For Immediate Release
Dan Beeton, 202-239-1460
New Report Finds IMF Agreements Have Included Policies That Could Worsen Economic Slowdown in 31 of 41 Countries
Pro-cyclical Fiscal and/or Monetary Conditions Have Been Attached to IMF Agreements During the World Recession
WASHINGTON - A new discussion paper from the Center for Economic and Policy Research
finds that 31 of 41 of countries with current International Monetary
Fund (IMF) agreements have been subjected to pro-cyclical macroeconomic
policies that, during the current global recession, would be expected
to have exacerbated economic slowdowns. The pro-cyclical conditions
noted in the report are either pro-cyclical fiscal or monetary
"More than a
decade after the Asian Economic Crisis brought world attention to major
IMF policy mistakes, the IMF is still making similar mistakes in many
countries," CEPR Co-Director and lead author of the paper, economist Mark Weisbrot said.
"The IMF supports fiscal stimulus and expansionary policies in the rich
countries, but has a much different attitude toward low-and-middle
The paper, "IMF-Supported Macroeconomic Policies and the World Recession: A Look at Forty-One Borrowing Countries,"
shows that in some cases, the IMF had relied on overly optimistic
growth forecasts - significantly underestimating the impact of the
world recession on borrowing countries. The paper also notes that in
some cases the Fund later loosened its policy conditions after the
economic performance was much worse than anticipated.
"It is time for the Fund to re-examine the criteria, assumptions, and
economic analysis that it uses to prescribe macroeconomic policies in
developing countries," the paper states.
The paper arises out of discussions with the IMF over the Fund's
recommended macroeconomic policies during the course of the current
world recession. In a panel discussion held on June 19, 2009,
there was disagreement between the IMF and CEPR over whether or to what
extent the IMF has supported pro-cyclical policies in borrowing
countries during the current world recession. CEPR agreed to take a
comprehensive look at current IMF agreements, as a prelude to further
discussions with the Fund on this issue.
The papers' authors do have praise for the IMF's actions in one area:
making available for borrowing some $283 billion of Special Drawing
Rights (SDR's - IMF reserve assets that can be exchanged for hard
currency) to member countries without conditions. The IMF's
unconditional lending and injecting liquidity into the world economy
with the SDR's, in a time of world recession, represents an
unprecedented step forward.
"The next step should be to eliminate harmful conditions attached to
other IMF lending facilities," the paper states.
The paper examines IMF agreements with the countries Afghanistan,
Armenia, Belarus, Bosnia and Herzegovina, Burkina Faso, Burundi, The
Central African Republic, Republic of the Congo, Costa Rica, Côte
d'Ivoire, Djibouti, El Salvador, Gabon, The Gambia, Georgia, Ghana,
Grenada, Guatemala, Haiti, Hungary, Iceland, Kyrgyz Republic, Latvia,
Liberia, Malawi, Mali, Mozambique, Mongolia, Niger, Pakistan, Romania,
São Tomé and Príncipe, Senegal, Republic of Serbia, Seychelles, Sierra
Leone, Tajikistan, Tanzania, Togo, Ukraine, and Zambia.
The Center for Economic and Policy Research (CEPR) was established in 1999 to promote democratic debate on the most important economic and social issues that affect people's lives. In order for citizens to effectively exercise their voices in a democracy, they should be informed about the problems and choices that they face. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.