AT IMF CP - Michigan 7 2023 CFMP

AFF Answers---CP---IMF
AFF---Perm do CP
SDRs include USD, which is domestically funded
IMF 1/23 (International Monetary Fund | January 2023 | “Special Drawing Rights” | https://www.imf.org/en/About/Factsheets/Sheets/2023/special-drawing-rights-sdr#:~:text=The%20SDR%20is%20an%20international,and%20the%20British%20pound%20sterling. | DOA: 7/24/23 | Saaπ)
What is the SDR?
The SDR is an international reserve asset. The SDR is not a currency, but its value is based on a basket of five currencies—the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
AFF---AT: Solvency
IMF’s role in crisis is insufficient and the RST structurally fails
Fresnillo et. al. 22 (Iolanda Fresnillo, Iolanda has been closely involved in local, national and international social movements and has campaigned on development finance, debt, human rights, feminism, environment, peace, trade and responsible consumption. She has worked for more than 10 years as a researcher, campaigns and communications manager at Observatori del Deute en la Globalització and as a research consultant at Eurodad, Medicos Sin Fronteras-MSF and Transnational Institute, among others. Iolanda holds a MA in Development and Cooperation and a BA in Sociology, both from the University of Barcelona | Maria Jose Romero, Policy and Advocacy Manager for Eurodad's work on development finance. Her role involves research and analysis, advocacy and monitoring policy developments. She joined Eurodad in 2012 and before that she worked at the secretariat of the Latin American Network on Debt, Development and Rights (LATINDADD), based in Peru, on tax justice and development finance | Chiara Mariotti, Associate Director - Equity Program - Open Society Foundations | Eurodad | “Analysis: World Bank and IMF failure to address the global polycrisis makes systemic reform even more urgent” | October 19, 2022 | https://www.eurodad.org/world_bank_and_imf_failure_to_address_the_global_polycrisis_makes_systemic_reform_even_more_urgent | DOA: 7/24/23 | Saaπ)
Last week's Annual Meetings of the World Bank and the International Monetary Fund - the Bretton Woods Institutions - was the first face-to-face gathering since the outbreak of the Covid-19 pandemic. The need for ambitious action could not be greater. The two institutions stressed that the world is facing multiple and interconnected crises - defined as a “polycrisis” by historian Adam Tooze - and outlined by the World Bank as: ‘Increased poverty. Food shortages. Energy shocks. Debt crises. Climate change. Inflation. War.’ The Bank’s forecast also predicted “the world may be edging toward a global recession in 2023”, while the IMF warned ‘the worst is yet to come’ for the global economy. This will have dramatic consequences for already rising poverty levels and inequalities. However, there was a disconnect between the alarming messages delivered by the World Bank and IMF - and by activists on the streets of Washington DC and around the world who were calling for action - and the underwhelming practical responses of the institutions. ¶ The main takeaway of the week is that the Bretton Woods Institutions have failed to deliver what is needed, proving yet again that they are unfit for purpose. The problem starts with their governance system, which simply must now be reformed. ¶ Designed in 1944, when power relations were driven by colonialism, the current governance structure and quota distribution, which gives the greatest power to a few countries, follows that same (neo)colonial logic. Mia Mottley, the Prime Minister of Barbados, argued in her address to the 2022 United Nations General Assembly, that the time had come “for a review of the settlement of the Bretton Woods institutions.” She said that the agreement that gave rise to the WB and the IMF “no longer serv[ing] the purpose in the 21st century that they served in the 20th century”. This was also raised by speakers at a civil society session dedicated to IMF governance, where the need to address the unbalanced governance structure and to end the ‘gentlemen's agreement’ that guarantees the US-European leadership at the BWIs, was clear.¶ A first step to deliver the systemic governance reform so desperately needed in both institutions would be a major change to the quota distribution. A major opportunity to advance with this reform is the upcoming 16th review of IMF quotas (the previous review failed to introduce any meaningful reforms). During the meetings IMF Managing Director, Kristalena Georgieva, acknowledged the high cost of failing to review the IMF quota, admitting to civil society organisations (CSOs) that “it undermines the credibility of the IMF, it undermines our ability to serve our members”. ¶ The polycrisis reveals the true colour of IMF policies¶ Civil society has for years denounced the gap between IMF rhetoric in favour of government spending on public services and social protection, and its practice that continues to recommend austerity measures. This year, the gap narrowed, as the rhetoric moved closer to the practice. Georgieva made clear that tackling inflation and reducing fiscal deficits are the priority, even if we are still deep in crisis with no end in sight, and even if countries have already contracted their public spending. As the 2022 edition of Oxfam and Development Finance International’s Commitment to Reducing Inequality Index shows, during the pandemic, half of low- and lower-middle-income countries saw health spending fall; half of the countries tracked by the Index cut social protection spending; 70 per cent cut education spending; two-thirds of countries failed to increase their minimum wage in line with gross domestic product. ¶ The standard IMF answer to CSOs’ concerns about the new wave of austerity cuts is that countries have to intensify social protection and other support measures targeted to the poorest and most vulnerable people. As Eurodad argued previously, targeted systems have proven to be inefficient at reaching those in need, commonly excluding over half of the intended beneficiaries and reinforcing gender stereotypes, rather than challenging them. In fact, civil society attending the Annual Meetings were astonished by the limited interest of IMF staff to seriously engage with CSO concerns, despite new evidence that by next year 85 per cent of the world will be affected by austerity. ¶ The only two measures announced to help countries face the crises and increase their fiscal space were the creation of a temporary Food Shock Window (FSW) for emergency lending, and the operationalisation of the Resilience and Sustainability Trust, both debt-creating tools.