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Therapy of International Monetary Fund
Iurie Gotisan, May 15, 2006
We will try to make a short incursion in the history of the International Monetary Fund (IMF) from the very beginning and we think that this would be useful to our readers, too. The economies were mostly national at the end of the World War II, the international trade was on the decline and both direct investments and financial transactions faced an impasse. These were the main circumstances that made the world powers, especially the United States and the United Kingdom, to agree on the post-war Bretton Woods Arrangements, the birth of IMF and World Bank (WB). Namely these two financial forums were aimed to allow an international trade in a world without moves of capital. WB should compensate the lack of direct investments, while IMF the lack of financial credit for compensation of disbalances in trade.
We mention in this context that Moldova joined the IMF and WB in 1992, immediately after being accepted as a full rights member to the United Nations. IMF is a specialised institutional organisation of the United Nations which covers most of U.N. member states, aimed to ensure a good functioning of the international currency system. In this regard, IMF aims at international monetary cooperation and development of international trade. The Fund is financed through contributions of member countries, while the size of fees depends on goals of members. In addition, the primordial mission of IMF is to correct the disequilibrium of balances of payments in member countries.
Although the IMF and WB hold their activity (and the entire crediting activity for sure) in underdeveloped countries, they are headed by representatives of industrialised states. As a tradition or through a tacit agreement, the IMF head is always a European (Spanish Rodrigo Rato at present), while the WB head is an American (Paul Wulfovitz). However, these persons regard the world through the eyes of the financial community. Washington dictates the programmes and they are approved after short missions during which their members study carefully the data provided by finance ministries and central banks.
Unquestionably, the IMF and WB are the main creditors of Moldova. The assistance provided by these organisations was very important in the past years for sure. However, we should remark that the policies applied by IMF and WB on Moldova did not always comply with interests of social security of population. Relations with IMF demonstrated that the Fund acts sometimes like a medieval doctor who prescribes the same treatment for all countries, regardless of the source of economic problems and pain of "patient".
Moldova did not have a programme with IMF since late 2002 and frankly speaking the country's economy has managed to avoid an eventual system crisis despite its absence. We consider that the balance of payments, its deficit in our case, especially of trade balance, which is the main component of the balance of payments, was compensated these years mostly from remittances of Moldovans working abroad. Informal data show that approximately one billion dollars entered Moldova last year and, no matter how cynical it could be, but about 17 million dollars, for example, which the Fund could grant for a part within the new programme, is an incomparable amount with one billion.
Of course, an agreement with IMF must exist and this enhances the country's credibility in front of international organisations with which Moldovan holds relations, in front of foreign investors, etc. However, the signing of agreements had rather a technical nature. This is a relevant example in this regard: the delayed enforcement of the interim cooperation agreement between Moldova and the European Union (which was signed in November 1995 but approved by E.U. in 1996) is due to the fact that the E.U. has waited for a confirmation from IMF that ongoing financial and economic reforms are satisfactory. The positive notices of IMF and WB may be crucial for the Moldova-E.U. relations in future as well.
Or let's remember the situation when the IMF has raised the problem of introduction of pre-shipment inspection for goods and interrupted its relatively small credit programme, mainly from this reason1. Instead, much money, perhaps millions of dollars, goes in continuation to Russia, Indonesia or Brazil, for example. Its standard credit programmes have mostly a political rather than economic ground. Nobody raises the "strange" question: why the IMF and WB, the main world creditors, do not oblige the United States, the biggest debtor in the world, to follow programmes on structural adjustments? The easy enough attitude of the IMF and WB towards U.S. confirms one more time that the political element persists in relations between international creditors and debtors.
If speaking about liberalisation of trade after requirements of the World Trade Organisation and WB, Americans and West-Europeans destroy customs barriers separating them from Asia, Africa or East Europe, while agricultural exports from these areas are being screened. Underdeveloped economies are overwhelmed by imports; the national industry is deriving, while unemployment is on the rise. In all likelihood, not the correctness or consistence is the most important problem for this institution in resuming the crediting. The injustice is everywhere and nobody expects the IMF or WB to treat a nuclear power like a poor country in South-East Europe such as the Republic of Moldova, which does not have a great strategic importance.
1 On the other hand, if the pre-shipment inspection was implemented in continuation by an international company like SGS, the present situation of wine exports and dissatisfaction of authorities with state of internal trade could be prevented