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May 2007: Ask Congress to Oppose IMF Restrictions on Poor Countries’ Health and Education Spen

In Brief: Over the last half-decade, a significant number of the world’s poorest countries have seen major scale-ups in funding for AIDS and other critical health and education efforts. Many countries, however, are not able to spend these resources to hire the health care workers or teachers they desperately need, because International Monetary Fund (IMF) policies often impose overly strict spending limits on countries. These IMF limits translate into budget and hiring ceilings — often disproportionately impacting education and health. Without the ability to increase government spending above the limits imposed by the IMF, poor countries are often unable to use additional foreign aid to help improve the health and education of their people and achieve the Millennium Development Goals (MDGs).

As Congress begins to consider the annual foreign aid spending bill, please continue to urge your members of Congress to increase U.S. funding for global health and education programs, including bilateral TB efforts, the Global Fund to Fight AIDS, TB and Malaria, and basic education programs. In addition, ask your member of Congress to include language in the annual foreign aid spending bill instructing the IMF to exempt health and education spending from the economic restrictions it places on poor countries.

Sample Letter

Engage	Dear Representative/Senator ________, As a teacher and member of RESULTS, a grassroots advocacy organization committed to ending hunger and poverty, I am very supportive of achieving the Millennium Development Goals (MDGs). I am concerned by the policies of the International Monetary Fund (IMF) that place spending restrictions on poor countries that limit the ability of those countries to invest in the health and education of their people.
Problem	For the 2008 foreign aid spending bill, it is critical the U.S. increase funding for key health and education efforts — including the Global Fund to Fight AIDS, TB and Malaria, which provides 21 percent of donor funding for HIV/AIDS and a remarkable two-thirds of donor funding for TB and malaria. I would also like to see us provide more money for bilateral TB programs and basic education programs. However, to ensure countries are able to invest this money in more teachers and health care workers, Congress must also address the impact of IMF imposed budget and hiring ceilings. Many poor governments are tragically unable to hire the teachers or health care workers they desperately need because to do so would exceed these overly strict and externally-imposed IMF ceilings. In some cases, assistance languishes because countries fear the consequences of challenging IMF policies.
Inform about the Solution	Allowing countries to break IMF budget and wage caps in order to increase hiring and other support for health and education would allow poor countries to expand investments in their people and move closer to achieving the MDGs. For example, because of the IMF wage ceiling, Kenya can hire only 5,000 of the 40,000 teachers it needs,[1] and Africa currently employs only 3 percent of the world’s health workers but suffers 25 percent of the global disease burden.[2] Congress should instruct our U.S. representative to the IMF board to work actively to modify IMF policies to lift the budget ceilings (and oppose bad policies) to allow expanded health and education spending so poor countries can use the resources they have to help the poor.
Call to Action!	In light of these urgent priorities, I would be grateful if you would speak personally and write to the chair and ranking member of the House Foreign Operations Subcommittee of Appropriations (or: Senate State and Foreign Operations Subcommittee of Appropriations), Congresswoman Lowey (D-NY) and Congressman Wolf (R-VA) (or: Senator Leahy and Senator Gregg ), and ask them to: 1) provide a total from all sources of $1.3 billion for the Global Fund to Fight AIDS, TB and Malaria; 2) provide at least $400 for global TB efforts; 3) provide $1 billion for global basic education with $200 million of that overall amount going directly to the Catalytic Fund of the Fast Track Initiative; 4) include language in the annual foreign aid spending bill requiring the U.S. to oppose any IMF agreement with developing countries that does not exempt critical health and education programs from the IMF imposed budget and wage/hiring ceilings. I look forward to your reply and to supporting your efforts to ensure that U.S. foreign aid for global health and education programs effectively reach the poor.

