Anna Yukhananov Washington
The number of conditions the International Monetary Fund (IMF) attaches to its loans has grown in recent years, despite promises to limit what critics see as onerous requirements, according to a study released yesterday.
The European Network on Debt and Development (Eurodad) also said nations desperate for cash were at a disadvantage in their dealings with the IMF, likening them to negotiating “at the barrel of a gun”.
The IMF had attached almost 20 conditions on average to each loan it approved in the past two years, Eurodad found. That was more than the number the group had calculated in two prior reports.
Many of the conditions also focused on politically contentious areas, such as public sector wage cuts or private sector reform, the report noted. Eurodad looked at the period from October 2011 to August last year, covering 23 loans.
In a 2011 review, the IMF promised to keep “conditionality parsimonious and focused on macro-critical issues”.
The Eurodad report said: “The IMF is going backwards – increasing the number of structural conditions that mandate policy changes per loan, and remaining heavily engaged in highly sensitive and political policy areas.”
The results were partly skewed by the biggest IMF loan programmes during the period covered. Loans to Cyprus, Greece and Jamaica accounted for 87 percent of all funds approved, and had an average of 35 conditions each, Eurodad said.
In the case of Cyprus and Greece, they were shaped by the IMF’s European-dominated executive board, which demanded strict budget cuts in exchange for aid, Eurodad’s director, Jesse Griffiths, said.
The report comes six years after the IMF’s internal watchdog urged the fund to reduce the conditions it attaches to loans, arguing they were not effective.
The IMF’s loan conditions have been a sore point for many countries and grassroots groups, who have argued they are excessive and harmful to the poor.
Many governments also complain IMF conditions are not well-tailored to country circumstances and political constraints, and may have unrealistic deadlines. They argue conditions reduce a country’s ability to control its economic programmes effectively.
Griffiths said nations in dire straits were at a disadvantage in negotiating with the IMF. For example, Ukraine had long resisted the IMF’s conditions, but it finally agreed to them this year after saying it was close to default. Ukraine’s prime minister said his government was on a “kamikaze” mission to make painful decisions.
The IMF says its conditions are necessary to put economies on the growth track, and ensure it gets its money back. But Eurodad found most countries were repeat borrowers.
In its report, available on Eurodad’s website, the network of NGOs concluded that deeper changes were needed, including overhauling the IMF’s governance structure to give developing countries a bigger voice. – Reuters