As the IMF / World Bank Spring Meetings
approach, the International Monetary Fund continues to be criticized for not
making reforms in a time of economic crisis.
Weisbrot, co-director of the Center for Economic and Policy Research in
Washington, spoke to VOA English to Africa Service reporter Joe De Capua about
whether this year's spring meetings will be any different from those of the
Weisbrot says they're different in one
way: "The IMF is getting a huge infusion of cash. They were really, just a
couple of years ago, down to very little. Their whole portfolio had shrunk by
more than 90%, down to $10 billion…only Turkey and Pakistan had most of that
$10 billion. And now they're going to be up to a trillion, if they get all the
money the G20 was talking about. So it's a huge change."
IMF has been criticized for the very strict conditions on its loans. Weisbrot
says that hasn't changed much at all and it isn't surprising, given its
structure. He says the people who criticize the IMF have very little voice.
"It's run by the high-income countries and really the principal overseer is the
US Treasury Department; that's been that way for 65 years." He says until that changes,
he doesn't think there will be a lot of change.
Weisbrot says there is pressure "They made a terrible mess out of the last
major crisis – the crisesof the
late '90s, beginning in Asia, spreading to Russia, Argentina and Brazil. It was
pretty much universally recognized by economists at that time that they had
helped cause the crisis and made it much worse."
economist says that led to calls for reform, "but what happened is that instead
of reform, the IMF just lost power and influence and lending over the ensuing
decade till nobody cared about them and they were still doing the same things
in the poorest countries, like in Africa, but that stuff doesn't make the news.
Now all of a sudden they're back and a lot of the governments in the G20 and
also outside of it had a lot of reservations about giving the IMF this money
without some kind of governance reforms."
Weisbrotsays the IMF will be approached for
loans only by the countries that have no choice. "Everybody will try to avoid
it as much as possible." He says there are a couple of countries, like Mexico,
that can draw on a credit line that's just been set up, "where they can draw
without conditions because they've met the conditions in the past, supposedly."
says since the US Treasury "really has the voice here, they can pick the
countries that they like or want to protect for political reasons, and that
will be the criteria whether those countries can get money without conditions.
But most of the lending is going to be done under traditional agreements that
have a whole set of conditions.
all requiring what economists call pro-cyclical conditions…cutting spending
and/or raising interest rates while the economy is slowing." He says the effect
on developing countries will be to "worsen the length of the recession for some
of them; it will make it harder for them to get out of the hole. You could have
more bank failures, for example; you could have damage that takes years [to
overcome]." He cited the example of Indonesia and its experience with the IMF
after 1997 and 1998 and said it took them years to recover even to their prior
level of GDP.
"I think the worst thing is that the
IMF is going to have influence in these countries for years to come."