IMF reassures COVID-19 support after hundreds of groups push back against belt-tightening measures

Charged with helping the global economy recover from the impact of COVID-19, the International Monetary Fund (IMF) was built to stabilize global markets at a moment just like this. During the worst economic crisis since the Great Depression, the IMF has taken unprecedented action by loaning about $100 billion of its $1 trillion fund for countries in need. 

“The IMF has been very loud and clear in this crisis. ..Turning to our membership, we say ‘spend, but keep the receipts.’”

“The IMF has been very loud and clear in this crisis,” IMF managing director Kristalina Georgieva said recently. “Turning to our membership, we say ‘spend, but keep the receipts.’” 

These initial loans had few strings attached and served as a lifeline for countries in freefall. But as the pandemic lingered, many needed more money. Costa Rica, for example, had to request another loan. And this time, the IMF asked that in exchange, Costa Rica increase taxes and sell some state assets. The country’s labor unions balked. Earlier this month protesters took to the streets for weeks. 

“The protests were so huge that the government had to cancel this proposal,” said Patricia Miranda, director of advocacy at LATINDADD, the Latin American Network for Social and Economic Rights. “[The IMF is] just deferring and postponing the problem for a couple of years or for two or three years. But they’re not getting the problem solved.”

Related: Africa must invest ‘in human capital’ to fight the coronavirus

There were also protests against IMF austerity measures in Ecuador. Miranda says Latin America has little say in its situation and is already sliding backward into a deep economic hole that took decades to work itself out of. That’s why her organization and 500 others across the globe signed onto a joint letter that urges the IMF to abandon the belt-tightening policies it has historically imposed on countries after an economic crisis. 

“It’s very important that governments still have the capacity and the space and the time to address this economic crisis in a way that is going to help people — and not increase inequality further.”

“People are not going to get jobs immediately,” said Nadia Daar, who directs the Washington DC office of OxFam International, one of the signatories. “So it’s very important that governments still have the capacity and the space and the time to address this economic crisis in a way that is going to help people — and not increase inequality further.”

Related: How the US coronavirus stimulus package compare to those of Europe

She says there is a simple way for the IMF board to approve trillions of dollars worth of a special asset that the IMF controls for all its member countries. That money wouldn’t have to be paid back. The IMF did this in response to the 2008 Great Recession. But the US has veto power on the IMF board, and the Trump administration has used it to shut down that option for now. So, the IMF is supporting countries through loans.

“They promote austerity to ensure that creditors are repaid, but also that debt levels remain ‘sustainable,’ meaning, debt levels remain low so that creditors, bankers are not going to be freaked out. And so, what matters is to keep the debt levels low, even at the expense of meeting health and recovery needs in these countries.”

“They promote austerity to ensure that creditors are repaid, but also that debt levels remain ‘sustainable,” said Bhumika Muchhala, senior policy researcher at the Third World Network, “meaning, debt levels remain low so that creditors, bankers are not going to be freaked out. And so, what matters is to keep the debt levels low, even at the expense of meeting health and recovery needs in these countries.”

Related: Global response COVID-19 should be model for climate action

She said the stability of markets shouldn’t be prioritized over human rights. The best solution, Muchala said, would be if lenders canceled countries’ debt. And IMF staff agree with her. IMF communications director Gerry Rice says they’re advocating for this to happen. Meanwhile, he says, the IMF knows it has to be cautious about when to call for belt-tightening for countries receiving loans. 

“At some point — and I think all countries recognize this is not just the IMF — there will be a need to restore public finances. … But the emphasis, at least as far as the IMF is concerned, will be on protecting the vulnerable.”

“At some point — and I think all countries recognize this is not just the IMF — there will be a need to restore public finances,” he said. “But the emphasis, at least as far as the IMF is concerned, will be on protecting the vulnerable.” 

Rice said repeatedly: This is not the old IMF.

“Everybody is anxious right now because we’re facing the biggest crisis of our lifetimes,” he said. “I can tell you that the big message from our annual meetings that just concluded was ‘do not withdraw support too early. Do not withdraw support prematurely.’ That is what we see as the biggest risk right now.”

And in the countries that are struggling, activists want to be clear that they’re not asking for a handout. Shereen Talaat, co-director of the Arab Watch Regional Coalition, is based in Morocco, where she said the pandemic has people struggling to fulfill their basic needs and austerity measures would be devastating.

“We’re not asking for free money. … You are doing a lot of investments. You will gain a lot of money from this investment.”

“We’re not asking for free money,” Talaat said. “You are doing a lot of investments. You will gain a lot of money from this investment.”

She says if people in her region aren’t living a decent life as workers or consumers, they won’t be able to contribute to a global economy that makes people in places like the US wealthy.