Dáil Éireann Debate, Tuesday - 30 June 2020
28. Deputy Róisín Shortall asked the Minister for Finance if he has considered the recommendation of a group (details supplied) which states that the IMF should only be permitted to impose one condition on borrowers, the full repayment within the agreed upon time limit, thus separating the IMF lending and policy advice functions; his views on the recommendation; and if he will make a statement on the matter. [13635/20]
Amharc ar fhreagraAs the Minister for Finance is Ireland’s Governor to the IMF, I propose to respond to the Deputy’s question. I presume that the Recommendations that Deputy Shortall is referring to are those contained in the “Unhealthy conditions: IMF loan conditionality and its impact on health financing” report published by Eurodad (the European Network on Debt and Development), which is a network of 50 civil society organisations (CSOs) from 20 European countries. This report outlined an interesting analysis of the impact of certain loan conditionality with a particular focus on health financing. It is timely that the Deputy raises this Report given the imperative for significantly ramping up the requirement for global healthcare financing against a backdrop of severe economic pressures.
As a recent graduate of a thankfully successful IMF programme ourselves, I can assure the Deputy we are very conscious of the perils of counter-productive conditionality attendant to sovereign financing. However, the objective of conditionality is not to penalise those who access IMF financing but rather to create conditions of sustainability and resilience. As I have recently noted, Ireland's reforms and reorientation after the financial crisis has left us in a far better position to deal with the range of impacts of the current pandemic crisis.
The IMF's primary mission is to ensure the stability of the international monetary system. This is achieved via:
- Surveillance - monitoring member country policies as well as national, regional, and global economic and financial developments;
- Policy advice - promoting policies designed to foster economic stability, reduce vulnerability to economic and financial crises, and raise living standards;
- Capacity development - providing technical assistance and training to help member countries build better economic institutions; and
- Financial assistance - providing loans to member countries that are experiencing actual or potential balance-of-payments problems.
IMF financial assistance is usually provided within the context of individual country adjustment programmes which include a set of corrective policy actions designed to overcome the problems that led the country to seek financial aid. These policy adjustments are an integral part of IMF lending and essential in order to restore sound financial and economic fundamentals and build resilience, thereby avoiding repeated crises and ensuring the long-term sustainability of the Fund’s members. Commitments to undertake certain policy actions as part of an IMF-supported programme are formulated and agreed in close collaboration with the requesting country’s Government. The over-arching goal is always to restore or maintain balance-of-payments viability and macroeconomic stability without resorting to measures that are destructive or harmful to national or international prosperity. These measures are also required to safeguard IMF resources by ensuring that the country’s balance of payments will be strong enough to permit it to repay the loan so that these funds can be made available to other member countries in need.
The conditionality of IMF programmes is broadly assessed by the Fund’s Executive Board and staff in periodic Reviews of Program Design and Conditionality. The most recent Review in 2018 examined the performance of Fund-supported programmes ongoing between September 2011 and end-2017 and concluded that conditionality was generally well-tailored to country needs and programme objectives. However, the Fund did acknowledge the need for IMF-supported programmes to work in concert with national reform plans; to improve two-way communication with the broader public to support buy-in; and to take institutional and political capacity to deliver programme objectives on a realistic timetable into consideration.
It is important to highlight that the financial assistance provided by the IMF is flexible and responsive. This has been aptly demonstrated over the last few months in the Fund’s rapid and comprehensive response to the unprecedented COVID-19 crisis. The IMF has played a significant role in providing vital emergency assistance to help members to deal with the immediate impacts of the COVID-19 pandemic. To date, over 100 of the Fund’s 189 members have requested emergency assistance. Of these, 70 requests for emergency financing have been approved for a total of US$ 24.4 billion. Much of this assistance was delivered through emergency financing instruments which focus on providing a fast-disbursement and limited-conditionality emergency response
Indeed, the Deputy will note that the increased use of these flexible instruments with low conditionality is in line with the thrust of the Eurodad Recommendation.
