IMF to spend $1.3m on aid reforms for Africa

from The East African

By BERNARD BUSUULWA
Special Correspondent

The International Monetary Fund (IMF) is to spend $1.3 million on new aid management reforms for Africa to address critical gaps that had threatened the credibility of its programmes on the continent.

The reforms, which were recommended by the IMF’s Independent Evaluation Office, range from support for higher aid flows through increased government spending and growth in net imports provided this does not affect macroeconomic stability, transfer of poverty and social impact analysis activities to alternative agencies and leaving advisory work on the composition of expenditure to the World Bank and other donor bodies.

The Fund’s communication policies were also targeted for reform because of the glaring gap between the institution’s current communication approach on aid and poverty reduction policies and the actual experiences at country level.

The IMF board of directors intends to utilise the reforms to ensure that the institution builds on its current achievements.

“They were encouraged by the finding that macroeconomic performance in sub-Saharan African countries had improved over the past decade. Directors generally agreed that notwithstanding this positive contribution, there remained considerable scope to make further improvements in the Fund’s work in these countries,” reads the implementation plan from the IMF’s Policy Development and Review Department dated June 5.

Through accommodating higher aid flows, the IMF expects sub-Saharan African countries to allocate more badly needed resources to education and health programmes besides importing vital materials like anti retroviral drugs to improve people’s welfare.

Currently, about 3,000 children die from malaria every day in Africa and over one million people are killed by the disease every year, most of them in sub-Saharan Africa. Besides, an estimated 1.4 million children are unable to attend school in sub-Saharan Africa every year, which results in reduced quality in terms of future labour, especially for information technology-based businesses.

With more aid flows, the IMF expects sub-Saharan African countries to access additional resources needed for achieving the Millennium Development Goals by 2015 without necessarily destroying macroeconomic stability — a situation of stable progress in major indicators like economic growth and inflation.

Based on the failure of Poverty Social Impact Assessments (PSIAs) in contributing effectively to Poverty Reduction Support Programmes, the IMF resolved to transfer responsibility for them to more capable bodies so as to achieve better results.

That was attributed to the fact that PSIAs fall under distributional policies that are not part of the IMF’s core or primary mandate and it would therefore be impossible for it to execute them effectively.

The IMF also resolved to shift the role of advising sub-Saharan countries on the composition of public expenditure to the World Bank and other agencies because they have better competencies in that area. That way, the countries in question will, among other things, obtain more appropriate advice on expenditure issues.

Communication policies within the IMF were found to be in need of reform as well, mainly because they seem not to be realistic.

The Fund’s directors noted that there exists a big gap between the IMF’s information on aid and poverty reduction efforts and the actual experiences that are felt at country level. Hence, the Fund’s positions on aid and poverty reduction efforts tend to clash with those of its members.

The reforms are expected to take six years of implementation and an estimated $0.25 million is meant to cover the expenses of preparing the initial implementation plans.

But some quarters are worried about the transfer of the role of advising governments on the composition of public expenditure from the IMF to the World Bank and other agencies, though they are less disturbed about the effects of increased aid on macroeconomic stability.

“If you look at macroeconomic stability and structural adjustment, we need to prevent heating of the economy through increased aid flows.

“Appropriate models can be derived to safeguard price stability in such situations. But it would be inappropriate for the World Bank to advise governments on expenditure composition issues because it is not very familiar with local conditions and lacks constitutional mandate. It would just give rise to another form of neo-colonialism,” said a director at the Bank of Uganda who requested anonymity.