Overseas Development Institute (ODI) research undertaken in 1980 included criticisms of the IMF which support the analysis that it is a pillar of what activist Titus Alexander calls global apartheid.
Developed countries were seen to have a more dominant role and control over less developed countries (LDCs).
The Fund worked on the incorrect assumption that all payments disequilibria were caused domestically. The Group of 24 (G-24), on behalf of LDC members and the United Nations Conference on Trade and Development (UNCTAD) complained that the IMF did not distinguish sufficiently between disequilibria with predominantly external as opposed to internal causes. This criticism was voiced in the aftermath of the 1973 oil crisis. Then LDCs found themselves with payment deficits due to adverse changes in their terms of trade, with the Fund prescribing stabilization programmes similar to those suggested for deficits caused by government over-spending. Faced with long-term, externally generated disequilibria, the G-24 argued for more time for LDCs to adjust their economies.
Some IMF policies may be anti-developmental; the report said that deflationary effects of IMF programmes quickly led to losses of output and employment in economies where incomes were low and unemployment was high. Moreover, the burden of the deflation is disproportionately borne by the poor.
The IMF's initial policies were based in theory and influenced by differing opinions and departmental rivalries. Critics suggest that its intentions to implement these policies in countries with widely varying economic circumstances were misinformed and lacked economic rationale.
ODI conclusions were that the IMF's very nature of promoting market-oriented approaches attracted unavoidable criticism. On the other hand, the IMF could serve as a scapegoat while allowing governments to blame international bankers. The ODI conceded that the IMF was insensitive to political aspirations of LDCs while its policy conditions were inflexible.
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Argentina, which had been considered by the IMF to be a model country in its compliance to policy proposals by the Bretton Woods institutions, experienced a catastrophic economic crisis in 2001, which some believe to have been caused by IMF-induced budget restrictions—which undercut the government's ability to sustain national infrastructure even in crucial areas such as health, education, and security—and privatisation of strategically vital national resources. Others attribute the crisis to Argentina's misdesigned fiscal federalism, which caused subnational spending to increase rapidly. The crisis added to widespread hatred of this institution in Argentina and other South American countries, with many blaming the IMF for the region's economic problems. The post-2000s trend toward moderate left-wing governments in the region and a growing concern with the development of a regional economic policy largely independent of big business pressures has been ascribed to this crisis.
In 2001, the Independent Evaluation Office, an autonomous body, was established to conduct independent evaluations of policies and activities of the International Monetary Fund.
In 2006, a senior ActionAid policy analyst Akanksha Marphatia stated that IMF policies in Africa undermine any possibility of meeting the Millennium Development Goals (MDGs) due to imposed restrictions that prevent spending on important sectors, such as education and health.
In an interview (2008-05-19), the former Romanian Prime Minister Călin Popescu-Tăriceanu claimed that "Since 2005, IMF is constantly making mistakes when it appreciates the country's economic performances". Former Tanzanian President Julius Nyerere, who claimed that debt-ridden African states were ceding sovereignty to the IMF and the World Bank, famously asked, "Who elected the IMF to be the ministry of finance for every country in the world?"
Former chief economist of IMF and former Reserve Bank of India (RBI) Governor Raghuram Rajan who predicted the 2008 financial crisis criticised the IMF for remaining a sideline player to the developed world. He criticised the IMF for praising the monetary policies of the US, which he believed were wreaking havoc in emerging markets. He had been critical of "ultra-loose money policies" of some unnamed countries.
Countries such as Zambia have not received proper aid with long-lasting effects, leading to concern from economists. Since 2005, Zambia (as well as 29 other African countries) did receive debt write-offs, which helped with the country's medical and education funds. However, Zambia returned to a debt of over half its GDP in less than a decade. American economist William Easterly, sceptical of the IMF's methods, had initially warned that "debt relief would simply encourage more reckless borrowing by crooked governments unless it was accompanied by reforms to speed up economic growth and improve governance", according to The Economist.
Feminist and postcolonial scholars have critiqued the IMF's structural adjustment and austerity programs for reinforcing neocolonial economic dependencies in postcolonial states. These policy conditions often reduce public spending on health, education, and social services, disproportionately affecting women and marginalized communities, while prioritizing debt repayment and market liberalization over social welfare and national economic sovereignty.
Conditionality
The IMF has been criticised for being "out of touch" with local economic conditions, cultures, and environments in the countries they are requiring policy reform. The economic advice the IMF gives might not always take into consideration the difference between what spending means on paper and how it is felt by citizens. Countries charge that with excessive conditionality, they do not "own" the programmes and the links are broken between a recipient country's people, its government, and the goals being pursued by the IMF.
Jeffrey Sachs argues that the IMF's "usual prescription is 'budgetary belt tightening to countries who are much too poor to own belts'". Sachs wrote that the IMF's role as a generalist institution specialising in macroeconomic issues needs reform. Conditionality has also been criticised because a country can pledge collateral of "acceptable assets" to obtain waivers—if one assumes that all countries are able to provide "acceptable collateral".
