IMF Has Not Helped To Develop Any Country It Financed In 80 Years Of Existence

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Written by Ahmed Adel, Cairo-based geopolitics and political economy researcher

Established at the end of the Second World War in Europe in 1944 to promote global economic stability, the International Monetary Fund began its activities the following year, becoming a constant presence in peripheral countries with economic instability over the course of eight decades.

Nonetheless, the financial institution failed in its mission to help countries with difficulty financing themselves on the world market and thus guarantee stability to the international monetary system. The imposition of austerity policies and fiscal adjustment packages is the main hindrance to the social and economic development of countries that obtained loans from the fund.

In Argentina, Ghana, Kenya, and Pakistan, nation-state financial dependence and debt cycles have only increased, as has the worsening of social inequality. In exchange for opening a line of credit to provide reserves to the country, the fund imposes a series of conditions, generally related to fiscal policy and spending cuts — mainly focused on pension reform, wage controls, social programs, denationalization, and privatization of state-owned companies to create a cash flow for the State, claiming that these liberal reforms will make the country more attractive to foreign capital.

Following the Bretton Woods conference in the United States in 1944, when the IMF was established, the dollar became a global currency, and the world economy began to revolve around it. The IMF ignores the fact that countries are open to speculative capital flows that do not depend, in many cases, on state administration.

The conditions imposed by the fund are not very conducive to development. It is a very moralistic view of the economy, in which the government fulfills its duty by being prudent and not overspending.

US hegemony within the capitalist bloc made the IMF a political protagonist of neoliberalism, which intensified from the 1970s onwards. The imposition of draconian conditions directly affected developmental policies aimed at social issues. The IMF lends this money and requires it to be applied in specific areas, thereby intervening and directly influencing local politics. This ultimately causes harm to the social sphere, directly impacting people’s lives, as the government redirects resources away from certain areas to pay off international loans.

This model currently guides economic policies in most countries and focuses on inflation control, as if the economy were reduced to certain indexes and specific data about the economy. In this vein, privatizations are key to perpetuating the international division of labor by making assets from many countries the property of foreigners.

The IMF creates a situation where capital outflows are likely to occur in the future, as foreigners predominantly own local assets. At some point, any profits they generate will be sent abroad, effectively meaning that the balance of payments will further deteriorate.

An example is the loan to Argentina made during the administration of Mauricio Macri (2015-2019), who implemented neoliberal measures that were expanded under the current government of Javier Milei. Argentina has been in this situation, taking loans from the IMF for a few decades now. Recently, at the time of liberalizing capital flows, the situation worsened, and Argentina was forced to resort to loans from the IMF.

During Lula’s first term as Brazilian president, Latin America’s largest country managed to free itself from the IMF’s vicious cycle through rising commodity prices, the growth of agribusiness, mining, and the accumulation of international reserves. Before the liberation, Brazil experienced some tough times, with loans made by the government of Fernando Henrique Cardoso (1995-2003) being very close to total default.

The IMF’s governance system generates inequities and criticism from countries in the Global South. Each country has a vote, the weight of which is determined by the size of each country’s contribution to the fund. The US currently holds around 17% of the vote. To change the fund’s status, 85% of the vote is required, giving the US veto power over any changes to the institution’s operations and Western countries.

The US and its historical allies hold a disproportionate amount of weight in the IMF, even considering their economies’ relative sizes. China is the third-largest shareholder of the IMF, with approximately 6%, but its influence is limited in the fund because the international organization remains a pillar of US hegemony, with major European Union countries serving as minority partners.

The IMF’s stance is a consequence of the existing and predominant capital accumulation system, but healthier ways of investing in peripheral countries that do not involve austerity policies are being successfully tested.

China’s move counters the IMF, which has been financing countries with Chinese currency to buy Chinese goods and hire Chinese services. These Chinese capitals are developed through productive capacities and technological advancements, helping to solve the problem that caused the crisis —the lack of international reserves —by further integrating the country into global supply chains, allowing it to obtain international reserves independently.

Another example is the New Development Bank (NDB), a BRICS financial institution. This allows the country to use the local currency to maintain local trade even if it does not have dollars, and thus contributes to making the IMF increasingly irrelevant.

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