In his latest blog, Shyam examines the IMF and its role in contributing to increased levels of poverty internationally during the COVID-19 pandemic.

23rd July 2021

By Shyam

The COVID-19 pandemic came on the back of a fragile and imperfect recovery from the Global Financial Crisis. Worldwide lockdowns resulted in millions of people being pushed into poverty after losing their jobs. Meanwhile, governments around the world tried desperately to mitigate the effects on their economies. In an effort to re-stimulate their economy, 81 countries applied for loans from the IMF. 

The IMF

The IMF has always held a place of power amongst the international community. It labels itself as an advocate for sustainable development and growth. An organization looking to bridge the gap between the rich and the poor to create a world that promotes international trade and cooperation. However, since its inception, the IMF’s ulterior motives have been clear. It tries to trap developing countries into unequal trade relationships in order to gain control over their resources, democracy, and population.

After forcing countries (mainly in Asia and Africa ) into generations and generations of indebtedness, the IMF has free-reign to impose what they call “Structural Adjustment Policies”. These are severe austerity measures such as reduced public expenditure, mass production of cash crops, and devaluation of the currency in order to promote exports. These are especially effective in sponsoring capital flight and speculation from foreign investors. As a result, more than $100 billion is leaving emerging market countries, the most rapid case of capital flight in history.

For the few not the many

Countries that have imposed these measures in order to take out COVID-19 loans have only experienced rises in poverty, inequality, and disease. For example, the IMF mandated VAT on countries like Nigeria and Angola has been applied to everyday food products such as clothing and food, preventing the population from meeting their basic needs. Violent protests in Ecuador were needed in order to prevent the government from cutting back expenditure on healthcare and unemployment benefits. Throughout history, one thing has been clear: austerity measures are used to benefit the few, not the many.

What has become clear as we navigate through this crisis is that major financial institutions and the governments that back them don’t have the best interests of the world’s greater population at heart. Developing countries have fallen victim to debt imperialism. Now, to truly promote equality and development, major changes have to be made to the world economic system.

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