Committee for the Abolition of Illegitimate Debt

Like 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.

, 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.

http://imf.org (IMF) was created in 1944 at Bretton Woods. Its official purpose was to stabilize the international financial system by regulating the circulation of capital. What it has become is the main international institution whose task is to impose inhuman neoliberal policies all over the planet. It is clearly an anti-democratic entity at the service of the interests of the major powers and large private corporations. The conditional granting of credits to countries in difficulty is one of its principal means of exerting pressure. In 2024, 191 countries were members.

 Undemocratic leadership

The IMF’s organization is similar to that of the World Bank: each country appoints a governor, usually its finance minister or the governor of its central bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx . Together they form the Board of Governors, the IMF’s sovereign instance; meetings take place once a year in October. The Board of Governors makes the major decisions (such as admitting new countries and preparing the budget).
For the day-to-day operation of the IMF’s missions, it delegates its power to an executive board, which consists of 24 members. The following eight countries – the same as for the World Bank – are entitled to one board member each: the US, Japan, Germany, France, the UK, Saudi Arabia, China and Russia. The other 16 board members are appointed by groups of countries that may differ slightly from those at the World Bank.
The third managing body is the International Monetary and Financial Committee (IMFC), which includes the 24 governors of the countries sitting on the executive board. It meets twice a year (in spring and autumn) and advises the IMF on the functioning of the international monetary system.
The executive board elects a managing director for a five-year term. Acting as a counterpart to the unspoken rule in force at the World Bank, this post is held by a European. The Frenchman Michel Camdessus held this position from 1987 to 2000, before resigning after the economic crisis in South-East Asia. The IMF had helped creditors who had made risky investments and imposed economic measures that resulted in more than 20 million people losing their jobs, leading to strong popular protests and the destabilization of several governments. The Spaniard Rodrigo Rato took over in 2004 before resigning in 2007 to join the international department of Lazard Bank in London. [1] In 2017, Rato was sentenced to four years in prison by a Spanish court for embezzlement at Bankia Bank. Frenchman Dominique Strauss-Kahn, the socialist former finance minister, became managing director in 2007, before having to resign in 2011 after being charged with sexual assault by a hotel chambermaid. [2] In July 2011, Christine Lagarde, who had up until then been the French finance minister, stepped in. Lagarde was sued in the Crédit Lyonnais case, which cost French taxpayers a great deal of money. She left her position in 2019 to become president of the European Central Bank ECB
European Central Bank The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.

https://www.ecb.europa.eu/ecb/html/index.en.html . A great deal could be said about the IMF under her leadership. After Lagarde’s departure, the Europeans and Washington again agreed on a European at the head of the institution. She is Kristalina Georgieva, a Bulgarian economist and former Chief Executive of the World Bank Group from January 2017 to September 2019, who had acted as President for three months. At the beginning of her mandate with the IMF, Kristalina Georgieva’s action at the head of the World Bank was questioned. She was accused of having influenced the authors of the Doing Business report to increase China’s ranking. An audit report drafted by the law firm WilmerHale at the request of the World Bank, criticizes in particular “pressure applied by CEO Georgieva and her advisor, Mr. Djankov, to make specific changes to China’s data points in an effort to increase its ranking at precisely the same time the country was expected to play a key role in the Bank’s capital increase campaign.” [3]
No matter, she was confirmed as IMF managing director and was reelected in 2024. [4]

In 2024, the IMF’s staff consisted of 3,100 senior executives from 162 countries, most of them based in Washington, DC. The IMF ‘number two’ (First Deputy Managing Director, FDMD) is always a representative of the US, which has paramount influence within the institution. During the Asian crisis in 1997–98, FDMD Stanley Fischer bypassed Michel Camdessus on several occasions. Anne Krueger played a very active part in the Argentine crisis of 2001–02. From 2006 to 2011, John Lipsky, former chief economist at J.P. Morgan, one of the main US business banks, played a leading role. As early as March 2010 he had warned that, as reported in a Reuters article, ‘developed countries with big budget deficits must start now to prepare public opinion for the belt-tightening that will be needed, starting next year’. [5] Twelve years later, we can only conclude that the neoliberal agenda has been enforced everywhere, with Greece, Ireland and Portugal having been monitored by the IMF since 2010. The IMF has also developed its damaging influence in many countries of the South. In 2018, it granted the biggest loan in its history to Mauricio Macri’s neoliberal regime in Argentina, a docile ally of the US. This resulted in a huge fiasco in 2019. Fortunately the measures imposed by the IMF on countries such as Ecuador and Haiti led to huge popular mobilizations in 2019 (in the case of Ecuador, the measures had to be abandoned under the pressure of the mass demonstrations). Later the IMF used the international debt crisis in countries of the south that started in 2022 to enforce a large number of austerity measures in approximately one hundred countries that asked for emergency loans. This resulted in major popular protests in Nigeria and Kenya in 2024. In the latter country the government had to abandon the most unpopular measures.

