Letter to Canadian EDs to the WB and IMF Re: the ESAF and SAPRI - July 13, 1999

Excerpts from a letter sent to the IMF & WB (July 1999)
Excerpts from a letter sent to: Tom Bernes, Executive Director for Canada, International Monetary Fund
Terrie O'Leary, Executive Director for Canada, World Bank

13 July, 1999

Dear Ms. O’Leary and Mr. Bernes,

I am writing, belatedly, on behalf of the Halifax Initiative, and the NGOs who joined us, to thank you both for meeting with us while we were in Washington for the Spring meetings. The meeting on April 26th, as well as the related meeting with Minister Martin on the 28th, was useful in learning more about the unfolding debt and financial architecture discussions as well as current Canadian positions in these areas. We also appreciated the opportunity to question you about the Enhanced Structural Adjustment Facility (ESAF) process and to briefly discuss the Structural Adjustment Participatory Review Initiative (SAPRI).

During our meetings, the debt discussions revolved around two key questions -- conditionality and resources. We were disappointed to hear the argument that debt reduction should be used to reward some countries for appropriate spending patterns and to punish those with questionable records. It flies in the face of growing public and political recognition that debt cancellation is a moral and economic necessity for the poorest countries, whether Honduras, Chad or Mali. The idea of debt reduction as a reward or debt as a punishment confirms the common assumption that the IFIs are not seriously interested in debt cancellation, as they would then lose the carrot, or the stick, for the implementation of particular policy reforms. Mr. Camdessus restated in April that debt reduction "must be in a way that creates incentives for countries to continue to persevere with adjustment and reform".

It is accepted that debt savings should be channelled to the poor. We share the position of civil society members in the South that resources that may become available be directed to social and environmental protection. IMF structural adjustment performance targets, however, are not appropriate or effective. Debt reduction should not be delayed or withheld pending IMF-directed performance benchmarks.

Structural adjustment programmes as currently developed and implemented have a very mixed record both in terms of their impacts on human development indicators and on ensuring "effective" use of government resources. While in Washington for the Spring meetings, we met with IMF ESAF staff and asked them if they have measured the distributional impacts of the policy changes. They did not see this as their role, but rather the role of the World Bank.

Whereas there is no consensus within NGOs in Canada and abroad on whether or how to condition debt relief, there is consensus that ESAF conditionally is not appropriate. A flexible approach, based on country-specific issues of governance and public accountability, could result in no conditionality for some and debt swaps for another, as an example. ESAF is a single-minded approach to conditionality and questionable in its outcomes. The debate on conditionality needs to be opened up at the IFIs, and we would like to call on Canada's leadership to open the debate around conditionality and move it away from ESAF.

Finally on ESAF, it should be mentioned that our meetings left us with the impression that ESAF is not being frequently or rigorously discussed at the Board, and that the pilot study, and broader reform of ESAF, are in need of revitalization. We would like to know what the plans are for disseminating the lessons learnt from the External Evaluation and the consultation and what their impacts have been to date. More specifically, we would appreciate more information on the case studies, such as what will be evaluated and to see the range of inputs received by the IMF last summer and fall. The web site has not been updated with ESAF reform material since September, for example. Canada took a leadership role to ensure that a consultation take place and we continue to expect a commitment to the ESAF Evaluation process from you, especially as Mr. Bernes is Chair of the Evaluation Committee.

Again, thank-you for meeting with us during the Spring Meetings.


Pamela Foster
Coalition Coordinator