IMF tarnished by praise of ousted despots

February 22, 2011

By Pierre Briançon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LONDON –  Less than two weeks ago, the International Monetary Fund’s executive board — its highest authority — assessed a North African country’s economy and “commended” its government for its “ambitious reform agenda”. The IMF also “welcomed (its) strong macroeconomic performance and the progress on enhancing the role of the private sector”, and “encouraged” the authorities to continue on that promising path. By unfortunate timing, that country was Libya. The IMF mission to Tripoli had somehow omitted to check whether the “ambitious” reform agenda was based on any kind of popular support.

Libya is not an isolated case. And the IMF doesn’t look too good after it gave glowing reviews to many of the countries shaken by popular revolts in recent weeks. Tunisia was hailed last September for its “wide-ranging structural reforms” and “prudent macroeconomic management”. Bahrain was credited in December with a “favourable near-term outlook” after the economy “managed the global crisis well”. Algeria’s “prudent macroeconomic policies pursued in the past (helped it) build a sound financial position with a very low level of debt”. And in Cairo, the IMF directors last April “praised (the Egyptian) authorities’ response to the crisis” as well as their “sound macroeconomic management”.

All this enthusiasm doesn’t mean the IMF was wrong — just that it was short-sighted. The macro-economic numbers and indicators the fund’s envoys looked at were genuine. They simply failed to assess whether reforms, structural or not, could be sustained in countries ruled by potentates without any legitimate democratic mandate.

The bitter irony of the current situation is that, in most cases, it would be better if these countries don’t stray too far from the economic policies they have pursued in the past. But the toppling of unpopular regimes will make it difficult for their successors to implement the same policies. In the future, the IMF might want to add another box to check on its list of criteria: democratic support.

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