The International Monetary Fund (IMF) has long attracted criticism for attaching to its loans contractionary economic policy conditions that undermine growth and development in borrower countries. The nature and scope of these conditions now assume even greater importance in light of the significant increase in IMF lending to countries affected by the 2008-09 financial crisis. This paper finds that, apart from some limited reforms in its crisis loans such as a new focus on social safety nets, the fund remains essentially wedded to the objective of securing macroeconomic stability in debtor states through the tightening of both fiscal and monetary policies. The prescribed policy measures, such as curbs on public spending and hikes in interest rates, carry a serious risk of exacerbating the downturn in economies already hit by the crisis. Given such damaging impacts, this paper argues the need for a fundamental departure from the pro-cyclical orientation of IMF loan conditions. The authors advocate increased flexibility for borrowing countries and, more importantly, a counter-cyclical strategy to pursue nationally driven development policies that can boost domestic economic activity and support equitable growth.
This product was added to our catalog on Tuesday 10 April, 2012.