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Ebola crisis: One more exhibit on how IMF undermines right to health in country programs

A recent article on ForeignPolicy.com, “West Africa’s Financial Immune Deficiency,” explains how the standard International Monetary Fund (IMF) approach to tight fiscal and monetary policies has led to many years of sustained under-investment in the infrastructure of the public health systems in Guinea, Liberia, and Sierra Leone, leaving them ill-equipped to deal with the Ebola crisis when it struck. Despite their recent pledges of nearly $530 million to help these countries, the economic policies of the World Bank and IMF long prioritized price stability (low inflation) and fiscal restraint (low budget deficits) over other spending goals in developing countries, with the effect of greatly limiting overall public spending each year. Because of this squeeze, most of the budget went to immediate needs and recurrent expenditures and little was left over for scaling up long-term public investment in infrastructure, including the underlying public health infrastructure. This led to a serious drop-off in public investment as a percentage of GDP seen across developing countries that in many cases has been sustained until today.

Such polices have led to the dilapidated health infrastructure we see across much of West Africa today, along with inadequate numbers of health personnel and demoralizing working conditions that have fueled the so-called “push factors” driving the migration of nurses from poor countries to rich ones (the “brain drain”).

The IMF’s public relations unit is quick to defend the institution by ducking the point about the drop-off in long-term public investment and instead only referring to recurrent budgets, and even pointing to actual slight increases in recurrent health budgets in recent years in these countries. The IMF consistently neglects to address the other more serious issue – the steep drop off in long-term capital expenditures, including for investments in the public health infrastructure, since its original Structural Adjustment Programs (SAPs) kicked-in in the 1980s and 1990s. Whenever critics raise the issue of long-term public investment as a percent of GDP, the IMF responds by only talking about recurrent expenditures; but readers should not be so easily fooled.

Specifically at issue are two controversial IMF policies to keep inflation at or below 5-7 percent per year and budget deficits under 3 percent of GDP. Critics contend that such policies have unnecessarily restricted the ability of countries to invest in long-term infrastructure and also undermined the ability of domestic industries to generate higher levels of productive capacity, employment, and GDP output – and consequently reduced tax revenues as well. However, there are in fact other more expansionary fiscal and monetary policy options that could allow for increased public investment in these countries – if the IMF would only let them. Advocates of stronger public health systems in the region must take seriously this problem of chronic under-investment in the public health systems, and call on the IMF to consider supporting such alternative policies.

Rick Rowden is a candidate in Economic Studies and Planning at Jawaharlal Nehru University (JNU) in New Delhi. The full article on which this blog is based can be accessed here.

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