IMF Imposing Even Tougher Austerity Conditions on New Loans

Yves here. In 2010, at the first Institute of New Economic Thinking conference at Kings College, Cambridge, Dominique Strauss-Kahn spoke at one of the lunches and tried to persuade the assembled group that among other things, the IMF was developing more enlightened policies. One of my lunch companions would have none of it. He said that while the research arm of the IMF was indeed turning out much more enlightened papers than they had in the past, there had been no change in policies.

This update at Triple Crisis paints an even grimmer picture: the IMF has been devising even nastier versions of its austerity hairshirt in recent years.

By Jesse Griffiths, Director of the European Network on Debt and Development (Eurodad). This post is based on the Eurodad report “Triple Crisis

Ukraine is the latest country faced by a debt crisis to be forced into the arms of the International Monetary Fund (IMF). The reality of the situation was pithily expressed by the Ukrainian Prime Minister, Arseniy Yatseniuk, who recently said he “will meet all IMF conditions… for a simple reason… we don’t have any other options.”

The European Network on Debt and Development (Eurodad) has, over the past decade, produced several reports criticising the excessive and often harmful conditions that the IMF attaches to its loans. The IMF claims to have seen the light and limited its conditions to critical reforms agreed by recipient governments. We decided to put that claim to the test in our latest report, published on Wednesday (April 2), and examined all the policy conditions attached to 23 of the IMF’s most recent loans. What we found was truly shocking. The IMF is going backwards—increasing the number of policy conditions per loan, and remaining heavily engaged in highly sensitive and political policy areas.

Here’s what we found:

  • The number of policy conditions per loan has risen in recent years, despite IMF efforts to ‘streamline’ their conditionality. Eurodad counted an average of 19.5 conditions per programme: a sharp increase compared to the average of 13.7 structural conditions per programme we found in 2005-07.
  • Almost all the countries were repeat borrowers from the IMF, suggesting that the IMF is propping up governments with unsustainable debt levels, not lending for temporary balance of payments problems—its true mandate.
  • Widespread and increasing use of controversial conditions in politically sensitive economic policy areas, particularly tax and spending, including increases in value added tax (VAT) and other taxes, freezes or reductions in public sector wages, and cutbacks in welfare programmes including pensions. Other sensitive topics include requirements to reduce trade union rights, restructure and privatise public enterprises, and reduce minimum wage levels.

Recent studies on related topics by the Center for Economic Policy Research (CEPR) and Development Finance International (DFI) have found similar findings.

What is to be done? Trying to cajole the IMF to improve itself is not what’s needed. Instead, we advocate for the IMF to go back to basics and fulfill the role that’s really required. It should focus on its true mandate as a lender of last resort to countries that are facing temporary balance of payments crises. Such countries need rapid support to shore up their public finances, not lengthy programmes that require major policy changes. Why not extend the example of the IMF’s new but little used Flexible Credit Line to all IMF facilities—requiring no conditionality other than the repayment of the loans on the terms agreed?

If countries are genuinely facing protracted and serious debt problems, then IMF lending only makes the situation worse. Instead, let’s prioritise developing fair and transparent debt work-out procedures to assess and cancel unpayable and illegitimate debt. However, the IMF should not be the venue for such debt work-out mechanisms: as a major creditor, they would face an impossible conflict of interest. Of course, this revamped role for the IMF is only possible if it addresses its crisis of legitimacy, and radically overhauls its governance structure to give developing countries a fair voice and vote, and to improve transparency and accountability.

Partners we work with who live under the grim cloud of an IMF programme learn to hate the institution. A conditionality-free IMF with a democractic makeover could be an institution the world could learn to love.

Print Friendly, PDF & Email


  1. allcoppedout

    DSK and Lagarde are so lovely. Their qualifications for the IMF job appear to be synchronised whoring and swimming. They should both be disbarred from public office on the basis of leading the IMF holocaust.

