The IMF and World Bank — wolves in sheep’s clothing
For years, the International Monetary Fund (IMF) has been pressing Gulf states to apply value-added tax (VAT) on consumer goods and services, ostensibly to strengthen fiscal budgets. It appears that Gulf Cooperation Council (GCC) states may have heeded that advice, although several including Kuwait and Oman have postponed its implementation, wisely in my opinion.
Saudi Arabia and the UAE introduced VAT on Jan. 1, 2018, and the result was a spike in inflation, with residents feeling the sting on their finances, according to polls. I have been open on social media about my objection to this 5 percent tax and I have written a letter to the authorities setting out my concerns and urging a U-turn.
Although VAT has hardly been a success story, the IMF now promotes personal income tax as well as taxes on businesses and real estate purchases. This is a very bad idea. I would strongly urge the UAE and all GCC countries not to fall for this terrible advice from global institutions with a damaging track record. The IMF and the World Bank (WB) cannot be trusted.
I have issued warnings on Twitter concerning the dangers of listening to the recommendations of the IMF and WB on taxes that are blanket and straight out of their playbook, rather than tailor-made according to individual economic circumstances. It is absolutely imperative for Arab states to retain economic sovereignty by consulting with their own financial experts. We must be our own doctors.
Egypt reluctantly fell into the IMF’s clutches when its back was against the wall in 2016. While recovering from economic shocks in the aftermath of back-to-back revolutions, Cairo agreed to accept a $12 billion IMF loan that naturally came with strings.
The most populous Arab nation was obliged to float its currency, which saw its value cut by more than half and caused massive inflation. It was forced to make severe cuts to fuel and other subsidies that, like the 1977 “bread riots,” could have unleashed social unrest.
However, unlike Venezuela, Algeria, Sudan and France, Egypt has dodged the bullet of fiery popular discontent and is seeing light at the end of the tunnel. The IMF’s conditions hurt Egypt’s middle classes, but its people have shown patience. The currency is strengthening and inflation is falling. The IMF is eager to offer the Egyptian government another loan, which has reportedly been declined.
Guess who is waiting in the wings to shower oil-rich Venezuela with debt? No surprise here. The IMF is poised to recognize the Trump administration’s anointed president, who seeks IMF cash to bolster his unelected government.
The IMF and WB should be shunned due to their inextricable linkage with US foreign policy. The facts are eye-opening.
Dr. Said bin Salem Al-Hadi from Oman understands the game. His core message is that the IMF targets developing economies, particularly resource-rich countries refusing to do Washington’s bidding, with the aim of reducing them to failures. He uses Iraq as an example and cites South American states caught on the IMF/WB hook whose economies have been driven to collapse.
The US occupation of Iraq was sold as delivering freedom and democracy to the people and look where they ended up. These global, or should I say American, financial institutions are used as weapons to create chaos.
After coercing countries to cancel Iraq’s debts, the IMF, WB and the World Trade Organization set about restructuring the Iraqi economy, including the privatization of state-owned corporations and foreign ownership, which had US companies such as Halliburton, Bechtel and others laughing all the way to the bank, even as the nation’s poorest were hammered with severe subsidies and wage cuts.
“The IMF is not really an independent actor. I do not think there is anyone in this town who would tell you with a straight face that it is not controlled by the US Treasury,” said Mark Weisbrot of the Washington-based Center for Economic Policy Research. His opinion is seconded by the Brookings Institution, which has confirmed that the US views all multilateral organizations, including the WB, as instruments of foreign policy to be used to support US objectives.
Former Ecuadorian President Rafael Correa accused the IMF of blackmail and there are unconfirmed allegations that his successor bartered WikiLeaks whistleblower Julian Assange, who sought sanctuary in the Ecuadorian Embassy in London, in exchange for an IMF bailout.
Frustrated with interference from the WB and IMF, Argentina, Brazil, Paraguay, Uruguay, Ecuador, Bolivia and Venezuela in 2009 established their own monetary fund, BancoSur, which unfortunately failed to get off the ground due to undercapitalization. Perhaps it is time for Gulf states and their Arab allies to consider something similar, offering unconditional loans with funding from wealthier countries.
It is absolutely imperative for Arab states to retain economic sovereignty by consulting with their own financial experts.
Khalaf Ahmad Al-Habtoor
Africa is heavily in debt to US-dominated monetary funds. Stringent IMF conditions imposed years of cruel austerity on Greeks forced into penury to the extent that many committed suicide or gave up their children into state care because they could no longer afford to feed them.
Jordan, whose economy is burdened by millions of refugees, agreed to an IMF loan in 2016 conditional upon its efforts to stimulate the economy and reduce public debt. The agreement stipulated Amman’s passing of a controversial tax law that elicited protests and strikes. Jordan is now negotiating with the IMF on a new development program. How about some of the wealthier Arab states holding out a helping hand instead?
For more on this topic, read John Perkins’ semi-autobiographical book “Confessions of an Economic Hit Man,” which is based on his own career. His job was to convince the leaderships of poorer countries to accept loans for infrastructure on the proviso that construction projects were contracted out to American companies. He says the loans were the bait for those countries to fall under the sway of US political influence and allow US companies access to their natural resources.
“Economic hitmen have managed to create the world’s truly global empire, basically a secret empire,” he claims. “We identify a country and corporations that have resources like oil and arrange huge loans for those countries from the World Bank or one of its sisters. The money never actually goes to the country, it goes to our own corporations to build infrastructure projects that help a very few wealthy people but do not benefit the majority.
“So they are left holding a huge debt that they cannot pay and so we go back at some point and say ‘you cannot pay your debts so sell us your oil cheap, vote with us at the next UN vote. Allow us to build a military base…’ If they fail, we send in the jackals to overthrow their leaders and, if the jackals fail to overthrow or assassinate their leaders as they did in Iraq, then we send in the military.”
No Arab country should ever again be fooled into that invidious position. Our leaders should probe the activities of these discredited tools of Washington and, hopefully, the next time they come knocking with advice or offers of billions of dollars, they will find the door shut.
- Khalaf Ahmad Al-Habtoor is a prominent UAE businessman and public figure. He is renowned for his views on international political affairs, his philanthropic activity, and his efforts to promote peace. He has long acted as an unofficial ambassador for his country abroad. Twitter: @KhalafAlHabtoor
