Nobel prize winner blasts IMF over loans

Nobel Prize-winning economist Joseph Stiglitz has warned that IMF lending was undermining the very economies it set out to help in a repeat of mistakes made during the 1997 Asian financial crisis, according to AFP via The West Australian.

“They are making the same mistake they were making in 97,” Stiglitz, a former chief economist at the World Bank, told reporters in Paris on Tuesday, referring to loans given to Iceland,  Pakistan and Ukraine to cope with the financial crisis.

The interest rates for the IMF loans are too high and the monetary policies imposed on crisis-hit countries are contractionary in contrast to the expansionary economic policies adopted in Britain or France, he said.

“This money with these conditions will probably weaken the economy” and ultimately “make it harder to repay the money,” said Stiglitz, who was in Paris to promote a new documentary called Around the World with Joseph Stiglitz.

“Stiglitz warned that IMF policies in Pakistan could increase support for Taliban militants and said that international financial institutions were harming democracy by limiting governments that they lent money to.

Stiglitz won the Nobel Prize for Economics in 2001 and has become an outspoken critic of the International Monetary Fund, accusing the fund of pursuing free-market policies that hurt developing countries.

In the past few weeks, the IMF has allocated $US16.4 billion ($A24.87 billion) to Ukraine, $US7.6 billion ($A11.52 billion) to Pakistan and $US2.1 billion ($A3.18 billion) to Iceland to help these countries cope with the effects of the economic crisis.