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International Monetary Fund | |
|---|---|
 Logo | |
| Founded | 27 December 1945 |
| Headquarters | Washington, D.C., United Sttaes |
The International Monetary Fund (IMF) is a neoliberal financial organization. Although it is a global organization, 38% of it is controlled by France, Germany, Japan, the United Kingdom, and United States.[1] The IMF and its fellow Bretton-Woods institution, the World Bank, have been led by a European and a US national since their inception, in what has been described as a "gentleman's agreement"[2] despite demands for a merit-based, transparent process to be instated.[2]
Upon membership in the IMF, member countries deposit a sum of money known as a quota subscription, denominated in special drawing rights (SDR),[3][4] which determines how much money they can draw from the IMF, with the sum also determining the voting power of the member country.[5][3] In return for financial assistance from the IMF, borrower countries must implement a set of economic reforms, typically referred to as structural adjustment programs (SAPs).[5] The reforms stipulated by the IMF typically impose austerity measures, increase privatization, and weaken social services.[6] The requirement to implement SAPs in order to receive loan installments is referred to as conditionality.[4] Historically, conditionality was enforced primarily through compliance with SAPs. However, the IMF also began requiring a "letter of intent" to be submitted by governments requesting IMF loans, with prior actions, quantitative performance criteria, and structural benchmarks to be approved for a loan.[7]
In his 100-page resignation letter from the IMF, former IMF senior economist Davison Budhoo described the extensive and systematic statistical fraud used by the IMF to impose its policies on developing countries, and explained that the consequences of these policies led to massive poverty and starvation. In the letter, Budhoo wrote that the IMF's policies are made in "utter disregard to local conditions" and lead countries to "self destruct" and "unleash unstoppable economic and social chaos"[8] and also compared the IMF's structural adjustment policies to a "terrorist attack".[9] He also stated that the routine policy packages of the IMF "can never serve, under any set of circumstances, the cause of financial balance and economic growth"[8] and that "the ill-gotten, inadvertent power that we revel in wielding over prostrate governments and peoples - can only serve to accentuate world tensions".[10]
It has been noted by the Bretton Woods Project, a civil society organization critical of the IMF and World Bank, that the IMF and World Bank's ability to position their policy prescriptions as "best practice" supported by "robust" theoretical and empirical work oftentimes results in the internalization of Bank and Fund positions by scholars, development practitioners and finance ministers. Furthermore BWP notes that though the IMF and World Bank claim that their work contributes to global welfare and the fulfillment of human rights, these institutions "lack clear evidence" for their claims and have faced objections by a myriad human rights experts.[11]
History
The Bretton Woods Institutions (BWIs) are the World Bank and the International Monetary Fund (IMF). They were set up at a meeting of 43 countries in Bretton Woods, New Hampshire, USA in July 1944. The idea behind them was ostensibly to help rebuild the economy after the Second World War and to promote international economic cooperation. They were based on the ideas of US Treasury Secretary Henry Morganthau, his chief economic advisor Harry Dexter White, and British economist John Maynard Keynes. The key decisions leading to the establishment of both institutions were largely steered by the US, and to a lesser extent the UK, and during the post-war period the BWIs were significantly influenced by the US’s geopolitical strength.[6]
While the establishment of the Bank and Fund was presented as an apolitical effort to rebuild the world economy in the aftermath of the Second World War, they served as a method to defend or expand the reach of western capitalism in the face of a potential challenge from the Soviet Union, and to promote US interests in particular. In the 1980s and 1990s, the policies championed by the BWIs were inspired in principle by the so-called "Washington Consensus", which focused ideologically on promoting free-market economic policies such as deregulation, privatisation and trade liberalisation, as well as targeting unlimited economic growth, and were implemented primarily through Structural Adjustment Programmes (SAPs). The devastating impacts of SAPs have been enduring and persist to this day.[6]
By country
Argentina
In 2018, the IMF granted Argentina a $56.3 billion loan, causing austerity and privatization. The loan was given the year before an election to favor right-wing candidate Mauricio Macri, an ally of Donald Trump.[12]
Indonesia
The IMF caused a banking crisis in Indonesia that decreased GDP by 14% and increased poverty by 40%.[1]
Jamaica
By 1976, Jamaica had a deficit of $231.2 in Jamaican dollars. The IMF made Jamaica devalue its currency and increase exports. It also forced the government to cut wages, end subsidies and price controls, and privatize industry. The IMF austerity increased the prices of various food items by 71% to 285%. Real wages dropped by 35% in 1978 alone, and the unemployment rate was 30% in 1980.[13]
Sierra Leone
The IMF made Sierra Leone devalue its currency, which also decreased the cost of its minerals, including diamonds. Increased diamond extraction led to a conflict that killed 70,000 people and displaced 2.6 million.[1]
Ukraine
Ukrainian President Viktor Yanukovych negotiated with the IMF before being overthrown in the 2014 Euromaidan coup. Because the IMF was demanding a decrease in wages and health and education spending, Yanukovych decided not to take the loan and began negotiating with Russia instead.
