Social services


IMF conditions blocks achievement of goals in education, health

12 September 2005

Two papers by ActionAid International, released at the UN Millennium Review Summit in New York in September, point the finger at the IMF for blocking achievement of the Millennium Development Goals (MDGs).

The first paper, Changing course: Alternative approaches to achieve the MDGs and fight HIV/AIDS, blames Fund macroeconomic conditions for developing countries’ inability to deliver economic growth and therefore the social spending required to meet the MDGs:

  • the report challenges the IMF’s demands for deficit reduction, arguing that Fund austerity fails to allow for sufficient investment spending during economic downturns;
  • fund requirements for “excessively low” inflation levels ignore evidence that successful growth and poverty reduction can occur at moderate inflation levels and economic wisdom which says that the benefits of lower inflation must be weighed off against “sacrificed economic output”; and
  • conditions requiring rapid trade liberalisation have seen a “whithering away” of domestic manufacturing capacity with a resultant loss of jobs, and an irrecoverable loss in tax revenue (see page 4).

The report asks why, when there is a growing consensus amongst development economists, the UN specialised agencies and even the Fund’s own evaluation body, that there is a need for greater fiscal policy space, developing countries do not rebel against Fund prescriptions. Interviews with officials in the central banks, finance ministries, health and education ministries in Bangladesh, Ghana, Malawi, Uganda and Zambia revealed two difficulties. Firstly, most central bank and finance ministry officials have internalised Fund economics and do not “acknowledge the possibility of more expansionary fiscal and monetary policies”. Secondly, health and education ministry officials are locked out of the process; the health ministry official in Malawi said that the ministry is given a spending ceiling, but “how the ceiling is arrived at is not known.”

how the ceiling is arrived at is not known

The second paper, Contradicting commitments: How the achievement of education for all is being undermined by the IMF, cites case studies from several African countries to drive home the case against Fund economics. A consequence of which is that governments are forced to reallocate funds from within the education budget to priority areas such as primary schooling. Another corollary is the mushrooming of private providers, a trend which ActionAid says “is progressively eroding the capacity of the state to provide free, universal education for all children.”

Both papers urge the IMF to rethink its definition of macroeconomic stability, replacing inflation targeting with targets based on human welfare. They call on donor countries to provide complete cancellation of debt for the poorest countries and to pressure the IMF to reduce economic policy conditionality. Support, say the authors, is needed for comprehensive poverty and social impact assessment on macroeconomic policy recommendations.