IMF case studies

• THREE FUNDAMENTAL PILLARS (Surveillance)

  In 2018, the IMF advised the Australian government to cut the company tax rates to "benefit productivity and reduce inequality”
• IMF POWER

  • The IMF is able to lend about $17 trillion to its member countries.
  • Criticism from some member countries regarding the influence the United States and European countries have over the organisation. 
  • The US has the largest voting rights due to having the highest GDP of all member states - thus enhancing their influence within. (20% of IMF funds) 
• Conditional Loans

  EURODAD STUDY 2018

  • Conditions attached to IMF loans increased to 26.8, compared to 19.5 per loan between 2011-2013.
  • The Study also found that 23 out of 26 programs studied on fiscal consolidation lead to austerity (increased taxes and/or raised taxes as a result of the loans.)
  • The Washington Consensus “(all policies imposed) is a one size fits all and ignores the characteristics of states.”
• STRENGTH OF IMF: Ghana

  2015: $918 million loan to help stabilise the economy. 

  • 3 PILLAR PROGRAM: Restore debt sustainability, strengthen monetary policy and clean up the banking system. 

  IMPACTS

  • Rise in economic growth from 2.2% in 2015 to 8.8% in 2019
  • Fall in inflation rate from 19% to 8%
  • Cuts to wasteful spending enabled for the provision of free secondary education. 

  For Ghana’s population of 28 million people, this ultimately results in higher incomes, better job opportunities and more purchasing power. 
• WEAKNESS OF IMF: Ecuador

  March 2019: agreement to borrow $4.2 billion over three years. 

  • IMF CHIEF: ‘comprehensive reform program aimed modernising the economy and paving the way for strong, sustained and equitable growth’
• Ecuador (CONTINUED)

  However, the program called for an enormous tightening of the country’s national budget - about 6% of GDP over three years (austerity measures). This would entail:

  • Firing tens and thousands of public sector employees.
  • Raised taxes that fall disproportionately on poor people. 
  • Cuts to public investment. 

  According to an article by the Guardian, all of this would serve to push Ecuador into a recession. Since the end of the deal, Ecuador has experienced small levels of economic growth, but has been slowing down and contracting back into the forecasted recession. 
• Threats to State Sovereignty - UK

  • In September 2022, the IMF’s criticism of Liz Truss’s proposed tax cuts contributed to a slump in the pound’s value. 
  • Decision to sack chancellor Kwasi Kwarteng (who announced the tax cuts) was taken while he was attending the IMF’s annual meeting