The IMF and Budget and Hiring Ceilings

Many poor countries are dependent upon loans and aid from international institutions and wealthy countries. As such, countries are forced to adhere to restrictions and requirements imposed by powerful international financial institutions, the most powerful of which is the International Monetary Fund (IMF). The IMF possesses not only economic power in the form of loans, but also a “global stamp of approval” for poor countries’ access to other international resources and investment. This gives the IMF huge leverage over the financial and monetary policies of poor countries. Governments must adhere to policies pushed by the IMF, which translate into ceilings (or caps) on overall spending, often including the hiring of workers and wages. These overall ceilings and the resulting caps on health and education spending and hiring of workers can severely constrain the ability of countries to respond to health and education crises. Ostensibly, one of the IMF’s goals is to reduce poverty. However, time and again the reduction of poverty through access to critical basic services has not been prioritized.

How Do IMF Policies Negatively Impact Health and Education?

The IMF’s strict policies limit a country’s capacity to invest in its education and health sectors, leading to inadequate government spending on health care infrastructure, health supplies, education, water, sanitation, agricultural infrastructure, and other basic needs. For example, Kenya can hire only 5,000 of the 40,000 teachers it needs[3], though it has 60,000 trained teachers[4]. Without the ability to spend more today, poor countries cannot make long-term investments to improve people’s lives by providing health and education services, which in turn will increase economic productivity and growth. The inability to increase public health and education budgets can also be debilitating to already-fragile economies by loss of these workers overseas.

IMF policies are also a major disincentive for Ministries of Health and Ministries of Education putting forward robust budgets. For example, in 2002, Uganda was awarded a $52 million grant from the Global Fund to Fight AIDS, TB and Malaria, but the Ugandan finance ministry raised the concern that it could accept the money only if Uganda cut out $52 million from its existing health budget. The Global Fund objected since it requires that any grant is additional to national spending, not a replacement for it. While this issue was successfully resolved, allowing Uganda to accept the additional money, Uganda was nearly forced to be more concerned about the IMF policies to keep spending and inflation under control than saving the lives of its own citizens; this is not a choice poor countries should be forced to make. Uganda represents an extreme example, but in dozens of countries, in a more subtle, invisible form, IMF-imposed ceilings exert a tragic dampening effect. Many countries are not even asking for the money they need from donors, because they know that they will not be allowed to spend it.

Although the IMF has shown some increased flexibility in select countries in recent years, it continues to apply what many economists believe are excessively tight monetary policies, even in countries with severe HIV/AIDS epidemics; e.g., more than half of all IMF agreements in Africa between 2003 and 2005 included a type of ceiling on workforce size and salaries (called a wage bill ceiling)[5] that almost certainly restricts hiring of health workers and teachers, even though almost two thirds (63%) of all HIV-positive people live in sub-Saharan Africa[6].

What Should Congress Do About IMF Budget and Wage Ceilings?

The U.S. has enormous power at the IMF and should press for changes in IMF policies so that poor countries can spend more on health and education. To achieve this, we must urge Congress to include language in the annual foreign aid spending bill instructing our representative to the IMF to oppose restrictive IMF policies and ensure exemptions for health and education.

Language must be included in the 2008 foreign aid spending bill (the State, Foreign Operations appropriations bill) that requires the U.S. to oppose any IMF agreement with developing countries that does not exempt critical health and education programs in these countries from IMF-promoted budget and hiring ceilings.

 

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[1] Action Aid, http://www.actionaid.org/main.aspx?PageID=31

[2] Third Session of the African Union Conference of Ministers of Health, “Africa Health Strategy: 2007 – 2015,” http://www.africa-union.org/root/UA/Conferences/2007/avril/SA/9-13%20avr/doc/en/SA/AFRICA_HEALTH_STRATEGY_FINAL.doc

[3] Action Aid, http://www.actionaid.org/main.aspx?PageID=31

[4] According to the Professor George Godia, Education Secretary, Kenyan Ministry of Education.

[5] Center for Global Development, http://www.cgdev.org/content/opinion/detail/10848/

[6] UNAIDS: 2006 AIDS Epidemic Update (Sub-Saharan Africa), http://data.unaids.org/pub/EpiReport/2006/04-Sub_Saharan_Africa_2006_EpiUpdate_eng.pdf