Will Biden ever stand up to the IMF’s abuse of power? | David Adler

JThis week, the Board of Governors of the International Monetary Fund (IMF) will meet at its headquarters in Washington DC to reaffirm the Fund’s three-pronged mandate: financial stability, economic soundness and – as Managing Director Kristalina Georgieva recently asserted – international solidarity. “I am determined to support our members however we can,” Georgieva said of the Fund’s new spirit. “Now is the time to seize this opportunity to build a better world.”

Georgieva is right: it’s now or never. The “biggest series of debt crises” in a generation is weighing on the countries of the South. Two ingredients make up this debt time bomb: rapidly rising levels of public debt among the world’s poorest countries, and a rapidly increasing percentage of that debt issued at variable interest rates. The combination of these two ingredients means that even minor rate hikes in wealthy countries will have explosive consequences in the developing world – just as supply chains seize up, food prices soar and the coronavirus pandemic Covid-19 is unleashed in under-vaccinated populations around the world.

In short, the Global South has never needed more support in its search for stability, strength and solidarity. But even a cursory glance at the IMF’s global activity reveals a systematic violation of this mandate, fueling – rather than solving – the health, hunger and housing crises that intertwine in the poorest countries. poorest in the world.

Take Argentina. In 2018, the IMF ignored warnings from its own staff to secure a $57.1 billion loan to the Argentine Republic under President Mauricio Macri: the biggest loan in the Fund’s history. Did the loan fulfill the IMF’s financial stability mandate? On the contrary: inflation rose, employment fell and capital fled the country at record rates. Now, long after Macri was ousted from office, the people of Argentina continue to pay the price. Argentina’s economy minister, Martín Guzmán, put it bluntly in his letter to Georgieva last month: “None of the objectives of the program have been achieved.”

What about economic power? At the start of the Covid-19 pandemic, the IMF declared its ambition to deploy $1 billion to fight the virus, protect the world’s vulnerable people and support their economies during the global shock. “Very unusual for the IMF,” Georgieva said in April 2020, “I would walk out and say, ‘please spend.’ Spend as much as you can, then spend a little more.

Too unusual to be true: Of the 85 countries that received pandemic support from the IMF, 73 of them were forced to undertake austerity measures in the name of “fiscal consolidation”. Oxfam’s report from last year is a world tour of the IMF’s broken promise to build and sustain strong economies: wage cuts in Tunisia, welfare cuts in El Salvador, energy subsidy cuts in Egypt . IMF austerity leaves the top 10% economically stronger, but only by impoverishing the bottom 90.

These statistics challenge the IMF’s solidarity mandate. But perhaps the best illustration of the IMF’s approach to solidarity can be found in its surcharges: the punitive, pro-cyclical and totally unnecessary fees that the IMF levies on its most indebted countries. One could imagine that the IMF would reduce if not eliminate its surcharges to align itself with its “new spirit of solidarity”. But again, it’s the opposite: surcharge fees have doubled from $1 billion to $2 billion between 2019 and 2021, while the number of countries facing surcharges has increased from 9 to 16. By 2025, the IMF expects that number to rise to 38.

IMF surcharges directly target the world’s vulnerable populations. In Ukraine, for example – where the government of Volodymyr Zelenskiy is struggling to stave off the Russian invasion while providing for the needs of more than seven million displaced people – the Fund will have collected $423 million in surcharges in just two years: 25% of the country’s total health budget. “Surcharges go exactly against what [the IMF is] supposed to do,” Nobel laureate Joseph Stiglitz said at a recent event at the Center for Economic and Policy Research. “It is meant to help countries … not to extract additional rents from them because of their urgent need.”

The IMF’s broken mandate may hit the South hardest, but its consequences are global. In countries like Mongolia and Mozambique, for example, the IMF is encouraging coal and gas extraction with tax breaks for fossil fuel companies. It will be the frontline communities in the countries that will suffer the most from climate collapse. But all nations heat in unison. Even the most air-conditioned countries do not have the luxury of ignoring the IMF’s climate report as a problem of the poor alone.

How, then, does the IMF fare? The Fund is a public institution financed by taxpayers’ money and controlled by member governments. From Argentina to Ecuador, from Pakistan to Egypt, people around the world have risen to protest IMF measures and demand another path for the state-funded institution. Experts have added legal substance to this widespread outrage, documenting violations of international law by the IMF and acts of ultra vires.

The IMF just shrugs its shoulders. “The IMF does not respect UN resolutions or the UN charter,” economist Andrés Arauz told the Progressive International survey last week. It is not a secret: in a letter addressed to Juan Pablo Bohoslavsky, independent expert at the Office of the High Commissioner for Human Rights of the United Nations, the IMF clearly pleads in favor of its impunity: “The IMF has not not accepted the Declaration on Human Rights Rights as the guiding principle of our operations.

The IMF’s abuse of power is therefore not a surprise. It is a natural response from an institution detached from the laws of its member states and the United Nations that binds them together. Adjusting the Fund’s mandate will not do the trick. Only strong accountability mechanisms – changing both who decides and how – can end the Fund’s impunity. Fortunately, there is no shortage of proposals for this mechanism, from the UN Economic and Social Council to the International Court of Justice. What we have lacked so far is the political will – especially from the IMF’s largest shareholder and sole veto holder, the United States of America.

Here we may have reason to be optimistic. The United States government seems to have rediscovered its passion for human rights, international law and the United Nations charter. Perhaps this selective passion will become universal and the United States will demand the application of these principles to the International Monetary Fund. This week’s spring meetings provide an opening for such intervention. But few of the Fund’s southern members are holding their breath.

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