Another line of criticism many commentators have had is the fairness of it all. PIIGS nations are developed, whereas more and more IMF funds come from developing ones. Aside from the rationale of rescuing nations on grounds arguably outside of the mandate of the IMF, there remains the problem of the IMF being a Western power dominated institution. Continuing the unspoken tradition of having a European IMF head did not reflect well for an institution now being perceived as the "EMF" since nearly half of all its lending now goes to troubled European states. It's the "reverse Robin Hood" of the IMF taking from the poor to give to the rich.
Which brings me to the current post. Just today, I covered central bank independence (CBI) with my students in comparative political economy class. (Yes, it's a somewhat dry topic judging from their interest, but an important one nonetheless.) To keep up to date, I visited various central banks' websites. Thus, I was astounded that the Philippines was now lauding its supposed turnaround from being a longtime IMF borrower to an IMF lender. While this change may reflect improved economic conditions particularly since the Asian financial crisis, I remain wary. While there is some gloating involved--you've come a long way, baby and all that--I believe it's not only a travesty of economic justice for reasons given above but also a political boondoggle on the country's part. In particular, the Philippine central bank boasts that it will in time give more to the global financial crisis New Arrangements to Borrow (NAB) whose most notable political-economic feature is that contributions are not allocated additional voting rights. From the press release:
The Philippines’ long-standing relationship with the International Monetary Fund (IMF) has evolved from being a prolonged user of Fund resources to a stronger partnership marked by the country's contribution to collective efforts in preserving the stability of the international monetary system. In 2010, the Philippines, through the Bangko Sentral ng Pilipinas (BSP), became a participant to the Financial Transactions Plan (FTP) of the IMF. The FTP is the mechanism by which the Fund finances its lending and repayment operations through a transfer of foreign exchange from members with strong external position to borrowing members. The Philippines holds a creditor (or reserve) position in the IMF through its participation in the Fund’s FTP. A member is said to have a creditor position in the Fund when the latter has used the holdings of the member’s currency to provide financial assistance to other members. Such use of a member’s currency is remunerated, i.e., earns interest and continues to be part of the country’s international reserves.The important thing to remember is that there are several more developing countries other than the Philippines that find themselves in this same "reverse Robin Hood" situation contributing to the IMF. There is an increased financial contribution, but where's the increased political clout--especially with regard to the NAB? While the Europeans are certainly not doing so well economically, their influence remains in both how IMF funds are used as well as how IMF leadership is selected. (I hope things will change at the World Bank, though.) The more things change, the more things stay the same, eh?
By virtue of their participation in the FTP, emerging market economies like the Philippines have joined international cooperation efforts to mitigate the spillover effects of Europe’s sovereign debt crisis by enhancing global financial safety nets. As of 31 December 2011, the Philippines has made available to the Fund through a currency exchange arrangement SDR163.8 million or about USD251.5 million. More than half of these funds were disbursed by the IMF to European countries such as Ireland, Portugal and Greece in an effort to address the financial crisis impacting the European economic zone. Most important, the country’s continued participation in the FTP will pave the way for the BSP’s admission in the New Arrangements to Borrow (NAB) facility of the IMF, a credit (lending) arrangement between the IMF and member countries or institutions which aims to forestall or cope with difficult situations that could impair the international monetary system.
The participation in the NAB would be a significant step in strengthening international cooperation. This would also demonstrate the BSP’s strong commitment to global efforts to help address threats to the international monetary system. The Philippines’ participation in the FTP marks a transition in the country’s relationship with the IMF. In 2006, the BSP prepaid all outstanding debt from the IMF which triggered the country’s early exit from its Post-Program Monitoring Arrangement and concluded the country’s use of IMF resources after nearly four and a half decades...This strong external payments position paved the way for the Philippines' entry into the creditors' list among the Fund members.
UPDATE: Also see the IMF's criteria on how it selects members to finance IMF transactions. Again, it's a double-edged sword for the likes of the Philippines. While some may see it as a compliment to be selected by virtue of one's financial position, the fairness element is sorely tested at the present time.
