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.
Mark 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 past.
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."
The 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.
But 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."
The 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."
He 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.
"They're 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."