IMF must work harder to avoid payments being used as a partisan tool
Published: 19 October 2022
New research from Dr Bernhard Reinsberg has shown that the IMF and other international institutions have failed to recognise how emergency loans have been used by governing parties and leaders to strengthen their political position and punish rivals.
As climate change and the energy crisis worsen, the International Monetary Fund (IMF) will once again be called on to support nations with emergency financial support.
New research from the School's Dr Bernhard Reinsberg and Rod Abouharb (University College London) has shown that the IMF and other international institutions have failed to recognise how emergency loans have been used by governing parties and leaders to strengthen their political position and punish rivals.
The research calls on governments and the IMF to recognise their impact on political institutions and put in safeguards to ensure democracy is not weakened in countries that are forced to go to the IMF for support.
Many countries turn to the International Monetary Fund (IMF) when they face economic woes. In exchange for emergency loans, the IMF requires countries to commit to far-reaching economic policy reforms. These include budget cuts, tax hikes, layoffs in the public sector, and other structural reforms that seek to increase to remove protections in different sectors of the economy. This new research examines how the public in countries under IMF programmes perceive the consequences of these programs for their own wellbeing.
Dr Bernhard Reinsberg says: "What is puzzling is that the same IMF program is perceived differently by different groups in society. Individuals who identify as government supporters view the consequences of these programmes more positively than individuals who support the political opposition."
"Political economists have long argued that governments implement IMF programs selectively to advance their political goals. But to our surprise, this argument had not been systematically tested with survey-level data. What was surprising is the consistency with which the patterns hold across different world regions. In addition to Sub-Saharan Africa, we also found similar patterns in Asia and Latin America, using the respective regional survey barometers."
First published: 19 October 2022