Opposition Leader Dr Kenny Anthony has promised that he would never take IMF money. But in the Eastern Caribbean, he is practically alone on this score. Even his good friend and fellow social democrat Dr Ralph Gonsalves in St Vincent has jumped on the IMF’s very concessionary Exogenous Shocks Facility to give relief to his island in the toughest of economic times.

The IMF wants to encourage more countries to seek its help as a precautionary measure rather than waiting until they’re in acute distress. But IMF-phobia is preventing many countries from taking advantage of extremely concessionary conditions in the Exogenous Shocks Facility. South Korea, Singapore and many Latin American countries have all openly expressed fears about having anything to do with the IMF—even when there’s US$11.6bn to be had at half a percent interest.

And the truth is that all of the money is not yet available. At the moment, however, only $2.8 billion has been promised in 2009. That’s only 25 percent of the total amount theoretically available to all countries.

Donor contributions totalling $700 million are needed to subsidise planned total lending of $2.8 billion over the first five years of the facility. So far, the UK has pledged $85 million, Japan $29 million, and France and Saudi Arabia have pledged to follow suit. UK chancellor Gordon Brown has encouraged oil producers to pay into the fund. Additional annual contributions of $700m by unspecified donors. Gordon Brown said that he expects the oil-producing countries to share some of their windfall earnings due to the high oil price. By now eight industrialized countries have endorsed the ESF, of which are only three known: Great Britain, Japan, and Saudi Arabia. It seems like unlikely that the resources available through the ESF sufficient to cover the various kinds of external shocks experienced by developing countries, nor is the funding for that even secured.

At the G20 summit earlier this year, finance officials hoped to forge a consensus over how much more money the fund needs. IMF and European Union officials say its resources should be expanded to $500 billion, while US officials contend it needs more. The April 2, 2009 G-20 Summit in London supported a dramatic increase in IMF lending resources to help combat the crisis. The G-20 agreed to triple the IMF’s lending capacity to $750 billion and enabling it to inject extra liquidity into the world economy via a $250 billion allocation of SDRs—the IMF’s quasi-currency.

All 43 contributors to the Poverty Reduction and Growth Facility—a predecessor of the ESF)—have consented to the activation of the account. Since last fall, it has doled out more than $40 billion in aid and has access to about $300 billion. The European Union has pledged to kick in another $100 billion.

So who is all this money for?

Most of it, $5bn, will go to India, Pakistan and Nigeria –—the world’s biggest low income countries. The other $6.6bn is to be shared between 75 other low income countries. Many of these are in Latin America and the Caribbean. But leaders in Latin America still habor ill-feeling to the IMF for the pain the institution caused them during its management of the 1980s Latin American debt crisis.

Eastern Caribbean countries seem to have decided collectively that a good deal is a good deal.

But African nations have outdone them all when it comes to accessing the ESF. In May the IMF board approved for a US$209m disbursement to help Kenya recover from the negative impact of skyrocketing food and fuel costs. Kenya accessed the funds under the rapid access component and is expected to apply for more ESF funding under the high access component.

Tanzania took even more than Kenya—a whopping US$336m—while Mozambique was approved for a US$176m disbursement. Tanzania also accessed ESF funds to the tune of US$76m.

When the ESF was first set up in 2005, the Third World treated it like any other IMF offer—that is like a plague. Promises from the IMF that the days of structural adjustments are over got bad to mixed reviews. Analysts saw the reforms as significant but incremental.

“You don’t make it new overnight by changing some of the rules of the game unless you completely overhaul rules of the game, which this is not,” said Carmen M Reinhart, a former IMF official who is now an economics professor at the University of Maryland.

Mark Weisbrot of the Center for Economic and Policy Research, a left-leaning think tank, said the IMF hasn’t gone far enough in scaling back policy prescriptions it imposes on borrowers and that poorer countries and those that do not prequalify for the flexible credit line still face harsh conditions.

“It is worth noting that nobody wants to borrow from the IMF even with ‘lighter’ conditionality,” he said, back after the ESF’s first revamp. “Everyone who can avoid the IMF is doing so. This shows how governments are voting with their feet—they still don’t want the IMF involved in their economic decision-making.”

Others said the IMF missed an opportunity to assist well-run countries hurt by the downturn while making it easier for countries with bad economic policies to borrow money.

But now that the global economic crisis has gotten worse, more and more countries are taking the bait.
What remains to be seen is whether they can use the money to steer their countries out of the global economic crisis or whether, further down the road, they will be deeper in the clutches of the IMF triggering a new Third World debt crisis.