The IMF-World Bank loan sharks: Prescribing poverty

April 2004 by Lee Sustar

LEE SUSTAR looks at the struggle today against the terrible twins of international finance—the International Monetary Fund (IMF) and the World Bank.

the global loan sharks of the 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.
and World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

are gathering in Washington, D.C., on April 24 and 25. The IMF and World Bank are dominated by their biggest shareholders among the governments of the richest countries—the U.S., Europe and Japan.

The two institutions exist primarily to finance loans to Third World countries. But the loans are tied to “structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

” programs that require privatization, deregulation, cuts in social spending and labor “flexibility”—the free-market agenda known as “neoliberalism.”

During the East Asian economic crisis of 1997-98, the IMF enforced economic policies dictated by the U.S.—including cuts in food subsidies for the poor in Thailand, Indonesia and other countries—to ensure that international bankers would get their money back. Outrage over the IMF’s policies spurred the global justice movement in the late 1990s—and the IMF became the focus of a 20,000-strong protest in Washington in April 2000.

Since then, the IMF has changed its rhetoric, but not its policies. In Argentina, which defaulted on its $141 billion debt in 2002, the IMF recently forced the government to repay a $3.1 billion loan as a condition for future “assistance.”

This, despite the fact that half of Argentina’s urban population lives under the poverty line and one in four live in what the government calls “extreme poverty”—in a nation that once had a standard of living comparable to some European countries. The IMF’s stranglehold was one important factor in the December 2001 uprising that forced four presidents to resign in a period of two weeks.

The World Bank is sometimes seen as more liberal than the IMF—but this a myth. Thus, the Bank’s Highly Indebted Poor Country (HIPC Heavily Indebted Poor Countries
In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia.
) initiative has provided debt relief for only 11 of 42 eligible countries. And even this aid is dependent on IMF-approved “professional-grade macroeconomic management, more open markets and support a stable environment for the private sector,” according to the Council on Hemispheric Affairs.

There is one country where the U.S. government does want to forgive an “odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts.
”—Iraq, now that Washington is ruling that country. No such proposals are forthcoming for the poorest countries that have repaid their external loans four times over since 1982.

That debt—some $1.6 trillion—is only about 5 percent of the world’s total, and could be easily written off. But bankers and bureaucrats in the U.S., Europe and Japan are determined to use the debt to bolster their imperial power—until the worldwide resistance is strong enough to break their grip.


ERIC TOUSSAINT is president of the Brussels-based Committee for the Abolition of the Third World Debt and author of the 1999 book, Your Money or Your Life: The Tyranny of Global Finance.

THE IMF and the World Bank are confronted with a very huge crisis. You have had a huge battle in the IMF between the U.S. and the European powers over who will be the new managing director. You also have what we saw at the [failed World Trade Organization] meetings in Cancun—a rebellion on the part of Third World countries, who want to intervene in the selection of the managing director of the IMF.

On the question of Iraq, we have to say that the decision of the IMF and World Bank to lend money to the interim government of Iraq is illegal. Once there is a withdrawal of U.S. troops, a new government in Iraq will never accept the debt reclaimed by the World Bank and the IMF.

In Latin America, one of the main preoccupations of the IMF and the Bank is the reluctance of Argentina to put in practice all of the demands of the IMF—and the decision in December 2001 to stop all payments to private creditors. Argentina has asked private creditors to give a reduction of 75 percent to the external debt of Argentina. That’s a big thing.

And the IMF and World Bank consider very dangerous the possibility that there may be a front developing against them between Argentina, Brazil, Venezuela and maybe Bolivia. I am pessimistic in relation to that, because [President Néstor] Kirchner of Argentina represents a capitalist government, and [Brazilian President Luíz Inácio “Lula” da Silva] is on a very neoliberal trend.

We have to combine the energy of the antiwar movements and the anti-Free Trade Area of the Americas and anti-World Trade Organization movements. It’s also important for people who understand the militarism of U.S. imperialism [in Iraq] to get involved in this movement. They are part of the same system.

One pillar of imperialism—the IMF and World Bank—is fragile because of the internal crisis, the issue of Argentina and the protests. I think we have to work together to put pressure on the IMF and the Bank to increase their crisis—which would have an important impact on the crisis of neoliberalism.


VICTOR GERÓNIMO is coordinator of both the Convergence of Movements of the Peoples of the Americas and the Colectivo de Organizaciones Populares (COP) in the Dominican Republic. The COP played a leading role in mobilizing for general strikes last November and again in January after an economic collapse sent prices soaring. This month, Victor was part of a tour of social movement leaders across the U.S. sponsored by 50 Years Is Enough, the global justice network that campaigns against the IMF and World Bank.

Tje first expression of protest against the IMF in the Dominican Republic dates from 1983. A protest began in the streets against the increase of the price of food and necessities, and against the terms of the government’s agreement with the IMF. The protests ended when the government negotiated aid from the United States. But these were conditioned on institutional reforms and cuts in social spending—in health, education, housing and water, among other things.

In response, in April 1984, there were marches, pickets and mobilizations at the national level. For three days, all the communities in the country protested in the streets in the same way we later saw in Argentina at the end of 2001. The demand was to break with the IMF and to lower prices—and to recover what had been negotiated away by the government and plundered by business. These kinds of struggles were seen later in Venezuela in 1987, in Argentina in 1989, and again in Argentina in 2001.

In various countries in the Americas, we’ve seen struggles with the same basic characteristics of the movement in 1984 in the Dominican Republic. This is all the result of the application of neoliberal policies—the IMF, NAFTA and more recently, the Plan Puebla-Panama [a U.S. proposal for a Mexican and Central American free trade area].

In the Dominican Republic, there are many similarities between the 1984 struggle and that of today. But today, it’s much more difficult. The people are much poorer.

There is more development—but there’s a difference between development and progress. There is big development in the hands of foreign interests—tourist hotels, agro-industry and other business that serve up cash to the multinational corporations.

Since 2000, neoliberal policies have become crueler and more savage. In Bolivia and Ecuador, new governments [taking office following popular rebellions] have followed policies that are similar, if not identical.

It’s the same with Lula in Brazil and Kirchner in Argentina. That’s why we’re visiting the U.S. in conjunction of the 60th anniversary meetings of the IMF and World Bank. We’re here to talk not only about the struggles in the Dominican Republic but also the other struggles against neoliberalism, such as NAFTA and the FTAA.

Source: Article orginally published at



8 rue Jonfosse
4000 - Liège- Belgique

00324 60 97 96 80