Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. See all of the questions and answers here. A reader asked:
Q: Will we finally see an IMF/WB policy that truly acknowledges the rights of the poor and the least developed countries? Will the reforms of the IMF/WB push for localization and food sovereignty as ways to face poverty?
Grabel: Certainly the IMF/WB have been discussing the poor and the poorest developing countries a good deal of late, especially in relation to the effects of the financial crisis on the most vulnerable. And some of the assistance packages that they’ve negotiated have paid somewhat more attention to the most vulnerable groups, such as pensioners (though concrete financial support for the most vulnerable groups has been pretty scant).
But whether the IMF/WB will move in directions that truly address the needs of the poor and the poorest countries is very uncertain at this point. Indeed, a good deal of the assistance funds provided by the IMF/WB during the current crisis have gone to wealthier countries, especially to struggling countries in Europe and not to the poorest countries in the world.
As far as the IMF/WB pushing for localization and food sovereignty in practical ways, well that, unfortunately, seems to me less likely in the foreseeable future.
Prof. Grabel’s point about the use of IFI funds for better-off countries is an important one. Because of the two-tier system both the IMF and WB (and other IFIs) use, the great bulk of the cash is designated for middle-income, as opposed to low-income, countries. The much-touted numbers for the G20’s bulking up of the IMF in response to the crisis could actually stand some dissection – LICs were eligible for very little of the $850 billion pledged, even though they were by many measures the most threatened by the crisis. In fact, apart from the $250 billion worth of Special Drawing Rights (SDRs) that were created as part of the $850 billion pledge (and which required no expenditure by anyone), little of the remaining $600 billion ever materialized. It is basically capital on call if the IMF gets desperate, which has never happened before and is unlikely to happen now. Of the money that the IMF did lend, a whopping proportion went to Eastern European countries. I predict that in a few years we will see the IMF’s material role in this crisis as being the agent of a bail-out of Western European banks which had over-exposed themselves in Eastern Europe. But in the process the IMF managed to recuperate its reputation after the long tailspin starting with the East Asian crisis.