Stealth Move in Washington Aims to Get $100 Billion for IMF Without Congressional Debate

"You don't have to do this." Those are the near-last words of several victims in the Coen brothers' classic film No Country for Old Men,
as they try to convince the movie's unrelenting assassin that he should
spare them. The assassin, played by Javier Bardem, finds this annoying,
because in his mind these murders are pre-determined.

So it is with the IMF's continuing confrontations with its borrowers,
with one government after another pleading: "You don't have to do
this." Turkey and Latvia were in the news last week, having joined the
roster of governments whose IMF
disbursements are being withheld because they find it politically
impossible to impose the required punishments on their citizens.

IMF sees these measures as necessary and pre-determined - in most cases
by the borrowing countries' having run-up unsustainable external or
budget imbalances. But in fact the IMF has a long track record - dating
back decades - of imposing unnecessary and often harmful conditions on
borrowing countries.

Latvia missed a 200 million euro disbursement from the IMF in March
for not cutting its budget enough. According to press reports, the
government wants to run a budget deficit of 7% of GDP for this year,
and the IMF wants 5%. Latvia is already cutting its budget by 40%, and
is planning to close some public hospitals and schools in order to make
the IMF's targets, prompting street protests. Latvia's GDP crashed by 18% in the first quarter
of this year, after a 10.3% drop in the preceding quarter. These are
among the worst declines in the world. This indicates that the IMF's
prescription is serious overkill. The purpose of IMF aid is supposedly
to make any necessary adjustment easier, not worse.

In Pakistan,
it would be surprising if the US Treasury, which is the principal
overseer of the IMF, did not see a need to ease up on the
contractionary IMF conditions there. The government of nuclear-armed
Pakistan is facing serious political problems right now, having
recently launched a major offensive against a growing Taliban
insurgency. Slowing Pakistan's economy at a time when the global
economic crisis is already doing that may not be the best policy from
the point of view of political stability. The IMF has negotiated an increase in Pakistan's fiscal deficit from 3.4% to 4.6% of GDP, but is holding the line against lowering interest rates.

In almost all of its standby arrangements
negotiated over the last year, the IMF has included conditions that
will reduce output and employment in situations where economies are
already shrinking.

Yet here in Washington there is a rush to
get the IMF more money without any congressional hearings or debate. We
are told that poor countries will suffer if the IMF does not get a
$108bn appropriation from Congress immediately. But this is nonsense.

we add up all of the IMF's commitments under the 16 standby
arrangements negotiated since the crisis intensified last year, the
total is less than $46bn. The poorest countries will not be allowed to
borrow anywhere near that amount.

The IMF already has $215bn on
hand, plus more than $100bn in gold reserves. It plans to create
another $250bn in SDR's, ie the IMF's currency. Even if we include the
$67.5bn that Mexico ($47bn) and Poland ($20.5bn) together can tap under
the IMF's flexible credit line, it is clear the IMF is trying to get
hundreds of billions of dollars more than it is likely to need. And it
has at least ten times the money that the poor countries - whose needs
are pocket change compared to IMF resources - will ever be allowed to

Yet the Obama administration, in a surprise move out of nowhere on Tuesday, decided to try and attach the $108bn for the IMF to another spending bill
in order to circumvent the normal legislative process. The reason for
this stealth maneuver is that they might run into trouble in the House,
where legislators are wary of voting for multi-billion blank cheques
after the backlash against the Tarp financial bailout. They will try to
convince Congress to approve this money without hearings or debate with
the idea that it must be done in order to save poor people in poor

Congress should be met with a chorus of opposition: "You don't have to do this."

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