Standing in the way of development? A critical survey of the IMF's crisis response in low income countries

Abstract

The International Monetary Fund (IMF), which has been criticised for the rigid economic policy conditionalities attached to its lending programmes, says it now provides borrower states greater flexibility to adopt expansionary policies. Standing in the Way of Development? assesses this claim in the context of the IMF’s central role in dealing with the effects of the global financial crisis in low-income countries (LICs). This paper evaluates the general macroeconomic policy scheme promoted by the Fund and closely examines the nature of its engagement during the crisis in a representative sample of 13 LICs. The authors find that, despite some relaxation of policy restraints, the IMF essentially remains wedded to its longstanding prioritisation of price stability and low fiscal deficits over other macroeconomic goals. Such a policy stance, it is argued, could undermine not only LICs’ prospects for a quick recovery from the crisis but also their longer-term development outlook. In light of this, this paper outlines the broad contours of an alternative macroeconomic policy framework geared towards supporting long-run equitable growth and poverty reduction.