The IMF: As I See It. A Loan-Shark; an Agent of Financial Colonialism; and Janus-Faced.!

-By Desmond Mallikarchchi -Former Prof. of Philosophy

(Lanka-e-News -25.June.2024, 9.20 PM) The IMF is not a sympathetic benefactor of poor countries. Instead of being ‘a friend in need’ or savior, the IMF’s behavior can be classified as predatory. (Definition: an attempt to trick, manipulate, or control other people to get what one wants without any regard for the harm it causes.) Some have compared the IMF to a shark. Like a shark eating small fish, the IMF swallows poor countries at its will. ‘It is one of the global loan sharks of the twins of international finance, the other being the World Bank’. (Lee Sustar: The IMF-World Bank Loan Sharks: Prescribing Poverty, 2004).

The term ‘shark’ has two meanings: (1) A large fish lives in seawater and has sharp teeth and a pointed fin Part 1 of the financial loan of 2.7 billion the IMF has pledged for the 17th time to Sri Lanka was released last March. The delay in releasing the second tranche of the loan was due to the failure of the SL government to satisfy the agreed policy requirements. However, the IMF released the second tranche a week ago but demanded that the SL government strengthen tax administration, remove tax exemptions, and actively eliminate tax evasion. But if our governments had met these requirements by themselves when they were in office for decades, then neither we would have to listen to the advice of the IMF on how to govern the country nor we would have been obliged to dance according to their tune. However, certain politicians and the general public seemed to have been very happy that the IMF’s insisted on this and tried to appreciate it, some in writing and some verbally. They, without studying the IMF in depth (I am pretty positive that 95% of our MP’s are ignorant (while some are clueless) about what the IMF is), went out to say that ‘they sound helpful and genuine.’ But the IMF is not that humanitarian, sympathetic, and helpful. Their track record, if studied closely, justifies this claim.

on its back. (2) A dishonest person persuades other people to pay too much money for something.(Cambridge Dictionary). The word‘shark’ is not only used for persons, but it is also being used for institutions and organizations as a compound noun, ‘loan shark’ as their actions clearly agree with the second meaning of the shark mentioned above. (ex: The IMF-World Bank: Loan Sharks 2004; The IMF: A brutal loan Shark for capital 2019:Are the World Bank and IMF loan Sharks? 2019.)

The IMF, as mentioned before, is engaged in a predatory maneuver, subjecting poor nations to loan traps while the poor countries are trying hard to gain some economic progress. It has become crystal clear from their recent behavior that the IMF has become the bandwagon of financial colonialism and imperialism. This is not the fancy imagination of the writer, but it is the true record of their legacy, at least of about 60 years. The two photographs that are being used for this article are the ‘visual representation’ of their track record. The facts and figures and the argument below are the written evidence for the pictures.

Under the theoretical guidance of Maynard Keynes and Walt Rostov, the IMF was established in 1944 as a part of the Bretton Woods agreement to provide financial and technological assistance to developing and poverty-stricken countries for achieve sustainable development and progress. The IMF displaying ‘human face’ states further that it works to foster global growth and economic stability by providing policy advice and financial assistance to poor countries to help them achieve macroeconomic stability and reduce poverty. (IMF.Ch.2).Though this thought is virtuous and sounds human, they have acted more often than not contrary to it, and hence, they have hardly accomplished this objective in practice.

The activities of the IMF, notably since 1965, testify to the above. To put them in brief: (a) playing the role of propagator of American imperialism.(b) Making poor countries poorer.( c) Stipulating extremely unrealistic conditions for bankrupt countries (d) Assisting American and European imperialism to realize their monetary colonialist objectives (e) Many instances have been reported where the IMF has acted disregarding the established law (f) Acting obstinately as they are blessed with impunity. (g) Violating the international agreement on human rights. (h) Granting loans to countries that are friendly with the U.S.A. while denying or delaying loan facilities to countries that do not support their ideology (ex: Vietnam, Venezuela). How could the IMF claim to be ‘humanitarian’ if the record of their achievement would be written like this, and how could the loans they provide and the loans they have already granted to poor countries be called philanthropic?