    The problem with any IMF loans, conditional or pie-in-the-sky otherwise, is surely who gets the money. Making the loans condition free might just speed up the looting. DSK said, “It is absolutely crucial for us, if we want the global economy to be run somewhat rationally to use what INET is doing here.” The food at the 2010 conference was poor and a few of us formed a fringe group and abandoned to The Anchor, a lovely old pub with river views and free of DSK.

    So did DSK mean what he said? The IMF is now worse than ever, a French leftist replaced by a French rightist. Kings College still uses the DSK quote above in some vain attempt to pimp the importance of economist-blather as policy relevant. Indeed, the chronic looting underlying IMF-World Bank policy has been adapted to corporate business to replace product competition sustainability. Voting with feet to pub is no answer, but we did hear there from an African colleague that handing over the money with a transparent accounting system might. With a wry smile, he accused us of being racist in assuming black people wouldn’t behave just like whites given first use of cash only to be accounted for by accountants. And had some grim stories to tell on the back-bungs IMF banksters get and what these often were. DSK looks rather angelic in comparison.

    It is frankly child-like to imagine the authorities listen to us.

    1. steviefinn

      I knew straight away that it was a very bad sign for the future of mankind when synchronised swimming was introduced into the Olympics.

      1. allcoppedout

        I understand the butt-faced dolphins were excluded from the games so as not to highlight how ugly Lagarde was. There was to have been a male version of the event, but this was abandoned when DSK put his name down to enter and police refused to swim at close quarters with him to prevent certain offences taking place.

  2. jb

    canceling unpayable and illegitimate debt… the idea, but nah, they are an institution that working hand in glove with disaster capitalism’s shock doctrine.

    Their true mandate is just a ruse to mislead and deceive. IMF mandates and agendas, never the twain shall meet at the IMF.

  3. Banger

    The IMF is an integral part of the world imperial system staffed by a class of international bureaucrats that have very little interest in the lives of the poor not because they are particularly evil but simply because they are part of the world’s new hereditary nobility which has reconstituted itself out of the ruins of the old regimes that burned and crashed in the 20th century. In other words, we are now getting back to the normal human condition–rule by elites. These elites will, increasingly, rule by decree enforced by military force. We aren’t there yet but we are going in that direction.

  4. allcoppedout

    You can see it in the faces of Lagarde and DSK. I believe these people can’t listen to argument and instead use only a form of biological-libidinal cunning. Machiavelli described these princes smiling, courteous, listening to everyone carefully in public and something else entirely behind closed doors. I think they might be evil Banger, perhaps by neglect and omission.

    1. steviefinn

      If evil is lack of empathy then they certainly are – Of course they would justify it, greater good etc.

    2. Banger

      I don’t regard these officials as “evil” themselves because I believe that, with very rare exceptions, we all have the spark of divinity within us–to put it another way we are each, in our essence, in contact with pure being (OT name for God is “I am that I am”). The public officials we speak of are just like most corporate drones, even mid-level managers, in thrall to an evil enterprise. For me, evil is defined by the tendency towards isolation and fragmentation and good is defined by the movement towards connection (love). MLK had the great insight that his movement was not just about liberating African-Americans but also racists who are also victims of the hate that surrounds them–in the same way we ought to understand that these “leaders” are stuck into a world-view that is clearly destructive to their own spirits as well as ours.

  5. allcoppedout

    Nah! I’m rotten to the core Banger. Yet even knowing this is to be less rotten than them.

    Not my real view. I like the idea of an emancipation of the (former) enemy. There are deep questions concerning data in the view you put forward. I don’t think Republicans and Tories eat babies, though some of them do look like they congregate in secret to receive the Devil’s ice-cold semen. But how do they see the world so differently?

    I tend to biology where you look to the Buddha (I’m guessing). History, as I’m apt to point out, has people contenting themselves with virtue ethics whilst living off the backs of slaves.

  6. Christer Kamb

    Agree on all accounts but when new debt(or old) get´s unsustainable(i.e Greece) they should default. Ukraine should default instead of a depression possibly leading to “salvation” from Putin!!

Comments are closed.