By Jeremy Tordjman ,AFP
WASHINGTON — Has the world’s crisis lender become politicized?
The International Monetary Fund (IMF) has been accused of giving in to political pressure in dropping a long established rule on prudential lending on Tuesday so that it can proceed with assistance for Ukraine. That follows similar charges that the fund, the world’s essential backstop in financial crises, bent its rules to support a bailout of Greece, and most recently to admit mainland China’s yuan currency into the IMF’s basket of elite reserve currencies. The newest move on Ukraine drew a rare, virulent outburst from Moscow, which said it “seriously undermines” its confidence in the IMF’s decisions. On Tuesday, the IMF board voted to drop a rule that forbids the fund from lending to member countries that are in arrears on loans to other official lenders, including sovereign governments. That move opens the door for the IMF to release new funds for Ukraine even if it misses payments on a US$3 billion loan from Russia.
An impasse in talks over the loan — which Kiev wants Moscow to partly write off — threatens to block the IMF proceeding with a US$17.5-billion rescue plan for Ukraine. The IMF “has for the first time in its history taken a decision aimed at supporting a borrowing country counter to existing agreements, solely for political reasons,” said Russian Prime Minister Dmitry Medvedev. And, writing in the Financial Times Thursday, Russian Finance Minister Anton Siluanov said the decision “may raise questions as to the impartiality of an institution that plays a critical role in addressing international financial instability.” “Its well-founded principles should be changed only after due consideration, and not in response to the politics of the moment.” The IMF stressed that the rule revision had been in discussion since 2013, well before the eruption of the Ukraine crisis. “The need for this reform has been evident for some time now,” said Hugh Bredenkamp, an IMF official. Changing the policy, he argued, effectively strengthens the incentives for official creditors to a country to work together to solve its problems. Even so, the timing raises questions. “It was right to move, but the timing is not right,” said Andrea Montanino, Italy’s former representative on the IMF executive board. “This was a mistake to do it in a rush, and that gives the impression that this was an ad hoc decision,” he told AFP. For several months the leading Western countries which dominate IMF policy had been searching for a way around Russia’s refusal to renegotiate its loan to Ukraine.