Reviews
Technical: insufficient analysis and lack of supervision methods
A team of IMF officials meets, generally every year, with government and central bank authorities (unions, employers' associations, professors, legislative bodies and financial operators) from each of the member countries in order to review the country's political and economic developments. To carry out the supervision of the countries, an IMF team visits the country, obtains economic and financial information and analyzes with the national authorities what has recently happened at the economic level and the monetary and fiscal policies, as well as the structural measures. Normally, officials prepare a final statement that summarizes what was discussed with the member country, leaving it in the hands of the authorities who have the option of publishing it. At the global level, the Executive Board relies heavily on reports prepared by technical officers on the outlook for the world economy and financial markets. However, an independent report prepared by a team from the IMF Independent Evaluation Office (IOE) for the period (2004-2007), which preceded the economic crisis of 2008[24] pointed out the IMF's inability to foresee the crisis during these years. The report notes that during this period "the constantly repeated message was that of permanent optimism" and the IMF shared the widespread idea that "a serious crisis in the main industrialized countries was unlikely." Until the first moments of the crisis and even in April 2007, "the IMF message presented a favorable international economic environment." The IMF had paid little attention to the deterioration of the balance sheets of financial sectors, the possible links between monetary policy and global imbalances, and credit expansion. The IMF had not seen the main underlying components of the brewing crisis. Russian President Vladimir Putin has also highlighted this problem, calling for a reform of the IMF to make it faster in making effective decisions in a very rapidly changing financial environment.[25].
In the United States, the IMF did not analyze the degradation of the rules for granting mortgages, nor the risk of this situation for financial institutions and "remained optimistic about the propensity for securitization to dilute the risks." In February 2006 the so-called Financial Sector Assessment Program (FSAP) covering the United Kingdom stated that "banks' mortgage loan portfolios do not appear to represent a major source of direct vulnerability." As for Iceland, where banking sector growth increased from 100% to 1,000% of GDP in 2003, IMF surveillance "has conspicuously failed to highlight the dangers of a oversized." In 2007, IMF reports stated that "Iceland's medium-term prospects remain enviable." The IMF welcomed "financial innovations" and recommended that other advanced countries use the same methods as the United States and the United Kingdom. In this context, the IMF criticized Germany and Canada in 2006. For the latter country, it declared that "the timid strategies of Canada's banking system offered very high returns on assets." lower than in the United States." The IMF's advice to these countries focused specifically against "structural barriers, some of which have helped protect these countries from the factors that triggered the crisis."[26]
If the Spring 2008 Global Financial Stability Report (GFSR) reported that major financial institutions could have solvency problems in the summer of 2008, the IMF "emphasized that the crisis was under control." In May 2008 in the Belgian capital of Brussels, Dominique Strauss-Kahn said of the financial sector that "we have left the worst news behind us."[27]
The OIE report explains the IMF's inability to identify risks and provide warnings through several factors:
• - Incomplete methods of analysis and a "high degree of doctrinal thinking."
• - The prevailing view that "self-regulation of markets would be sufficient to eliminate any major problems of financial institutions."
• - Insufficient link between macroeconomic analysis and that of the financial sector.
• - Gaps in internal governance.
Criticism of the IMF
Critics of the IMF argue that the dominant role that developed countries have within the organization causes the IMF to direct its global policies towards the promotion of free market capitalism.[28] because of having imposed on developing countries—and more recently on some European countries—its economic programs based on the Washington Consensus, which consist of reducing the deficit and public spending and consequently of social services and benefits, based on monetarist policies and theories and on the principle free market,[29] which must be carried out as conditions of the loans made and which according to critics have caused an increase in the gap between rich and poor and a worsening of public services, such as healthcare.[30] Critics maintain that the IMF's free market approach contributes to social inequality,[30] regressions in the distribution of income and harm to social policies. Some of the best-known criticisms in the academic world have come from the social democratic economist Joseph Stiglitz, chief economist of the World Bank from 1997 to 2000 and Nobel Prize winner in Economics in 2001.[31].
The IMF is also criticized for having supported and financed military dictatorships in Latin America and Africa.[32] Other sources have specifically criticized its policies on the environment[33] and food.[34].
Some of the criticized policies are:
• - Sanitation of the public budget at the expense of social spending. The IMF points out that the State should not grant subsidies or assume expenses for groups that can pay for their benefits, although in practice this results in the reduction of social services to sectors that are not in a position to pay for them.
• - Generation of primary surplus to cover external debt commitments.
• - Elimination of subsidies, both in productive activity and in social services, along with the reduction of tariffs.
• - Restructuring of the tax system. In order to increase tax collection, it has generally promoted the implementation of regressive taxes that are easy to perceive (such as the Value Added Tax).
• - The concept of services, in the interpretation of the IMF, extends to include areas that are traditionally interpreted as structures for ensuring fundamental rights, such as education, health or social security.
• - Labor flexibility policies, understood as the liberalization of the labor market.
These points were central in the IMF negotiations in Latin America as conditions for the access of the countries in the region to credit in the 1980s. It is argued that they caused a slowdown in industrialization, or deindustrialization in most cases. The recessions in several Latin American countries at the end of the 1990s and financial crises such as that of Argentina at the end of 2001 are used as examples of the failure of the policies of the International Monetary Fund, since these countries determined their economic policy based on the organization's recommendations.
The IMF and Libya
Other critics of the IMF focus on the fact that it also reaches agreements with dictators regardless of their ideological sign. On November 18, 2008, the then head of the IMF, Dominique Strauss-Kahn, summarized his meeting with Libyan leader Muammar Gaddafi as follows: "The meetings we have had reflect our common view on Libya's achievements and on the main challenges it faces. The ambitious reforms of recent years have produced strong growth [...]. The main challenge is to maintain the pace of ongoing reforms with a view to reducing the size of the State".[35].
This economic analysis was confirmed six days after the beginning of the uprisings in Benghazi that marked the beginning of the Libyan War on February 15, 2011. An IMF report praises Colonel Gaddafi's good economic management of Libya, encouraging him to "continue to improve the economy", mentioning his "ambitious reform program".[36]
• - List of countries by GDP (nominal) "Annex: Countries by GDP (nominal)").
• - List of countries GDP (nominal) per capita_per_c%C3%A1pita "Annex: Countries by GDP (nominal) per capita").
• - List of GDP (PPP) countries "Annex: Countries by GDP (PPP)").
• - List of countries by GDP (PPP) per capita (PPP)_per_c%C3%A1pita "Annex: Countries by GDP (PPP) per capita").
• - Inter-American Development Bank.
• - World Bank.
• - Washington Consensus.
• - New Development Bank.
• - United Nations Organization.
• - International monetary system.