IMF lending can deepen economic crises, says report

By on 12/04/2014

New research suggests that the International Monetary Fund (IMF) is weakening the economies of countries to which it lends money.

The European Network on Debt and Development, Eurodad, says that the number of conditions the IMF attaches to its loans is increasing, with a continued focus on “harsh austerity measures and [interference] in sensitive policy areas.”

A new report from the organisation, entitled “Conditionally Yours: An analysis of the policy conditions attached to IMF loans”, suggests that such conditions are inimical to a nation’s economic growth – meaning recipients of IMF bailouts often struggle to maintain payments or enjoy recovery.

The conditions attached to IMF loans, such as fixed tax rates, spending cuts, or public-sector pay freezes, have long been regarded as controversial. While the IMF claims to have streamline its lending conditions, Eurodad claims the number attached to loans has increased by an average of almost six since 2005.

Moreover, it states that the largest loans come with the most conditions, with countries like Cyprus, Jamaica and Greece being especially badly affected.

Eurodad also expresses concern over Ukraine’s likely acceptance of help from the IMF, saying proposed conditions to cut energy subsidies and raise gas prices could have a negative effect on the country’s economic stability.

Jesse Griffiths, a director of Eurodad who co-authored the report, 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.”

About Kevin Sorkin

Pendragon International Media publish www.globalgovernmentforum.com, a community of senior government officials around the world. Global Government Forum is an important international network focusing on impartial, government news, analysis and best practice. The content addresses the real issues facing senior leaders in public service policy and administration today and aims to support them in developing public services for the future. Our aim is to help all organisations engage with this important community by improving understanding and strengthening relationships. I am the founder of the Civil Service Awards and Civil Service Live, which are now established industry leading brands and extremely important events for government. I also launched and published Civil Service World, civilserviceworld.com and Civil Service World Research and Information bringing together the civil service community to enable communication, sharing of best practice, inspire and motivate the civil service community. Over the years I have established relationships with the most senior officials in government and the private sector and have built a very strong and positive reputation across the industry.

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