Square pegs, round holes, and why you can’t fight HIV/AIDS with monetarism

The briefing examines the contradiction between the need to greatly scale-up social spending to fight HIV/AIDS and what can actually be spent under the IMF’s current low inflation monetary policy.

The following points are highlighted:

• spending on public health and education systems will need to be substantially increased in order to effectively combat HIV/AIDS and achieve the other UN Millennium Development Goals by 2015
• however, currently, countries are not able to increase public spending to the levels necessary for achieving the MDGs while also complying with the IMF’s preferred low-inflation/low-spending policies
• there is no consensus on the most acceptable level of inflation among economists, and many economists, including some at the World Bank, disagree with the IMF that inflation needs to be as low as 5 percent per year or below
• discussions of alternative monetary policies that would allow for such trade-offs between slightly higher inflation and more public health workers are currently precluded from the outset, but it is precisely these discussions that HIV/AIDS advocates must insist on.

Recommendations of the report are:

• given this degree of uncertainty, the IMF’s low-inflation targeting approach to monetary policy must be abandoned in favor of alternative monetary policies
• health, education, and HIV/AIDS advocates should work together within civil society and with their parliamentarians and media to publicly call on their finance ministries or treasury departments to take concrete steps on the IMF to stop loan conditions that call for tight monetary policies that constrain public spending at unnecessarily low levels.