¶ The FSW might provide some short-term relief to countries struggling to pay for their food imports, but it does nothing to correct the IMF’s long held support for trade liberalisation measures, market-led land reforms and financial deregulation of agriculture, which have contributed to creating a dysfunctional and unbalanced global food system.¶ The operationalisation of the RST is the latest move of the so far-failed attempt to rechannel the 2021 Special Drawing Rights (SDRs) allocation to countries that need it the most. While the IMF announced that Rwanda, Barbados and Costa Rica have officially applied for the RST, no SDR has been rechanneled yet. ¶ At the Meetings, civil society reiterated concerns previously expressed about the RST, such as the fact that eligible countries must have a concurrent programme with the IMF, meaning they will have to withstand the Fund’s macroeconomic recommendations and definition of a stable macroeconomic environment, whether they agree with it or not. An additional concern is the emphasis placed on the hope that the RST will play a catalytic role for private capital to support climate needs, introducing reforms that will make it easier for governments to play a ‘de-risking role’ and create incentives to attract private investment in the energy transition. This sounds too much like WBG’s ‘maximising finance for development’ approach, termed by Professor Daniela Gabor the ‘Wall Street Consensus’, which has been questioned due to its focus on driving private capital into areas that should remain under the State. This is also something that may end up increasing the financial vulnerability of the Global South, serving the interest of private capital instead of those of people and the planet. None of these issues were addressed.¶ The RST, with its combination of macroeconomic programmes in the area of climate adaptation, energy transition and pandemic preparedness, will turn the IMF into a major actor in climate action. However, its limited expertise in the area, its unwillingness to move away from conditionality and austerity, and its unequal governance system make it ill-placed to play such a role. Climate action and climate finance should follow the principles of ‘polluters pay’ and ‘common but differentiated responsibilities’. They should include a strong element of justice and retribution, acknowledging that the most important policy issue in economics today is how to tackle climate change in an equitable, just, gender-responsive and human rights-based manner. All of these are yet to be seen in the IMF’s engagement with climate. ¶ The IMF should use a greater variety of instruments to help countries expand their fiscal space, such as the elimination of surcharges - a system of fees on loans from the institutions; a new allocation of Special Drawing Rights - especially if targeted to developing countries; and more focus on the need for debt restructuring. Yet none of these measures were addressed during the Meetings.
AFF—AT: NB
RST design flaws dooms the plan and the climate
Ahmed et. al. 21 (Sara Jane Ahmed, Finance Adviser to the Vulnerable Twenty Group of Ministers of Finance | Alicia Bárcena, Executive Secretary of the United Nations Economic Commission for Latin America and the Caribbean | Daniel Titleman, Director of the Economic Development Division of the United Nations Economic Commission for Latin America and the Caribbean | Project Syndicate | “The IMF's Misstep on Climate Finance” | December 13, 2021 | https://www.project-syndicate.org/commentary/imf-must-adjust-funding-criteria-in-response-to-climate-vulnerability-by-sara-jane-ahmed-et-al-2021-12 | DOA: 7/24/23 | Saaπ)
The International Monetary Fund seems determined to dilute one of the best examples of global cooperation in response to the economic disruptions induced by the COVID-19 pandemic and climate change. It must change course now, before it is too late.¶ The IMF’s allocation of $650 billion in special drawing rights (SDRs, the Fund’s reserve asset) in August was long encouraged and widely welcomed. Given the IMF’s tight rules, it was clear from the start that the vast majority of SDRs would go to countries that did not need them. As a result, G7 leaders pledged to re-channel upwards of $100 billion of their allocations to “countries most in need of … pandemic [support to] stabilize their economies, and mount a green and global recovery … aligned with shared development and climate goals.”¶ While these moves seem small compared to the $17 trillion that rich countries have spent to support their economies during the pandemic, they were nonetheless significant. In October, just two months after the allocation, the G20 backed a plan by the IMF and the World Bank to develop and implement a Resilience and Sustainability Trust, which would allow wealthy countries to channel their allotments to low- and middle-income countries vulnerable to economic shocks. Because the RST could be used to address risks related to climate change, it would fill a glaring gap in international finance. The IMF announced that it would have a proposal ready for its 2022 spring meetings.¶ But will it be enough?