International politics play an important role in IMF decision making. The clout of member states is roughly proportional to its contribution to IMF finances. The United States has the greatest number of votes and therefore wields the most influence. Domestic politics often come into play, with politicians in developing countries using conditionality to gain leverage over the opposition to influence policy.

Academic Jeremy Garlick cites IMF loans to South Korea during the 1997 Asian financial crisis as widely perceived by the South Korean public as a debt-trap. Garlick writes that the public was generally bitter about submitting to the conditions imposed by the IMF, which required South Korea to radically restructure its economy and consult with the IMF before making economic decisions until the debt was repaid.

In 2020 and 2021, Oxfam criticized the IMF for forcing tough austerity measures on many low income countries during the COVID-19 pandemic, despite forcing cuts to healthcare spending, would hamper the recipient's response to the pandemic.

Support of dictatorships

The role of the Bretton Woods institutions has been controversial since the late Cold War, because of claims that the IMF policy makers supported military dictatorships friendly to American and European corporations, but also other anti-communist and communist regimes, such as the Socialist Republic of Romania. An example of IMF's support for a dictatorship was its ongoing support for Mobutu's rule in Zaire, although its own envoy Erwin Blumenthal provided a sobering report about the entrenched corruption and embezzlement and the inability of the country to pay back any loans. In 2021, the IMF approved a US$1 billion loan to the autocratic Uganda despite protests from Ugandans in Washington, London and South Africa. Critics also claim that the IMF is generally apathetic or hostile to democracy, human rights, and labour rights. The controversy has helped spark the anti-globalization movement.

Arguments in favour of the IMF supporting dictatorships is the claim that economic stability is a precursor to democracy. A 2017 study found no evidence of IMF lending programs undermining democracy in borrowing countries, it found "evidence for modest but definitively positive conditional differences in the democracy scores of participating and non-participating countries". Critics highlight various examples in which democratised countries fell after receiving IMF loans.

Party-based autocracies and democracies can face similar incentives when considering agreements with IMF, in contrast to personalist and military regimes.

Impact on access to food

A number of civil society organisations have criticised the IMF's policies for their impact on access to food, particularly in developing countries. In October 2008, former United States president Bill Clinton delivered a speech to the United Nations on World Food Day, criticising the World Bank and IMF for their policies on food and agriculture:

The FPIF remarked that there is a recurring pattern: "the destabilization of peasant producers by a one-two punch of IMF-World Bank structural adjustment programs that gutted government investment in the countryside followed by the massive influx of subsidized U.S. and European Union agricultural imports after the WTO's Agreement on Agriculture pried open markets."

Impact on public health

The structural adjustments programs (SAPs) demanded by IMF conditionality contribute to the weakening of public health services in a number of ways. Cuts in funding to public health services prompted by IMF SAPs contribute to poorer working conditions in the sector, causing repercussions for health service quality and availability. This has been shown to negatively impact vaccination rates, increase exposure to conditions with risk-factors like disability and death, and higher prevalence of tuberculosis.

A 2009 study concluded that the strict conditions resulted in thousands of deaths in Eastern Europe by tuberculosis as public health care had to be weakened. In the 21 countries to which the IMF had given loans, tuberculosis deaths rose by 16.6%. A 2017 systematic review on studies conducted on the impact that structural adjustment programs have on child and maternal health found that these programs have a detrimental effect on maternal and child health among other adverse effects.

Structural adjustment programs are considered a form of neo-colonialism by some academics due to their intensification of healthcare access inequality, and their promotion of external intervention and aid to meet health needs in developing countries.

Scandals

Managing Director Lagarde (2011–2019) was convicted of giving preferential treatment to businessman-turned-politician Bernard Tapie as he pursued a legal challenge against the French government. At the time, Lagarde was the French economic minister. Within hours of her conviction, in which she escaped any punishment, the fund's 24-member executive board put to rest any speculation that she might have to resign, praising her "outstanding leadership" and the "wide respect" she commands around the world.

