What is the point of the PSI? The views of African policymakers

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In 2005 the International Monetary Fund (IMF) introduced the Policy Support Instrument (PSI). The PSI is an instrument for low-income countries that do not need or want to borrow from the IMF under its Poverty Reduction Growth Facility (PRGF). Oxfam commissioned research with Development Finance International to test the experiences with the PSI. The research report “What is the point of the PSI? The views of African policymakers” present the frank views of African policy makers and practitioners on their experiences and expectations in their engagement with the IMF. The world has seen a dramatic turn around since the first bank fell in the United States. The global community is now facing the worst economic recession since the Second World War. While banks and countries deemed to be of systemic importance for the world economy are being bailed out, aid commitments to Africa face real risk of default. And as recent economic growth in Africa seems set to be reversed, African Governments’ progress on guaranteeing basic rights to education, health, employment and livelihoods and the fight against poverty are now threatened. The IMF’s role has also seen a dramatic turn around from an organization that was considered to be increasingly irrelevant to an organization that has been given a lead crisis response role. This makes this research even more relevant now. The lessons that can be drawn from the research are not solely limited to the Policy Support Instrument. It gives valuable insights on how policy makers from low-income countries interact with the Fund and how perception and political processes are intimately interlinked with decisions by countries, donors and the Fund.
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  What Is the Point of The PSI ? June 2009 1  WHAT IS THE POINT OF THE PSI? The Views of African Policymakers A Study for Oxfam by Matthew Martin, Alison Johnson and Gideon Rabinowitz Development Finance International June 2009  What Is the Point of The PSI ? June 2009 2   Disclaimer This research has been commissioned by Oxfam West Africa on behalf of Oxfam International to contribute to public debate and to invite feedback on development and policy issues. The views expressed in the text and its recommendations are those of the authors and not necessarily those of Oxfam International. © Copyright 2009 by Development Finance International Ltd. Permission must be obtained from them prior to any further reprints, republication, photocopying, or other use of this work. Published by Development Finance International Ltd 4 th Floor, Lector Court, 151-153 Farringdon Road London EC1R 3AF, United Kingdom Tel.: 44 (0)20 – 7278 0022 Fax: 44 (0)20 – 7278 8622 E-mail: publications@dri.org.uk  What Is the Point of The PSI ? June 2009 3   Foreword   When this research was developed in 2008, the possibility of a global financial crisis was only recognized by a few, and trillion dollar bank bailouts were unthinkable. So the srcinal purpose of the research was straightforward; evaluate whether the Policy Support Instrument, one of the IMF’s facilities for low-income countries, was meeting its stated objectives and the expectations of policy makers. The project aimed to present the frank views of African policy makers and practitioners on their experiences and expectations, and what they felt were the most useful way to engage with the Fund. Since 2008 the world has profoundly changed. The global community is now facing the worst economic recession since the Second World War. While banks and countries deemed to be of systemic importance for the world economy are being bailed out, aid commitments to Africa face real risk of default. And as recent economic growth in Africa seems set to be reversed, African Governments’ progress on guaranteeing basic rights to education, health, employment and livelihoods and the fight against poverty are now threatened. It is tragic that this should be happening as we approach the end of the timeline for the delivery of the Millennium Development Goals. The IMF’s role has also seen a dramatic turn around from an organization that was considered to be increasingly irrelevant to an organization that has been given a lead crisis response role. As part of this response to the crisis the IMF is now revising its facilities for low-income countries. The Policy Support Instrument is one of these facilities. This makes this research even more relevant now. The lessons that can be drawn from the research are not solely limited to the Policy Support Instrument. It gives valuable insights on how policy makers from low-income countries interact with the Fund and how perception and political processes are intimately interlinked with decisions by countries, donors and the Fund. Oxfam would like to thank Development Finance International for their hard and sustained work. The research asks vital questions about whether Policy Support Instrument is a useful instrument in the range of IMF support facilities for low-income countries, and is therefore essential reading for anyone involved in assessing how the IMF should interact with low-income countries in future. I hope that policy makers and practitioners, others including parliamentarians, business communities and civil society will find much food for thought in this research when deliberating on Policy Support Instruments and debating the future shape of the Funds engagement with low-income countries. Irungu Houghton Pan-Africa Director Oxfam International  What Is the Point of The PSI ? June 2009 4
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