afrol News, 28 July - As nations around the world grapple with the impact of high food and energy prices, strategies by International Monetary Fund (IMF) target to work with African countries to protect spending on health, education, and other services while at the same addressing inflation and balance of payments repercussions, the Fund has revealed.

"It is a bit of a balancing act," explained Adrienne Cheasty of IMF's Fiscal Affairs Department. "The IMF is keen for countries to maintain and even increase spending on health and education. But they are under growing pressure because of the rise in commodity prices."

The body notices that, in general, spending on health and other social programmes has risen in low-income countries that borrow from IMF under its Poverty Reduction and Growth Facility.

It further says these low-income countries have benefited from unprecedented global growth over the past few years, and in many cases from debt relief provided by IMF and other lenders. "But now that countries are facing a slowing world economy and rising inflation, IMF is working to help them preserve the gains they have made, through additional lending and policy advice," the Fund said in a statement.

IMF Managing Director Dominique Strauss-Kahn had warned in April this year that a rise in food prices of 48 percent since end-2006 is a huge increase that may undermine gains the international community has made in reducing poverty. Mr Strauss-Kahn stated that policy responses to higher food prices had to be tailored to meet needs of each country, mentioning four steps that IMF could tailor to help address higher food prices.

He listed amongst others, support to poor countries in African and beyond in designing appropriate macroeconomic policies to deal with shocks, providing advice and technical assistance for countries where rising food prices are eroding terms of trade, through targeted income support for the poor, but without jeopardising hard-won gains on economic stabilisation.

He also said that in countries where price shocks are affecting balance of payments, assistance could be provided through IMF lending facilities, while at the same time, working, along with other agencies and donors, to help countries mitigate negative impacts.

The IMF's African Consultative Group meeting of 11 April further discussed the impact of high world food and fuel prices and the challenges they present for policymakers in sub-Saharan Africa and also globally. The group had noted in a statement that many African countries have significant exposures to higher prices for fuel and other commodities, especially food, saying high food prices risked undermining gains made by many countries in reducing poverty in the last 5-10 years.

"The speed and size of the price increases have been large. We agreed that policies should aim at helping those least able to cope with high prices, while not jeopardising hard-won gains on economic stabilisation," the consultative group's statement said.

The meeting further agreed that the effect of shocks could be mitigated by temporary, targeted subsidies to help protect most vulnerable, although ensuring that subsidies did not become permanent.

The sub-Saharan Africa group had further resolved that countries should avoid distortionary policies such as untargeted subsidies, and that direct price and export controls might discourage food production, be difficult to enforce, and drain scarce resources from other critical purposes.

The IMF as part of international effort to improve health and living standards, particularly in sub-Saharan Africa, says it has adopted a broad approach that involves, first and foremost, country governments and citizens, but also international organisations, nongovernmental organisations, and the private sector.

"Through its policy advice and technical assistance, IMF aims to make a contribution to strengthening health services - an essential step in raising income and standards of living," said the IMF, however clarifying that it does not get involved in specifics of health spending and priorities, but actively supports achievement of the Millennium Development Goals - three of which relate to health.

The Fund further explained it helps countries mobilise resources and create room in national budgets for higher social spending. "In addition, PRGF-supported programmes typically seek to protect priority sectors, which include spending on primary education and basic health care, from possible spending cuts. Indeed, in some cases these programmes include specific floors on poverty-reducing spending," said the statement.

On poverty reduction related strategies, the Fund said it focuses on ways that low-income countries can achieve high levels of growth that can foster poverty reduction, especially by providing policy advice, technical assistance, financial support, and debt relief.

"In addition, the IMF tries to ensure that developed countries' policies are supportive of low-income countries' development efforts by backing the scaling up of aid, the opening of markets to developing countries' exports, and the maintenance of a stable international economic climate that can help developing countries grow," said the Fund, further stating it would continue to be a vocal advocate for expanding official development assistance from the industrial countries, including through new and increased contributions to the Global Fund to fight AIDS, tuberculosis, and malaria.

"Alongside the World Bank and United Nations agencies, the IMF is working in the campaigns against HIV/AIDS and other diseases, such as malaria and tuberculosis," said the body. It continued that it is also collaborating to expand country-level HIV prevention and treatment programs, saying such programmes are important components of many Poverty Reduction Strategy Papers (PRSPs), which are prepared by government agencies in collaboration with civil society and development partners.

The IMF said in conjunction with other partners, it is helping countries improve their public financial management systems and ensure that funds, including those for health programs, are used efficiently and transparently. "A central principle of IMF's economic policy advice is that public spending on critical social needs - healthcare and education - is among the most productive and responsible expenditures by a country," concluded the IMF statement.

By Lawrence Keketso

© afrol News

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