Committee for the Abolition of Illegitimate Debt

IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org loans come with conditions which are often highly controversial, for example influencing taxes and cutting spending; freezing or reducing public sector wages; and mandating cutbacks in welfare programmes, including pensions. There are also conditions on the restructuring and privatisation of public enterprises, and conditions that reduce minimum wage levels.

Although the IMF has said it has tried to “streamline” its conditional lending, Eurodad counted an average of 19.5 structural conditions per programme – a sharp increase since 2005-7 when Eurodad found an average of 13.7 conditions. The biggest loans had the heaviest conditions, with exceptionally high numbers in Cyprus, Greece and Jamaica – which totalled an average of 35 structural conditions per programme.

Almost all the countries were repeat borrowers from the IMF, suggesting that it is propping up governments with unsustainable debt levels, not lending for a temporary balance of payments Balance of payments A country’s balance of current payments is the result of its commercial transactions (i.e. imported and exported goods and services) and its financial exchanges with foreign countries. The balance of payments is a measure of the financial position of a country vis-à-vis the rest of the world. A country with a surplus in its current payments is a lending country for the rest of the world. On the other hand, if a country’s balance is in the red, that country will have to turn to the international lenders to meet its funding needs. problems – its true mandate. Developing countries have a limited voice and minority vote at the IMF, and so these developments are especially worrying for them.

The Ukraine is the latest country to have been in negotiations with the IMF, with conditions attached to their proposed loan reported to include a cut in energy subsidies for consumers and a rise in gas prices by 50 per cent.

Jesse Griffiths, co-author of the report and director of Eurodad, said: “It is clear that the IMF needs a major overhaul. It should stop using its power to interfere in highly sensitive and controversial economic reforms, and recognise that its current model often makes debt situations far worse. We recommend that the IMF focuses on its true mandate of providing emergency funding without harmful conditions, and that more permanent and just solutions are found for countries devastated by debt crises.”

The report makes three recommendations:

The IMF should focus on its true mandate as a lender of last resort to countries that are facing temporary balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of payments crises. Such countries need rapid support to shore up their public finances, not lengthy programmes that require major policy changes. A far more sensible approach would be to 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. The development of fair and transparent debt work-out procedures should be prioritised by the international community, and at regional and national levels, 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 Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. .
The IMF must urgently address its crisis of legitimacy, and radically overhaul its governance structure to give developing countries a fair voice and vote, and to radically improve transparency and accountability. A vital first step would be to introduce double majority voting, so that approval is needed from a majority of IMF member countries, in addition to a majority of IMF voting shares.
To read the full report go to http://eurodad.org/conditionallyyours. To read the full press release, click here.

Source: http://eurodad.org/Entries/view/1546183/2014/04/02/Harmful-conditions-increasingly-attached-to-IMF-loans-according-to-new-research