IMF Role in Global Economic Crisis

The IMF has been variously reproached for not having foreseen either the scale of the financial crisis or when the crisis would break and because it did not become more active, at least at the beginning. The more the crisis spread, the more active the IMF became.

Hardly any State had asked for credit aid over a long period and the sum of the outstanding credits had sunk to an all-time low. In October 2008 several countries had to apply to the IMF for aid.29 Suddenly the question arose of whether the IMF would have enough resources if it were confronted with numerous large-scale applications for loans due to the financial crisis. At the same time this about-turn in calls on the IMF challenged it to accelerate and complete the ongoing revision of its credit instruments. This also involved an examination of the frequently criticised economic policy conditions for granting loans. As the IMF recommended massive stimulation programmes to the industrialised countries impacted by the crisis, the developing countries accused the IMF of double standards in view of their previous experience with its stringent conditions. And finally, the developing countries emphatically urged the IMF to at last step up the reforms on voting rights and other governance questions.

In its publication World Economic Outlook30 the IMF showed increasingly clearly how severely the developing countries had been impacted by the crisis. In March 2009 the IMF published an important and comprehensive survey of how the poorest countries have been hit by the crisis and the measures that had to be taken (IMF 2009a). The IMF report submitted to the UN conference in New York in June can also be described as fundamental (IMF 2009b).

In the meantime the IMF had expanded both its instruments for the grant of credit and its financial resources. The IMF created the flexible credit line as a precautionary measure for countries whose policies are considered good and which post sound macro-economic data. The credit conditions were simplified and the credit lines raised. The instruments for the poorest countries were also reformed.

The IMF has also built up its own resources. In August 2009 it created USD 283 billion new special drawing rights, including USD 110 billion for the developing countries (and USD 20 billion of these for the poorest countries).34 In September the Executive Council permitted the IMF to sell 400 tonnes of gold.35 Further, there were also bilateral contributions by the individual member countries, as called for by the G-20.36 This financing procedure was still in progress in October 2009. Switzerland also pledged to provide the IMF with an exceptional, set-period contribution to the stocking up in the amount of CHF 12.5 billion (FDF 2009b).

The Swiss Council of States approved the credit at its 2009 summer session (Official Bulletin 2009). On the other hand, the consultative commission adjourned the decision-making until it could examine the report announced by the Federal Council regarding the increase of official development assistance (ODA) to 0.5% (CPE-N 2009).

With a view to the annual meeting in Istanbul in early October 2009, the IMF awarded itself good marks for the work achieved so far. IMF aid granted to the 15 countries which applied for credit in the past few months was successful (IMF 2009c).37 In the poorest countries the IMF commitment had helped to make way for effective programmes. The conditionalities have been simplified and limited (IMF 2009d).

The non-governmental organisations do not see the IMF in such a favourable light. Some three international networks reproach the IMF for changing its policy only insignificantly. Rather, fiscally restrictive IMF conditions in three countries examined38 would impair the essential social protection (Solidar, Global Network, and Eurodad 2009). P. Chowla (2009) also sees a restricted development potential in IMF resources.

The developing countries and non-governmental organisations are by no means satisfied with the extent and pace of IMF institutional reforms. It is a fact that the IMF is now bound to implement quota reform and with it the revision of voting rights by January 2011.39 The developing countries would like a shift in voting rights of at least 7% to give them a majority. The blocking minority of the US should also be done away with. At all events, in 2009 the IMF did undertake an extensive dialogue with civil society that led to the publication of a civil society report (New Rules 2009) and to a joint event in Istanbul before the annual meeting.

At the annual meeting in Istanbul the IMF monetary and finance commission confirmed the G-20 agreement and called on it to continue with the reforms already initiated.41 For the most part, Hans-Rudolf Merz would like to follow suit. However, whenever there was a potential conflict of interests between the cautious financial gestures of the IMF and increased transfer of resources to the developing countries, Merz always upheld the former, e.g. in the question of utilisation of special drawing rights, in the event of possible financial risks for the IMF with watered down conditionalities and in the deployment of gold reserves and interest costs for loans to the poorest countries (FDF 2009b).