This article has been cross-posted on Triple Crisis.
Ukraine is the latest country faced by a debt crisis to be forced into the arms of the IMF. The reality of the situation was pithily expressed by the Ukrainian Prime Minister, Arseniy Yatseniuk, who recently said he “will meet all IMF conditions… for a simple reason… we don’t have any other options.”
Eurodad has, over the past decade, produced several reports criticising the excessive and often harmful conditions that the IMF attaches to its loans. The IMF claims to have seen the light and limited its conditions to critical reforms agreed by recipient governments. We decided to put that claim to the test in our latest report, published on Wednesday (April 2nd), and examined all the policy conditions attached to 23 of the IMF’s most recent loans. What we found was truly shocking. The IMF is going backwards – increasing the number of policy conditions per loan, and remaining heavily engaged in highly sensitive and political policy areas. Here’s what we found:
What is to be done? Trying to cajole the IMF to improve itself is not what’s needed. Instead, we advocate for the IMF to go back to basics and fulfill the role that’s really required. It should focus on its true mandate as a lender of last resort to countries that are facing temporary balance of payments crises. Such countries need rapid support to shore up their public finances, not lengthy programmes that require major policy changes. Why not extend the example of the IMF’s new but little used Flexible Credit Line to all IMF facilities – requiring no conditionality other than the repayment of the loans on the terms agreed? If countries are genuinely facing protracted and serious debt problems, then IMF lending only makes the situation worse. Instead, let’s prioritise developing fair and transparent debt work-out procedures to assess and cancel unpayable and illegitimate debt. However, the IMF should not be the venue for such debt work-out mechanisms: as a major creditor, they would face an impossible conflict of interest. Of course this revamped role for the IMF is only possible if it addresses its crisis of legitimacy, and radically overhauls its governance structure to give developing countries a fair voice and vote, and to improve transparency and accountability.
Partners we work with who live under the grim cloud of an IMF programme learn to hate the institution. A conditionality-free IMF with a democractic makeover could be an institution the world could learn to love.