BUSINESS-ECONOMY
The International Monetary Fund is facing criticism from its independent watchdog over inconsistencies in its handling of major bailouts. A new report highlights concerns about political pressures influencing decisions on large loans to countries like Argentina, Ukraine, and Egypt. The International Monetary Fund’s independent watchdog has raised concerns over the IMF's handling of its largest bailouts over the past two decades. The report highlights inconsistencies in loan decisions for countries like Argentina, Ukraine, and Egypt, attributing these to potential political pressures. Argentina alone has received $44 billion since 2018 under the IMF’s exceptional access policy, designed for outsized loans exceeding normal limits. The watchdog warns that these policies risk damaging the IMF’s credibility, delaying debt resolution, and failing to attract private investment as intended. IMF chief Kristalina Georgieva acknowledged the need for a policy review but emphasised maintaining flexibility to avoid weakening market confidence. The IMF’s exceptional access policy, introduced in 2002, was meant to regulate large, high-risk bailouts. However, a review of cases from 2002 to 2023 shows mixed results. Argentina, currently seeking another $10 billion loan, is one of the IMF’s largest borrowers. In, 2018 it tapped a $44 billion bailout, which it struggled to repay, even using a renminbi swap line with China. Similarly, Ukraine’s IMF support is critical for financing its war effort, while Egypt's recent bailout aimed to stabilise its economy amid regional conflicts. The watchdog found that these large loans often rest on assumptions rather than solid analysis, raising doubts about their effectiveness and fairness. According to the IMF’s independent evaluation office, political pressures may be influencing major bailouts, compromising the fund's even-handedness. The report notes that large shareholders, such as the US and China, often play a role in these high-stakes decisions. The IMF has been criticised for approving large loans based on political assurances, such as promises of spending cuts, which are not always delivered. In some cases, these bailouts delay rather than solve debt issues. While IMF reforms have reduced surcharge rates on large loans, the watchdog warns that inconsistent policies risk undermining trust in the fund. Georgieva agreed to review the policies but cautioned against changes that could hurt market confidence. (With inputs from the agencies) A journalist, writing for the WION Business desk. Bringing you insightful business news with a touch of creativity and simplicity. Find me on Instagram as Zihvee, tr None
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