One view is that conditionality undermines domestic political institutions. The recipient governments are sacrificing policy autonomy in exchange for funds, which can lead to public resentment of the local leadership for accepting and enforcing the IMF conditions. Political instability can result from more leadership turnover as political leaders are replaced in electoral backlashes. IMF conditions are often criticised for reducing government services, thus increasing unemployment.
Another criticism is that IMF policies are only designed to address poor governance, excessive government spending, excessive government intervention in markets, and too much state ownership. This assumes that this narrow range of issues represents the only possible problems; everything is standardised and differing contexts are ignored. A country may also be compelled to accept conditions it would not normally accept had they not been in a financial crisis in need of assistance.
On top of that, regardless of what methodologies and data sets used, it comes to same the conclusion of exacerbating income inequality. With Gini coefficient, it became clear that countries with IMF policies face increased income inequality.
It is claimed that conditionalities hinder social stability and hence inhibit the stated goals of the IMF, while Structural Adjustment Programmes lead to an increase in poverty in recipient countries. The IMF sometimes advocates "austerity programmes", cutting public spending and increasing taxes even when the economy is weak, to bring budgets closer to a balance, thus reducing budget deficits. Countries are often advised to lower their corporate tax rate. In Globalization and Its Discontents, Joseph E. Stiglitz, former chief economist and senior vice-president at the World Bank, criticises these policies. He argues that by converting to a more monetarist approach, the purpose of the fund is no longer valid, as it was designed to provide funds for countries to carry out Keynesian reflations, and that the IMF "was not participating in a conspiracy, but it was reflecting the interests and ideology of the Western financial community".
Stiglitz concludes, "Modern high-tech warfare is designed to remove physical contact: dropping bombs from 50,000 feet ensures that one does not 'feel' what one does. Modern economic management is similar: from one's luxury hotel, one can callously impose policies about which one would think twice if one knew the people whose lives one was destroying."
The researchers Eric Toussaint and Damien Millet argue that the IMF's policies amount to a new form of colonisation that does not need a military presence:
Following the exigencies of the governments of the richest companies, the IMF, permitted countries in crisis to borrow in order to avoid default on their repayments. Caught in the debt's downward spiral, developing countries soon had no other recourse than to take on new debt in order to repay the old debt. Before providing them with new loans, at higher interest rates, future leaders asked the IMF, to intervene with the guarantee of ulterior reimbursement, asking for a signed agreement with the said countries. The IMF thus agreed to restart the flow of the 'finance pump' on condition that the concerned countries first use this money to reimburse banks and other private lenders, while restructuring their economy at the IMF's discretion: these were the famous conditionalities, detailed in the Structural Adjustment Programmes. The IMF and its ultra-liberal experts took control of the borrowing countries' economic policies. A new form of colonisation was thus instituted. It was not even necessary to establish an administrative or military presence; the debt alone maintained this new form of submission.
International politics play an important role in IMF decision making. The clout of member states is roughly proportional to its contribution to IMF finances. The United States has the greatest number of votes and therefore wields the most influence. Domestic politics often come into play, with politicians in developing countries using conditionality to gain leverage over the opposition to influence policy.
Academic Jeremy Garlick cites IMF loans to South Korea during the 1997 Asian financial crisis as widely perceived by the South Korean public as a debt-trap. Garlick writes that the public was generally bitter about submitting to the conditions imposed by the IMF, which required South Korea to radically restructure its economy and consult with the IMF before making economic decisions until the debt was repaid.
In 2016, the IMF's research department published a report titled "Neoliberalism: Oversold?" which, while praising some aspects of the "neoliberal agenda", claims that the organisation has been "overselling" fiscal austerity policies and financial deregulation, which they claim has exacerbated both financial crises and economic inequality around the world.
In 2020 and 2021, Oxfam criticized the IMF for forcing tough austerity measures on many low income countries during the COVID-19 pandemic, despite forcing cuts to healthcare spending, would hamper the recipient's response to the pandemic.
Support of dictatorships
The role of the Bretton Woods institutions has been controversial since the late Cold War, because of claims that the IMF policy makers supported military dictatorships friendly to American and European corporations, but also other anti-communist and communist regimes, such as the Socialist Republic of Romania. An example of IMF's support for a dictatorship was its ongoing support for Mobutu's rule in Zaire, although its own envoy Erwin Blumenthal provided a sobering report about the entrenched corruption and embezzlement and the inability of the country to pay back any loans. In 2021, the IMF approved a US$1 billion loan to the autocratic Uganda despite protests from Ugandans in Washington, London and South Africa. Critics also claim that the IMF is generally apathetic or hostile to democracy, human rights, and labour rights. The controversy has helped spark the anti-globalization movement.
Arguments in favour of the IMF supporting dictatorships is the claim that economic stability is a precursor to democracy. A 2017 study found no evidence of IMF lending programs undermining democracy in borrowing countries, it found "evidence for modest but definitively positive conditional differences in the democracy scores of participating and non-participating countries".
A 2020 study found the reverse causality with democracy as a precursor to economic stability. Critics highlight various examples in which democratised countries fell after receiving IMF loans.
Party-based autocracies and democracies can face similar incentives when considering agreements with IMF, in contrast to personalist and military regimes.
