U.S., U.K. Signal Disapproval of IMF Aid to Dictator-Led Nation
(Bloomberg) -- The U.S., Germany and the U.K. were among nations that took the rare step of withholding support from a recent International Monetary Fund decision to approve $67 million in emergency financing for Equatorial Guinea, a dictator-led nation dogged for years by corruption concerns.
The IMF on Sept. 15 said its executive board gave the go-ahead for the oil-rich central African nation’s request for assistance. The money is meant to help contain the pandemic-induced economic fallout and the destruction that ensued after a fire detonated munitions stores at a military barracks in its biggest city.
The debate within the fund was less about whether to help the nation, and more about what types of conditions to attach to the aid, according to people familiar with the discussion, who asked not to be identified because board conversations are private.
The abstentions amount to a show of disapproval for the ultimate decision to provide funds to the nation of 1.4 million under the IMF’s Rapid Financing Instrument, which comes mostly without conditions on the borrower country. Nations that abstained argued that a loan should fall under a normal program that would require Equatorial Guinea to commit to reforms in areas such as transparency and anti-corruption, as in the Extended Fund Facility loan agreed to in 2019, the people said.
The issue highlights the debate occurring at central banks and finance ministries across the world, where policy makers must decide how long to continue extraordinary support due to the Covid-19 pandemic.
While no one voted against the loan for Equatorial Guinea, abstention is a rare step at the IMF board, which normally operates on the basis of consensus. The 45% of IMF voting shares who chose to abstain is unusually high, the people said.
France was among the countries supporting the emergency lending, which passed with a simple majority of votes, but board members representing the U.S., Germany, Canada, and the U.K. declined to participate, according to the people familiar with the decision.
The IMF press office declined to comment, citing the fund’s policy to refrain from discussing the breakdown of board votes.
An official at the French Finance Ministry confirmed the nation’s backing for the emergency loan, saying the aid is to support a recovery from the pandemic and the explosions. France supports IMF efforts to ensure governance-improvement reforms in Equatorial Guinea, the person said.
IMF member nations are represented at the board by 24 executive directors, whose voting share is roughly proportional to the size of the economies that they represent. Smaller countries often are grouped together and represented by a single board member.
The U.S. Treasury Department, Japanese and German governments declined to comment. A spokesman for Equatorial Guinea’s government declined to comment and referred the request to the foreign minister, who couldn’t be reached for comment.
A spokesperson for the U.K. Treasury declined to comment, citing a policy not to discuss IMF voting records.
President Teodoro Obiang Nguema Mbasogo, 79, who has been in power for more than four decades, as well as his family and associates, have long been criticized by human-rights groups for misusing and squandering the tiny nation’s oil wealth. Meanwhile, most of its residents live in poverty. In 2019, the authorities agreed to compel senior public officials to declare their assets as part of the $280 million IMF support package.
The government needs to follow through on that commitment, as well as publish a list of state assets earmarked for privatization and set out plans to establish an anti-corruption commission as soon as possible, the Washington-based lender said in the Sept. 15 statement announcing the approval of the emergency loan.
Equatorial Guinea ranked 174th out of 180 countries in Transparency International’s Corruption Perceptions Index for 2020. The IMF in its normal lending often requires developing nations to commit to stepping up their fight against corruption in order to receive money.
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