Distilling the Lessons from the ESAF Reviews [IMF Enhanced Structural Adjustment Facility]

Paper begins with a brief summary of lessons for program design; the staff and Executive Directors are encouraged to view this as a checklist (Section II) of areas where programs need to be strengthened. Section III proposes a range of operational changes intended to help governments stay the course of their reform efforts by improving the process of program preparation and implementation: Ownership of a program by the authorities should be fostered by widening the policy debate within government and considering alternative policy mixes that would be consistent with appropriate program objectives. The Fund can also assist governments in their task of building a national consensus for reform. The Fund should be more selective in providing support under the ESAF. Greater use should be made of prior actions, particularly in areas of structural reform fundamental to the success of the program: in the absence of such actions, the Fund should be prepared to withhold financial support. Staff reports for requests for support under the ESAF should include a discussion of the commitment and capacity to implement the program. The staff and the Board might also increase their emphasis on the strength of the program and signs of official commitment in deciding on the level of access. The internal and external evaluations indicated the need for improvements in Bank-Fund collaboration on ESAF countries. To reinvigorate this process and, it is hoped, to demonstrate the potential of closer collaboration to deliver better integrated programs drawing on the combined expertise of the Bank and the Fund, it is proposed to experiment with new modes of collaboration in 5 to 6 low-income countries that would serve as pilot cases. Experience with the pilot cases would be reviewed in 12 to 18 months to draw lessons for improved modes of collaboration for all countries. Bank staff agree with this proposal. In each pilot case, special attention would be paid to three areas that were highlighted in the evaluations: accelerating public enterprise and financial sector reforms; identifying and addressing potential adverse social consequences of the program; and assessing medium-term investment needs and the related capacity to attract and absorb external financing, including from the private sector. Of course, efforts to improve assistance in these areas will continue in other countries as well. Section IV suggests changes to the existing ESAF framework to facilitate closer monitoring and considers appropriate vehicles for post-ESAF relations with members. The staff proposes modifying the existing ESAF Trust Instrument to permit semi-annual or quarterly reviews and disbursements along the lines of extended arrangements. The staff does not propose the introduction of precautionary ESAF arrangements, primarily because the concessionality of ESAF resources would create incentives (and perhaps domestic pressures) for countries to draw on the facility even in the absence of balance of payments need. An ESAF-eligible country seeking endorsement of its program without a current or prospective balance of payments need could request a precautionary extended arrangement; closer alignment of monitoring for ESAF and extended arrangements would facilitate prompt consideration of an ESAF arrangement if a need were to arise.[author]WWW site has text of the report, supporting materials and invitation for public commentary