Arrested Development: International Monetary Fund lending and austerity post Covid-19

13 October 2020 by Daniel Munevar

Kristalina Georgieva (CC - Flickr - IMF)

A Eurodad-led review reveals insufficient and inadequate multilateral response to the Covid-19 pandemic on the part of the IMF, locking a large number of countries into a decade-long crisis of debt and austerity.

A review of International Monetary Fund 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.
(IMF) staff reports for 80 countries, conducted by Eurodad, illustrates a dismal decade ahead for developing countries.

The IMF reports were prepared as part of the process of approval for financial assistance between March and September of 2020. They reveal an insufficient and inadequate multilateral response to the Covid-19 pandemic which will lock a large number of countries in a decade-long crisis of debt and austerity. The need to protect and increase investment to achieve the Sustainable Development Goals (SDGs) and a fair and green recovery features in every public intervention by IMF officials. However, these commitments are difficult to find in IMF program design. IMF programs are on track to arrest development efforts in the next decade.

The main findings of the review are:

  • Harder, faster and wider austerity
  • A hampered Covid-19 response
  • Paying the costs of the pandemic four times over
  • The burden shifted on to the vulnerable
  • Public services being slashed
  • Heavier debt burdens and vulnerabilities
  • Arrested development
  • All debt and no sustainable development

This report illustrates the dramatic failure of the IMF and the international community to respond to the Covid-19 pandemic. The measures adopted to tackle the ongoing economic downturn fall far short of the effort needed to meet the current scale of need in the global south. The IMF projections and recommendations for fiscal consolidation set the tone for yet another “lost decade” for development. The situation we face in the wake of the pandemic means even greater need for concerted global action that puts human rights, sustainable development, gender equality and climate justice at its core.

Download the report:

Source: Eurodad

Daniel Munevar

is a post-Keynesian economist from Bogotá, Colombia. From March to July 2015, he worked as an assistant to former Greek Finance Minister Yanis Varoufakis, advising him on fiscal policy and debt sustainability.
Previously, he was an advisor to the Colombian Ministry of Finance. He has also worked at UNCTAD.
He is one of the leading figures in the study of public debt at the international level. He is a researcher at Eurodad.



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