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As IMF Waives Pakistan Bank Law Not Power Subsidy Deadline, Conditionality Cut Only in Name?

By Matthew Russell Lee

UNITED NATIONS, August 10 -- On August 7 the International Monetary Fund's executive board approved additional funds for Pakistan, up to $11.3 billion, explicitly waiving a previously condition that more stringent bank supervision legislation be enacted. Also waived, or excused, was Pakistan's delay in complying with a commitment to eliminate power subsidies, In a media conference call late on August 7, Inner City Press asked the IMF's head of mission to Pakistan Adnan Mazarei about the two waivers.

  He acknowledged both, but insisted that the IMF no longer engages in conditionality, and therefore there was no formal vote on the continuation of power subsidies. The bank supervision commitment, it seems, comes from another time. But if both commitments were sought, is the IMF's claim to no long engage in conditionality just a semantic difference? What really has been changed?

Adnan Mazarei, public notation of power subsidy waiver not shown

From the IMF transcript:

Inner City Press: I see in the press release that the Board granted a waiver to legislative amendments to increase the effectiveness of bank supervision. I wonder if you could say if that’s extended for a particular period of time. And, also, I did not see any mention of this power subsidy. I thought that IMF had asked that that be eliminated by July 1. At least it has been reported some places that that is, but I do not see it in the press release.

I also saw an article about the consolidation of ministries in Pakistan, including the Ministry of Human Rights is somehow being something directed by or requested by the IMF. Can you comment on that?

MR. MAZAREI: Let me start with the last question on the consolidation of ministries. I think it is very good for a government to be lean and mean in this administration, but the Fund has had nothing to do with that particular recommendation. We do not micromanage government organizations; we make general recommendations about the level of spending. We do not get involved in how many ministries government should have or not.

On the issue of electricity, electricity sector, as you are aware, is a major drain on the economy of Pakistan. Because of ongoing recurrent blackouts, GDP growth and manufacturing output and generally welfare of consumers is very much undermined. At the same time, because of well-known and long-lasting problems of areas of customers not paying the power companies, the government putting in place price limits on electricity, which has created also some financial problems with electricity sector, investment in power and energy in Pakistan has been very low.

The World Bank and Asian Development Bank have recently agreed with Pakistan on a set of measures to help improve the finances of the electricity sector, taking care of the problem of inter-enterprise areas, which is in Pakistan known as circular debt. At the same time, the Asian Development Bank and the World Bank have agreed with the Pakistani authorities on possible increases in electricity prices in the period ahead such that by August of next year, electricity tariff differential subsidies will be eliminated.

You are absolutely right that the authorities had intended to eliminate the subsidies by last July, but because of political considerations, because of social issues, these increases have been delayed.

Now, on bank supervision, you are absolutely right. The authorities had indicated that they would like to increase the powers of the Central Bank in the area of bank supervision, but they have been delayed in implementing this, and they are going to do this by September 1, hopefully. And the waiver doesn’t have a time limit, but the authorities have committed to do this, and in a short while from now, and that should be okay.

Inner City Press: Could I just ask was there not a waiver given on the power subsidy or was the commitment made by the government not as sort of binding, or does the press release just not contain all the waivers that were given?

MR. MAZAREI: There was no conditionality on the electricity sector. What we put down officially as performance criteria, which we will not have anymore going here forward because policies in this area have changed, used to require waivers. Now, the reason there was no waiver for electricity, as I said, was because there was no formal conditionality on this. And this area, the issue of electricity is formally in the domain of the World Bank. We are interested in it by and large by of its criticality in terms of macroeconomic policy for the government finances and for growth.

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IMF Won't Detail Sri Lanka Vote Or Release MoU, Spins Only to Colombo Despite Press Exclusions

By Matthew Russell Lee

UNITED NATIONS, July 27 -- While the International Monetary Fund speaks of its transparency, and the government of Sri Lanka brags about releasing its Letter of Intent to the IMF, the Technical Memorandum of Understanding for the IMF's contested $2.6 billion loan to the Rajapakse regime is still being withheld, and the IMF won't even confirm that the abstention of the UK, France, Germany, Argentina and U.S. from Friday's vote on the loan.

