A survey of UK charities and NGOs by Red Pepper has uncovered deep frustration at the IMF's approach to "debt sustainability" - a country's ability to service new and existing borrowing. It comes at a time when the IMF is moving towards a major new strategy for dealing with poor country debt.
Recent IMF research puts a refined analysis of projected growth and export earnings at the centre of proposals for calculating the debt sustainability of low-income countries. By analyzing such factors, the IMF reasons, the capacity of poor countries to use their revenues to pay back new and existing debts can be calculated.
Development NGOs are appalled at the IMF's persistence in putting forward this sort of creditor-focused approach. Christian Aid noted: "The IMF defines debt sustainability as a country's 'capacity' to repay. This capacity would be based on projected growth and export earnings. What many NGOs have been calling for is for debt service to be based on a country's 'ability' to pay - having already taken into account their vast investment needs - in education, transport, water and health."
The IMF's position has particularly riled NGOs because of its stated commitment that future strategies for dealing with debt have to help poor countries reach internationally agreed targets on poverty and welfare - the so-called Millennium Development Goals (MDGs).
Jubilee Research said: "The only true way to define debt sustainability is to base it on the analysis of a country's ability to meet the MDGs. Only when a country has sufficient resources to reduce poverty through spending on health, education, water and so on, should they then start repaying their creditors."
Christian Aid commented: "As the IMF's understanding of debt sustainability doesn't incorporate poverty and development variables, it is difficult to see how this links back to, or indeed supports, the MDGs.
Being at odds with the IMF is nothing new for NGOs. Nevertheless, how the IMF formulates a new strategy on debt sustainability is seen as particularly crucial.
Because the IMF is looking at debt sustainability as a whole - both new and existing debts -any new strategy will determine how the IMF, together with the World Bank, deals with new loans and grants to poor countries in the future.
And new finance for low-income countries is essential. There is general recognition now that even if an immediate and total cancellation of poor countries' debt took place, as demanded by the Jubilee 2000 campaign, many countries would still need substantial new external financing if they were to have any hope of meeting goals on poverty reduction.
NGOs have responded to the situation by arguing for a reformed debt cancellation programme that matches the amount of debt reduction countries need with the finance they need to meet the MDGs.
Where total debt cancellation is not enough and new money is needed, CAFOD has called for a "new aid financing structure that is big enough, flexible and efficient enough to put all debtor and low-income countries' finances on a path aimed at reaching the MDGs by the year 2015."
Jubilee Research says that any new borrowing should be strictly controlled, and should not take place if it is likely to lead to substantially increased debt burdens in future, over around 5-10% of revenues. "Given the lack of availability of grants, some borrowing will still be necessary. If this is the case, donors should provide countries with grants rather than loans in order to help them to meet the MDGs," the organisation said.
Despite the strength of opinion, the vocal demands of the NGOs may fall on deaf ears. In its May research paper, "Debt Sustainability in Low Income Countries - Towards a Forward Looking Strategy," the IMF dismissed calls for debt cancellation and the kind of "poverty-first" approach to debt sustainability espoused by NGOs.
In the paper, the IMF argued that the country-by-country judgment required for debt relief and new grants would be logistically difficult and potentially unfair. It also says that limiting debt repayments to marginal amounts would obstruct the "evolution of a credit culture." And most contentiously of all, it says that without firm commitments from donor countries to come up with the money, emphasizing debt cancellation in an approach to debt sustainability is counter-productive.
It is this sort of attitude that has helped to bring a more political edge to the positions of many NGOs in recent years. CAFOD commented: "Annual global military expenditure has reached US$650 billion, and subsidies to rich producers in OECD countries are in the region of US$350 billion. Global aid budgets are creeping back up again after years of decline, but are still in the region of US$50-60 billion. So this is not a question of lack of money. It is a question of a lack of political will."
The IMFs paper on debt sustainability is available on its website. NGOs and civil society groups have until the end of September to respond.