Committee for the Abolition of Illegitimate Debt

RFI: 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.

http://imf.org has decided to rescue many European countries such as Iceland, Ukraine, and today, Hungary, by granting them important loans. Why these particular countries according to you?

Eric Toussaint: First of all it has to be clear that the IMF itself is going through a crisis. It is in a severely weakened position. Last year it had only one big client left: Turkey. Just six or seven years earlier, the IMF was providing loans totaling more than 100 Billion Dollars, whereas just before this crisis, its portfolio of loans was right down to 17 Billion Dollars. The IMF will take advantage of the present crisis to grant more loans, since its existence depends on the loans it provides. The IMF actually depends on the 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. paid by the borrowing countries to remain in activity.

RFI: So the IMF will prefer lending to countries which are more able to repay their debts…

Eric T.: You have to be careful though. The IMF will also offer its services to Southern countries; there’s no doubt about that. The IMF wants to regain power after this recent period of weakness vis a vis a number of Southern countries. Over the last few years many countries of Asia and Latin America have repaid their outstanding obligations early, which means the IMF has lost the means of putting pressure on these countries. It is most probable that the IMF will offer loans to Africa, Latin America and Asia, pretending that the poorer countries do need “its” money because of this crisis. However, you have to know that IMF loans come with conditions attached which require the countries to apply specific policies; policies which have routinely had extremely harmful effects throughout the past 20 years. These policies have proved harmful because the International Monetary Fund, along with the World Bank World Bank
WB 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.

has imposed a completely open market economy on the Southern Countries. African countries and more especially the population of the African countries know that they have been hit head-on by the food crisis.

In Africa, for most people, the main concern these last months has not been the financial crisis of the banks of Europe and the United States, but rather the dramatic rise of the food prices. The policies dictated by the IMF and the World Bank are directly responsible for this rise (I’d like to come back to that later).

RFI: Are you, Eric Toussaint, trying to say that the IMF is more flexible with some countries than others? Regarding the conditions?

Eric T.: Yes, of course I am. In no way will it impose the same conditions on Iceland or on other European countries.
Allow me to point out that the IMF has not demanded the Washington authorities to take public budget consolidation measures, whereas whenever it is dealing with the governments of Southern countries, it invariably tries to impose the economic measures it considers appropriate.

RFI: So, according to you, there is indeed a double standard?

Eric T.: Absolutely, there is no doubt about it. Listen to this: there are 24 Executive Directors at the IMF. Only 2 of them are African. These two African administrators represent each more than twenty countries. When they vote, these two (together) represent less than 5% of the vote. The United Stated alone has 17% of the vote. France alone has a bit less than 5%. This means that when France votes, it weighs as much as all the African countries together. So yes, of course there are double standards. It is absolutly clear. It has to be changed as quickly as possible. The situation is totally unacceptable and it cannot go on any longer.

RFI: Do we need to reform aid to poorer countries when we know that sometimes the problem is that a country “assisted” by the IMF is publicly branded as being in difficulty which then makes eventual lenders wary? Should we be more discrete in our way of giving help to poorer countries?

Eric T.: Listen, personally I think that, first of all, it is essential to pay a correct rate for goods imported from countries considered as “poor” and to stop recommending policies which are harmful to their local producers. This is what I wanted to say earlier regarding the food crisis. The International Monetary Fund and the World Bank convinced the African countries to reduce their domestic food production whereas it guaranteed them food sovereignty, food security, especially in cereals. The IMF and the World Bank drove these countries to increase their exportations of tea, bananas, cacao, etc. and to depend on wheat and rice imported from Europe and Asia to feed their own populations. And now that these prices are literally exploding, the African countries find themselves with nothing, and the local producers are not there any more to meet the demand.

So my answer is that, rather than talking about more generosity towards these countries, and I’m not at all convinced about this so-called ”generosity”, what African countries need is more justice.

RFI: Thank you Eric Toussaint, President of the Committee for the Abolition of Third World Debt, live from Brussels, and let me cite your last book Who Owes Who? 60 questions about World Debt, already published in French: 60 Questions/60 Réponses sur la dette, le FMI et la Banque mondiale, CADTM-Syllepse, Liège-Paris, 2008.

NB: Eric Toussaint is also the author of: The World Bank: A Critical Primer, Pluto Press / Between the lines / David Philip Publisher, London - Toronto - Cape Town, 2008; World Bank: A Never-Ending Coup d’Etat Editorial VAK (Mumbai-India), 2007.

Translated by Jinane Prestat in collaboration with Elizabeth Anne.