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No, the IMF did not cause the Ebola crisis

No, the IMF did not cause the Ebola crisis

Headlines blaming the IMF for the Ebola crisis are something you may expect in the tabloid press. However, a robust debate on the role of the IMF in the spread of Ebola was started by an article in The Lancet, a leading health journal.

Four British professors claimed that the fiscal austerity contained in IMF programs with Guinea, Sierra Leone and Liberia hampered the development of health care systems in these countries and thus contributed to the spread of Ebola. This sparked many comments, mainly on the Washington Post's Monkey Cage blog, which have been summed up nicely by Tom Murphy.

The IMF responded with a timid letter to The Lancet arguing that between 2010 and 2013, spending on health as a percentage of GDP had increased in Sierra Leone, Guinea and Liberia by 0.24, 0.7 and 1.6 percentage points respectively.

This is not much of a response.

These countries have been in IMF programs for many years (Guinea 21 years, Sierra Leone 19 years and Liberia seven years). Notwithstanding the small rise in the past three years, over the last two decades health spending as a proportion of GDP was basically constant in Sierra Leone and Guinea. There was a rise from very low levels in Liberia when the civil war ended in 2003.

The fact remains that these countries all have very weak health systems. [fold]

As others have noted, the IMF probably wanted to say (but could not) how difficult it was to deal with war torn countries with little administrative capacity, low quality institutions and very poor overall governance.

Chris Blattman from Columbia University has led the attack against the Lancet article. He said the argument against the IMF 'just doesn't really make sense if you're familiar with the governments in these places, local politics, or more generally how weak states actually work'. He goes on to say, 'when you're three steps removed from war or a coup, and you don't have a functioning police or justice system, building a public health system is not your first investment.'

The authors of The Lancet article responded with a point-by-point rebuttal, which resulted in a further comment by Blattman. There were many other articles, some supporting Blattman, others the authors of The Lancet piece.

These debates over the IMF are not new. The Fund is regularly criticised as being 'anti-poor', with its focus on balancing a country's books, which results in a reduction in social spending. Protests were once a regularly feature at annual IMF meetings.

But the reality is that countries usually enter into IMF programs when they have significant economic problems, including unstable public finances and excessive debts. For this reason, it has been pointed out that it is not relevant to make comparisons, such as spending on health, between countries who do and do not have IMF programs. As Tom Murphy notes, 'The reason a country would get a loan from the IMF, generally a lender of last resort, means that things are not going great'.

When a country is in a mess, its fiscal position is out of control and it cannot repay its debts, it is a bit much to criticise the IMF for saying that the country has to get its finances in order. Lee Crawford argues that to criticise the IMF for telling countries they have to cut their spending is a bit like blaming firefighters for causing fires because they are always at the scene.

In Australian budget debates, when there are calls for additional spending in a particular area, politicians often say that they cannot spend money they do not have. Money is also a constraint holding back additional health spending in the three West African economies hit with Ebola.

This is the key point in Blattman's response to the counter-claims from the authors of the Lancet piece. He states: 'When someone suggests "This country should spend more on X", the most important thing you can ask is the unpleasant accounting question: "Where should that money come from?" More loans? More aid? Less spending on something else?'

Blattman is right. But one of the lessons from the Ebola crisis is that these countries must place a greater priority on improving their health systems. The authorities in these countries have to take responsibility, but this requirement also needs to be more directly taken into account in the design of Fund programs. After the Ebola crisis had spread, the IMF changed its rules to let the three West African countries borrow more and run up bigger deficits. The IMF Managing Director said that it was good to increase budget deficits at such a time, adding 'We don't say that very often'. But this was after the crisis had unfolded and thousands of people had died. We will never know the counter-factual, but in setting deficit targets in the stabilisation programs prior to the crisis, perhaps greater allowance should have been given to the need to increase spending on health.

In any event, this has to be a priority in future IMF programs.

Photo courtesy of Flickr user International Monetary Fund.

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