Describe three impacts (both positive & negative) of the IMF or the World Bank on
Caribbean economies since the 1970's.
After the Second World War ended in 1945, the allied nations met in Bretton Woods
in the US to discuss how to rebuild the global economy. This resulted in the birth of the
International Monetary Fund (IMF) which commenced operations in 1947 with 40 members
which has grown to 189 members in 2020. The IMF has three main functions which are
known as surveillance, technical assistance and lending. The advantages of the IMF are
lending short term loans to member states, offering technical support and advice and its
policy reform measure. However, while the IMF has advantages, the IMF is not ‘well liked’
in the Caribbean due to the severe catastrophic impacts which it has had on some Caribbean
economies such as Jamaica due to its strict policy agendas, the level of control and influence
which first world countries such as the United States have and high interest rates which it
charges to small island developing states (SIDS).
The most important function of the IMF is obviously lending, the IMF offers short
term lending to countries which would prevent their economies from crashing. For example,
in 2018, Barbados’ foreign reserves were dangerously low which meant that the currency
could be devalued so the IMF stepped in to offer the country financing to bail them out of
trouble. Further, the IMF also offers lending to countries to resolve balance of payments
disequilibrium so the economy can be in equilibrium again. Other Caribbean countries such
as Jamaica have gone to the IMF for short term loans to maintain economic stability.
In addition, the IMF offers countries the necessary technical support and assistance for
countries who may need an economist from the IMF to help the country to draft macroeconomic policies and training as well. This allows the member country to implement
effective fiscal and monetary policies and especially exchange rate policies. Moreover, this
training is welcomed by many developing or “third world” countries who may not have the
expertise. For example: Grenada may have to develop contractionary fiscal policies but need
technical assistance to draw up the policies and put them into effect.
Supporters of the IMF believe that its policy reform measures are not harsh or “antisocialist” but simply show governments that keeping on government run corporations which
are failing to make a profit or even breakeven are not sustainable. Supporters argue that the
IMF imposes the necessary reforms necessary for governments to see economic growth with
measures such as privatisation, control of the money supply and contractionary fiscal policy
such as tax increases will cause short term pain but will be essential for preventing future
crisis which could lead to devaluation and lead to long term economic growth and
development. For example, in 2018, when Barbados went to the IMF, the IMF stated that bus
fare had to be increased and the government increased it by 75% so it went from $2 BDS to
$3.50 BDS.
Yet, despite, the potential benefits of having the IMF, its role has proved to be very
controversial. The IMF had such severe impacts on Jamaica that there was a documentary
called “Life and Debt” highlighting the IMF’s catastrophic impact amongst other issues. The
IMF is often referred to as the lenders of last resort due to the stringent policies which it
enforces. Many countries state that the IMF “shoves policies down their throats.” In Jamaica,
the IMF needed to come due to Michael Manley’s socialism experiment compounded with
rising oil prices which plunged a thriving Jamaican economy into a lot of debt. When the
IMF intervened, they stated that education and health care are non-productive sectors which
do not earn revenue and needed a budget cut. How does a country function without large
spending on education and healthcare? In fact, how will the country maintain a workforce
without these critical social services? These “anti-socialism” policies are the reasons why
many other Caribbean countries are fearful of going to the IMF. In addition, they forced
Jamaica to lower tariffs which killed their agricultural sector and allowed foreign goods to
flood their markets. Jamaica had a thriving banana industry, poultry industry and dairy
industry but the entire agricultural sector was decimated due to the IMF policies.
The IMF has been heavily criticized by countries like Argentina and Venezuela because the
‘richer countries’ such as the United States, United Kingdom and other first world countries
dominate decision making. Decision making in the IMF is based on the amount of money
each country pays into the quota system. In fact, these first world countries have in excess of
38% of the vote so obviously SIDS are silenced in the IMF and the IMF is run by first world
countries. The IMF also decimated the economies of other countries such as Argentina.
Venezuela’s former president went as far as to call the IMF “mechanism of American
imperialism” and “a weapon of neo-colonialism.” An economist even stated that the IMF
wants to tell small island developing states to fix their balance of payments issues when the
United States has a trade deficit of in excess of $200 billion US dollars. The IMF is neocolonialism!
Furthermore, when countries go to the IMF for lending after exhausting all other
options, the IMF charges astronomical interest rates to small island developing states (SIDS)
such as the Caribbean. For example, the rate of interest on an IMF loan to Jamaica is 13%,
countries are going to the IMF to try to stabilize the economy and get out of debt, not get into
more debt! Now, the interest rate to the United States is 5.3%, which demonstrates a clear
preference for large, free market economies. How is it possible that they charge 13% to a
SID? It is clear that first world countries obviously have a large influence on the IMF and
these countries are preying on hapless, poor, indebted nations and forcing them into a
downward spiral of poverty and enforcing “anti-socialist” policies when almost every
Caribbean country has a mixed economy, with the exception of Cuba. As some people say
“The first world countries are the IMF.” A prominent economist stated that the Caribbean is
constantly failed by the IMF.
In conclusion, the IMF’s disadvantages outweigh the advantages and their track
record has not been encouraging, many of the countries which they ‘helped’ are now poverty
stricken with their ‘anti-socialism’ policies. Therefore, since the 1970’s, the Caribbean has
not benefited significantly from the IMF especially Jamaica who had the IMF decimate their
economy and left their people jobless and poverty stricken.