The study by Dreher, Sturm and Vreeland (2009) finds that the IMF prefers countries it deems as close to major IMF shareholders such as the United States of America. The IMF also favors countries with identical United Nations voting records as its main shareholders. These countries control the IMF decision making and many of them want states receiving IMF loans for different foreign policy or strategic reasons. IMF top leadership and the organization’s decision-making process are also greatly influenced by the various foreign policy issues of its member countries and by non-state organizations such as large global banks.
Based on the study, the political intervention in the lending decisions of the organization shows that countries with temporary membership in the United Nations Security Council have a higher likelihood of receiving IMF loans. For instance, countries acting as non-permanent UN Security Council members have a higher possibility of receiving IMF loans because of the attempt by the US to win their favor at the council. The meaning of this is that IMF loans are exchanged for possible political backing at the council. An excellent example of this exchange is the Romania case in which the country voted to agree with Western powers regarding Security Council Resolution 678 that allowed the use of force in Iraq in 1991. The IMF later awarded the country a loan of 300 million (SDR). Yemen, nevertheless, voted in opposition to the use of force, which led to the reduction of United States aid to that country and the country not receiving another loan from the IMF for six years.
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The study demonstrates that big power allies are treated favorably by global financial organizations. Major shareholders at the IMF use their voting power to soften or harden the lending conditions to a needy country based on the country’s political behavior.
Reference
Dreher, A., Sturm, J. E., & Vreeland, J. R. (2009). Global horse trading: IMF loans for votes in the United Nations Security Council. European Economic Review , 53 (7), 742-757.
