The proposals and promises put forth at this week's G20 summit are being scrutinized and analyzed by many groups. One of them is the Jubilee USA Network, an organization lobbying for debt reduction and elimination for poor nations.
Executive Director Neil Watkins says of the London summit, "I think overall it's a mixed bag. On the good side, I think the G20 really recognized the fact that this is a global crisis and it's having impacts on countries all around the world, from Africa to Latin America to Asia. So they put forward large new sums of money, which [are] urgently needed, and came together around a common platform," he says.
However, there are questions about the G20 proposals. Watkins says, "The devil is in the details, as always with these sorts of global initiatives, and there are a couple of concerns that we have and other civil society groups have been raising. One is that nearly all of the response, all of the money being provided to developing nations, will be coming in the form of loans, rather than grants."
He compares that to someone driving their car into a house and then giving the homeowner a loan to repair the damages, instead of paying outright for the repairs. "The crises originated in rich countries and the effects are being felt by the poorest countries," he says.
The Jubilee USA Network fears the huge increase in loans could trigger a new debt crisis in the developing world. Most of those loans would come from the International Monetary Fund (IMF).
"The IMF has received a huge endorsement with this G20 announcement. More than $850 billion will likely flow through the IMF following the G20 agreement. It's fascinating because a little more than a year ago, the IMF in its last fiscal year made loans totaling just over one billion dollars. So you have a huge increase, a huge investment of trust in an institution heavily criticized over the past 10 or 20 years by many developing nations for some of the austerity conditions that it has placed," he says.
Watkins would like to see reforms at the IMF before the loans are made. Asked about the likelihood of that happening, he says, "There's a huge global demand…. I think there are two main issues that civil society and even governments have been highlighting. One is the governance problem and the fact that the IMF, its structure of accountability and its board reflect the global economy of about 20 or 30 years ago, not the current realities. And then the second issue is the sorts of policy advice that the IMF continues to give."
Watkins sees some movement to discuss changing the IMF governing board and allow more representation from emerging markets. But he says actual changes may still be a few years away.
"The second issue is that the policy advice that IMF gives has changed a little bit, but not significantly. And one of the things we're finding is that even in the most recent crisis loans the IMF has been giving, you're seeing some of the same old policies that the IMF has been promoting for the past 20 years…policies that restrict spending, that insist on higher interest rates -- exactly the opposite sorts of policies that the rich countries and the United States are pursuing to respond to the current crisis," he says.Watkins calls it a "double standard," adding that the IMF needs to "provide more flexibility to poor countries to respond to the crisis in a way that benefits the people of their country."
