1. INT’L FINANCIAL SYSTEM JOINT CLASS EIGHT PROGRAM OWNERSHIP AND CONDITIONALITY Prof. David K. Linnan UI-UGM-USC-UNDIP - USU Univ. of South Carolina Joint Videoconferenced Class School of Law October 3, 2002

2. CLASS LISTSERV ALSO FOR IMF NEGOTIATION EXERCISE Joining class LISTSERV 1)Send e-mail to listserv@vm.sc.edu 2)In message body Subscribe laws-817 [first name] [last name] 3)Course listserv to send messages will be laws-817@vm.sc.edu

3. CLASS LISTSERV ADMIN Upon subscribing from e-mail address where you want to receive listserv messages, you will receive information message on using listserv Listserv purposes are for direct student discussions and for faculty to distribute materials (like class powerpoint presentations) Further information on listservs otherwise at http://www.sc.edu/ars/handouts/listserv.html

4. CONCEPTUAL ISSUES BACKGROUND FOR NEGOTIATION EXERCISE What is an IMF program? Why is an IMF program (ie, what is IMF’s job)? What is program ownership? What is conditionality’s role? What is the relationship between program ownership and conditionality?

5. CONCEPTUAL ISSUES WHAT IS AN IMF PROGRAM? An IMF program is the program articulated between the IMF and a potential borrower on the level of economic policy presumably necessary to provide the IMF with reasonable assurances of repayment w/in meaning of IMF treaty. I

6. CONCEPTUAL ISSUES IMF PROGRAM ISSUES (PROCEDURAL): What is the scope and time horizon for such a program given that results on a country level will not appear instantly like a digital photo? How do you capture, and do you publicize the program (practically speaking, the LOI issue)? How do you measure performance over time w/in a program (practically speaking, the program review issue)?

7. CONCEPTUAL ISSUES WHY IS AN IMF PROGRAM? The short answer is because the IMF is called in normally as firemen when the house is already burning (ie, financial crisis). The more complex answer requires first determining what the IMF can and should do, since the program is just the special expression of its general authority and task.

8. CONCEPTUAL ISSUES IMF PROGRAM ISSUES (SUBSTANTIVE): If problems are short term (financial crisis) but solutions are at best long term exercises (no instant digital photo results), should the IMF treat the symptom (eg, currency plunging) or the cause (eg, structural impediments, if in fact those are the cause)? If the IMF treats the symptoms it focuses on financial sector issues and macroeconomic targets. If the IMF focuses on the causes, need theory of cause (Washington consensus) and underlying theories of economic activity & growth (New Institutional Economics & issue re World Bank competencies, ie why is the Bank)

9. CONCEPTUAL ISSUES WHAT IS PROGRAM OWNERSHIP? If discussing an economic program for a country, most basically is the program the country’s own or is it imposed by the IMF as external financial “cop”? The analogy is to financial accountants and the problem of whether an issuer’s financial statements are the issuer’s or the accountant’s responsibility.

10. CONCEPTUAL ISSUES PROGRAM OWNERSHIP ISSUES If the country does not “own” program, only incentive to follow it is otherwise IMF stops lending (eg, passive aggression) When you say “country owns,” who do you mean in particular since the possibilities are the government only, perhaps only the executive branch, what about the population affected by austerity? What if at an economic level country’s own experts doubt prescriptions like Washington consensus, or overwhelming political economy-entrenched interests problem?

11. CONCEPTUAL ISSUES WHAT IS CONDITIONALITY’S ROLE? Conditionality is commonly conceived of as either playing a monitoring role (eg, how do you know whether a program is being carried out), or being the program itself. Is there a difference?

12. CONCEPTUAL ISSUES CONDITIONALITY ISSUES The problem with whether conditionality is the program itself or only a measure reaches all the way back to the role of the IMF and programs themselves If conditionality is a measure, you have to look at conditionality and ask whether they are “clean” conditions or subject to substantial interpretation, meaning how clear are the conditions in quasi-contractual terms at indicating when the IMF will stop lending

13. CONCEPTUAL ISSUES CONDITIONALITY ISSUES (CONT’D) There are different kinds of conditionality, with implications for the question whether the IMF should treat the symptoms or the cause (macroeconomic targets versus structural adjustments, with idea that structural adjustments increasing heavily since early 1990s) If conditionality is the program itself and the Washington consensus dictates the program, you likely see privatization looming large? Or would you still see privatization conditions or structural impediments conditions generally if conditionality is procedural as targets and oriented towards symptoms

14. CONCEPTUAL ISSUES CONDITIONALITY ISSUES (CONT’D) Do the macroeconomic targets as conditionality look cleaner (eg, inflation shall be no more than 10%), and how do you draft a clean privatization undertaking, looking at results, specifying process, what?

15. CONCEPTUAL ISSUES What is the relationship between conditionality and program ownership?