Bringing the IMF in from the cold

International Monetary Fund Managing Director Christine Lagarde (L) speaks with Secretary-General of the United Nations Ban Ki-moon (R) at the High Level Meeting of the Ebola Recovery April 17, 2015 during the 2015 IMF/World Bank Spring Meetings at World Bank Headquarters in Washington, DC
International Monetary Fund Managing Director Christine Lagarde (L) speaks with Secretary-General of the United Nations Ban Ki-moon (R) at the High Level Meeting of the Ebola Recovery April 17, 2015 during the 2015 IMF/World Bank Spring Meetings at World Bank Headquarters in Washington, DC

For many of the world’s poorest countries, achieving universal health coverage – and the other health-related Sustainable Development Goals (SDGs) – will require a big expansion of government health expenditure. There are a number of global actors that can help enable that expansion – or get in the way. One is the International Monetary Fund (IMF), which provides loans, alongside a set of mandatory conditions, to countries experiencing macroeconomic crises. These conditions often require governments to reign in their spending and borrowing, and their effects on health system capacity in poor countries have been the subject of intense debate. Many global health scholars have argued that the IMF has prevented the equitable development of health systems in Africa. Others argue to the contrary that the IMF has enabled higher public health spending in LMICs on average.

There is a more nuanced position that, like its neighbour on Washington’s 19th Street, the World Bank, the IMF is not the creature it was in the last 15 years of the 20th century. Then, IMF lending to low-income countries focused on so-called Structural Adjustment Facilities (SAFs), which were designed to deal with long-term structural obstacles to growth but focused on minimizing the role of the state, with damaging consequences for health and social welfare. But since then, the nature and extent of the conditions imposed by the IMF have changed – in the poorest countries at least. In 1999, the IMF replaced SAFs with a set of lending facilities for these countries under the Poverty Reduction and Growth Fund (PRGF), designed to enable higher government spending. The architecture for the poorest countries changed again in 2009, in a series of reforms that further enhanced the IMF’s focus on safeguarding ‘social protection’. By failing to take account of this variation over time, the existing research is less informative than it could be about what the IMF does and what its consequences are for poor countries.

As the IMF is left out in the cold, scholars are missing out on opportunities to influence this key global actor. Our work in GHPU has begun to address this. We have examined, for example, how the effects of IMF agreements on public health spending vary by type of agreement (i.e. those that are designed to emphasise social protection, and those that are not), and by the income category of the recipient country (see more here). Our study, which examined spending for 127 countries for the years 1995-2012, controlled for determinants of spending and accounted for endogeneity using a Heckman-style selection model, finds that social protection agreements in low-income countries are associated with an increase in per capita government health expenditure of roughly 4% on average. More traditional lending facilities, such as standby agreements, which are the mainstay of IMF activities in middle-income countries, led to a decrease in such spending, of 3.4% on average.

In other words, the IMF both enables and constrains government health spending depending on the conditions it employs. Rather than seeing the IMF as inherently hostile to key global health goals, the IMF has the capacity to play a more progressive role.

Of course, this does not imply that the IMF is doing ‘enough’. Countries in which the IMF has most influence are among the most vulnerable. When these countries experience an economic ‘shock’ (whether this is due to a sudden crisis or merely the economic volatility that is normal in such contexts), the IMF must do more than merely cushion the blow; otherwise, its claims to support the SDGs will begin to sound dreadfully hollow.

Take, for example, Sierra Leone, which is struggling to recover from the recent Ebola crisis. The outbreak led to a sustained economic crisis, which continues to this day. The IMF cancelled the country’s debts in the teeth of the crisis – but then lent the country more money. Under the current agreement between the IMF and national authorities in Sierra Leone, public spending per capita will be constrained sharply: indeed, it is forecast to be 7% lower in 2022 than it was in 2016 . We do not yet know what the effect will be on the health sector specifically, but the outcome is unlikely to be consistent with meeting SDG targets. The IMF is no longer the monster of the 1980s. But questions remain about how it can play a more progressive role in supporting countries in achieving a sustainable path to key global policy goals.

 

Photo: International Monetary Fund Managing Director Christine Lagarde (L) speaks with Secretary-General of the United Nations Ban Ki-moon (R) at the High Level Meeting of the Ebola Recovery April 17, 2015 during the 2015 IMF/World Bank Spring Meetings at World Bank Headquarters in Washington, DC

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