IMF will not fund any program with Nigeria if there are proven cases of corruption

Managing Director International Monetary Fund Mrs Christine Lagarde yesterday said that if there are proven cases of corruption against any country not just Nigeria, it will not enter into any monitoring program with it. She said that there are instances when The Fund insisted on documentary evidence relating to contracts before entering into program discussion with such countries. Answering reporters question at a crowded press briefing on the situation in Nigeria where government is alleged to be victimizing whistle blowers, Lagarde said “it is a very important question you raise, I can assure you that there are cases when countries, and I would not single out African countries, any country; when countries come for negotiations for a program, for a monitoring program, whether with or without funding, where we have that dialogue with the authorities about the authenticity, the evidence relating to contracts, to licenses, the ways in which business has been conducted. “There has been instances under my watch where we have said, sorry, but unless and until we have documented information about the circumstances under which such contract, such mining rights were granted, unfortunately we can not work together. “And, I can assure you that it is efficient. All right. And I applaud any instances when authorities, in Africa or elsewhere. The discussion went thus: QUESTIONER: We recently witnessed the recent declaration by Nigeria of being Africa’s biggest economy, after its recalibrated indicators, and which before that everybody is a witness to what happened between the federal government and the central bank. Well, Nigeria may not have anything to do with the IMF right now, with the Fund right now, but Nigeria’s situation is only an isolated case in Africa, where we have whistle blowers coming out to— Interruption; Do you have a question? Exactly. This is the background to the question. Whereas, the government tries to victimize the whistle blowers, but the same government comes to the Fund to put in a proposal for a grant with staff. In this case, has the Fund any upper hand to play the super power by wielding a stick with strong conditionality? LAGARDE It is a very important question that you raise. I can assure you that there are cases when countries, and I would not single out African countries, any country, when countries come for negotiations for a program, for a monitoring program, whether with or without funding, where we have that dialogue with the authorities about the authenticity, the evidence relating to contracts, to licenses, the ways in which business has been conducted. And there have been instances under my watch where we have said, sorry, but unless and until we have documented information about the circumstances under which such contract, such mining rights were granted, unfortunately we cannot work together. And, I can assure you that it is efficient. And I applaud any instances when authorities, in Africa or elsewhere, actually have the courage to step up and identify when there are shaky, if not shady, circumstances under which those rights are granted. The discussion went like this: There seems to be a different assessment on the risks of protracted low inflation or deflation in the eurozone between the Fund and the European monetary authorities, especially on the timing of the response. You just said that there was unanimity on unconventional measures, but several opponents of the ECB have also said these will not be imminent, whereas Mr. Blanchard the other day said the sooner the better. What is the message that you are going to deliver to them later today when you meet them? MS. LAGARDE: I’m obviously on the same page as my chief economist, so the sooner the better is good. But, we have an ongoing dialogue with the European authorities, and we highly respect the judgment of the central bank. They have their fingers on the pulse of the European economies and they we were very encouraged to see at their latest board meeting and subsequent press conference that they are envisaging any tools to respond to the situation, and I think it is going to be a question of timing now. But we are encouraged”. The question is about the IMF. What would happen after the Senate refuses the increase of the quota to the IMF? What would be the schedule for the restructuring of the governance and quota issue? The second one is about restructuring of sovereign debt. It is said here, but it is a rumor, that the IMF is supporting the possibility of leaving out the agreement of CACs, the collective action clauses, that has included sovereign debt contracts after the crisis of the 1990s, and 2003, and the probability of supporting some kind of default before helping the countries to stand up. Could you please tell us about that? LAGARDE: We don’t comment on rumors, but I’m not going to leave you with that. It is a bit short. I think it is clear to everybody that the collective action clauses, as they’re applied, proved to have deficiencies, and we certainly realized that when we dealt with the Greek debt restructuring. So, what do we do? Do we just sit and wait, or do we try to work in good cooperation with other members, with the membership first, of course, and in consultation with others to see how they can be improved? I think our duty is to do some work, to do enough consultation, enough iteration of how they can be improved, and then submit them for Board review and see how we move forward. We have been tasked by the Board to actually explore that.