War-torn Iraq, quake-ravaged Haiti, conflict-devastated Sierra Leone. So many countries around the world face the legacy of terrible hardships that have left them scarred and fragile. Some have questioned whether the IMF has a meaningful role to play in these countries, but they couldn’t be more wrong. A recent review found that the IMF has played an important positive role in fragile states. This doesn’t mean we always got it right. We can do better. There is plenty of scope to adapt how we engage in these countries; to be more flexible and deepen cooperation with other development partners. In this post, Dominique Desruelle discusses a few ideas that we’ll be exploring—and discussing with stakeholders—in the months ahead, including at a high-level public seminar in Washington later this month.
In town for the Annual Meetings, Dominique Strauss-Kahn, our Managing Director, paid a visit to Bilgi University in the heart of Istanbul. He spoke to a gathering of students about the role of the IMF in the current crisis, and took some of their questions.
The Managing Director likened the IMF to an “economic Red Cross” because its goal is to help solve a country’s economic problems while avoiding social unrest and war. He noted that the relationship between peace and economic stability was well understood by the people who founded the IMF in 1944, in the aftermath of the Great Depression and the second world war.
Continuing with the medical analogy, he pointed out that countries only need IMF resources when they are “sick”—when they face serious balance of payments problems requiring policy adjustment. If you go to the doctor with a liver problem, he mused, the doctor will treat you, yes, but will also insist that you stop drinking. So policy conditions are necessary. Still, the Managing Director admitted, the medicine had sometimes been too bitter in the past. The IMF had developed a “harsh image”—not paying enough attention to local circumstances, political realities, or social consequences. It was seen as more of a policeman than a doctor.