IMF policies undercut health and education programs in developing countries, trainees learn

April 9, 2007

Participants in a teach-in on alternative macroeconomic policies to get more doctors, nurses and teachers hired in developing countries. Photo: K. McNeely/CWS

Church World Service joined Washington based advocates from various organizations mid March to probe how International Monetary Fund policy (IMF) prevents impoverished countries from providing adequate health care and education for their people.

In the three-day training, US-based international advocacy organizations working on health, education, HIV/AIDS and women's rights learned about the obstacles facing poor countries throughout the Global South as they seek to increase public spending.

The training event was part of a multi-country Economic Literacy and Advocacy Project that ActionAid International will be doing over the next two years with nongovernmental organizations in the US that focus on health, education, HIV/AIDS and women's rights. The project addresses the overly-restrictive spending policies of IMF loan programs.

In addition to the activities with US groups, the organization is also setting up economic literacy projects in Sierra Leone and Malawi, with plans to do the same in Kenya and two other countries yet to be determined.

Like Church World Service and other organizations working in countries in the global south, ActionAid International has found that impoverished country governments can rarely hire the numbers of doctors, nurses and teachers needed to meet the Millennium Development Goals (MDGs) of a chieving universal primary education and halting and reversing the spread of HIV/AIDS, malaria and other major diseases.

The IMF's focus on low inflation targets often prohibits a country from spending more in the public sector. According to Professor Peter Howitt of Brown University, when countries try to lower inflation, economic growth is usually sacrificed.

For example, in the United States, when inflation was high in the 1979 the Chair of the Federal Reserve raised interest rates which slowed investment in new industry. The high interest rates slowed spending, creating high unemployment, low production levels for all industries and a recession. By 1983 inflation was lowered to four percent, but overall economic growth, measured in gross domestic product (GDP), fell to 30 percent of what it had been in 1980.

When developing countries are persuaded by the IMF to implement measures to reduce inflation they sacrifice growth and development.

At the literacy training, the United Nations Development Program's Rathin Roy proposed that countries prepare two different budgets with different kinds of “paybacks.” A country's Minister of Finance who needs a fiduciary payback could strike a balance with Ministers of Health and Education who need development paybacks. Roy proposed that the actions and investments of the various country ministries ought to be taken with an eye toward maintaining this balance.

Participants in Church World Service's Speak Out alert list have been advocating for passage of S. 805, the African Health Capacity Investment Act of 2007 . If passed this legislation would offer an excellent model for the U.S. government to help countries in sub-Saharan Africa build the capacity and develop the human resource infrastructure to secure and maintain the health of their citizens. But the benefits of this legislation could be squelched by fiscal policies that do not free a country to hire adequate numbers of nurses and doctors. The same is true of countries wanting to improve access to primary education. Governments must have the freedom to hire the number of teachers needed to achieve universal primary education by 2015.

A New York Times editorial during the G8 summit in 2005 pointed out the absurdity of what developing countries are being asked to do in lowering inflation rates. "There is a desperate need,” the July 3, 2005 editorial said “for greater policy coherence in a period when many national governments, including Washington, are sensibly exhorting African governments to spend more on primary health care and education while international financial institutions largely controlled by those same Western governments have been pressing African countries to shrink their government payrolls, including teachers and health care workers."

It is high time a balance is struck so that countries can truly develop. Church World Service staff in Washington will attend follow-up advocacy strategy meetings this week with other US groups in focused advocacy work directed at US Treasury and Congress in 2007 and 2008. Church World Service will join others in calling for changes in these aspects of future IMF loan programs.