Robert Weissman: A New Life for the IMF: Capitalizing on Crisis

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A New Life for the IMF: Capitalizing on Crisis
by Robert Weissman


April's G-20 meeting - involving the heads of state of 20 of the world's most economically powerful countries - failed to yield an agreement on increased European stimulus spending or on new global financial regulatory rules. But it did feature one overriding tangible agreement: A commitment to expand massively the International Monetary Fund (IMF), in order to channel funds to developing countries rocked by the financial crisis.

The G-20 countries agreed to give the IMF up to $750 billion in new resources, three times more than it currently controls. The G-20 also pledged to provide $250 billion in trade financing to developing countries, and to channel $100 billion to low-income countries through multilateral developing banks.

Fleeing foreign investors, plummeting remittance earnings, falling commodity prices and shrinking export markets are devastating developing countries, leaving them in dire need of infusions of hard currency. The IMF money is intended to fill the developing countries' financing gap, and also contribute to the global stimulus effort.

But IMF critics warn that the Fund is requiring countries to implement contractionary policies, such as higher interest rates and lower government spending, that are the opposite of the expansionary policies pursued by rich countries, and that will undermine the stimulative intent of the promised new money.

The Hardest Hit

Developing countries are in desperate need of additional finance. Although they had nothing to do with mortgage-backed securities or credit default swaps, developing countries are getting worst hit by the global economic meltdown. .............(more)

The complete piece is at: http://www.multinationalmonitor.org/mm2009/032009/weissman.html