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Due to rising borrowing costs and conflicts, the International Monetary Fund was forced to deal with more economic crises, including major crises in Ukraine, Egypt, and other locations in Africa, as well as Argentina and Pakistan.
The International Monetary Fund increased outstanding credit – a basic measure of the money spent by the Washington-based fund – to approximately $151 billion at the end of last February, according to CNBC World estimates based on IMF data. (The IMF reported this figure as 113 billion units of cash reserve assets, called special drawing rights.)
Standard Global Loans
The amount of loans is likely to increase further after the Fund finishes increasing the volume of its support to Egypt to $8 billion, which is likely to take place this month, pushing the total amount towards setting a new record next August.
Masoud Ahmed, head of the Center for Global Development Research and former head of the Middle East Division at the International Monetary Fund, said that although the pandemic era has ended, “countries are still experiencing pressures and tensions. The world has become more dangerous geopolitically. There are also more tensions and conflicts.”
his number compares to 90 countries during the height of the Covid-19 epidemic, and most of these programs are small emergency loans without interest, which represents the highest number ever under the regular borrowing programs provided by the Fund.
Widening Income Gap Between Countries
For her part, Kristalina Georgieva, the Fund’s director since 2019, warned that the widening income gap between rich and poor countries is a key factor in fueling instability as well as conflicts.
“We are also seeing a decline in trust between countries, as geopolitical tensions rise,” she said in a speech last week. She added that “a fragmented world will be poorer and less secure,” referring to the effects of the Russian invasion of Ukraine and the war between Israel and Hamas, in addition to “many conflicts that often do not receive widespread media coverage.”
Georgieva highlighted the $1 trillion in funds provided by the Fund to support liquidity, including funds available but not being used. By comparison, the amount currently owed is rather small, less than 0.2% of the size of the global economy, which exceeds $100 trillion, but it constitutes testimony to the pivotal role of the International Monetary Fund in controlling and managing the global financial system that the United States of America established in the wake of… World War II.
Taking these roots into account, it is not surprising that the files of many of the countries borrowing from the Fund – including the largest borrowers, Argentina, Egypt, and Ukraine – intersect with Washington’s major geopolitical priorities.
Taking Into Account American Interests
“The United States views the Fund as a vital tool for enhancing its national security, economic well-being, and interests in financial stability across the world,” said Mark Sobel, a former US Treasury official who spent nearly two decades focusing on international policy, particularly the IMF. Western officials – and certainly Americans – view the International Monetary Fund as the first response mechanism in the face of crises.
Supporting Ukraine against Russia constitutes an important example in this regard, as the Fund votes to reformulate its rules to allow lending to a country in a state of war, a decision that was only possible through the support of the United States of America, which has 16.5% voting rights that gives it veto power.
Loans To Egypt And Argentina
Loans from Egypt and Argentina together – the largest borrowers – represent $58 billion, nearly half of the total outstanding credit, and they are long-standing clients of the Fund.
The International Monetary Fund declined to provide an explanation of its priorities or details of the loans.
Meanwhile, the volume of IMF lending to Egypt is increasing, a country that represents a strategic axis located at the crossroads between Africa and the Middle East region, and adjacent to the borders of the Gaza Strip and Israel. But the country’s faltering economy secured only a limited portion of the more than $50 billion pledged globally.
“Egypt did not accidentally get all these programs, although it did not modify the role of the military in the economy,” said Martin Mhlison, former director of the IMF’s chief strategy, policy and review division. “The influence of geopolitical considerations on this work is clear.”
Los Angeles Times
Alessandra Signorelli
Amandine Lhoste
Calin Van Paris
Kara Nesvig