The IMF has been thinking through its role in the achievement of the Sustainable Development Goals (SDGs). This is excellent news. Its current thinking includes proposals such as supporting economic diversification, macroeconomic stability, and structural transformation. There are also solid – and encouraging – intentions to support countries to reduce inequality and to finance responses to the effects of climate change.
I’d like to add a few more. Earlier this week I presented these to Sean Nolan, the IMF’s deputy director of the Strategy, Policy and Review Department, and Stefania Fabrizio, deputy division chief of the Expenditure Policy Division in the Fiscal Affairs Department (phew). Both took copious notes, and are keen to have Fund commitments in this area monitored.
I've grouped the proposals into three elements: financial and technical support; monitoring; and advocacy. More traditionalist parts of the IMF are not always comfortable with the latter, but it’s really important, and an appropriate role for a global institution.
Finance and technical support
1. The IMF needs to continue to give fiscal support to governments to finance their national development plans which will be derived from the SDGs, in accordance with domestic priorities. Of course, IMF money will be but a drop in the ocean of the trillion-dollar agenda but it is a vital – if expensive – source of capital for the poorest and most vulnerable countries, who face a constant cycle of shock and vulnerability.
In addition, there will need to be increased flexibility in the amount of debt the IMF allows countries to accrue before it sanctions them. ODI research shows the tax capacity of the world’s poorest countries falls far short of the scale of public investment required – there’s an $84 billion annual financing gap for social services and social protection alone. Many countries, such as Kenya, are already butting up against their debt-to-GDP thresholds, and still have significant financing needs.
2. It needs to continue to encourage (and thereby incentivise) countries to invest in education, health, and social protection, and productivity in the agricultural sector, all of which will be vital to achieving the SDG commitment to leave no one behind. While as the IMF says, the rebuilding of reserves is important, equal weight should be given to the urgent need to invest in these sectors (and the IMF should evangelise about this too – see point 8).
3. The IMF can play a useful role in helping countries with the technical aspects of target setting. However, it will need to do so with tact and only when asked to: some governments are wary of donor involvement in this national process.
4. The IMF should fully participate in the follow up and review mechanism of the SDGs, reporting its own contribution to the goals – for instance Goal 8 on growth and employment – each year to the High Level Political Forum, the official monitoring body.
5. If the IMF were to require governments to include a metric of progress on income inequality reduction as part of its mandatory reporting process (the so-called Article IV) this would add heft to the IMF’s research findings that inequality is macro-critical - important for economic stability and key to achieving the SDGs wider economic goals. It could also include other Goal 8 indicators such as decent work or diversified economies – reinforcing the incentive of the SDGs.
6. It should beef up its technical assistance on the collection of timely, high quality economic data, as part of the data revolution. It should also continue to support countries with the financing of sustainable and equitable taxation systems.
7. The Fund’s in-country Resident Representatives should speak out publicly about the goals at every opportunity.
8. Finally a broader framing piece. As a global institution, the IMF should do more to speak out to shape the new development agenda: making it crystal clear that a healthy environment and educated, well-fed population is a vital corollary to economic stability – and that far from being mutually exclusive, in fact the three elements of progress are indivisible. The IMF’s charismatic managing director Christine Lagarde is part of a new high level panel on women’s economic empowerment. This is an excellent example of the Fund helping change the terms of the debate – it would be great to see more in the future.