The following letter was issued to the Managing Director of the IMF following reports of IMF pressure on the Nicaraguan National Assembly during its debate over the national budget. In December of last year, the National Assembly revised the 2003 budget presented by President Bolaños, increasing social spending -- including an increase in salaries for health-care workers and teachers-- over levels presented in Bolaños' original budget, and decreasing debt payments in the short-term. Bolaños vetoed the budget changes. The IMF executive board announced that IMF loans to Nicaragua would be jeopardized should the Assembly vote to override the veto. Under IMF pressure, the Assembly upheld President Bolaños' veto and the social spending was reduced back to original levels.

March 13, 2003

Horst Köhler
Managing Director,
International Monetary Fund
(cc: see below)

Dear Mr. Köhler:

We write to express our concern over the undue influence exerted by the IMF Executive Board during the recent debate over Nicaragua’s national budget. In the midst of national debate over the FY2003 budget, representatives of the IMF announced that loans and assistance to Nicaragua would be jeopardized should the National Assembly reject the budget proposed by President Enrique Bolaños. Apparently in response to this pressure, the Nicaraguan National Assembly has voted to pass the Presidential budget, and a new loan agreement with the Fund will be signed on March 13, 2003. By making strong, public statements in favor of the Presidential budget and declaring Nicaragua “out of compliance” with the Fund, the IMF Directors have acted in a heavy-handed manner, showing disregard for democratic processes and allowing little room for constructive, informed debate over the budget.

The source of conflict over the budget was a series of modifications proposed by the National Assembly to the Presidential budget. In mid-December 2002, the Assembly presented a revised budget that would have, among other things, increased salaries for government workers—including police, health-care workers and teachers, given greater budget autonomy to programs at the municipal level, and reduced internal debt payments in the short-term.

The IMF weighed-in heavily in favor of the Presidential budget. Speaking for the Executive body, Japan’s Executive Director Ken Yagi called on the National Assembly to accept the original terms of the Presidential budget. Speaking in Managua on January 15th, Mr. Yagi declared that Nicaragua was out of compliance with the IMF program and risked losing a recently approved Poverty Reduction Growth Facility (PRGF) loan and interim assistance under the Highly Indebted Poor Country (HIPC) Initiative. Mr. Yagi’s statements were tantamount to an ultimatum and left little room for constructive debate.

The role the IMF has played in this national debate on budget priorities raises concerns as to the influence the Fund exerts over democratic processes and policy decisions in sovereign countries. While IMF officials took pains to state that the Fund “has not issued any ultimatums,” the Fund’s sway over a highly indebted and poverty-stricken country is considerable. Many Nicaraguans have expressed concern that loan conditions are used by the IMF to influence national politics and undermine their government’s decision-making power.

We register our disappointment with the conduct of the IMF Executive Board during the Nicaraguan budget debate. We urge the members of the Board to tread lightly in future dealings with Nicaragua and with other impoverished countries in which the IMF exercises considerable influence. While Nicaragua must demonstrate responsibility in fiscal matters, the IMF must at all times respect the independence of sovereign governments and legislatures, allowing democratic debate to proceed free from unwarranted external influence.

Sincerely,

Greg Davidson Laszakovits
Office Coordinator
Church of the Brethren, Washington Office

Reverend Jerrye G. Champion
National Board President
Church Women United

Cristina Espinel and Barbara Gerlach
Co-Chairs
Colombia Human Rights Committee

Reverend David A. Mosczulski, OFM
Director
Franciscan Washington Office on Latin America

Katherine Hoyt
National Co-Coordinator
Nicaragua Network

Andrés Thomas Conteris
Program Director for Latin America and the Caribbean
Nonviolence International

Tom Ricker
Co-Director
Quixote Center/Quest for Peace

Margaret Swedish
Director
Religious Taskforce on Central America and Mexico

Linda Mashburn
Executive Director
Sister Parish, Inc.

Wes Callendar
Director
Voices on the Border

Geoff Thale
Senior Associate for Central America
Vicki Gass
Associate for Economic Issues
Washington Office on Latin America

Steve Bennett
Director
Witness for Peace

CC:

Nancy P. Jacklin
United States Executive Director,
International Monetary Fund

Anoop Singh
Western Hemisphere Department Director
International Monetary Fund

Marco Piñon
Deputy Division Chief
Western Hemisphere Department
International Monetary Fund

Members, House and Senate Treasury/Postal Appropriations Sub-Committees
United States Congress

Members, Hispanic Caucus
United States House of Representatives