Despite the fact that the IMF has given loans in billions of dollars to bankrupt and undeveloped nations, the borrowing countries haven’t achieved any perceivable and substantial progress either infra-structurally or super-structurally, apart from a few short-term positive outcomes. The quality of life of the people has not improved. True, the knavish local politicians too are partly responsible for this agonized situation, but the role of the IMF is evident.    

There is no country that has taken loans from the IMF that has achieved any development. No country has risen from the ‘abyss’ they had fallen into. A number of countries are in a state of ‘Zombie’. If any country has attained any progress, it is only a country that has established friendly ties with America. Besides, the conditions the IMF dictates are unattainable. This is one of the main criticisms that have been leveled against the IMF by its critics. They have also been criticized for demanding a high interest rate from economically crippled poor countries and for collecting their dues up to the last penny without showing any mercy.

They are also eying up thriving trade zones in the victimized countries with the intention of snatching them in the process, or at some point. There is plenty of evidence, but we will refer to our own. For the pledged loan of 2.9 billion dollars to be granted, the IMF laid down a condition that two of our main profit-generating institutions namely, the insurance cooperation and the telecom (SLT) may need to be sold to private entrepreneurs in the open market. This is how the IMF assists the imperialists in converting poor countries into their fiscal colonies. The IMF is the medium through which they realize their objectives. If this role of the IMF is not like a ‘Shark’, what else is it?

Similarly, in Kirgizstan, where 97% of the population is below the poverty line, the IMF blocked all their loan-application avenues and released the second quota of the loan approved, but under inhuman conditions. Even for us, they would give the second quota of the promised loan only after pressurizing the present government to impose further burdens upon the people who are already experiencing hardships. Biglaiser and McGauran (2002), based on research conducted on 81 countries that had taken loans from the IMF, revealed that the IMF is deliberately stipulating conditions that cannot be easily met by poverty-stricken countries. (‘The effects of IMF loan conditions on poverty in the developing world’). Although their interest rate is normally 6%, when a country is borrowing in dire distress, there are instances where the IMF has raised the interest rate up to 9 to 10 %. This is obviously exploitative, ruthless and an expression of an elementary or mild form of sadism. Consequently, the IMF easily meets the requirement of the second definition of the term shark mentioned above.  

The IMF’s official website emphasizes that its lending process is flexible, but there are ample examples where it has not abided by this principle and has become intermittently unhelpful. The IMF had harassed Venezuela so much that Hugo Chaves even considered withdrawing from the IMF in 2009. Once again, when Venezuela applied for a loan of 5 billion dollars to meet the COVID disaster, the IMF refused that on political grounds. As Zambia failed to abide by the inhumane policy conditions of the IMF, the IMF not only stopped releasing the balance but also told Zambia to pay a penalty as well. The Zambian Minister of Finance pleaded, ‘Please do not penalize us’. But the hard-hearted IMF was unshaken and proceeded with their decision. While over 6.5 million people became destitute in Ukraine, the IMF tried to take their interest of over 2.3 billion dollars from Ukraine. What kind of humanitarian gesture is that? These actions and decisions of the IMF endorse that they well deserve the metaphor of the ‘shark’.   

Yanis Verfakis, a former Minister of Finance of Greece (2015) and the author of Technofeudalism (2023), holds that the IMF is ‘toxic’ and argues further that the countries caught up in their trap end up as deserts. Even ‘Neo-liberalist’ Milton Friedman was not happy with the IMF providing loans on conditions because the very structure of the IMF money lending is anti-democratic. Friedman was absolutely correct,  ‘as the economy, society, and governments of borrowing countries have all been hurt by these conditionality as the conditions from the IMF slow down economic development, increase poverty and inflation, and make things more unequal’. If unequal, then it is undemocratic.

