Why is the IMF so unpopular?
The IMF subjects the people already hurt by the failures of their governments to more hurt by the failures of the markets.
People have protested against the International Monetary Fund (IMF) in country after country that has borrowed from it, be it Argentina, Ecuador, Egypt, Greece, Jordan, Kenya, Nigeria, Pakistan or Tunisia. The placards held by the protesters often accuse the IMF, the global lender of last resort, of promoting debt imperialism and worsening economic inequality.
Why is the IMF so unpopular even though one of its key functions is providing its "resources to member countries in need"?
Free markets fundamentalism
Much of the bitterness against the IMF comes from the conditions it attaches to its loans. These conditions stem from free markets extremism: cutting down the role of the government because of an unshakeable belief in the supremacy of markets.
"Free markets may not be perfect but they are probably the best way to organise an economy," reads the tagline of an article on finance and development on the IMF's website - summarising the problematic mindset criticised by many over the years.
Over the years, the notion of free markets has been the subject of a great deal of critique. For example, Ha-Joon Chang, an economist from Cambridge University, explains that there is no such thing as a free market to begin with and regulations restrict the freedom to contract in all markets, from restricting child labour to requiring banks to hold capital.
The late Mahboobul Haque, a Pakistani economist and finance minister, who earned widespread respect for his work on human development, articulated his practical observation as follows: "Markets are not very friendly to the poor, to the weak, to the vulnerable, either nationally or internationally. Often we act as if markets are free. They are not. I have seen that in my country. The markets are often the handmaiden of powerful interest groups, and they are greatly affected by the prevailing distribution of income." Shock therapy that doesn't cure
The conditions attached to IMF's loans, known as structural adjustments, tend to be quite standard, such as cutting government expenditure, liberalising trade, removing restrictions on flow of capital, privatising state-owned enterprises, cutting increasing taxes, and so on.
To be fair, the structural adjustments often include things which the borrower country ought to have done on its own, such as broadening the tax base and strengthening its institutions like the central bank. However, even the justifiable adjustments are put together as a shock therapy. Countries are required to somehow complete in a few years what they have been struggling to do over decades. Little wonder then that Pakistan has been reaching borrowing agreements with the IMF since 1958 and commenced multiple programmes without fixing its economic fundamentals.
Empirical studies on results of IMF's structural adjustments are divided. However, a consistent criticism is that the IMF overestimates
subsidies, growth and underestimates the suffering caused by the adjustments. The IMF's own 2018 review of programme design and conditionality doesn't seem to disagree: "Directors shared the assessment that growth assumptions were often too optimistic, driven largely by global forecasting errors and the underestimation of the impact of policy adjustment and overestimation of structural reform payoffs." Unfair adjustments
Sovereign debt is replete with spillover costs (or externalities) including inter-generational injustices. Debt is contracted at the hands of the ruling elite but it is paid back by generations of ordinary citizens through the nose. It is because of the injustice in debtfinancing that the IMF is facing protests by the Kenyans for approving $2.34 billion three-year financing for Kenya.