Several key issues were discussed during the International Monetary Fund and World Bank Spring Meetings which took place in Washington, D.C. some of which have been discussed in the previous article, “The International Monetary Fund and World Bank Spring Meetings: Questions and Concerns.” While the meetings have concluded, much work remains to be done to reform the IMF’s system of governance and demands for reform are increasing at an accelerated pace. It is no longer just civil society organizations, which play a key role in influencing national and global economies, which carry the flag for reform, but government representatives and experts have now joined them in their efforts.
The scope of the discussions that took place during the Spring Meetings and the annual IMF and World Bank meetings did not remain limited to negotiations between government representatives, experts and administrators seeking additional financial or technical assistance, but rather extended to other realms regarding the structure and governance of these two institutions and the effectiveness of their interventions. Stakeholders are conducting similar conversations at the national and international levels.
Calls to reform the IMF’s operating mechanisms gained traction following the distribution of the 2021 Special Drawing Rights. The majority of the funds meant to support economic recovery from the COVID-19 pandemic went to developed countries that have financial surpluses, and not to poor countries in dire need of financial assistance.
Likewise, the current IMF voting process, which is based on a quota system, reveals a considerable power imbalance. A handful of countries hold more power than the rest of the countries combined, while countries most in need of liquidity and financial assistance, particularly during the pandemic, have the least say in the decision-making processes. Those countries thus hardly had any role in determining the timing, amount and mechanism of allocating the recent Special Drawing Rights, contrary to common sense and economic logic.
As a result, experts are increasingly pressuring for reforms to address the unjust IMF governance system, pointing out that many of its interventions have fallen short of what is needed to improve living standards and both the global and local economies.
Dozens of countries have worked with the IMF under various restructuring programs of different shapes and sizes to alleviate debt and debt servicing and to mitigate the deficits of their public budgets and current accounts. In most countries, these goals have not been achieved. Rather, their debt has expanded, becoming a ticking time bomb threatening the economies of dozens of nations as well as the global economy. Furthermore, the national budget and current account deficits associated with IMF joint programs have not been addressed.
Demands to reform the IMF’s system of governance push to restructure decision-making mechanisms, allowing the countries most in need of aid to play a greater role in IMF decisions and to review the austerity policies imposed by the IMF on countries with which it has joint programs and agreements.
The austerity measures that have been imposed and continue to be imposed by the IMF on low-income countries have led to an increase in poverty, the weakening of social protection systems, the exacerbation of social inequality, the emergence of distorted and unfair tax policies, as well as high price levels of basic commodities, accompanied by low wage levels.
These inequities are directly related to the IMF’s interventions, which aim to liberalize markets, lower wage levels, lift subsidies on various basic commodities, and weaken working conditions. Their tactic has been to adopt a “targeted” approach in designing social protection programs, providing cash assistance to a small number of the poor – moving away from designing comprehensive and coherent social protection programs that would effectively prevent people from falling into poverty. In reality, increased poverty rates and the rise of social and economic inequality are inherently linked to IMF interventions.
We in Jordan hold a vested interest in reforming the structure of the International Monetary Fund and its governance, whether at the level of expanding the scope of participation in decision-making processes or in regards to reconsidering IMF interventions which exacerbated numerous economic and social problems. We must collectively encourage and advocate for these long-awaited reforms.