Title: Parliament, Governance and Poverty Reduction Istanbul, Turkey March 23-25, 2004 Macroeconomic Policy and Poverty Reduction
1Parliament, Governance and Poverty
ReductionIstanbul, TurkeyMarch 23-25,
2004Macroeconomic Policy and Poverty Reduction
- Presentation by
- Sanjaya Panth, Deputy Division Chief,
- Policy Development and Review Department, IMF
2Overview
- Objectives of macroeconomic policy
- Macroeconomic policies and poverty reduction
- How does the IMF fit in ?
- Parliaments, Civil Society and the IMF.
3I. Objectives Of Macroeconomic Policy
-
- Macroeconomic stability and sustainability
- full employment and maximum output at home
balanced financial and economic relationship
with rest of the world. - domestic price stability and appropriate exchange
rate
4I. Objectives Of Macroeconomic Policy (contd.)
-
- Macroeconomic Challenges
- Need to take into account where the economy is
recession or boom - Need to overcome permanent shocks e.g. loss of
key export market - Ability to weather temporary shocks such as
temporary fall in price of main export
5I. Objectives Of Macroeconomic Policy (contd.)
-
- The Policy Response
- fiscal and monetary policies that work together
rather than against each other - Avoidance of excessive deficits (fiscal and
external) - Manageable debt
6II. Macroeconomic Policies And Poverty Reduction
- Sustained economic growth requires macroeconomic
stability - Growth is a necessary condition for broad and
sustained poverty reduction but is not always
sufficient. - Sometimes, the potential tensions between
macroeconomic stability and social/poverty
reducing policies have to be addressed.
7II. Macroeconomic Policies and Poverty Reduction
(contd.)
- Macroeconomic policies also affect poverty
directly - Level of incomes and their volatility
- Distribution of incomes
- Examples
- Inflation hurts the poor on fixed incomes
- Tax and expenditure policies can affect income
distribution and work to the benefit or detriment
of the poor
8II. Macroeconomic Policies and Poverty Reduction
(contd.)
- A Framework For Policies
- Low and steady inflation and minimize economic
boom-bust cycles - Reduce unfinanceable fiscal deficits that
ultimately hurt the poor - Maintain balanced trade finance with rest of
the world and appropriate exchange rate
9II. Macroeconomic Policies and Poverty Reduction
(contd.)
- A Framework For Policies
- Expenditures focused on key social services and
basic infrastructure - Monetary and financial sector policies to foster
access of the poor to credit - Structural policies to correct distortions in
critical sectors
10III. The IMFs role
- Advice on macroeconomic policies for stability
through - Annual consultations
- Financial support to countries during adjustment
- Technical assistance
- Poverty Reduction and Growth Facility (PRGF) for
low-income members
11III. The IMFs role (contd.)
- Fund financial arrangements
- Macroeconmic problems are self-correcting but
very slowly and very painfully. - Instead of following this course, Fund programs
aim to help ease the pain of adjustment - Financial assistance helps buy time while
conditionality helps ensure that policies are put
in place to permanently address the problem
12III. The IMFs role (contd.)
- PRGF Architecture
- Reserved for 77 low-income members
- Three year arrangements
- Interest rate of 0.5 percent
- Repayment over ten years with 5-1/2 year grace
period
13III. The IMFs role (contd.)
- Goals of PRGF
- Integrate goals of poverty reduction and growth
more fully into lending to LICs - Enhance government and national ownership by
deriving program from the countrys PRSP - Better integrate social and sectoral objectives
with macroeconomic policy - Increase emphasis on good governance policies -
transparent fiscal management
14III. The IMFs role (contd.)
- Features of PRGF Programs
- Embedded in the overall strategy for growth and
poverty reduction the PRSP - Budgets that include more expenditures directed
at helping the poor - Appropriate flexibility in targets
- More selective conditionality
- Improved public resource management
- Social impact analysis
15IV. Parliaments, Civil Society and the IMF
- The Role of Parliaments
- Importance of budget process and of prioritizing
among competing objectives - Parliaments should be instrumental in
- ensuring that the concerns and priorities of
their constituents are reflected in the national
PRS and in the budget
16IV. Parliaments, Civil Society and the IMF
(contd.)
- The Role of Parliaments (contd)
- Parliaments should be instrumental in
- helping government make hard choices among
competing demands - assisting in identifying the impact of measures
- comparing actual spending to the planned budget
and holding governments accountable for the
execution of the budget .
17IV. Parliaments, Civil Society and the IMF
(contd.)
- The main counterparts of the IMF are governments
- But the IMF has long interacted with legislators
and has recently broadened its outreach and
dialogue - A recent Working Group of Executive Directors
discussed the IMFs outreach to parliamentarians.
Legislators are invited to send comments on the
report, which is being made available here
18IV. Parliaments, Civil Society and the IMF
(contd.)
- Key venues for IMF parliamentary outreach
initiatives include - Country level
- Training
- International Fora
- Other
19IV. Parliaments, Civil Society and the IMF
(contd.)
- The IMF has also increased its outreach to CSOs.
The policy is to respond positively to all
requests to engage in a constructive dialogue - Groups we regularly see include national and
international NGOs, labor unions, faith-based
organizations, business associations, economic
research institutes, and other think tanks. - A quarterly newsletter to civil society is widely
distributed and posted on our website. It is
translated into French, Spanish, and Russian.