Their concepts of ‘macro-intervention’ and local ‘restructuring’ have also created enormous problems. For example, let’s look at the crisis that occurred in East Asia in 1997. Although Indonesia and Thailand implemented the IMF’s proposals for structural adjustments, they had not benefited from them. Malaysia was also hit by the crisis, but they did not seek refuge in the IMF. By practicing ‘unorthodox’ methods and taking ‘bold steps’, they sailed through the crisis safely and escaped falling into the jaws of the IMF shark. Although Indonesia and Thailand experienced some short-lived improvement, there was no lasting solution. The problem is becoming ‘gangrene’. Their biggest problems were settling the IMF loan installments. They had no financial ‘reserves’ to pay back the loans. In these two countries, controlling the rising rates of inflation, curbing the rising cost of living, and addressing the problem of unemployment have not been better from the level of 1997/98. Afghanistan requires urgent assistance right away to survive, as she is one step away from famine. What has happened to, Kenya, South Sudan, Angola, Nigeria, Brazil, and Greece? What is happening to Sri Lanka right now? No different from the above. The research conducted between 2000 and 2023 had shown that the IMF funds have a limited impact on lessening poverty. (Lang 2001; Garuda 2000; Vreeland 2002).   

The situation of Latin American countries that have been caught up in the IMF loan traps is far more pathetic than this. The statement of Steve Hank, professor of applied economics at John-Hopkins University, who served in the capacity of the economic advisor to President Suharto of Indonesia (1998), still remains true”: ‘a country begins to face economic problems as soon as it obtains IMF loans’. This statement is truer today than at the time it was first made 25 years ago.

South American countries on IMF loans are no better. No country in Latin America has improved economically by borrowing from the IMF.  The Argentine government, for example, faced numerous economic challenges: the unsustainable build-up of debt, rapid depreciation of its currency (the peso), economic contraction, inflation and hence she was in a big mess economically. She had no option but borrowing 50 billion US dollars from the IMF by agreeing to the unsympathetic conditions laid down by the IMF. Washington Post reporter Paul Blustein,, through his books The IMF and the Bankrupting of Argentina 2005: Chastening 2003; Laid Low 2016:  revealed how Argentina as a consequence, fell into the fire from the frying pan. Countries such as Bolivia, Colombia, El Salvador, and Brazil which are on IMF support still in deep waters. There is no sign of a safe haven for them.

About 92 countries in the world are debtors to the IMF. When these countries find it difficult to settle one loan, what they do in desperation is ask for another loan, which is quite understandable. The IMF is shrewd and strategic and exploits the situation. But first, they say, as a tactic, that they cannot lend money, whereas they are eager to lend. After a week or so of tug-of-war, they release the money, charging a higher interest rate. Like a deer caught up in the coils of a giant python, there is no escape for poor countries but getting crushed to death. So, there is no escape for any country that has borrowed money from the IMF. Recall what Verfarkis and Hanks said above. In fact, these companies are fiscal terrorists. They are cannibalistic institutes that come under the guise of genuine benefactors, but finally they devour those countries. This observation and argument are equally valid for the World Bank too. This is why the metaphor of ‘Janus Faces’ is appropriate for both the IMF and the World Bank.

The IMF and the World Bank are twins, as they were born in the same year, 1944. The hidden objectives of both are the same: legitimizing Neo-liberal capitalism and strengthening and expanding Euro-US financial imperialism. Further, their objective is to tighten the grips of ‘credit traps’ on the countries that are trying to survive in great difficulties and thereby bring underdeveloped and developing countries under their power and surveillance. In the past, Great Britain was known as ‘the empire that the sun never set’. It was built with the power of weapons, (or militarily), in the 18th and 19th centuries. The same is repeated today, but not by military means but by the power of money and finance. But today, it is not Britain; the U.S.A plays the first fiddle and the Britain only the second. Anyway, both are financial colonialists.

A campaigner for the IMF, James Boughton once wrote that because of the IMF’s financial support, we can see a silent revolution taking place in borrower countries. (Boughton, Silent Revolution: The IMF, 1979-89.)

