The International Monetary Fund (IMF)

The IMF is an international organization that supports countries with financial aid for development projects. The IMF's loan conditions promote a free-market system and countries need to repay the IMF for loans received. The IMF has also endured criticisms about its lending policy, as most developing countries find it very hard to repay IMF loans.

Recent IMF Policy Changes

In 2002, the policy-setting body of the IMF backed up a plan to give countries more room to choose alternatives to IMF economic advice - a recognition that the lender's free-market remedies have sparked a backlash from Argentina to Malawi. According to Drajem (2002:1), the IMF, which has US$92 billion in outstanding loans to about 90 countries, pledged at its annual meeting to reduce the conditions it requires for those loans and to devise an orderly way for countries which are overwhelmed by debt to default. Drajem (2002) further states that with Argentina, Turkey and Brazil roiled by recession and debt, the IMF pledged to allow countries to try alternatives to its typical advice to cut spending, open capital markets and sell state assets. These IMF prescriptions have been blamed for stalling growth, causing job losses (as in the case of the privatization of state assets such as telecommunications and ICT companies such as Telkom South Africa where many jobs have been lost during the restructuring process), and the kind of unsustainable debt that sent Argentina into history's biggest default. Menon (2002:1) also reported that SBC Communications' (in the US) shares fell eight percent after the second-largest US local telephone firm said it would cut 11,000 jobs as it lost customers to rivals, especially wireless carriers. The stock fell $1.75 to $20.15 in New York. SBC Communications said revenue declined more than $1 billion in the first half compared with the same period in 2001. SBC also stated their intention to lower capital spending by 38 percent in 2003 (Menon 2002:1).

Also in 2002, it was expected that Latin America's economy would shrink for the first time in two decades, even after most countries in that region followed IMF advice through the 1990s. South African Finance Minister Trevor Manuel said after the meeting of the World bank's policy committee in 2002, which he heads, "We need an open-ended approach not stuck to any one set of policies and the World Bank pledged not to 'micromanage' borrowers" (Drajem 2002:1). The IMF and the World Bank officials have been reported by the media to say that opening markets to trade and investment is still the fastest route to prosperity, so it remains to be seen how much the developed countries will open up their markets to the developing countries and vice versa, for economic cooperation and international development.

A new vulnerability of developing countries has been sparked by corporate disasters and scandals in the US, bad bank debts in Japan and weak growth in Europe is fueling concern that more changes are needed in international lending policies such as that of the IMF.