 Operation on the private-enterprise model

Since 1969, the IMF has had its own accounting system that governs its financial activities with member countries, based on units known as Special Drawing Rights (SDR). This was devised at a time when the system established at Bretton Woods, based on fixed exchange rates, was faltering. Its aim was to remedy shortfall in reserve assets at the time, especially in gold and the US dollar. It was not able to prevent Bretton Woods from collapsing in the wake of President Nixon’s decision to terminate the free convertibility of the US dollar to gold in 1971. With a system of floating exchange rates, the SDR has mainly become just another reserve asset Asset Something belonging to an individual or a business that has value or the power to earn money (FT). The opposite of assets are liabilities, that is the part of the balance sheet reflecting a company’s resources (the capital contributed by the partners, provisions for contingencies and charges, as well as the outstanding debts). . Originally valued at 1 USD, it is now revalued daily from a basket of hard currencies (the US dollar, the yen, the euro, the pound sterling, and since 2016 the Chinese renminbi). [6] In 2023, the IMF board approved a steep increase in SDRs that mainly benefited to the riched countries.

Quite unlike any democratic institution, the IMF functions almost exactly like a business. Any country that becomes a member must pay an entry fee known as a ‘quota share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. ’ and thus becomes a shareholder. The quota share is calculated according to the country’s economic and geopolitical importance. Twenty-five per cent of it must normally be paid in SDR or one of its component currencies (or in gold, until 1978) and the rest in the country’s local currency.

As with the World Bank, a country’s quota share determines the voting rights it has within the IMF, which corresponds to 250 votes plus one vote per tranche of 100,000 SDR of quota share. This is how the executive board of the IMF gives the United States its predominant position (with 16.49 per cent of voting rights). By way of comparison, in November 2024, Republic of the Congo chaired a group of 17 African countries representing 487 million individuals – 152 million more than the United States – yet had only 1,40 per cent of voting rights, or eleven times less than the United States.

In 2016, under pressure from emerging countries, a reform of the transfer of voting rights came into force, but it was in fact a masquerade.

Table 1 Distribution of voting rights among IMF board members, November 2024

Source: IMF [7]

It is clear that within such a system, countries of the North easily manage to muster a majority and effectively run the IMF.

Their actual power is disproportionate compared with that of countries of the South, whose voting rights are ludicrously low in comparison with the number of inhabitants.

In early November 2024, the IMF decided to create a 25^th executive director’s position. It had been talked about for some fifteen years, and was to be awarded to sub-Saharan Africa. Is this good news for Africa? Will it benefit from greater consideration by the Fund’s governing bodies?

In fact we have to say straightaway that this is not good news: the countries of Sub-Saharan Africa belonged to two groups (except Ghana that was in a third group) that totalled 4.63% in voting power. Now they belong to three groups instead of two and have 4.61% of votes. So in terms of votes within the IMF board, the weight of Africa has not increased, and even slightly decreased.
Before this position was created, the group presided by Tanzania included 23 countries and had 3.02% of votes; the group presided by Congo Brazzaville included 23 countries and had 1.61% of votes. This meant a total of 4.63% of votes in the IMF.
Now the group presided by Mozambique includes 14 countries with 1.83% of votes, the group presided by Côte d’Ivoire includes 14 pays with 1.40% of votes and the group presided by Congo includes 17 countries with 1.40% of votes. This means a total of 4.61% of votes in the IMF.

The United States on their own have an executive director with 16.49% of votes in a context in which significant votes require 85% of votes. The US are thus the only country who alone has veto power.
France has 4.03% of votes, so hardly less than all Sub-Saharan African countries together.
Germany has 5.31% of votes, so more than those countries together.
It must also be said that two major countries of Sub-Saharan Africa had lost a significant part of their voting power with the previous reform in 2010, implemented from 2016. Indeed south Africa lost 21% of its votes and Nigeria 41% (see Patrick Bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. , https://www.cadtm.org/The-BRICS-New-Development-Bank-Sub-Imperialism-Working-within-not-against ).

Table 2 Voting rights of some FMI board members

Source: IMF; United Nations

 A Difference with the World Bank

Unlike the World Bank, the IMF uses states’ subscriptions to constitute its reserves for lending to countries with a temporary deficit. These loans are granted on condition of signing an agreement dictating the measures the country must enforce. The money is released in tranches, after verification that the measures demanded have effectively been applied.

As a general rule, a country in difficulty can borrow up to 100 per cent of its quota share from the IMF annually and up to 300 per cent in all, barring emergency procedures. The loan is short-term and the country is expected to repay the IMF as soon as its financial situation is back to normal.

In fact, the IMF levies 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. surcharges on the loans it grants to countries that call on its services. The interest rate charged by the IMF when it applies a surcharge can be as high as 8%.

