News / Economy

IMF Ramps Up Loan Conditions Despite Promises, Study Finds

International Monetary Fund (IMF) Managing Director Christine Lagarde delivers remarks on the world's economy at the National Press Club in Washington, D.C, Jan. 15, 2014.
International Monetary Fund (IMF) Managing Director Christine Lagarde delivers remarks on the world's economy at the National Press Club in Washington, D.C, Jan. 15, 2014.
Reuters
The number of conditions the International Monetary Fund attaches to its loans has grown in recent years, despite promises to limit what critics see as onerous requirements, according to a study released on Wednesday.
 
The Eurodad network of European development groups also said nations desperate for cash are at a disadvantage in their dealings with the IMF, likening them to negotiating “at the barrel of a gun.”
 
The IMF attached nearly 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, according to the report. Eurodad looked at the period from October 2011 to August 2013, 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 programs 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, said Eurodad's director, Jesse Griffiths.
 
The report comes six years after the IMF's own internal watchdog urged the fund to dramatically reduce the conditions it attaches to loans, arguing they were not entirely effective.
 
Political constraints
 
The IMF's loan conditions have long 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 effectively control its economic programs.
 
Griffiths said nations in dire straits are at a disadvantage in negotiating with the IMF. They are desperate to get cash and show financial markets and other donors that their policies have the IMF's seal of approval.
 
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 is on a “kamikaze” mission to make painful decisions.
 
“It's like at the barrel of a gun,” Griffiths said. “Those are decisions that are political and should be made in consultation with the people in those countries, and not through negotiations” with the IMF.
 
The IMF argues its conditions are necessary to put economies on the growth track, and ensure it gets its money back.
 
Eurodad, however, found most countries were repeat borrowers. Twenty out of the 22 countries with new IMF programs from 2011 to 2013 had borrowed in the past decade, and a majority had borrowed in the previous three years.
 
Some IMF conditions, such as drastic budget cuts that can weigh on an economy, may also make it more difficult for countries to repay their loans. The IMF in 2012 admitted it had miscalculated the economic cost of government austerity.
 
Eurodad said deeper changes were needed, including overhauling the IMF's governance structure to give developing countries a bigger voice. The IMF in 2010 agreed to an initial step to boost the power of emerging markets, but the reforms have been held up by the opposition of the U.S. Congress.
 
See the full report.

You May Like

India PM Modi's party distances itself from religious conversions

BJP under fire for being slow to rein in hardline affiliate groups allegedly trying to promote a Hindu-dominant agenda by luring Muslims and Christians to convert to Hinduism More

Anti-Whaling Group Found in Contempt of Court

Radical environmentalists who threw acid and smoke bombs at Japanese whalers in the waters off Antarctica continue their campaign to disrupt Japan's annual whale hunt More

UN's Ban Urges End to Discrimination Against Ebola Workers

Ban was speaking in Guinea on the second day of a whistle-stop tour aimed at thanking healthcare workers of the countries at the heart of the epidemic More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8143
JPY
USD
119.23
GBP
USD
0.6390
CAD
USD
1.1596
INR
USD
63.304

Rates may not be current.