After the coup, the new government took a $26 billion loan from the IMF after cutting its gas subsidy for citizens by 50%. The IMF has offered Ukraine another loan after the beginning of the 2022 Russo-Ukrainian conflict.[14]
Yugoslavia
In the late 1960s and early 1970s, Yugoslavia tried to borrow from the West to expand its economy. When a recession began in the West, the West banned Yugoslavia from exporting goods in order to put the country in debt. The IMF and World Bank forced Yugoslavia to restructure its economy by cutting social spending, freezing wages, eliminating worker-controlled enterprises, and increasing unemployment. Economic growth dropped from 7% per year in the late 1960s to under 3% by the 1980s and was negative by 1990.[15]
Zambia
The IMF forced Zambia's government to eliminate subsidies for pesticides and fertilizers, decreasing agricultural output and leaving seven million people short of food.[1]
COVID-19 pandemic
From January to October 2020, the IMF gave COVID-19-related loans to 81 countries, including 41 in Africa. The majority of these loans required countries to cut government spending or wages. 14 African countries were required to implement austerity measures in 2021 and 19 more had to by 2023.[16]
A 2023 report by Human Rights Watch, analyzing 39 loan programmes from 2020 to 2023 and affecting a combined total of over 1 billion people, found that the austerity imposed by the IMF on recipient countries has led to an erosion of human rights, disproportionally affecting people with low incomes. This is despite the presence of social spending floors - a minimum that a country must spend on social services - which the IMF falsely claims helps protect the most vulnerable in societies from cuts in public spending. In reality, these social spending floors are improperly and vaguely calculated and many people face increased hardship regardless.[17]
References
- ↑ 1.0 1.1 1.2 1.3 Arman Tendulkar (2021-10-11). "The International Monetary Fund: A Vehicle for Modern Day Imperialism" International Policy Digest. Retrieved 2022-06-19.
- ↑ 2.0 2.1 “The under-representation of low- and middle-income countries on the BWIs’ Executive Boards is exacerbated by the historic ‘gentleman’s agreement’ between the United States and European countries, which has seen the Fund and Bank led by a European and US national, respectively, since their inception. Civil society has long called for this opaque system to be replaced with a merit-based, transparent process. However, the April 2019 appointment of World Bank President David Malpass – a US national who ran unopposed for the Bank’s top job – demonstrated that the gentleman’s agreement remains alive and well despite civil society opposition”
"What are the main criticisms of the World Bank and the IMF?" (2019-06-04). Bretton Woods Project. Archived from the original on 2025-01-29. - ↑ 3.0 3.1 "IMF Quotas". International Monetary Fund. Archived from the original on 2025-03-15.
- ↑ 4.0 4.1 “SDR: Special Drawing Right. An internal account and reserve asset created by the International Monetary Fund in 1970. The value of SDR's varies proportionately with a basket of five national currencies (the US dollar, sterling, deutschmark, the french franc and the yen). [...] SDR's are distributed among the participating countries in proportion to their IMF quota. Under the SDR facility, member countries of the IMF may use their SDRs either bilaterally to buy back their own currency from another member country if that country is willing to sell, or through the Fund. Under a so-called Standby Arrangement, member governments may borrow more than their quota, provided they satisfy the Fund that they observe certain key policy indicators prescribed by the Fund. This is referred to as IMF Conditionality.”
Ankie Hoogvelt (1987). The crime of conditionality: Open letter to the managing director of the International Monetary Fund (IMF). Review of African Political Economy. doi: 10.1080/03056248708703717 [HUB] - ↑ 5.0 5.1 “How Does the IMF Operate?” Bretton Woods Project. August 23, 2005.
- ↑ 6.0 6.1 6.2 “What Are the Main Criticisms of the World Bank and the IMF?” Bretton Woods Project. June 4, 2019. Archived 2022-09-18.
- ↑ “While historically the IMF and Bank enforced conditionality primarily through SAPs, today, the IMF requires a ‘letter of intent’ from governments requesting a loan. To be approved by the IMF for a loan, the letter requires prior actions, quantitative performance criteria and structural benchmarks – the latter of which continues to contain structural macroeconomic policy reforms. Despite efforts to ‘streamline’ the number of conditions in the face of severe criticism, the IMF’s 2018 Review of Program Design and Conditionality found that the number of structural conditions is on the rise.”
"What are the main criticisms of the World Bank and the IMF?" (2019-06-04). Bretton Woods Project. Archived from the original on 2025-03-15. - ↑ 8.0 8.1 “Our policy package for Trinidad and Tobago - i.e. the conditionality that we are demanding for any Fund program, and the measures that we are asking the authorities to implement as a necessary precondition for a loosening of the iron grip that we now hold on the fortunes of the country in so far as its recourse to international capital markets and official bilateral donors are concerned - can be shown, even in a half-objective analysis, to be self-defeating and unworkable. That policy package can never serve, under any set of circumstances, the cause of financial balance and economic growth. Rather, what, in effect, we are asking the Government of Trinidad and Tobago to do is to self-destruct itself and unleash unstoppable economic and social chaos.”
