Does the World need the IMF?

By Chibamba Kanyama

I was consumed by adrenaline that morning as the watch ticked. This was ahead of a presentation to over 60 Mission Chiefs for the International Monetary Fund. I was fully aware the then IMF Deputy Managing Director, Min Zhu, would be seated with me on the front seat together with my assistant Camilla Raymond.

The report to be presented was about the ‘2014 IMF Global Opinion Survey’, the first of its kind in the history of the Fund as most previous reports were focused on regional perceptions. The reason for the high adrenaline was because David Hawley, the Deputy Director in the Communications Department, had spent several days rehearsing with me and Camilla about how to make a presentation to such a critical group of economists. We were to use the feedback from Mission Chiefs to validate the findings before presenting to the IMF Board, headed by Managing Director, Christine Lagarde.

‘If we successfully go through this huddle, we will be ready for the big one,’ remarked Hawley two hours before the afternoon presentation. The Survey was administered by a Canadian-based research firm, Globescan, who sent online questionnaires to 66,000 stakeholders from whom we had a 10 percent response rate. The stakeholders were segmented according to interest levels: governments (Ministries of Finance, central banks, parliaments), private sector, international organizations, media, academia and civil society. We had 72 respondents from Zambia, quite a good number in relative terms.

The objective of the survey was to help us understand how stakeholders assessed the Fund’s role and the effectiveness of its core functions as well as determine stakeholders’ most pressing economic issues for the world economy and for their respective countries. We were confident the findings would be legitimate because all respondents had interacted with the Fund one way the other and were quite conversant about its mandate. The danger of random selection was that most citizens in North America, a lot more in the USA, had not heard about the IMF despite it taking a central physical position in the high street of Washington DC.

IMF LEADS IN QUALITY ECONOMIC ADVICE: The Fund was perceived to be one of the most effective international organizations alongside the World Bank, and more than 80 percent of respondents in all regions described it as having high relevance for the stability of world economies. Other attributes valued by respondents were the Fund’s expertise and advice, its keeping pace with developments, and that it worked collaboratively. The part of working collaboratively was comforting to the mission chiefs who sat attentively throughout the presentation.

Being considered ‘collaborative’ was a huge achievement given the long journey the Fund had travelled in halting its earlier tendency of imposing programs on countries. Two events had changed the IMF’s operational model: The failure of the Structural Adjustment Programmes in the 1980s had hurt the Fund’s reputation. Second, the Asian Crisis of 1997/8 had taught the IMF a lesson about how to best engage with countries. The Fund paid a huge price for closing its ears from the public and market sentiments, absorbed by the ‘know-it-all-mentality’.

One of the respondents wrote the following, ‘As an economist, I love the work of the IMF and believe it tries to make a positive difference to the world. But I think sometimes the solutions it proposes to member countries are well founded in theoretical economics but don’t take account of practical realities of how markets operate. If there were one thing I could change therefore, it would be that the IMF gets a little more grounded in reality. This would require it to get a bit more local knowledge about members e.g. I don’t think the IMF advice to some of the south east Asian countries during the Asian crisis was very good, because it didn’t have an appreciation of the local idiosyncrasies of those countries. The advice was good on paper – float your currencies – but other macro characteristics of those economies meant that wasn’t a good idea for all countries to which the advice was given.’ The ‘SAP’ IMF was the one that Dr Derrick Chitala and PeP Leader Sean Tembo were referring to in their most recent articles.

To demonstrate this shift, the IMF instituted several policies among them the need for full involvement of civil society and private sector in every engagement with country authorities, including program discussions. The number of staff on the Communications Department increased from about three prior to the Asian crisis to around 125 in 2014, symbolizing the importance of communications and information flow. In other words, the IMF demystified the long-held view that it was a secret society to one now considered to be among the most transparent organisations in the world. This is supported by the research findings on communications which revealed a strong appreciation for IMF knowledge products, particularly the flagships (Annual Meetings and Spring Meetings), and for the range, relevance and timeliness of information.

All stakeholders found the IMF highly effective during financial crises, valuing it most for helping countries overcome financing difficulties and providing sound policy advice. In other words, as highlighted by the Survey findings, the IMF has built its global reputation around three areas: Providing sound policy advice to member countries, helping countries overcome financial crisis (we went further to document such countries that have come out of crisis and information is available on the website) as well as providing high quality economic data (Zambia relies a lot on IMF data about Zambia than it does from the Central Statistics Office!).

IMF NOT EVEN-HANDED: The room became even more attentive when we highlighted areas perceived to be of weakness by the over 6,000 respondents. These are the areas even the IMF Board became extremely interested in (and it directed management to take practical steps to address them).

While the IMF was seen as being collaborative and able to keep pace with a rapidly changing world, there were concerns as to whether it was even-handed in its treatment of all of its member countries. The respondents from Sub-Saharan Africa and parts of Latin America believed the Fund was unfair with regards to the loan policies and conditions for emerging and developing economies. This assessment received considerable discussion within the IMF for several months.

In addition, while IMF was generally seen as being effective in serving its member countries, particularly when it came to identifying economic risks and offering policy advice and technical assistance, it was failing to meet its goal of promoting jobs.

FUND STILL RELEVANT: Even though there are many grey areas about the effectiveness of the IMF, the world still considers it a truly relevant institution in meeting financial crisis as well as stabilizing world economies. The issue is about how its policies should translate into the creation of jobs, improvement of livelihoods and narrowing the gap between the rich and the poor.

The presentation before the Mission Chiefs was considered a huge success as denoted by a special card and bottle of wine delivered to my office the following morning by Mr. Zhu in person. It was a whisper of ‘Long live IMF’!