By Dr Danny Bradlow, PhD, University of Pretoria — The Conversation, 10 August 2022
In most rich countries the news that a mission from The International Monetary Fund (IMF) is coming to visit is met with indifference. But in most African — and many Caribbean — countries, the news can cause great consternation. History has a lot to do with it. The citizens of many developing nations have suffered through their governments, under IMF pressure, cutting subsidies and social spending, firing public sector workers, and increasing taxes. A 2021 Oxfam study found that The IMF encouraged 33 African countries to adopt austerity policies in the wake of the COVID pandemic. Another important reason is lack of knowledge — the public gets little information about the purpose of the IMF’s visit or its likely outcomes.
The IMF sends its staff on two basic types of missions. The first are surveillance missions — the IMF regularly, usually annually, sends a staff team to assess the state of each country’s macro economy, the risks it faces, and its capacity to continue evolving in a sustainable way. The outcome is a report discussed by The IMF’s Board of Executive Directors that is usually made public. These recommendations are purely advisory; the country is free to ignore them if it is confident it will not need IMF financing. But this is a luxury that a country cannot afford if it thinks it may need IMF financial support. The second type of mission is initiated by requests for IMF financing. Their purpose is to assess the country’s need for financial support and to negotiate the terms of provision. The IMF provides financing on an unsecured basis, making it subject to policy conditions known as “conditionalities” — the premise being that the country is essentially living beyond its means and must reduce its expenditures to the level of its income. The scale of sacrifices necessary to restore a country to macroeconomic health, and the scope of conditionalities, are matters for negotiation between the government and The IMF, depending on the balance of bargaining power between them. This article has been republished under Creative Commons licence.