Global Policy Forum

Jim Lobe

The austerity policies imposed on developing countries by the International Monetary Fund (IMF) are undermining the global fight against the HIV/AIDS crisis, according to a new report by several prominent public-health and development groups. Released on the eve of next week's annual meeting here of the IMF's board of governors, the 26-page report, 'Blocking Progress' charges that the conditions which the IMF attaches to its loans and debt relief may be making it much harder for governments to finance the rapidly rising expenses of fighting the epidemic.

In particular, those policies that are aimed at keeping inflation low and public spending in check, while consistent with neo-liberal orthodoxy, may be having a disastrous impact on the ability of the government to provide critical medical and family-planning services that are urgently needed both to curb the spread of the disease and to treat its victims. "This report should be a real wake-up call to people concerned about the alarming impact of AIDS on prospects for development and stability," according to Paul Zeitz, executive director of the Global AIDS Alliance (GAA), who contributed to the report. "It shows the terrible price we could pay if a rigid adherence to economic orthodoxy wins out over common sense."

Nearly three million people died of AIDS last year, almost all of them in developing countries, including many whose health systems are least able to cope. Some 9,000 people are currently dying each day, according to the latest UN statistics. While nearly three quarters of those deaths take place in sub-Saharan Africa, the disease is spreading rapidly in Asia, especially in that region's two most populous nations, India and China, and in Russia and other eastern and central European nations.

The impact has been little short of catastrophic in some southern African nations where the incidence of HIV/AIDS in the adult population surpasses 25 percent. Not only are health-care systems overstretched, but, because AIDS normally strikes men and women in their most productive years, economic growth - a major preoccupation of both the IMF and its sister institution, the World Bank -- has been seriously retarded in the hard-hit countries. To deal with the crisis, UN experts at the recent International AIDS Conference in Bangkok estimated the financing needs of developing countries will increase to $12 billion next year and to $20 billion by 2007, roughly four times what wealthy nations and other donors, like the World Bank, are currently providing.

But AIDS activists are worried that developing countries will be reluctant to accept such funding if, in doing so, they will have to break their agreements with the IMF not to exceed strict "budget ceilings" resulting in a cut-off of loans by the agency and other donors who condition their own assistance on compliance with IMF adjustment programs. The issue became acute last year when the Ugandan finance ministry tried to block the acceptance of a $52 million grant awarded by the Global Fund to Fight AIDS, Tuberculosis, and Malaria for fear that it would break limits on public spending that had been agreed with the IMF. Speaking at the World Bank in November 2003, UNAIDS executive director posed the question directly: "when I hear that countries are choosing to comply with the ...ceilings at the expense of adequately funded AIDS programs," he said, it strikes me that someone isn't looking hard enough for sound alternatives."

The 25-page report marks an effort to address precisely that issue by arguing that the IMF's stress on keeping inflation low - in many cases, under five percent per year - may not only be undermining anti-AIDS efforts, but may also be based on shaky economics. "Despite the ...IMF's preference for low rates of inflation," according to the report, "there is no consensus among economists on what is an appropriate level of inflation, or at what level inflation begins to undermine economic growth rates." "The IMF's insistence on very low inflation targets must be scrutinized," said the report's main author, Rick Rowden, of ActionAid International USA. "This issue must be brought into the center of public debate if countries are ever to be allowed to scale-up public health spending effectively to fight HIV/AIDS."

The situation is particularly poignant in a country like Kenya where more than 4,000 trained nurses and thousands of health workers, who could be mobilized in the fight against AIDS, are unemployed because IMF targets limit the government's public spending. "The low-inflation targets set by the IMF lead directly to limits on the national budgets of poor countries, which lead to ceilings on national health budgets," according to Joanne Carter, an analyst of RESULTS Educational Fund, a U.S. lobby group that fights "diseases of poverty" in poor countries. "Most poor countries would like to significantly increase spending on fighting AIDS, but they have give up trying to fight against the IMF because they know they must comply with their loan conditions just to keep their access to current levels of foreign aid," she said. "If you go against the IMF, you risk getting cut off from all other sources of aid." The World Bank, which is a critical source of development finance, for example, conditions its loans on compliance with IMF conditions. The report calls for the Bank to de-link its lending from the IMF's seal of approval.

Due to the weighted voting systems of their boards, both the Bank and the IMF are subject to the control of the major western industrialized nations, known as the Group of Seven (G-7). The G-7, which is made up of the governments of the U.S., Britain, France, Germany, Italy, Canada and Japan, is already under pressure from development groups to cancel more than $100 billion in debts owed to the IMF and the World Bank by the world's poorest nations, most of which are in sub-Saharan Africa.

Despite their compliance with existing debt-reduction programs, these countries are still forced to pay in debt service each year than they can spend on the health of their citizens. Debt cancellation, according to the groups, would also free up money to spend on health care and fighting the AIDS crisis.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C íŸ 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.