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Departing Deputy Managing Director: Ouattara assesses challenges for global economy, poverty reduction issues, and role of IMF

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 1999
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IMF Survey:With only a few months left in 1999, what do you see as the greatest challenges facing the world economy in the next millennium?

Ouattara: Given the globalization of the world economy, it is essential for all countries to be fully engaged in the process. This means that, whether they be small or large, all countries need to adopt good policies and have open economies to fully benefit from globalization. The past two years have shown that even if there is a crisis, taking steps to open the economy; to have transparency, accountability, and good governance in the management of public resources; and to demand good economic policies does yield results. We have seen examples in Korea, Thailand, the Philippines, and other countries.

For the poorer countries, particularly in Africa, the task is much more difficult. They have not been able so far to attract foreign capital as easily, and armed conflicts too often damage their image. But good policies in the end do give the assurance of best results. So in the next few years, I think the key task of the world community, particularly of the IMF, will be to continue to sustain a framework of good policies globally.

IMF Survey:Drawing on your perspective both as a politician and as an IMF official, what can the IMF do to encourage a politician to follow good advice on economic policy?

Ouattara: The IMF is not a political institution. That has to be clear. Moreover, as an international organization, it is very difficult for us to become involved in domestic affairs. The choice of leaders and the choice of economic programs should be in the hands of the population, of the citizens of that country.

But on the economic front, the IMF can certainly have an important input. For example, by supporting the policy elements that lead to the liberalization of the domestic economy, we are helping to create a level playing field for all economic players in the country. This support also ensures that public or private monopolies, usually owned by political interest groups, can be dismantled and replaced by a competitive system of access to the assets of the country.

IMF Survey:Democracy is generally seen as the answer to holding countries with diverse ethnic groups together. Yet, as the world has become more democratic, countries have been increasingly splitting apart in response to ethnic tensions. Has your conception of the nation-state changed?

Ouattara: There are conflicts in many places in the world, and some of these are ethnic conflicts. But I do not think the cause of the conflicts is the diversity of the population. Rather, it has more to do with the lack of fair treatment of segments of a population by certain groups of the population—for example, the oppression by a majority or the holding on to power by a minority. So the fairness and transparency of elections and the fair treatment of citizens are special requirements for building a successful nation-state. A clear case is South Africa, where the transition from apartheid to democracy was carried out very smoothly, certainly thanks to President Mandela as a person, but also thanks to the process, which was viewed by both white and black populations as having been fair.

At the same time, you have to make sure that there is enough decentralization—that all the power and decision making is not concentrated in the hands of the central government or a core group of people. This is important because, at some stage, if certain regions receive the bulk of public resources, including public investment, those in the other regions might feel that they are being shortchanged by the system.

IMF Survey:How do the increasing globalization of world markets and the call for greater regionalization in Africa fit in?

Ouattara: Of course, you cannot speak of nation building without looking at it in the context of globalization. In Africa, there are more than 20 countries with fewer than 10 million people, and 15 that are landlocked. These countries need to come together in large enough economic—and probably even political—units, so that they can achieve economies of scale and have more of a say at the international level.

IMF Survey:In light of the ongoing conflicts, can the IMF play a role in conflict prevention and resolution, on top of the postconflict assistance we now offer?

Ouattara: Again, the IMF is not a political institution; questions of prevention and resolution should be dealt with at the bilateral level (by individual countries), the regional level (by the Organization of African Unity, among others), and the international level (by the United Nations). But from an economic angle, the IMF can play a role by looking at the financial impact of aid flows, whether they be financial or humanitarian. It can also play a role by looking at the composition of spending. Is the government putting money into productive areas, such as health and education, or into nonproductive areas, such as military expenditures? Here I would like to add that the role of the major industrial countries is critical, but their efforts must be better coordinated. Ultimately, however, peace begins with the fair treatment of people as individuals or as a group in a country. The stories of Kosovo and Rwanda are the stories of one group trying to suppress the other.

IMF Survey:What impact has the IMF had on the developing world over the past 10 years, especially since the inception of the Enhanced Structural Adjustment Facility (ESAF)? In what direction do you see the IMF’s role in these developing regions evolving?

Ouattara: The IMF has an important role in the developing world, and this was reinforced in 1987 when the Managing Director Michel Camdessus proposed setting up the ESAF. I believe that this facility has been helpful, first, by reassuring the poor countries that they have a place in the institution and, second, by helping them achieve economic progress. Indeed, the data show that countries that have implemented policies in the framework of ESAF programs have achieved better results, not only on growth but on inflation and on social indicators. This process must be reinforced. The IMF should continue to encourage governments to devote as much of their resources as possible to the social sectors—including monitoring social policies to find out how many classrooms have been built, how many dispensaries have been provided with medication, how many teachers are going to teach, and so forth.

IMF Survey:There is a lot of talk right now about debt relief and, since the Group of Eight summit in Cologne in June, of enhanced debt relief. How do you judge the potential impact of an enhanced debt-relief initiative? And what do you feel about its greater focus on poverty reduction?

Ouattara: The focus of debt relief should be on poverty alleviation. In Africa, poverty indicators for most countries are higher than 50 percent of the population, which is simply not acceptable. Remember that in East Asia, about a quarter of a century ago, these indicators were also at between 50 and 70 percent, and now in many countries they are well below 10 percent.

How can we link debt reduction to poverty alleviation? We need to ensure that programs are coherent on the macro level, and that the resources freed up by debt relief benefit well-monitored social programs. And I believe that IMF-supported programs also need to be linked to governance issues. When you look at the composition of expenditures, you will see that in many countries, the problem of lack of growth, or slow growth, stems from the fact that countries have devoted resources to nonproductive ends. So trying to make sure that expenditures are more oriented to human development will yield better results.

IMF Survey:Is there a case for outright debt cancellation?

Ouattara: Clearly this is a matter of how many resources you can devote to relief. You can imagine that this could be done, but the danger is that creditor countries might stop giving additional resources to the country involved and the debtor country might abandon good economic policies. Just look at the former Soviet Union (FSU) countries. Russia took up the debt of all the other FSU countries—many of them ESAF countries—and yet many have continued to build up debt, with debt now becoming a problem for some. Completely canceling that debt did not lead to faster economic growth or good economic policies. Thus, it is critical that any debt relief be linked to conditionality, accountability, good social policies, good governance, and sound economic policies.

IMF Survey:What do you see as the IMF’s role in governance issues? Has the IMF been able to make any progress in this area with member countries?

Ouattara: In terms of governance and issues of corruption, for example, the IMF can play an important role by helping governments pinpoint the areas where there is corruption or misallocation of resources. This has happened in many countries, not only in Africa but in Asia and Latin America, and several programs have been suspended while waiting for the government to try to correct these abuses or misallocations of resources. It must also be said that liberalization of the financial and trade sectors, or the labor markets, contributes to better governance by creating more opportunities—and equal opportunities—for citizens’ access to goods and services and jobs.

IMF Survey:One of your contributions inside the IMF has been to bring the wisdom of a practitioner to the internal debate. What do you now take with you from your experience as Deputy Managing Director?

Ouattara: When I was offered the job of Deputy Managing Director, I accepted because I felt that given my experience as a central bank governor, and thereafter as a politician—since I was prime minister and acting president in my country before coming here—my contribution could be twofold: bringing in the viewpoint of the recipient countries, namely, the poor countries; and underscoring that the political process is quite complex. It is not easy for a government to decide to reduce subsidies, for example, on bread or on bus tickets. It is not easy for a government to reduce the size of the civil service without adequate compensation or to freeze salaries over a long period of time. So the IMF has to take social circumstances into account when proposing policy measures, and I feel that this has become an important element in our decisions. I have also been convinced by my experience as a politician that we need to look at key social indicators, not just economic indicators, as the latter by themselves do not necessarily translate into happiness or even economic development.

What am I taking back with me? Three elements. First, a deep sense of humility. Over the past 30 years, I have worked with staff members who are extremely competent and devoted to their jobs and the objectives of the institution. The high quality of the staff is something that has to be noted and praised, and I think the evolution of the IMF over the past 50 years reflects that.

Second, I take with me the experience of a broader sample of decision making, because the IMF has 182 member countries. During the past five years, I have dealt with about 110 countries. To see the political system evolving from one country to another—or even within the same country—to see how governments have addressed policy issues and emergency cases, as was the case in East Asia recently, and to see how some of the poorer countries are struggling to get out of poverty—all these are experiences that I value.

Third, an appreciation of the efficiency of the institution, especially in its decision-making process.

IMF Survey:What are you looking forward to doing after you leave the IMF?

Ouattara: I am looking forward to going back to my country, Cote d’Ivoire, to put to good use what I have learned in this great institution. I have come to the conclusion, after nearly three decades of national, regional, and international service, that true and lasting progress must mostly come from within a country, with the continued support of the international community. At some point in your lifetime, you need to contribute directly to the well-being of your people: this is what I hope to achieve.

The IMF should continue to encourage governments to devote as much of their resources as possible to the social sectors.

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