Bangladesh will receive $1billion loan from the IMF which will come with a package of “reforms” and loan conditions. These unpopular conditions are also called “IMF pills”. A government, usually a poor muslim Asian or African country, will agree to IMF loans (and its pills) when it reaches a position of near bankruptcy. IMF acts as the lender to the lender of last resort.
IMF loans become the only way out as countries face a critical situation in their reserves (which is in US dollars). Sinking reserves restrict the country’s ability to keep credit lines open for importing essential commodities, without which its fragile economy could come to a halt.
Loans, of any kind, will impose certain conditions on the borrower to ensure the lenders’ security by various means. When industries borrow from commercial banks they agree to leverage, liquidity, dividend and management conditions. This helps the lender collect payment safely on maturity. Violation of conditions is generally met with strict penalties of some sort.
It would be unacceptable for commercial banks to impose conditions on the borrowers’ business operations in marketing, pricing or human resources. A lender should not be in a position to dictate prices of goods just because its raw materials were financed by bank loans. These are unwanted and undesirable functions of a lender.
IMF loans to poor countries does exactly that. Their loans come with “fiscal policy, monetary and exchange rate policy, financial sector policy and trade and investment policy”. Through these “reform” conditions IMF can literally control the economy in general and the financial sector in particular.
At what stage should a country incline towards IMF packages. Obviously, when the country is broke and unable to get foreign currency (US Dollar) loans from anywhere else. These bankrupt countries’ financial strongmen fall on their knees to beg for cash at the expense of sacrificing their sacred duty towards the nation. Because, its the bloody consumers, the average citizens, who will end up paying for all those loans as well as pay more taxes to the government as a result of those IMF pills. Pls click on the link below to see the most recent victim of these pills: