The International Monetary Fund’s Influence on Trade Policies of Low-income Countries: A Valid Undertaking?

Abstract

This article explores the involvement of the IMF in influencing the setting of trade policy and tariff regimes of low-income countries, in the specific context of the HIPC (Heavily Indebted Poor Countries) initiative and the related PRGF (Poverty Reduction and Growth Facility) lending mechanism. The authors begin by discussing, in brief terms, the prominence of Washington Consensus considerations on the guidance provided by the Fund, followed by a legal critique of the Fund’s mandate on trade, notably in what pertains to surveillance activities and conditionality; in this section, the authors analyse whether the broadening of the Fund’s traditional focus from monetary and fiscal policy to trade policy is truly within the boundaries of its mission. The authors tackle the issue of direct and indirect influencing by the IMF of poor countries’ trade policies and tariff regimes, and how such influencing may occur as part of traditional interactions between the Fund and these countries, with special emphasis on the HIPC initiative, PRSPs (Poverty Reduction Strategy Papers) and the related provision of financial resources through the PRGF lending facility. Given the lack of consensus on the assumed benefits of trade liberalization for poorest countries as far as poverty reduction and economic growth are concerned, the