Momani: American Politicization of the International Monetary Fund

B Momani, “American politicization of the International Monetary Fund,” Review of International Political Economy 11, no. 5 (2004): 880-904.

The IMF has been criticized as being a tool used by the US to influence the politics of other countries. The IMF denies this, and makes the claim that conditionality agreements are created through highly technocratic processes that are widely separated from the corruption of political interests. “This article argues that political intervention in the terms and conditions of IMF agreements occurs when IMF staff recommendations are repeatedly disregarded. This method traces politicization in the IMF decision-making process, by comparing and contrasting IMF staff’s Article IV Consultations for slippages in recommended conditions” (881).

IMF contributions are used to determine the relative voice of different member countries in establishing policy. These quotas are determined as a product of GDP production as well as current account factors. The US has the largest share of votes in the IMF with a total of 17% of the overall vote followed by Japan (~6%) and Germany (6%). The combination of 23 African countries represent a total of 1.16% of the total vote. Because many decisions require 85% consensus to be had, the US essentially wields a veto.

The literature is reviewed. It shows a mixture of results that all lean towards the US exerting a certain kind of power through determining lending conditionality. The author argues that this study will provide added-value because it will utilize IMF archives that were previously not available. The method will explore Article IV Consultations, which are produced by IMF staff and are expected to be mostly apolitical. If final conditionality differs greatly from the Article IV Consultations, then political motivations are assumed to be in play. If the final conditionality does not differ greatly, the opposite is concluded.

Figure 2 (888) outlines a causal flow-chart that can be used to determine whether or not political pressure was applied in IMF conditionality being imposed. The case study explored is Egypt.

“Based on numerous interviews with IMF staff, staff members expressed resentment towards the Executive Board for interfering in their negotiations with Egypt and other countries. The staff argued that many countries had important allies in the Executive Board which helped them receive favoritism” (895). Executive Board members who were keen on making sure that a certain policy towards a certain country went through stayed abreast of that country’s negotiation with the IMF for political reasons, it was argued by some.

“While there is no clear algorithm for IMF decision-making, based on IMF written statutes, the IMF argues that its decision-making is apolitical, and based on its staff’s recommendations. The IMF claims that external factors, such as the distribution of power inn the international system, is perhaps symbolically reflected in IMF quotas, but does not affect the final outcome of decisions. This is based on the belief that the IMF staff, who are technocratic and not politically motivated, determine the conditions attached to loan agreements” (898).

“In 1987 and 1991, Egypt demonstrated to the US government that tough IMF conditions would undermine Egypt’s political stability in an already volatile region and therefore the United States intervened to ensure two lenient agreements by usurping staff recommendations. Lenient agreements that did not reflect the Article IV Consultations prepared by the IMF staff prevailed because of US pressure on the Executive Board. So, it can be learned that the staff did not succumb to US pressure by changing the post-agreement Article IV consultations. On the contrary, the United States was able to push lenient agreements through without the implicit support of th EIMF staff. Decision-making in the Fund did not follow the principle of consensus building, but rather reaffirmed that US power in the Fund is enforced at all levels within the process of determining conditionality” (898-90).