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May 02, 2008

Forward motion on debt and the IMF

I'm just getting back from vacay, but there's a few things I wanted to drag out of my email backlog and share.

First, in case you hadn't heard, the Jubilee Act passed the House. This is a major victory for the global justice movement, as it not only expands debt cancellation  for 24 additional impoverished countries, but also rolls back some of the conditionality that has been used to turn developing countries into basketcases.  The vote was 285-132, with many GOP joining the vast majority of the Dems in passing the legislation (only Reps. Jason Altmire (D-Pa.), Chris Carney (D-Pa.), Brad Ellsworth (D-Ind.), Kirsten Gillibrand (D-N.Y.), Nick Lampson (D-Texas) and Gene Taylor (D-Miss.) among Dems voted no - the first 5/6 are freshmen!)

I recently asked some friends who work on IMF issues to rebut the statement: "The IMF is dead." A few have responded. Mark Weisbrot also had a good column in the LA Times talking about how the IMF is dying, but is still not dead yet:

The collapse of the IMF creditors cartel has been a huge blow to U.S. influence. It was most pronounced in Latin America, where most of a region that used to be referred to as the United States' "backyard" is now governed by states that are more independent of Washington than Europe is.

The problem is that poorer developing countries, especially in Africa, remain dependent on foreign aid from the IMF (and the World Bank and other sources) to fund their basic budget and import needs. This can be harmful to their development and their people. In recent years, the IMF -- insisting that such measures are necessary to hold down inflation -- has imposed conditions that limit their public spending and, according to the fund's own internal evaluation, have prevented these countries from spending aid money on urgent needs, such as healthcare and education.

These countries need to join the rest of the developing world in breaking free of the IMF's policy conditions. The U.S. Congress may consider legislation that would pressure the IMF to use some of its huge gold reserves for debt cancellation and to limit the IMF's control over policy in poor countries. These would be important steps forward for the world's poor.

Our bud Rob Weissman had a similar piece at Huffington Post:

Although the Fund has promised that it would reform the way it imposes conditions on poor countries, a new report from Eurodad, the European Network on Debt and Development, finds that, over the last six years, IMF conditions have not changed in number or kind.

One thing has changed, however. Impressed by the IMF's repeated failures, middle-income countries have paid back their loans to the Fund, and are not taking out any news ones.

This in turn has two consequences. For now, at least, the IMF has lost its hold over most middle-income countries -- but it maintains its iron grip on the world's poorest countries. And, the Fund is experiencing a financial crunch of its own. It had depended on the interest payments from middle-income countries to support its budget.

Developing countries are not shedding tears over the IMF's financial distress. "At long last, the IMF is experiencing first hand serious budget cuts," says Cheikh Tidiane Dieye of Environment and Development in Africa (ENDA), based in Senegal. "The poetic justice of this is palpable. In Senegal, the IMF has mandated budget cuts for years. As a result, we have been unable to invest in health care, education and other essential services. If the IMF's loss of financial power is accompanied by a loss in political power, this could be good news for all Africans."

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