Davison L. Budhoo (1988). Enough is Enough: 'Part I'. - ↑ “Quite frankly, our "program" is nothing but a hotchpotch of irreconcilable and conflicting elements and objectives; it reduces economics to a farce. It is the recipe for comprehensive disorder and all enfolding disintegration of the fabric of national life - economic, political, social - without reason or rationale or sensitivity to the aftermath. More pointedly, our action in Trinidad and Tobago does not relate to any clear set of economic principles - however misguided and inappropriate such principles may be. We're just striking out wildly in every direction and at everything in our path; we strike out thus and we create maximum grief and confusion. It's like a terrorist attack, you know, splashing around rifle fire and bazookas and even nerve gas indiscriminately so as to get the highest death toll in the shortest possible time.”
Davison L. Budhoo (1988). Enough is Enough: 'Part IV'. - ↑ “Self-defeating and unethical as it may seem, what we have done and are doing in Trinidad and Tobago is being repeated in scores of countries around the world, particularly in Latin America and the Caribbean and Africa. Sometimes we operate with greater restraint, sometimes with less, but the process and the result are always the same: a standard, pompous recital of doctrinaire Fund "advice" given uncompromisingly and often contemptuously and in utter disregard to local conditions and concerns and susceptibilities. It is the norm now rather than the exception, that when our "one-for-all and all-for-one" Fund cap doesn't fit the head for which it is intended, we cut and shave and mangle the head so as to give the semblance of a fit. Maybe we bust up the head too much in Trinidad and Tobago, but have no illusions that the way We operate throughout the world - the narrow and irrelevant epistemology underlying our work, the airs and affectations and biases and illusions of superiority of our staff vis-Á-vis government officials and politicians in the developing world, our outrageous salaries and perks and diplomatic immunities and multiple "entitlements", the ill-gotten, inadvertent power that we revel in wielding over prostrate governments and peoples - can only serve to accentuate world tensions, expand even further the already bulging ranks of the poverty-striken and destitute of the South, and stunt, worldwide, the human soul, and the human capacity for caring and upholding norms of justice and fairplay.”
Davison L. Budhoo (1988). Enough is Enough: 'Part I'. - ↑ “While maintaining they have no obligations under international human rights law, despite objections of myriad human rights experts and the opinion of one of the Bank’s former General Counsels, both the Bank and Fund claim their work to eradicate poverty and increase economic growth and stability ultimately contributes to global welfare and the fulfilment of human rights, without clear evidence. First, this ‘win-win’ scenario has been the subject of countless critiques pointing to obvious trade-offs and conflicts between ‘pro-growth’ and ‘pro-equity’ policies, including in a paper by the IMF’s own research department in 2014.
Second, according to data on poverty rates, the vast majority of the poverty eradication achieved during the last 40 years is actually largely attributed to China, which has certainly not followed the policy prescriptions of the BWIs (see Observer Winter 2017-2018), while the IMF’s 2018 conditionality review found several IMF programmes where “debt overshot projections by significant margins, reflecting disappointing growth and higher fiscal deficits”, with lower programme completion rates. Additionally, the pace of poverty reduction is reportedly slowing, while the number of people living in extreme poverty in Africa is increasing, and even the way the Bank measures poverty levels remains highly disputed. These and other critiques call into question the efficacy of the BWIs’ policy prescriptions more generally and their theoretical ability to effectively contribute to the fulfilment of human rights in the first place.”
"What are the main criticisms of the World Bank and the IMF?" (2019-06-04). Bretton Woods Project. Archived from the original on 2025-03-15. - ↑ Fernanda Vallejos (2022-03-10). "Argentina Demands Justice From the IMF" The Intercept. Archived from the original on 2022-06-16. Retrieved 2022-06-19.
- ↑ Vijay Prashad (2008). The Darker Nations: A People's History of the Third World: 'Kingston' (pp. 229–34). [PDF] The New Press. ISBN 9781595583420 [LG]
- ↑ Prabhat Patnaik (2022-03-06). "The IMF Connection with the Ukraine Crisis" Peoples Democracy. Retrieved 2022-06-19.
- ↑ Michael Parenti (2000). To Kill a Nation: 'Third Worldization' (pp. 19–21). [PDF] Verso.
- ↑ Dian Maria Blandina (2022-06-29). "IMF Loans Continue to Undermine Health in Africa" Black Agenda Report. Archived from the original on 2022-06-30. Retrieved 2022-07-06.
- ↑ Brian Stauffer (2023-09-25). "Bandage on a Bullet Wound" Human Rights Watch. Archived from the original on 2023-10-06. Retrieved 2023-10-06.