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    Square pegs, round holes, and why you can't fight HIV / AIDS with monetarism.

    Rowden R

    Washington, D.C., ActionAid International USA, 2005 Mar. [4] p.

    How to get a square peg through a round hole? How can poor countries invest in the doctors, nurses, and teachers needed to meet the Millennium Development Goals (MDGs) when current International Monetary Fund (IMF) loan conditions limit the spending of recipient country governments? There is a fundamental contradiction between the need to greatly scale-up social spending to fight HIV/AIDS and what can actually be spent under the IMF’s current low-inflation monetary policy. How can significantly more money be spent in these economies without producing higher levels of inflation than the IMF’s low-inflation policy permits? In order for many poor countries to receive foreign aid from the World Bank or any of the rich countries, borrowing countries must first be given the “green light” by the IMF, an action that signals to other lenders that their national macroeconomic policies are sound. Because it opens the door to all the other major foreign aid donors and creditors, this “signaling effect” gives the IMF tremendous leverage over many aid-dependent countries in terms of the economic policy reforms it attaches as loan conditions. Unless a borrowing country is satisfactorily implementing the IMF’s preferred economic reform policies, it risks getting the “red light” – and being cut off from access to the major sources of foreign aid, credit, or debt relief programs. Of particular concern among the IMF’s binding loan conditions are economic policy reforms related to monetary policies (policies in which a central bank attempts to regulate the money supply and interest rates in order to control inflation and stabilize the currency). (excerpt)
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