2 April 2014
Eurodad report shows how IMF lending often makes crisis countries’ situations worse
As the International Monetary Fund (IMF) prepares for its Spring meetings, new research reveals that the number of conditions it attaches to its loans are rising – and they continue to be linked to harsh austerity measures and interfere in sensitive policy areas.
Conditionally Yours: An analysis of the policy conditions attached to IMF loans is the latest in a series of reports on the IMF’s lending practices produced by the European Network on Debt and Development (Eurodad) over the past decade.
IMF loans come with conditions which are often highly controversial, for example influencing taxes and cutting spending; freezing or reducing public sector wages; and mandating cutbacks in welfare programmes, including pensions. There are also conditions on the restructuring and privatisation of public enterprises, and conditions that reduce minimum wage levels.
Although the IMF has said it has tried to “streamline” its conditional lending, Eurodad counted an average of 19.5 structural conditions per programme – a sharp increase since 2005-7 when Eurodad found an average of 13.7 conditions. The biggest loans had the heaviest conditions, with exceptionally high numbers in Cyprus, Greece and Jamaica – which totalled an average of 35 structural conditions per programme.
Almost all the countries were repeat borrowers from the IMF, suggesting that it is propping up governments with unsustainable debt levels, not lending for a temporary balance of payments problems – its true mandate. Developing countries have a limited voice and minority vote at the IMF, and so these developments are especially worrying for them.
The Ukraine is the latest country to have been in negotiations with the IMF, with conditions attached to their proposed loan reported to include a cut in energy subsidies for consumers and a rise in gas prices by 50 per cent.
Jesse Griffiths, co-author of the report and director of Eurodad, said: “It is clear that the IMF needs a major overhaul. It should stop using its power to interfere in highly sensitive and controversial economic reforms, and recognise that its current model often makes debt situations far worse. We recommend that the IMF focuses on its true mandate of providing emergency funding without harmful conditions, and that more permanent and just solutions are found for countries devastated by debt crises.”
The report makes three recommendations:
For more information, or to request an interview, please contact Julia Ravenscroft on + 32 2 893 0854
Eurodad (the European Network on Debt and Development) is a network of 48 non-governmental organisations from 19 European countries working on issues related to debt, development finance and poverty reduction. Since it was founded in 1989, Eurodad has been pushing for development policies that support pro-poor and democratically-defined sustainable development strategies. Eurodad works on the promotion of responsible finance principles. See Eurodad’s responsible finance charter.