The International Monetary Fund (IMF) has historically shied away from formally engaging in politics. This position appears to be shifting with the institution’s rhetoric increasingly highlighting the political economy of reform and communication with the ‘grassroots’. The rhetoric, however, is currently a long way from reality. Prior to this year’s World Bank and IMF Annual Meetings in Washington DC, over 70 civil society organisations (CSOs) signed a letter to the IMF executive board highlighting the lack of meaningful consultation on IMF programmes and policies (see Observer Autumn 2024). IMF Managing Director Kristalina Georgieva referred to the letter directly during the Meetings, promising a review of CSO engagement by mid-2025 – a process whereby the voices of civil society and ordinary people are to be “heard and included.” Yet, there is little information on how that will be achieved given a lack of clarity over how the Fund will consult on major forthcoming policy review processes, such as the conditionality and surveillance reviews, the Interim Guidance Note on Mainstreaming Gender, and the IMF and World Bank’s joint Bretton Woods at 80 Initiative.

This uncertainty can be considered in the context of the other major message coming from the Annual Meetings that a “pivot” towards fiscal consolidation is necessary as a result of the much discussed ‘high debt, low growth’ dynamics in the global economy. The rationale for the grassroots turn appears to be the result of a growing fear within the institution that policy measures will be rejected by the population, leading to revolt and unimplementable reforms.

This fear is not new. The IMF’s Independent Evaluation Office (IEO) in its ongoing evaluation of the Fund’s fiscal policy advice highlighted that lack of attention to the sustainability and political economy of reforms is a weakness of the institution. In addition, their review of the Fund’s evolving mandate highlighted significant issues with prioritisation of issues and resource allocation. In a year of numerous elections worldwide, the Fund has also adopted something of a defensive stance in the context of increasing rejection of neoliberal orthodoxy from mainstream left parties and more definitively and successfully from the populist far right. The Fund has repeatedly called upon governments not to forget the necessity of fiscal discipline, despite admitting its unpopularity. The direct appeal to the public also comes as a result of what has been referred to as the IMF’s “protest problem”. Over the past year there has been unrest in a number of countries which movement leaders have connected to IMF policies including in Argentina, Bangladesh, Kenya, Sri Lanka and Nigeria (see Observer Autumn 2024).

Instead of planning an austerity charm offensive to make it more acceptable to the public and to the people reeling from its devastating impacts, the Fund, through its review of program design and conditionality policy, needs to significantly change its approach in supporting countries in trouble.Nabil Abdo, Oxfam International

With populations around the globe rejecting the status quo, is the IMF out of ideas?

In addition to the Regional Economic Outlook for Sub-Saharan Africa published in October, the Fund’s World Economic Outlook (WEO) cautions that ‘social discontent’ will make reforms unimplementable. It argues that the public are in danger of being swayed by factors such as pre-existing beliefs, prejudices and misinformation, presenting them not as rational actors who are defending their economic interests. The WEO therefore considers all policy directions adopted by the IMF as positive or neutral – contradicting research that demonstrates that staff’s ideological biases and professional ties have an impact on conditionality – and refuses to consider that fiscal constraints or austerity have demonstrated negative effects. The WEO also seems to disregard the findings of its own working paper, Fiscal Discourse and Fiscal Policy from September 2024, which an IMF blog summed up: “respondents either want to increase spending or maintain it at current levels in their countries. People want more infrastructure, schools, hospitals, and services (education, health, safety).” The WEO concludes that the success of reform is down to an “effective communication strategy” that confronts prejudices, and “fosters trust among all stakeholders and the general population.” This seems to side-step the fact that many countries have repeatedly ended up in IMF programmes, even when they have ‘successfully’ implemented its advice.

The Regional Outlook for Sub-Saharan Africa is somewhat more direct. It argues that fiscal consolidation is required, noting that in several countries this should take place with the depth and speed that will certainly risk rejection and social unrest. However, the recommendations are similar to those above. It argues that communication with stakeholders is central to underscore the necessity of reforms and correct the pre-existing beliefs of a population. Interestingly, it argues that policies should be better designed, puts a number of progressive policy prescriptions such as progressive income and property taxes forward, and there is an admission that currently social protection programmes are inadequate and poorly designed. However, it appears that these measures are not treated seriously as an end in themselves: they exist because they are necessary to ensure that broader structural reforms are not rejected. In addition, it is fundamentally contradictory as it claims consultation is key while simultaneously asserting that the public are uneducated about the impact of economic policy or unable to ascertain whether measures are successful or not.

Nabil Abdo, of global CSO Oxfam International argues, “instead of planning an austerity charm offensive to make it more acceptable to the public and to the people reeling from its devastating impacts, the Fund, through its review of program design and conditionality policy, needs to significantly change its approach in supporting countries in trouble. This means that IMF supported programs should be designed to enable countries to address their crises while reducing inequalities through progressive economic policies that places the burden of reform on the wealthiest and not on the people who are bearing the brunt of them through the same old crushing austerity policies.”

The Fund’s new stated commitment to improve policy design and consultation practices forms part of a broader project to reimagine the role of the institution as Georgieva begins her second term. How this fares very much depends on whether the gap between the institution’s rhetoric and reality persists.