This write-up can be taken only as a propaganda technique designed to convince its member countries (170 in all) to borrow from the IMF when in distress. Besides, this is inaccurate information and far from the truth, as there is no country that has taken loans from the IMF, undergone a ‘silent revolution’, or experienced a ‘silent evolution’. The protests of the general public, complaints of the disappointed debtors, demonstrations launched against discrimination, petitions, and pleadings all evince that no such ‘revolution’ or ‘evolution’ has taken place in indebted poor countries. Instead, what the whole world heard was the sound of the wailing, sighing, and screams of the innocent victims who were about to fall into the mouth of the ‘Shark.’ Some of the findings of Joris Luendgick’s study on banks are true with regard to the IMF as well (Swimming with Sharks, 2015). The countries that try to swim with the Bank Sharks, ‘like the IMF’, will never succeed, as those monetary sharks are always victorious in swallowing those countries through subtle manipulations and deploying crafty strategies.

However, the IMF does not wish to see these countries entirely ruined, or destroyed either. That means they do not want to see these countries get lost in the deep sea of economic collapse. Their strategy is to keep such countries alive and in conditions of ‘coma’, or in the state of ‘paralysis’, or in a ‘zombie’ situation until the collection of the interest due. The hidden objective of granting loans in billions of dollars is to have these countries as their ‘colonies’. True, this objective is not on the official agenda of the IMF, but it is the intention of the US and other capitalist countries, which are key shareholders of the IMF. The IMF is only a ‘cat’s paw’. Thus, the ‘loans’ released by the IMF to bankrupt or developing countries are not humanitarian aid but investments made towards realizing their politically motivated colonial objective.

There is much published literature on the IMF and politics. Several studies have shown how the IMF is covertly and overtly engaged in politics and how American politics dictate the terms of IMF loan grants and their conditions. (Babb, 2003; Stone, 2008). (Thacker, 1999. ‘The High Politics of IMF Lending’,World Politics). What countries should be given priority, the loan amount, the conditions of lending, the interest rate, and the pay-back period are all political decisions. (Example: postponing the decision whether Cuba should be given membership or deciding not to grant the membership to Vietnam.) In the IMF’s own words, ‘Loans to Sudan continued out of ‘respect for Sudan’s strategic role in the region’. Anyway, the plain truth is that the very founding of the IMF itself was to carry out a political agenda. The concept of ‘economic solidarity’ was merely a pretext. Pit bulls and Rottweiler dogs are trained not to be ‘lap dogs’, but to be aggressive. The IMF is fulfilling both roles.

Based on these facts, the image of the IMF could well be seen as follows: 1. The IMF is an apparatus formed to work for or with imperialist countries to spread their power over poor countries. (Nowshad The IMF: Development or Hindrance) 2. The IMF is a financial institution that pulls the countries that are being roasted in the pan into the hearth. 3. The IMF is an organization that dictates unbearable conditions to borrowing countries and systematically and fraudulently devours them like a shark. 4. The IMF also serves as an agent for financial colonialism, which is a form of neo-liberalism.

The IMF is also seen by corrupt and swindling politicians as the washroom that cleanses their sins, and they consider it their last resort for escape when they cannot spot any other option to circumvent the problem.  

What could be concluded on the basis of the above brief survey and analysis of the IMF is that there is a manifest contradiction between their objectives and their practices, that is, between what they say in their manifesto, namely, ‘to achieve sustainable growth and prosperity for all of its 170 odd member countries and reduce poverty around the world’, and what is practiced in the field. Therefore, we need to think twice before sympathizing with the IMF and ‘falling in love’ with its enticing face because the IMF reminds us of a deity in Greek mythology, the double-faced Janus, who pretends to have one set of feelings while acting under the influence of another.

-By Desmond Mallikarchchi

Former Prof. of Philosophy
University of Peradeniya

by     (2024-06-25 16:00:42)

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