The row over the tough conditions imposed by the IMF on
crisis-hit eastern European countries as part of their rescue
plans boiled over yesterday after the US was accused of trying
to push its $108 billion contribution to the Fund through
Congress without a debate.
The Obama administrations surprise decision to attach
the IMF bill to an emergency spending bill to cover the costs
of the wars in Iraq and Afghanistan going through Congress last
night would deprive elected politicians of the opportunity to
demand reform of the role and policies of the Fund, campaign
Joseph Stiglitz, former World Bank chief economist and Nobel
laureate told Emerging Markets that dodging the issue
of governance reform made it more likely that [the IMF]
will pursue policies that are pro-cyclical and therefore
counterproductive, thereby repeating the risks of the
Such a move would increase the likelihood the IMF will
not be as effective an instrument for disbursement as one would
have hoped in regions including eastern Europe. He added
that the fund continued to push policies that are
antithetical to the beliefs of many countries, both borrowers
and potential creditors.
The US contribution is part of a $500 billion global boost
to IMF resources approved by the leaders of the G20 countries
at an April summit in London, as part of a package of measures
aiming at stemming the financial crisis.
JubileeUSA, a Washington-based advocacy group, said there
was an urgent need for a debate over the policies the IMF was
implementing in regions such as eastern Europe. The IMF
is continuing to push through contractionary policies on a
number of countries at a time of depression or recession,
Neil Watkins, the groups executive director, told
Emerging Markets. We are concerned by the double
standards where rich countries benefit from fiscal
stimuli, he said.
The IMF withheld a E200 million payment to Latvia after it
missed a target to cut its budget. The government wants to run
a budget deficit of 7% of GDP but the IMF wants it to cut by a
further 28% to 5%. Spending cuts imposed earlier this year
triggered street riots which led to the fall of the
The IMF has announced a total package of E55bn that includes
six other countries Hungary, Ukraine, Belarus, Georgia,
Armenia and Romania. Negotiations over a loan to Turkey have
stalled over demands for spending cuts.
Peter Chowla, policy officer at the Bretton Woods Project,
the advocacy group, said conditions imposed on countries such
as Hungary, Romania and Latvia showed the same old, same
old, IMF with demands for cuts in fiscal deficits.
But Marek Belka, director of the IMFs European
Department, said that at the start of the crisis the Fund was
criticised for not being tough enough. We think we are
already quite flexible, he told Emerging
Markets. As a matter of fact it sometimes happens
that we are more lenient on fiscal targets than the authorities
of these countries.