Standing in the way of development: a critical survey of the IMF’s crisis response in low income countries

This paper assesses the IMF’s macroeconomic framework and its renewed role in low-income countries (LICs) during and after the recent food, fuel and financial crises. Particularly, the document assesses the claims by the IMF in the context of its programmes in 13 LICs in between 2007 and 2009.

The paper's main findings about IMF progress during the crisis are: 

• there has been very little fundamental change in terms of IMF programmes for LICs during the period under study
• policy space left for LICs to address the crisis has not been substantially expanded 
• the relaxation of deficit targets thanks to IMF policies during the crisis have not only been marginal in size but have also proved to be short lived
•  IMF policy recommendations have remained conditioned by a short-term bias, focused primarily on maintaining price stability
  

The author notes that the IMF is already laying the groundwork for reverting to its traditionally restrictive macroeconomic framework; a policy stance that is inconsistent with the need of LICs to recover quickly from the impact of the global crises and accelerate their growth. Therefore, the report recommends the following policies to be in place in order to help long term equitable growth and poverty eradication in LICs:

• active use of fiscal policy to support public investment to build up essential economic and social infrastructures, on which private investment inevitably relies
• ensure adequate money supply to meet the growing demand for money as a result of the growth-induced rise in income
• manage exchange rates so they can foster broad-based export competiveness and lead to greater structural diversification of the domestic economy
• regulate the capital account to confront the continuous outflow of domestic private capital from their economies