Tuesday, June 9, 2009

Can additional funding to the developing countries through the IMF be helpful?

Economists at the CEPR say, No unless…! The $108 billion in new funds for the IMF approved by the US Senate is not going to counter the world recession, they say. Why? Because without reforms in the IMF itself, additional funding injections would not be helpful. (The G20 pledged $500 billion for the IMF to lend to struggling economies)

Contrary to remarks by IMF Managing Director Dominique Strauss-Kahn that rich country contributions to the IMF make "this…the most coordinated stimulus ever," the IMF has been mandating economic conditions for countries receiving new loans, including deficit reduction, monetary tightening, and inflation-targeting measures that run counter to the worldwide need for an increased economic stimulus.

"Throwing $108 billion at the IMF without any reforms is a mistake, and one that Americans will later regret."

"There's little evidence that the IMF has actually helped boost GDP growth in developing countries over the past 30 years, and a lot of evidence to the contrary," Weisbrot said. "Giving the IMF this money without reform conditions is a mistake, and one that will come back to haunt us in the future."

Also, see this one:

Almost all of the agreements that the IMF has concluded since the global economic crisis began have included the opposite of stimulus programs: for example spending cuts or interest rate increases. The amount of money that will help poor countries is tiny. And it is difficult to see why the IMF would need hundreds of billions of dollars to help governments with balance of payments support: for sixteen Standby Arrangements negotiated since the crisis intensified last year, the total has been less than $46 billion.

And, here is Kevin Gallagher:

Kevin Gallagher argues that the IMF, in its emergency assistance plans for developing countries, is still imposing harsh conditionalities that limit rather than expand government spending. “If the IMF is to receive significantly higher lending authority, it should be forced to abandon its draconian austerity policies, which are more inappropriate than ever in the current crisis,” he argues.

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