  The worse people fare, the greater the IMF’s influence

The IMF is thus one of the largest holders of gold reserves, third in line after the United States and Germany, since countries used the precious metal to pay their subscription to the IMF. In addition, in 1970–71, South Africa – which the IMF saw no reason to rebuff despite its notorious violations of human rights under the apartheid regime – sold it huge quantities of gold.

In the early twenty-first century, when all its major clients had paid what they owed in advance or ceased to call on its resources, the IMF went through a delicate financial period and in April 2008, its executive board approved the sale of 403 tons of gold at a price of $11 billion, to replenish its coffers. Although those reserves are not used for IMF loans, they nevertheless give it the stability and stature it needs to retain the consideration of international financial actors.

After a significant decrease in outstanding credits from the IMF to member states, the international crisis which erupted in 2007–08 provided the ideal pretext for resuming the attack, multiplying loans, especially to European countries, using them as a justification for imposing draconian antisocial measures and harsh austerity on populations.

Table 3 Timeline of credits granted by the IMF and repayments it received, 2000–2023 (USD billion)

Source: IMF

We can clearly see in the above table that the stock of loans granted by the IMF dwindled between 2003 and 2007 from over USD90 billion to only USD13.1 billion. With the 2008 financial crisis and its recessive effects on the world economy in 2009, the stock of IMF loans increased again and was over USD100 billion per year between 2011 and 2014. A decline followed between 2015 and 2017. A new increase started in 2018 with the huge loan to Mauricio Macri’s neoliberal government in Argentina, under Donald Trump’s presidency. IMF loans further increased with the CoViD-19 pandemic in 2020, the consequences of the invasion of Ukraine in 2022 and the rise of interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. decided on by major Western central banks (the US Federal Reserve FED
Federal Reserve Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank : http://www.federalreserve.gov/ , the European Central Bank, the Bank of England). We note that in 2023, repayments to the IMF (USD37.8 billion) were well beyond new loans (USD 27.6 billion). In short, the worse people fare, the greater the IMF’s influence.

The IMF thus uses desperate situations to increase the influence of neoliberal capitalism. Contrary to what it sometimes claims, it never cancels any debt. When the IMF or the World Bank boast about cancelling debts, they actually take money from a special funds fed by member countries of the IMF or the World Bank. Conclusion: 1) countries that feed this fund count their contribution as official development assistance ODA
Official Development Assistance Official Development Assistance is the name given to loans granted in financially favourable conditions by the public bodies of the industrialized countries. A loan has only to be agreed at a lower rate of interest than going market rates (a concessionary loan) to be considered as aid, even if it is then repaid to the last cent by the borrowing country. Tied bilateral loans (which oblige the borrowing country to buy products or services from the lending country) and debt cancellation are also counted as part of ODA. Apart from food aid, there are three main ways of using these funds: rural development, infrastructures and non-project aid (financing budget deficits or the balance of payments). The latter increases continually. This aid is made “conditional” upon reduction of the public deficit, privatization, environmental “good behaviour”, care of the very poor, democratization, etc. These conditions are laid down by the main governments of the North, the World Bank and the IMF. The aid goes through three channels: multilateral aid, bilateral aid and the NGOs. (ODA), which sometimes leads them to cut other ODA spending; 2) the IMF does not cancel debt, because when part of the debt of a country in difficulty is restructured, it is repaid thanks to the special fund provided by member countries.

 The IMF, a public danger

The IMF’s purpose, as defined by Article I (ii) of its Articles of Agreement is ‘To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.’ [8]

In fact, the policies of the IMF are in contradiction with its statutes. The institution does not promote high levels of employment and income. Under the influence of the US Treasury and backed up by the other Northern countries, the IMF has taken it upon itself to become a major player in defining the economic and financial policies of its member countries. And to do so, it does not hesitate to go far beyond its mandate.

The IMF has thus facilitated the current complete freedom of capital movements throughout the world, one of the major causes of the financial crises that have so cruelly hit the countries of the South. Lifting all controls on capital movements favours speculation and is in contradiction with Section 3 of Article VI of the IMF statutes, which states, ‘Members may exercise such controls as are necessary to regulate international capital movements’. [9]

Surveillance, financial aid and technical assistance are the three fields in which the IMF intervenes. However, neither annual monitoring of member countries nor its experts’ recommendations have enabled the IMF to foresee and avoid the major crises that have occurred since 1994. The policies dictated by the IMF have in fact aggravated them.

Over recent years, IMF policies aimed at ending public subsidies of staple products (fuel and food) and vital public services (such as public transportation) and reducing social services have triggered popular insurrections, for example in Nicaragua (April 2018), Sudan (December 2018), Haiti (summer 2018 and in 2019), Ecuador (October 2019), Kenya and Nigeria in 2024. Clearly, the nefarious policies of the IMF have not changed.

Translated by Christine Pagnoulle and Vicki Briault