¶ Extreme weather events like floods and hurricanes can trigger financial instability in vulnerable countries as they wipe out capital stock and sources of foreign exchange. Likewise, countries dependent on fossil-fuel exports face fiscal uncertainty as demand for oil and gas decreases to meet climate goals. In both cases, spillover effects can negatively affect trade. Countries confronting such conditions must undertake a structural transformation of their economies. But many low- and middle-income countries lack access to the cost-effective, flexible financing they need.¶ A well-designed RST would make the IMF criteria for resource allocation and country eligibility more adaptable. Unfortunately, five design flaws in the IMF’s approach would render the planned RST ineffective for most climate-vulnerable countries.¶ The first flaw concerns eligibility. IMF programs discriminate on the basis of income, but climate change does not. While the G20 explicitly called for the establishment of an RST covering low-income and climate-vulnerable middle-income countries, the IMF has adopted a narrow interpretation according to which middle-income countries would be eligible only if they do not exceed a certain income threshold.¶ But traditional measures of income are a poor criterion for determining eligibility. The IMF must adjust its thinking to actual circumstances and ensure that eligibility is based on climate vulnerability. It should not be controversial to integrate into the criteria simple measures such as susceptibility to physical climate risks like floods, droughts, and hurricanes, or economic factors like the share of fossil-fuel exports in total foreign-exchange earnings.¶ Second, there is a problem with the terms and accessibility of the funds. Developing countries lack the fiscal space to mobilize domestic resources to address the structural changes their economies need. Many also lack access to external resources on reasonable borrowing terms. But the IMF is proposing that RST users be charged the SDR interest rate (currently five basis points and on the rise) plus a margin of up to 100 basis points. These rates are not very different from what the Fund currently charges middle-income countries. More problematic is the access limits, which would be 100% of quota, or less than the SDR equivalent of $1 billion. These guidelines would do little to address the financing needs of all but the smallest countries.¶ The third flaw is the IMF’s insistence on conditionality. The Fund sees the RST as a top-up scheme for existing programs. This is deeply troubling. According to the IMF’s own research, its existing lending facilities are stigmatized, owing to their high levels of conditionality and low levels of performance with respect to economic recovery and other social outcomes. The RST was supposed to be a new instrument that recognizes and channels resources to the countries that are most vulnerable to climate change. But what the IMF plans is repackaged business as usual.¶ The fourth flaw is that even though the IMF is only now devising a climate-change strategy, it would head the RST. Multilateral and regional development banks are also prescribed SDR institutions, and they have a longer view and a stronger track record on climate policy. They need to be part of the RST’s governance.¶ Lastly, there is the question of scale. IMF Managing Director Kristalina Georgieva has said the RST would be funded with around $30 billion initially and then scaled up to $50 billion. While the RST alone cannot be expected to substitute finance needed to address the intensifying effects of climate change, the needs assessment released by the Standing Committee on Finance of the United Nations Framework Convention on Climate Change put the figure at $6 trillion, and other estimates are significantly higher. At the recent UN Climate Change Conference (COP26), Barbados Prime Minister Mia Amor Mottley, whose country is among the world’s most vulnerable, proposed an annual increase in SDRs of $500 billion for 20 years to finance resilience and sustainability.¶ The IMF’s shareholders and stakeholders must reconsider the RST’s design. To succeed, it must include all climate-vulnerable developing countries, regardless of income level. It must provide low-cost financing that does not undermine members’ debt sustainability and is not linked to pre-existing IMF programs with onerous conditionalities. It must be governed by key stakeholders in development-finance institutions. And it must scale appropriately over time.¶ The IMF must make the necessary adjustments to its proposal for the RST. If it cannot, creditor countries should refrain from capitalizing it.
IMF loans are unsustainable and are fiscally dangerous
McQuillan 7/13 (Lawrence McQuillan, Director, Center for Entrepreneurship, and Senior Fellow in Political Economy, Pacific Research Institute for Public Policy, San Francisco, California. Coeditor of The International Monetary Fund: Financial Medic to the World | Britannica | “International Monetary Fund” | 7/13/2023 | https://www.britannica.com/money/topic/International-Monetary-Fund | DOA: 7/24/23 | Saaπ)
The impact of IMF loans has been widely debated. Opponents of the IMF argue that the loans enable member countries to pursue reckless domestic economic policies knowing that, if needed, the IMF will bail them out. This safety net, critics charge, delays needed reforms and creates long-term dependency. Opponents also argue that the IMF rescues international bankers who have made bad loans, thereby encouraging them to approve ever riskier international investments.¶ IMF conditionalities have also been widely debated. Critics contend that IMF policy prescriptions provide uniform remedies that are not adequately tailored to each country’s unique circumstances. These standard, austere loan conditions reduce economic growth and deepen and prolong financial crises, creating severe hardships for the poorest people in borrowing countries and strengthening local opposition to the IMF.