Former IMF Managing Director Rodrigo Rato was arrested in 2015 for alleged fraud, embezzlement and money laundering. In 2017, the Audiencia Nacional found Rato guilty of embezzlement and sentenced him to years' imprisonment. In 2018, the sentence was confirmed by the Supreme Court of Spain.

Reform

Function and policies

The IMF is only one of many international organisations, and it is a generalist institution that deals only with macroeconomic issues; its core areas of concern in developing countries are very narrow. One proposed reform is a movement towards close partnership with other specialist agencies such as UNICEF, the Food and Agriculture Organization (FAO), and the United Nations Development Programme (UNDP). The United States is the IMF's most powerful member, and its influence reaches even into decision-making concerning individual loan agreements. The U.S. has historically been openly opposed to losing what Treasury Secretary Jacob Lew described in 2015 as its "leadership role" at the IMF, and the U.S.' "ability to shape international norms and practices".

Emerging markets were not well-represented for most of the IMF's history: Despite being the most populous country, China's vote share was the sixth largest; Brazil's vote share was smaller than Belgium's. Reforms to give more powers to emerging economies were agreed by the G20 in 2010. The reforms could not pass, however, until they were ratified by the United States Congress, since 85% of the Fund's voting power was required for the reforms to take effect, and the Americans held more than 16% of voting power at the time. the U.S. finally ratified the voting reforms at the end of 2015. The OECD countries maintained their overwhelming majority of voting share, and the U.S. in particular retained its share at over 16%.

The criticism of the American- and European-dominated IMF has led to what some consider "disenfranchising the world" from the governance of the IMF. Raúl Prebisch, the founding secretary-general of the UN Conference on Trade and Development (UNCTAD), wrote that one of "the conspicuous deficiencies of the general economic theory, from the point of view of the periphery, is its false sense of universality".

Alternatives

In March 2011, the Ministers of Economy and Finance of the African Union proposed to establish an African Monetary Fund.

At the 6th BRICS summit in July 2014 the BRICS nations (Brazil, Russia, India, China, and South Africa) announced the BRICS Contingent Reserve Arrangement with an initial size of US$100 billion, a framework to provide liquidity through currency swaps in response to actual or potential short-term balance-of-payments pressures.

In 2014, the China-led Asian Infrastructure Investment Bank was established.

See also

  • Annual Meetings of the International Monetary Fund and the World Bank Group

References

Footnotes

Bibliography

Further reading

  • Copelovitch, Mark. 2010. The International Monetary Fund in the Global Economy: Banks, Bonds, and Bailouts. Cambridge University Press.
  • deVries, Margaret Garritsen. The IMF in a Changing World, 1945–85, International Monetary Fund, 1986.
  • James, H. International Monetary Cooperation since Bretton Woods, Oxford, 1996.
  • Joicey, N. and Pickford, S. "The International Monetary Fund and Global Economic Cooperation" in Nicholas Bayne and Stephen Woolcock, The New Economic Diplomacy: Decision-Making and Negotiation in International Relations, (Ashgate Publishing, 2011).
  • Keynes, J.M. The Collected Writings, Vol. XXVI. Activities 1941–1946: Shaping the Post-War World: Bretton Woods and Reparations, Cambridge, 1980.
  • Moschella, M. Governing Risk: The IMF and Global Financial Crises (Palgrave Macmillan; 2010).
  • Skidelsky, R. John Maynard Keynes: Fighting for Britain, London, 2000.
  • Truman, E. Strengthening IMF Surveillance: A Comprehensive Proposal, Policy Brief 10–29, Peterson Institute for International Economics, 2010.
  • Weiss, Martin A. The International Monetary Fund. (Washington, DC: Congressional Research Service, 24 May 2018).
  • Woods, N. The Globalizers: The IMF, the World Bank, and Their Borrowers, Ithaca, 2006
  • Woods, Ngaire and Lombardi, Domenico. (2006). Uneven Patterns of Governance: How Developing Countries are Represented in the IMF. Review of International Political Economy. Volume 13, Number 3: 480–515.