Ahmad M. Awad
Dozens of civil society organizations, research centers, and independent experts raised numerous questions and concerns with the management of the International Monetary Fund and the World Bank, during the Spring Meetings recently hosted by the two influential economic institutions in Washington, D.C.
This time around, in addition to issues traditionally raised in these meetings, the participants representing governments, and civil society, economic, social and environmental experts focused their attention on ways to increase financial assistance and loans – to maintain the economic, political, and social stability of countries, whether these are subject to IMF programs or not.
Indeed, it must be pointed out that the IMF plays a central role in shaping the economic policies and reform plans that countries must adhere to when participating in IMF programs. Even though government experts are the ones who develop these policies, their design depends on the IMF’s methodological framework and the implementation of austerity measures. The prevailing structure of the global economy has given the IMF the “magic key” that enables it to determine how governments with faltering economies can obtain development loans from different international financial institutions, developed countries, or the global banking sector- which has large financial surpluses and needs market participants to use its various financing tools.
Therefore, the door to the majority of foreign funding sources available to countries becomes closed to those who do not have an IMF report stating that the country’s economic policies are in-line with the IMF’s economic philosophy. These funding sources become unobtainable even in circumstances in which the government seeks funding to cover budget deficits and current balance of payments deficits – exposing countries to high financial risk.
Among those questions and concerns raised by experts is the issue of imposing additional surcharges on a country if its debt obligation exceeds a certain limit. Specifically, Human Rights experts and independent research centers have called into question whether imposing these surcharges in addition to the country’s existing loans is fair and contributes to the IMF’s pledged commitment to helping countries with pervasive structural problems. The imposition of such surcharges only worsens a country’s economic problems and increases its need for assistance.
Critics raise concerns regarding the IMF and the World Bank’s prescribed solutions for addressing the global debt situation, as they often exacerbate the problem rather than provide economic stability. Several experts have pointed out that the IMF’s choice of policies does not offer effective solutions for reversing the economic decline resulting from a country’s debt obligations, but rather places the entire international economy in a precariously volatile state prone to implode at any moment.
Numerous experts also question the fairness of distributing the Special Drawing Rights, which the IMF allocated to countries two years ago to help combat the challenges of the COVID-19 pandemic. The IMF’s distribution of these assets was done without considering the country’s level of need for this funding, and some studies have indicated that it was in fact wealthy countries who received the lion’s share of this foreign exchange asset at the expense of poorer countries and those most in need of additional funding.
Furthermore, a number of experts demand revision of several fundamental policies of the International Finance Corporation of the World Bank. The purpose of these policy changes would be to compensate members of local communities that have been harmed by the implementation of projects funded by the World Bank. Similarly, experts at the Spring Meetings have questioned the efficacy of austerity measures which the IMF imposes on countries, trying to break out of their economic deterioration, as conditions for their financial assistance. Countries often face budget deficits, current account deficits, and high public debt. These have reaped a heavy toll on the living standards, economic situation and livelihoods of ordinary citizens; austerity measures only exacerbate the existing economic challenges faced by the population. In the Arab region, among many others, these policies have failed to assist in overcoming financial challenges even after the completion of several IMF programs.
Throughout the Spring Meetings, the necessity of reforming the IMF and World Bank’s governance and unjust voting powers was a reoccurring theme of discussion. This timely debate comes as critics point out that in the current system, voting majority is held by a limited number of states which excludes the voices of the majority of IMF member countries. This is reflective of the current global system’s lack of inclusion and fairness to the broader international community.
These issues will be discussed further in subsequent articles reflecting on further meetings and panel discussions over the course of the Spring Meetings in Washington D.C. attended by the author.