The International Monetary Fund (IMF)
What is the IMF?
The International Monetary Fund (IMF) was created in the 1940s after World War II to help finance the rebuilding of Europe and to provide short-term loans to countries which were importing more than they were exporting. However, in the 1980s, the Reagan administration in the U.S. and the Thatcher government in the U.K. led a sea change in the way economics is understood, and introduced a whole new set of free market and "free trade" policies into the international foreign aid system by attaching conditions on foreign aid to developing countries. At the IMF in particular, part of this major change was the introduction of "monetarist" policies, which prioritized extremely low inflation and government deficits over other goals such as higher employment, GDP growth and public spending. While these policies may have seemed appropriate for tackling the huge debt crisis and macroeconomic instability afflicting many developing countries at the time, today these policies are no longer appropriate and may in fact be undermining the ability of poor countries to scale up public spending to fight HIV/AIDS, TB, malaria and achieve the Millennium Development Goals (MDGs).
The immediate consequences of the IMF policies in the 1980s and 1990s included steep layoffs of personnel across all public sectors, and over the long-term, IMF policies have prevented countries from adequately investing in public infrastructure and workforce, leading to dilapidated public health and education systems across the developing world today. According to the Independent Evaluation Office of the IMF, the quasi-independent branch of the IMF's restrictive spending policies prevent countries from being able to absorb and spend more foreign aid and from generating more of their own resources domestically.
