by Sir Ronald Sanders
(The writer is Antigua and Barbuda’s Ambassador to the United States and the Organization of American States. He is also a Senior Fellow at the Institute of Commonwealth Studies at the University of London and Massey College in the University of Toronto. The views expressed are entirely his own)
In the wake of the economic damage done by the effects of the COVID-19 pandemic, countries in every continent of the world have turned to the International Monetary Fund (IMF) for assistance.
It is right that they have done so. The IMF exists to provide economic and financial support to countries when other options have been extinguished. The pandemic brought countries to that situation in rapid time, particularly tourism dependent countries which were the hardest hit.
In some countries, there is an ideological resentment of the IMF. That resentment is based on past harsh conditionalities that the Fund included in the terms of its loans to countries already in desperate straits. That resentment should be re-evaluated. IMF conditionalities still exist, but they are more geared to recognising the breathing space governments require to get their countries’ economies performing at an optimum level. The Fund wants to be repaid, so that, in turn, it can pay back the banks, governments and institutions from which it borrows to supplement its lending resources.
While the main source for IMF loans on non-concessional terms are provided by member countries, through their quota payments, the Fund also borrows money that it lends. Of the IMF’s current total resources for lending, amounting to about US$1 trillion, a significant portion is money that must be repaid.
If the IMF fails to service its loans, the entire world will lose an extremely important pillar of the global financial architecture, resulting in infectious economic instability and, eventually, political chaos and civil strife.
Consequently, like any lender, the IMF has to make sure that borrowing countries will be able to repay. It sets terms – called conditionalities – to ensure that the best use is made by borrowers of the money they are advanced, and that loans can be repaid.