Impact on access to food
A number of civil society organisations have criticised the IMF's policies for their impact on access to food, particularly in developing countries. In October 2008, former United States president Bill Clinton delivered a speech to the United Nations on World Food Day, criticising the World Bank and IMF for their policies on food and agriculture:
We need the World Bank, the IMF, all the big foundations, and all the governments to admit that, for 30 years, we all blew it, including me when I was president. We were wrong to believe that food was like some other product in international trade, and we all have to go back to a more responsible and sustainable form of agriculture.
The FPIF remarked that there is a recurring pattern: "the destabilization of peasant producers by a one-two punch of IMF-World Bank structural adjustment programs that gutted government investment in the countryside followed by the massive influx of subsidized U.S. and European Union agricultural imports after the WTO's Agreement on Agriculture pried open markets".
Impact on public health
The structural adjustments programs (SAPs) demanded by IMF conditionality contribute to the weakening of public health services in a number of ways. Cuts in funding to public health services prompted by IMF SAPs contribute to poorer working conditions in the sector, causing repercussions for health service quality and availability. This has been shown to negatively impact vaccination rates, increase exposure to conditions with risk-factors like disability and death, and higher prevalence of tuberculosis.
A 2009 study concluded that the strict conditions resulted in thousands of deaths in Eastern Europe by tuberculosis as public health care had to be weakened. In the 21 countries to which the IMF had given loans, tuberculosis deaths rose by 16.6%. A 2017 systematic review on studies conducted on the impact that structural adjustment programs have on child and maternal health found that these programs have a detrimental effect on maternal and child health among other adverse effects.
Structural adjustment programs are considered a form of neo-colonialism by some academics due to their intensification of healthcare access inequality, and their promotion of external intervention and aid to meet health needs in developing countries.
Scandals
Managing Director Lagarde (2011–2019) was convicted of giving preferential treatment to businessman-turned-politician Bernard Tapie as he pursued a legal challenge against the French government. At the time, Lagarde was the French economic minister. Within hours of her conviction, in which she escaped any punishment, the fund's 24-member executive board put to rest any speculation that she might have to resign, praising her "outstanding leadership" and the "wide respect" she commands around the world.
Former IMF Managing Director Rodrigo Rato was arrested in 2015 for alleged fraud, embezzlement and money laundering. In 2017, the Audiencia Nacional found Rato guilty of embezzlement and sentenced him to 4+1⁄2 years' imprisonment. In 2018, the sentence was confirmed by the Supreme Court of Spain.
Function and policies
The IMF is only one of many international organisations, and it is a generalist institution that deals only with macroeconomic issues; its core areas of concern in developing countries are very narrow. One proposed reform is a movement towards close partnership with other specialist agencies such as UNICEF, the Food and Agriculture Organization (FAO), and the United Nations Development Programme (UNDP).
Jeffrey Sachs argues in The End of Poverty that the IMF and the World Bank have "the brightest economists and the lead in advising poor countries on how to break out of poverty, but the problem is development economics". Development economics needs the reform, not the IMF. He also notes that IMF loan conditions should be paired with other reforms—e.g., trade reform in developed nations, debt cancellation, and increased financial assistance for investments in basic infrastructure. IMF loan conditions cannot stand alone and produce change; they need to be partnered with other reforms or other conditions as applicable.
U.S. influence and voting reform
The scholarly consensus is that IMF decision-making is not simply technocratic, but also guided by political and economic concerns. The United States is the IMF's most powerful member, and its influence reaches even into decision-making concerning individual loan agreements. The U.S. has historically been openly opposed to losing what Treasury Secretary Jacob Lew described in 2015 as its "leadership role" at the IMF, and the U.S.' "ability to shape international norms and practices".
Emerging markets were not well-represented for most of the IMF's history: Despite being the most populous country, China's vote share was the sixth largest; Brazil's vote share was smaller than Belgium's. Reforms to give more powers to emerging economies were agreed by the G20 in 2010. The reforms could not pass, however, until they were ratified by the United States Congress, since 85% of the Fund's voting power was required for the reforms to take effect, and the Americans held more than 16% of voting power at the time. After repeated criticism, the U.S. finally ratified the voting reforms at the end of 2015. The OECD countries maintained their overwhelming majority of voting share, and the U.S. in particular retained its share at over 16%.
The criticism of the American- and European-dominated IMF has led to what some consider "disenfranchising the world" from the governance of the IMF. Raúl Prebisch, the founding secretary-general of the UN Conference on Trade and Development (UNCTAD), wrote that one of "the conspicuous deficiencies of the general economic theory, from the point of view of the periphery, is its false sense of universality".
Alternatives
In March 2011, the Ministers of Economy and Finance of the African Union proposed to establish an African Monetary Fund.
At the 6th BRICS summit in July 2014 the BRICS nations (Brazil, Russia, India, China, and South Africa) announced the BRICS Contingent Reserve Arrangement with an initial size of US$100 billion, a framework to provide liquidity through currency swaps in response to actual or potential short-term balance-of-payments pressures.
In 2014, the China-led Asian Infrastructure Investment Bank was established.