  Inner City Press asked IMF spokesman William Murray to "state which countries abstained or vote against the $2.6 billion loan to Sri Lanka on Friday, or to explain why such basic information on voting on a loan of this size is not routinely made public."

  The IMF's Murray replied, "On Board votes, it is their policy to refrain from formally disclosing specific votes." What kind of transparency is this?

  Inner City Press also asked Mr. Murray, "how were reporters who cover the IMF and/or the loan to Sri Lanka informed about the conference call with [head of IMF mission to Sri Lanka] Brian Aitken?"

  Murray replied that "that was a briefing with reporters in Colombo."

  At three IMF press briefings this year, Inner City Press has asked about Sri Lanka's application for a $1.9 billion loans. In March, asking in person in the IMF's briefing room, Inner City Press was told that conditions were being negotiated by the IMF's mission to Sri Lanka. After that briefing, Inner City Press was approached by IMF communications staffer Yoshiko Kamata, who committed to keep Inner City Press informed.

  At two subsequent IMF briefing, the IMF's Caroline Atkinson told Inner City Press that the loan was only for the Central Bank, and that international views would be considered. Then the loan was approved, Mr. Murray declined to confirmed which countries abstained, and Ms. Kamata set up a media conference call in Washington DC about the loan without informing or inviting Inner City Press.

Sri Lanka troops --  IMF loan, dead journalists and TMoU not shown

   It's reported that
the UK, France, Germany, Argentina and the United States abstained on the Sri Lanka loan. While the IMF now refuses to confirm this, sources remind Inner City Press of the irony that, during the Malvinas / Falklands Islands contoversy, an IMF loan to Argentina was opposed by a "gang of four" of the UK backed up by Oman, Belize and ironically Sri Lanka, in quid pro quo for a development project loan from Margaret Thatcher...

* * *

After IMF Vote, Sri Lanka Releases Letter, Drops IDP Release from 80 to 60%

By Matthew Russell Lee

UNITED NATIONS, July 25 -- Only after procuring approval of a $2.6 billion loan from the International Monetary Fund Executive Board did the Sri Lankan government, under pressure, put online a copy of its July 15 Letter of Intent to the IMF.

  Contrary to claims that the purposes and IMF debate around the loan had nothing to do with the detention camps and relocations in Northern Sri Lanka, the Letter of Intent describes use of funds for the camps, and states that "the government aims to resettle 70-80 percent of IDPs by the end of the year."

   When UN Secretary General Ban Ki-moon belatedly visited Sri Lanka and the Manik Farm internment camp in late May, the government said it would release 80 percent of those being detained by the end of the year. The July 16 letter to the IMF -- withheld until after the July 24 vote on the loan -- dropped the percentage to seventy.

   In fact, before the IMF board voted but also before it was publicly acknowledged that the release of detained Tamils was part of Sri Lanka's letter of intent to the IMF, Sri Lanka's foreign minister had already further dropped the percentage, to sixty.

  Some now say that the IMF board on July 24 voted on old and inaccurate information -- which was allowed only because the IMF and Sri Lanka withheld the July 16 letter until after the $2.6 billion had been voted on.

UN's Ban and Mahinda Rajapakse: extended detention of IDPs not shown

At the UN's July 24 noon briefing, before the IMF executive board vote, Inner City Press asked UN Associate Spokesman Farhan Haq:

Inner City Press: Since it was said that the Secretary-General was closely monitoring the compliance with the joint statement and all of this, it’s just come out that the Foreign Minister of the country has now said that the commitment made, including while the Secretary-General was there, to allow 80 per cent of those in the detention camps to return home by the end of the year no longer holds, that it’s going to be a lower number. Has the UN taken note of that and what’s the response to that?

Associate Spokesperson Haq: We have always expected the Government to abide by the commitments that have been reached on this particular matter. Beyond anything further, I’d check whether OCHA has new reaction to the latest comments. I don’t know whether we necessarily would react to the very latest comments that you just cited, though.

   Those detained by the Sri Lankan government can, some say, legitimately be called political prisoners. The government committed to the UN to release 80% of them by the end of the year. The government committed to the IMF, in a letter withheld until after approval of a $2.6 billion loan, to release 70 to 80% by the end of the year. [A reader points out that per Mahinda Rajapakse, it is not a commitment or promise, only a "target" -- click here.]

