Monday, April 11, 2016
On Sri Lanka, IMF Says Nearing 36-Month Program, ICP Asked in Feb, Accountability
By Matthew Russell Lee
UNITED NATIONS, April 11 -- Back on March 17 when the International Monetary Fund held is biweekly briefing, Inner City Press arrived in person with questions on Zimbabwe, Jamaica and, as for months, Sri Lanka.
But it was not a normal briefing: it started with a paper about the International Monetary System, leaving the ten journalists present to fight for time to ask their questions. Inner City Press got in two questions, see below, but not the one about Sri Lanka.
Now on April 11 the IMF has provided an update, that it is nearing agreement with Sri Lanka's government on a 36 month program, to be further discussed at the upcoming Spring Meetings in Washington:
"A staff team from the International Monetary Fund (IMF) led by Todd Schneider visited Colombo during March 31- April 11 to hold the 2016 Article IV consultation discussions and to discuss the authorities’ request for a Fund supported arrangement. The mission made significant progress toward a staff level agreement with the government on an economic program that could be supported by a 36-month Extended Fund Facility (EFF). Program discussions will continue in Washington D.C. on the margins of the Spring Meetings of the IMF and World Bank, with the objective of concluding a staff-level agreement with the authorities, subject to approval by IMF Management and the Executive Board, in the next two weeks.
At the end of the visit Mr. Schneider made the following statement:
“Macroeconomic performance in 2015 reflected a mix of positive underlying growth momentum, the impact of domestic policies, and an increasingly difficult external environment. The fiscal deficit expanded, public debt increased, and the balance of payments position deteriorated despite an improvement in the terms of trade. Real GDP growth in 2016 is expected to remain around 5 percent and inflation in the low single digits. Over the medium term, there is potential for growth to rise closer to Sri Lanka’s estimated potential output level, but prospects will hinge on a policy upgrade in the near term and removing bottlenecks to trade and investment.
“The authorities’ proposed economic program aims to achieve high and sustained levels of inclusive economic growth, restore discipline to macroeconomic and financial policies, and rebuild fiscal and reserve buffers. Key objectives underlying the reform agenda include: (i) improving revenue administration and tax policy; (ii) strengthening public financial management; (iii) state enterprise reforms; and, iv) structural reforms to enable a more outward-looking economy, deepen foreign exchange markets, and strengthen financial sector supervision"
Note: accountability is NOT on the program. We'll have more on this.
Back on March 17 in the IMF's small briefing room in Washington, a Greek journalist asked about Greece; Ukainian TV asked about a quote from Victoria Nuland then fought for question time with TASS. A Brazilian journalists asked if there will be a program.
Inner City Press jumped in with the Zimbabwe question, since the head of the Central Bank has been saying the country will get a loan up to $984 million in the third quarter.
Not so fast, IMF Deputy Spokesperson William Murray said. He had a long if-asked, which we'll insert here later. The upshot is that Zimbabwe still owes too much money, and despite support from (some) other states as an IMF meeting in Lima, the rules are the rules. At least for Zimbabwe.
Inner City Press also asked Murray to acknowledge that the windfall profits made off Argentina by vultures Singer and Dart wont' inevitably incentivize more predatory behavior. Murray said he wasn't going there. But the market will be: watch this site.
asked questions and got responses on Tunisia, Jamaica and Zimbabwe.
In Jamaica, after an extended period of austerity, a new government has been elected, led by the Jamaica Labour Party's Andrew Holness IMF spokesperson Gerry Rice said the IMF "takes note" of the new government and will hold discussions with it.
But what will it portend for the upcoming austerity-related benchmarks and reviews?
Inner City Press asked: "On Jamaica, what is the relation between the IMF's program and review(s) and the elections and their results? When will the review due March 15 be done?"
Rice answered: "There’s a question about Jamaica, what’s the relationship now between the IMF and Jamaica, given the elections, and when will the review, due on March 15th, be done. You know, clearly, we note the election of Mr. Holness and the GOP, the election results. We look forward to continuing to support Jamaica under its new leadership and we plan to discuss the economic priorities with the new authorities soon. Again, I’d note Mr. Holness has made clear during his campaign the intent to continue the reform program supported by the IMF, so we look forward again to a close policy dialog with the new leadership and geopolitical changes that the authorities and the staff have agreed to delay the discussions of the 11th Review for now, and I’ll come back when we have a date on that.
In Zimbabwe, despite a Staff Monitored Program, parliamentarians are complaining about the IMF's delay, moving toward new elections with no progress with the IMF.
Inner City Press asked: "On Zimbabwe, what is the IMF's response to criticism by parliamentarians that the normalization of relations under the Staff Monitored Agreement is taking too long and that if it does not speed up, the country will prepare for new elections without any meaningful progress with the IMF?"
