NCPA - National Center for Policy Analysis

The IMF And Corruption In Client Countries

June 10, 1996

Some observers of International Monetary Fund practices charge that the agency is not doing enough to attack private and public sector corruption in the countries it serves. They say that corrupt practices in these countries are discouraging private investors from lending to emerging businesses, thereby undermining efforts to achieve economic and political stability, as well as improving the financial prospects of ordinary citizens.

Some experts are recommending that IMF change its lending practices and other policies:

  • Current lending policies should be revamped so as to avoid lending to countries which are pursuing irresponsible economic policies in developing nations.
  • The IMF should make it clear that countries overcome by corruption -- a frequent problem in some third world nations -- will not be coddled, nor will aid constantly be available to repair just enough of the damage done by corruption to attract foreign investment.
  • Further, the IMF should abandon its perennial prescription of devaluation and tax increases to solve the problems of economically unstable countries, since devaluation is more likely to cause domestic inflation that stifles growth than to stimulate exports, while tax increases tend to destabilize democratically elected governments.

Finally, critics suggest that American taxpayers begin to ask themselves why they should fund and support an IMF that repeatedly comes to the aid of those around the world who try to sabotage the rule of law.

Source: Mansoor Ijaz (Crescent Investment Management L.P.), "The IMF's Recipe for Disaster," Wall Street Journal, June 10, 1996.

 

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