Whose Debt Traps? IMF Uses COVID-19 Pandemic To Enforce Austerity

Oct. 16, 2020 (EIRNS)—Alan MacLeod reports for MintPress News that the IMF is using the COVID-19 pandemic as an opportunity to push for austerity: “76 of the 91 loans it has negotiated with 81 nations since the beginning of the worldwide pandemic in March have come attached with demands that countries adopt measures such as deep cuts to public services and pensions—measures that will undoubtedly entail privatization, wage freezes or cuts, or the firing of public sector workers like doctors, nurses, teachers and firefighters.”

The IMF’s reports have described its approach of pushing for austerity and fiscal “responsibility” as “all pain, no gain” that do not improve the economic standing of the countries under the IMF’s thumb. Ecuador is a perfect example: The previous President Rafael Correa made poverty reduction a priority and condemned the IMF/World Bank, but the current President Lenin Moreno has made an about-face. Last year he cut the health budget by 36% in order to get a $4.2 billion IMF loan. The overwhelmed health system led to high COVID death rates. In October 2020, a new $6.5 billion deal was worked out with the IMF, which demands more cuts to health spending, reduction of cash transfers for those unable to work due to the pandemic, and a slashing of fuel subsidies for the poor.

Is this the way to create growth in the future?

Contrast the directed loans towards specific infrastructure and manufacturing projects that are typical of Chinese foreign investment, with the financial loans made by the IMF and accompanied by demands to adopt measures that reduce the country’s ability to repay those loans.