WASHINGTON: 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 yesterday.
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.
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 programmes.
Reuters