  Then prior to the IMF vote, but before the letter to the IMF was released, the government gave itself space to continue to detain some additional 30,000 to 60,000 people past the previously committed deadline. The UN has nothing to say, and the IMF is giving $2.6 billion to the government.

  Some call it an IMF reward for the extended detention of political prisoners -- apparently the IMF would look favorably on the internment -- and opacity or delayed release -- practices of Myanmar and North Korea. Watch this site.

IMF footnote: the belatedly released Sri Lankan Letter of Intent to the IMF about the loan puts in a different light the IMF Director of Communications' public May 21 response to Inner City Press' questions about IDPs and relocation, that "perhaps it's just helpful to clarify that when the IMF lends, it is not for specific projects. We lend to support a country's finances. We make a loan to the Central Bank to support reserves."

  Then why was the following in Sri Lanka's Letter of Intent to the IMF, withheld under after the IMF vote?

Reconstruction of the North and East and the protection of vulnerable groups adversely affected by the conflict will be an integral part of our program. To this end the government has moved quickly to provide humanitarian assistance to those affected by the conflict and to develop a post-war reconstruction plan. The immediate priority is addressing the humanitarian needs of the estimated 280,000 internally displaced persons (IDPs). The government aims to resettle 70-80 percent of IDPs by the end of the year...In 2009 the government intends to make room within the programmed deficit targets for spending on humanitarian assistance and the resettlement of IDPs using savings in existing budget provisions, redeployment of certain categories of military personnel for demining and for the provision of basic infrastructure, and any external grants from our development partners. About two percent of the projected government spending will be used for the provision of humanitarian assistance and the resettlement of displaced persons. A needs assessment is expected to be completed by end July 2009 to determine additional funds needed for the broader reconstruction strategy.

Watch this site.

* * *

As IMF Hands $2.5B Loan to Sri Lanka, Letter of Intent Withheld, Ethnic Cleansing Alleged

By Matthew Russell Lee

UNITED NATIONS, July 24, updated -- As the International Monetary Fund's executive board approved a $2.5 billion loan to Sri Lanka, the IMF refused to release a copy of the Rajapakse government's letter of intent for the loan. As far back as a March press briefing in Washington, Inner City Press asked the IMF what safeguards, if any, would ensure that the IMF funds not boost the Rajapakse government's shelling and now detention of civilians in northern Sri Lanka, and alleged ethnic cleansing there.

   At its press briefing days before the IMF Managing Director announced his staff's recommendation that the loan be approved, IMF spokesperson Caroline Atkinson said that the international community's views would be taken into account. But her colleague William Murray on Friday rejected Inner City Press' reject for a copy of the letter of intent, first saying that Sri Lanka would be the one to release it, then replying that the IMF's "transparency policy" leaves release entirely in the hands of the applicant, Sri Lanka. Mr. Murray wrote:

"Will check on the Letter of Intent. They're released by the member country, and typically after Executive Board review of the economic program. Sri Lanka's board meeting is today."

And then, after Inner City Press formally re-request a copy of the Letter, Murray wrote:

"The publication of the Letters is governed by the Executive Board's transparency policy. That policy empowers the member country to decide whether to release the document or not."

   But the policy states that the country's consent to publication by the IMF is "presumed." So why is the Sri Lankan letter not made public by the IMF?

IMF, through a glass darkly, Sri Lankan letter of intent not shown

   In fact, long after Sri Lanka's Ambassador to the U.S. had publicly announced the IMF's approval, which he said no one opposed, Mr. Murray at 5:49 p.m. Friday told Inner City Press to "stay tuned" about the IMF's Sri Lanka decision. While the Times of London reported that the UK would vote against the loan, the UK has only a five percent say. At press time it appeared the UK, France, Germany, Argentina and the United States abstained on the loan, an "IMF source" was quoted. How can the IMF let an applicant country scoop it on announcing a loan, while allowing the country to withhold its letter of intent?

Update -- long after deadline for this article and after Sri Lanka already announced the IMF's approval, the IMF put online a press release (no further communication was received from Mr. Murray) putting the size of the loan even larger, at $2.6 billion. Analysis will follow, watch this site.

