The International Misery Fund, Daily Brief September 28, 2023.

Loans from the International Monetary Fund (IMF) are making many people’s lives worse around the world.

In principle, the global financial institution is of course supposed to do the opposite. Working like a bank for national governments, the IMF pools money from 190 countries and acts as a “lender of last resort” to governments that get into serious debt troubles. The intention is to get the country back on its feet financially.

It’s not surprising these loans come with conditions, but what may be surprising to some is just how unreasonable these conditions can be, and how unevenly they impact society. In most cases, they inflict brutal austerity on people, reducing government spending on public services and/or increasing regressive taxes so bluntly that they violate many people’s rights.

Take the case of Pakistan. A 2022 deal between the IMF and Pakistan requires the government, among other things, to end energy and fuel subsidies and increase taxes. The result has been a rise in electricity and fuel prices, inflation, and currency depreciation – all of which hit the poorest hardest. Millions of Pakistanis are thus forced to make impossible choices.

A 47-year-old rickshaw driver in Lahore told Human Rights Watch, “I can either get medicine (insulin) for my diabetes or pay for my daughter to go to school or keep the lights on at my house. I can do only one of the three. The IMF should come and see how I am managing my life.”

The human rights connection is clear. People’s rights to education, healthcare, food, and more are all negatively impacted by the conditions of these IMF loans.

International financial institutions and governments have international human rights obligations to act otherwise. They should be responding to economic crises in ways that protect rights, not steamroller over them.

Another way to look at it is this: while it’s well-off politicians who have driven a country into debt, when it comes time to fix the problem, it’s the poorest and most vulnerable who are made to pay the price.

And here’s the kicker: the IMF’s own research indicates these austerity programs generally don’t work as intended. For the most part, such “fiscal consolidations” – a term linked to austerity measures – “do not reduce debt ratios, on average.” So, they are not even effective at reducing debt, which is their primary objective and the reason so many people are suffering.

To be fair, the IMF has sometimes tried to mitigate the impact of austerity measures. But most of these efforts have been based on outdated stereotypes about poverty, as we noted in Jordan a few months ago.

As my expert colleague Sarah Saadoun says, “The IMF’s experiment of trying to offset the harm caused by austerity programs simply isn’t working.”

The IMF needs to go back to the drawing board. They need a new approach, one that starts with the goal of fulfilling economic and social rights. Let their policies then flow from there.

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