With energy and food prices rising, more and more countries with growing deficits are turning to the International Monetary Fund (IMF). After Ghana, Pakistan and even Sri Lanka, Bangladesh applied for aid totaling 4.5 billion dollars (4.4 billion euros) from the Washington-based institution at the end of July. As its energy spending increases, which it imports, its foreign exchange reserves have shrunk by $5 billion in 12 months. Those of Pakistan, sufficient to cover little more than a month’s imports, have also hit an alert threshold. Sri Lanka has plunged into a political, social and humanitarian crisis after defaulting on its external debt last May.
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Every crisis has its opportunities. The IMF, which is on the front line to save these countries from bankruptcy, wants to erase the bad memories left by the so-called “structural adjustment programs” that were fashionable in the 1990s and 2000s, the cuts in fiscal spending and combined privatizations. The fund has now banned the word “austerity” from its vocabulary and is arguing for more “targeted spending”.
high risk
“The IMF continues to call for higher taxes and lower subsidies in its aid programs, but no longer addresses measures to reduce poverty,” emphasizes Ganeshan Wignaraja, a researcher at the Overseas Development Institute in London. No doubt this is the consequence of the social movements of the 2011 Arab Spring. “These countries had good indicators and balanced accounts, but we saw that excessive inequalities can lead to social crisis and economic collapse,” observes economist Hakim Ben Hammouda , former Tunisian Economy and Finance Minister. Too often the IMF is unaware of the political fragility of the countries it works with. »
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The institution, which has $1,000 billion in reserves, says it has helped 92 countries for a total of $237 billion since the pandemic began in 2020. An amount that could quickly rise as 60% of low-income countries are at high risk of over-indebtedness, compared to 30% in 2015. “If several dozen countries default, the IMF will owe the wealthy to greed Countries lack the means to help them,” laments David Bradlow, Professor of Economics at the University of Pretoria, South Africa. These have halved in relation to the size of the world economy compared to 1944. »
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