The IMF’s role in the Ebola outbreak

5 February 2015 by Julia Robinson , James Pfeiffer

  • Decades of IMF lending to Ebola-affected countries in West Africa led countries to prioritise debt payments over investment in public services
  • Health services have been starved of investment, including vital public health infrastructure
  • Pressure on the IMF, including from the G20, to relax spending restrictions and forgive debts, is mounting

As 2015 began, the world received a sobering message. Not only have the number of Ebola cases exceeded 20,000, but in some affected countries, especially Sierra Leone, the virus is still spreading. The death toll now tops 8,000 and the usual answers to how this outbreak got so huge so quickly – poverty, bad governance, cultural practices, endemic disease in Guinea, Liberia and Sierra Leone – are giving way to a deeper questioning of the poor public health response. Critics are turning to the structural causes of weak health systems and increasingly showing that international lending policies, including and especially those employed by the 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.
, should carry much of the blame.

The IMF has been active in West Africa for many years; the first IMF loan to Liberia was in 1963. And for almost as long, public health activists have pointed to the detrimental effects of the strings the IMF attaches to its loans, known as conditionalities, which more often than not constrain investment in public sector health services. As a December 2014 comment in medical journal, the Lancet explained, the IMF has provided support to Guinea and Sierra Leone for nearly two decades, and to Liberia for seven years. All three countries were engaged in IMF programmes when the Ebola crisis began. IMF conditionalities meant countries have had to prioritise repaying debt and 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. payments over funding critical social and health services. Countries such as Guinea, Sierra Leone and Liberia have had to limit not only the number of health workers they were able to hire (Liberia had only 60 doctors before the Ebola outbreak, Sierra Leone had 136), they’ve also had to cap wages to a pitifully low level to meet broader IMF policy directives. The Lancet comment also points out that in Sierra Leone, IMF-mandated policies explicitly sought to reduce public sector employment. In 1995 -1996, the IMF required the retrenchment of 28 per cent of public employees. The World Health Organisation reported a reduction of community health workers from 0.11 per 1,000 population in 2004 to 0.02 in 2008. Caps on wage spending continued into the 2000s. The Lancet authors state, “By 2004, [Sierra Leone] spent about 1.2 per cent of GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
less on civil service wages than the sub-Saharan African mean.”

The problem is, the IMF requires cuts to the same public systems that could respond to a health crisis before it sweeps across the country. When countries sacrifice budget allocations to meet macroeconomic policy prescriptions, as per the IMF’s decree, it is at the expense of social spending. Without money to fund basic infrastructure, health facilities are left crumbling, sometimes without access to water or electricity, and completely unprepared for complex emergencies. Few health workers are trained in infectious disease control, and those that have received training lack protective equipment and materials due to non-functioning supply systems. It is no wonder that when a truly serious epidemic such as Ebola entered the scene, the West African countries, which have had to deal with IMF conditions for decades, found themselves struggling to respond.

A considerable amount of money has poured in to fight Ebola, about $1billion so far, some of it from the IMF itself. Just how much of this money will go to build health systems, though, is under debate. In the past, IMF austerity conditionalities included directives to put aid money away in national reserves for a rainy day. Indeed, research has shown that increased funding for health, while under the influence of IMF programmes, actually reduces governments’ spending on health – because if they did, they would be violating the conditions of IMF loans. So the $1billion of Ebola aid that could help to build the very same health systems that had deteriorated from decades of IMF constraints is constrained once again and is diverted to fund one-off NGO projects or short-term UN programmes.

There is a growing chorus calling for reform to IMF policies, and the slow response to Ebola has shone a light on just how weakened the health systems have become after decades of restrictions in the name of economic reform. First among this chorus are the presidents of affected countries. At an October 2014 press conference with the IMF, 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.

, and presidents from Guinea, Sierra Leone, and Liberia, Guinean president Alpha Condé remarked, “I’m extremely pleased to hear the IMF managing director [say] that we need help and we can increase our deficit, which is quite a change from the usual narrative.”

Pressure has come from all sides for the IMF to loosen its restrictions on deficit spending as well as to forgive billions of dollars in debt and to rechannel those debt servicing payments to funding lifesaving health services, supplies, and desperately needed personnel to respond to what has been an overwhelming patient load. Even the G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). issued a statement in November 2014 urging the IMF to “ease pressures on Guinea, Liberia and Sierra Leone, through a combination of concessional loans, debt relief, and grants”. The US, the largest shareholder of the IMF, is also pushing to erase about 20 per cent of the three countries’ total IMF debt. Had these measures been taken a decade earlier, and the resources invested in public sector health systems, it is likely the Ebola outbreak could have been quickly contained and thousands of lives saved. The US Congress has pledged $5.4 billion in its 2015 budget, $2.5 billion of it going straight to African countries in their efforts to fight or prevent the virus from entering their country.

That’s all a good start, but we’ve got to learn the true lesson from the Ebola crisis to prevent the next public health crisis in Africa. IMF conditionalities must end, debt cancelled, and health systems built – no strings attached.

Source : Bretton Woods Project



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