2007 Spring Meetings

Session on Confronting the Contradictions: Teacher Shortages: Is the IMF to blame?

Saturday, April 14, 2007

IMF Mission chiefs from Mozambique (Jean Clément) and Sierra Leone (Norbert Toé), along with Anne-Marie Ainger, an economist/consultant with ActionAid, attended the discussion and offered rebuttals and responses. The discussion was attended by 25 persons comprising representatives from CSOs, IMF, and WB. The session ran for over 3 hours.

ActionAid panellists presented findings from the report describing the impact of wage bill ceilings on hiring, training and retaining quality teachers in Malawi, Mozambique and Sierra Leone. They also emphasized that without the wage bill ceilings, the overall budget available for all national expenditures, including social sector spending, is unnecessarily reduced by restrictive inflation and deficit spending targets set into the Poverty Reduction and Growth Facility (PRGF) by the IMF.

In the presentation ActionAid asked three key questions of the IMF:

1. When will the IMF cease using unjustifiably low wage ceilings that constrain the hiring of trained teachers as conditionality in the PRGF?
2. When will the IMF allow countries to consider a range of options to set inflation and deficit targets so governments can hire more trained teachers?
3. When will the IMF start using the outcomes of the poverty and social impact assessments (PSIA) in the design of their programs?

ActionAid panellists concluded by calling for fundamental change in actions and policies and for the IMF to take responsibility for the impact of its policies and recognise that there is not only one way forward.

The IMF said it is reducing the emphasis it places on  wage bill ceilings since these are not the best way to resolve such underlying problems as lack of absorptive capacity, bottlenecks in capacity to train teachers (i.e. Mozambique), payroll management, and lack of credible data on the number of teachers needed. The IMF continues to review, on a county-by-country basis, the need for wage bill ceilings, but is committed to back away from recommending them if normal budgetary processes are working. This statement was also made in the IMF Survey, released a day before the panel, in an article on effective budgeting. IMF staff also said that often governments are more comfortable having a wage bill envelope in the budget, given the competitive demands from ministries. However, the wage bill can always be increased if more resources become available.

ActionAid panellists acknowledged that while wage bill ceilings is but one of the key issues, they cited  evidence which shows that the IMF continues to play a role in setting unjustifiably low ceilings, leading to caps on the number of teachers (and health workers) that can be hired, creating havoc in education systems, translating into ballooning class sizes and dwindling quality of education. While capacity constraints were acknowledged, ActionAid advocated that the way to deal with them is not to impose a strict and low ceiling but rather to dedicate more spending to build capacity.

The discussion then turned to the role of the PRGF. IMF representatives stated that opening the PRGF discussions to the public is an issue for national actors to decide, its main interlocutor is the Government and it the Government’s responsibility to facilitate IMF meetings with line ministries and civil society. They also emphasized that they regularly engage in consultative processes, including insisting that the PRSP informs the PRGF, and so the latter can be seen as a by-product of public consultation. 

However, the IMF’s Independent Evaluation Office (IEO) report on the “IMF and Aid in sub Saharan Africa”, subject of a long productive panel discussion the day before, documents that nearly 80% of IMF staff understand that the PRGF leads the PRSP, not the other way around, and that whereas 80% of IMF staff claimed that they are now more open to discussing with CSOs, only 20% of CSOs expressed the same view (pg. 30).  ActionAid panellists raised questions about the PRSP process and asserted that the PRGF dictates macro economic policies in the former, and presented information from interviews with Governments and additional evidence that the IMF does not meet with CSOs and line Ministries.  ActionAid also pointed out how the IMF is perceived to be leading national policy making, thus undermining national sovereignty, while at the same time claiming to respect ‘country ownership’ by saying that they defer to countries’ wishes about who to consult with.

The World Bank representative raised some interesting points on education and said the bleak picture Confronting the Contradictions paints of the education sector is not generally shared by Bank. The pupil-teacher ratio, for instance, is already high and rising in many countries, although  and regional-wide variations are of concern. He advocated to front load the teaching force, as enrolment at the earlier years is growing, asserted that countries have made substantial progress in improving their capacity to train teachers, and also stated that countries need to take responsibility for budgetary decisions. As the recurrent budget is already high and FTI recommends no more than 65% of budget for wages, the entire budget should grow.

Overall, responding to the criticism on macroeconomic policy, the IMF panellist claimed that some of AA’s information sources and facts were not entirely accurate. The other IMF representatives present also asserted that the IMF attempts to be participatory in its processes and information-sharing, and said that this effort to be more open is not always recognized by CSOs. 

For example, in responding to AAI’s call for the IMF to defend the target 5% inflation rate embedded in PRGFs and allow for greater flexibility and national discretion in setting both inflation and deficit spending targets, the IMF representative emphasized how inflation hurts the poor. On other macro policies, they said: governments under IMF-supported PRGF programmes are seeing increased revenues; non-concessional borrowing leads to problems of debt sustainability; the real issue in the case of Malawi is high levels of domestic debt, that HIPC trigger conditions and PRGFs have floors on pro-poor spending and many countries have seen an increase in social spending in the past few years; and that more credit is going to the private sector as a result of IMF policies.

ActionAid clarified that AAI does not advocate any particular rate of inflation, but rather advocates for countries’ rights to be able to choose their own targets based on a wide array of evidence and experience that is available. The inflation level should be considered in respect to other national and social goals such as education and health. ActionAid also asserted that low inflation hurts the poor because reducing inflation entails sacrificing spending on education, health, etc. – rights that everyone has. At the moment it is only the IMF and the Ministry of Finance that discuss, if at all, the trade-offs of maintaining low single-digit inflation rates and spending in social sectors. This discussion is held behind closed doors without the participation of Parliamentarians, sector ministries and civil society. These national actors might actually weigh the benefits of increased government spending on health and education different inflation rates would make possible were they given that opportunity.

At the panel’s close, all agreed the conversation had been productive and dynamic and must continue and be open to national actors. ActionAid clarified its demand for governments and citizens to be allowed to consider borrowing as a possible macroeconomic policy. This is especially true when borrowing can be used to finance social spending in education and health care that will in turn contribute to long-term economic growth and allow countries to repay their loans in the future.

(Prepared by Amy Gray of Action Aid)