* * *

On Sri Lanka, IMF Said Ready to Lend, Dodges Ethnic Cleansing, Where Are Obama, UK?

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis

UNITED NATIONS, May 20 – With the Red Cross blocked from access in Sri Lanka to the wounded and dying, with NGOs increasingly barred from the UN-financed camps for IDPs, in Washington the International Monetary Fund said Thursday that it looks forward to presenting for approval to its Board Sri Lanka's request for a $1.9 billion loan.

  The statement was made by the IMF's director of external relations Caroline Atkinson. Inner City Press online asked a follow-up during the Fund's biweekly press briefing, which Ms. Atkinson re-stated: please state whether as the Sri Lankan government says the proceeds of any IMF loan would support re-housing in the north, which some would described as ethnic cleansing?

    The IMF's Ms. Atkinson responded, “Perhaps it's just helpful to clarify that when the IMF lends, it is not for specific projects. We lend to support a country's finances. We make a loan to the Central Bank to support reserves. Any other question?”

    On March 12, Inner City Press went to the IMF in Washington and asked Ms. Atkinson's colleague David Hawley what safeguards were being considered to ensure that the proceeds of any IMF loan to Sri Lanka wouldn't be enable war or ethnic relocation. Mr. Hawley said that things were at an early stage. Later, French Ambassador to the UN Jean-Maurice Ripert told Inner City Press that “the Americans are trying to play with the loan.”

   The U.S. subsequently confirmed this, receiving human rights credit for raising the issue. The UK has as well. After a contrary statement by the UK Ambassador to the UN, in response to Inner City Press' question at the UN Security Council stakeout, UK Foreign Minister David Miliband said he didn't think conditions for an IMF loan to Sri Lanka were right. Are they now?

IMF's Dominque Strauss-Kahn and Ms. Atkinson, ready to lend to Sri Lanka

   Now, after two weeks ago refusing to take the question at their briefing, the IMF says that while there is still no access to the killing zone in the North, while doctors who reported on the war as well as offering treatment are detained and interrogated, it wants to present the loan for approval by its Board within weeks.

  What happened, some ask, to the ostensible US and UK opposition? At the US State Department this week, the Obama Administration appeared to waver or move on from it previous position, both on the loan and as stated by the President following Time magazine's diagnosis that Barack Obama was failing the Sri Lanka test.

The IMF's implicit argument that it is not supporting what a government does on the ground by lending to its Central Bank is specious. In fact, many experts on Sri Lanka note that the government's military offensive in the North was assisted not only by aid after the tsunami, but even more by the proceeds, to the Central Bank, of debt forgiveness. Now during the current crisis the IMF wants to make a loan to the Sri Lankan Central Bank. Ms. Atkinson alluded to, but did not give an explanation as requested by Inner City Press, of a “larger facility” being discussed.

Victor's justice, victor's loans, some call it, as they call the UN's Ban Ki-moon's impending visit to Sri Lanka a sort of victory tour. Inner City Press leaves today on the UN trip. Watch this site.


  Click here for an Inner City Press YouTube channel video, mostly UN Headquarters footage, about civilian deaths in Sri Lanka.

Click here for Inner City Press' March 27 UN debate

Click here for Inner City Press March 12 UN (and AIG bailout) debate

Click here for Inner City Press' Feb 26 UN debate

Click here for Feb. 12 debate on Sri Lanka

Click here for Inner City Press' Jan. 16, 2009 debate about Gaza

Click here for Inner City Press' review-of-2008 UN Top Ten debate

Click here for Inner City Press' December 24 debate on UN budget, Niger

Click here from Inner City Press' December 12 debate on UN double standards

Click here for Inner City Press' November 25 debate on Somalia, politics

and this October 17 debate, on Security Council and Obama and the UN.

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These reports are usually also available through Google News and on Lexis-Nexis.

Click here for a Reuters AlertNet piece by this correspondent about Uganda's Lord's Resistance Army. Click here for an earlier Reuters AlertNet piece about the Somali National Reconciliation Congress, and the UN's $200,000 contribution from an undefined trust fund.  Video Analysis here

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