Is the IMF fit for purpose?

The International Monetary Fund is the worlds lender of last resort. But, asa debt crisis looms, many nations no longer trust it and are looking elsewhere for help

- Jamie Martin

Last summer, after months of unusually heavy monsoon rains, and temperatures that approached the limits of human survivability, Pakistan experienced some of the worst floods in its history. The most extensive destruction was in the provinces of Sindh and Balochistan, but up to a third of the country was estimated to be submerged. The floods killed more than 1,700 people and displaced a further 32 million. Some of the country’s most fertile agricultural areas became giant lakes, drowning livestock and destroying crops and infrastructure. The cost of the disaster runs to tens of billions of dollars.

Inlate August, as the scale of this catastrophe was becoming clear, the Pakistani government was trying to avert a second disaster. It was finally reaching a deal with the International Monetary Fund IMF) to avoid missing payment on its foreign debt. Without this agreement, Pakistan would probably have been declared in default an event that can spark a recession, weaken a country’s long-term growth, and make it more difficult to borrow at affordable rates in the future. The terms of the deal were painful: the government was offered a 1.17bn IMF bailout only after it demonstrated a commitment to undertaking unpopular austerity policies. But the recent fate of another south Asian country appeared to show what happens if you put off the IMF for too long. Only weeks before, the Sri Lankan government, shortly after its own default - and after months of refusing to implement IMF-demanded reforms - was overthrown in a popular uprising.