Does Wall Street Still Hold Sway?
Slow, Small Changes at the IMF
By MARK WEISBROT
Over the past year or two the IMF has made some positive changes in policy and in their published work, some of which challenges the conventional wisdom among central banks and even the past practice of the IMF itself. The Fund, which prior to the current decade was one of the most powerful financial institutions in the world, has presided over a number of economic disasters and was widely seen – at least in the low- and middle-income countries to which it has lent for the past four decades – as generally doing more harm than good. Now there is debate over how much it has changed, and what these changes mean for the IMF itself and its role in the global economy going forward.
First, the good news: Last year the IMF created some $283 billion of its reserve currency, Special Drawing Rights (SDRs), available for borrowing by its 186 member countries. This is exactly the kind of thing that should be done in a world economic downturn. It is similar to the “quantitative easing” – i.e. creating money – that the U.S. Federal Reserve and the Bank of England have done during the recession. Although the IMF is not a world central bank, in this case it was acting as one, in a positive way. And the SDRs were made available to member countries without any conditions attached – something the IMF has never done before. Unfortunately, the SDRs were allocated according to each country’s IMF quota, which meant that the high-income countries got the bulk of the money. And of course most of the low-income countries can’t afford to take on more debt. Nonetheless, this was a positive step for the IMF towards developing countries. more