IMF has been participating, and this is an issue not just for the US, although it has been most discussed in the context of the US, but the effects of the AML on remittances and the result, the stringent adherence to standards has led to a concern more globally that might be affecting the flow of remittances to those jurisdictions... where such remittances and the channels through which they flow are more important. We have not discussed this... there is work ongoing in the Fund, including in collaboration with other institutions like the World Bank... and we expect to be able to have more information on this in a few months time."

   In the embargoed media conference call, two questions in a row went to the Financial Times, which opined that the IMF report takes the side of the Democratic Party. The IMF disagreed. The IMF said, in writing, “As the epicenter of the global financial crisis that began in 2008, the United States passed a major law in 2010, the Dodd-Frank Act, to reform its financial system. Officials need to complete the rulemaking under the law, while parts of reform agenda face legislative proposals to water them down.”

   Central Banking asked two questions and Reuters one, on federal insurance regulation. Watch this site.

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