Rice answered: " On Zimbabwe, what’s the IMF’s response to criticism from parliamentarians about normalization of our relations, is it taking too long? The status with Zimbabwe is that we have what we call a staff monitored program. We’ve had that for some time. It helps a country establish a policy record with a view to normalizing relations with creditors. We are also providing some technical assistance. We have an ongoing mission and it’s aimed at conducting the third and final review under that SMP, that staff monitored program, and the 2016 Article IV.
As you probably know, Zimbabwe is currently in arrears to the IMF and others and the strategy entails how to clear those arrears that are due to the IMF, the World Bank and others. The Zimbabwean authorities presented their plans for repaying their arrears during the annual meetings in Lima and that has received support from creditors and development partners. So successful completion of that SMP and a depending of ongoing reforms sets the stage for advancing the discussions about the reengagement process. That’s where we are on Zimbabwe. I’m going to leave it there for today. Thank you very much for your cooperation and patience this morning. I really appreciate it."
On Tunisia, Inner City Press asked: "On Tunisia, is a new IMF line of credit on schedule to be approved by the Board on April 22? What did Mr Blotevogel when he said “"Expected growth for 2016 does not correspond to the aspirations of the Tunisian people. It will not be strong enough to reduce unemployment.” What does the IMF recommend, then?"
Rice directed Inner City Press to a forthcoming press release: "There’s a question on Tunisia asking about asking about the status of the program with Tunisia. There’s an IMF mission in Tunisia until today negotiating a new four year Fund arrangement to support the authority’s program. And in fact, we’re going to be releasing a press release as soon as I finish here, so I can refer you to that. It will give the complete update on where we are on that matter."
Back on February 11, Inner City Press asked the IMF, "On Sri Lanka, please comment on and provide context for the reported request from the government for a new IMF program."
IMF Spokesperson Gerry Rice, after noting how Inner City Press submits its questions (electronically), replied that Sri Lankan authorities have expressed an interest in a program to deal with balance of payments. He said there would be a negotiating mission in late March or early April.
The embargoed briefing began with a read-out of the press release that there is no competition to Christine Lagarde for a second term -- similar to the way at the UN, there was no competition to Ban Ki-moon for a second term. Is this any way to run a multilateral, quasi universal international organization?
Inner City Press also asked about Romania (“Romania on Monday made the last interest payment on the 13 billion euro it took from IMF in 2009” and Dragos Tudorache, head of the Chancellery of the Prime Minister, has said "We don’t plan to conclude a new deal with the IMF” - please provide an IMF comment / response) and this, on Burundi:
"On Burundi, at the UN Peacebuilding meeting at the UN yesterday (Feb 10), the IMF said any new program would depend on relations with the international community. Please explain this, how relations with the international community impact an IMF program."
Back on January 14, Inner City Press submitted a number of questions, leading with Burundi and whether the Nkurunziza government's "income" from sending troops to Somalia and Central African Republic should be disclosed in the budget. See below.
On February 10 in the UN Peacebuilding Commission, while the IMF still didn't directly address the sleight of hand with the UN's peacekeeping funds, it presented a stark picture of Burundi's economy. It said GDP fell over four percent in 2015.
The IMF said any new program would depend on relations with the international community.
The World Bank's Bella Bird spoke by video from Addis Ababa; she said the World Bank still has $270 million of projects in Burundi, but said the government is closing down, not reaching out.
Burundi's Ambassador to the UN Albert Shingiro, after these critiques, went on and on bragging about blocking the proposed MAPROBU peacekeeper force in Addis, denouncing NGOs he left UNnamed and false media reports. He continues to block @InnerCityPress on Twitter. We'll have more on this.
Back on January 14, IMF spokesperson Gerry Rice read out Inner City Press' question then referred to the IMF's March 2015 sixth review, saying the government had committed to include the income from peacekeeping operations in the budget. Rice then said due to deterioration in the security situation, the seventh and eight reviews are not possible and the program is "off track."
On January 14 the IMF's Rice also noted the US Congress having approved quota reform (answering that he was not aware of any new oversight this might trigger), and said that Managing Director Lagarde will hold Greece meetings in Davos. Rice declined to answer ICP's question on Nigeria, saying much has been said on the topic; a Trinidad and Tobago question remained outstanding as the embargo time expired, but Inner City press was later on January 14 told on Trinidad and Tobago, the IMF's engagement with the country is one of economic policy advice or what we call surveillance. There is no program nor any talk of that, Inner City Press was told.
Back on December 5, 2015, Inner City Press also asked the IMF about Burundi (and Zambia), and Rice said 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 now, Inner City Press' question about Antigua and Barbuda, below; there will be more about Dominica.
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 are two other questions Inner City Press submitted on October 29, still without answer:
On Antigua & Barbuda, in light of recent comments by IMF Mission Chief Arnold McIntyre, what is the IMF's view of and comment on the information in the US FBI's charge sheet and indictment of Antigua's former ambassador (and former UN PGA) John Ashe, particularly with regard to corruption in the country?
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.