The growing civil society movement coalescing around issues such as debt and sustainable development combined with the global financial crisis in 1998 has led to a shift in the debate surrounding structural adjustment policies in the developing world. One of the most significant signs that this debate has changed is the International Monetary Fund’s (IMF) recent decision to re-name its structural adjustment facility- the Enhanced Structural Adjustment Facility (ESAF)- the Poverty Reduction and Growth Facility (PRGF). This name change symbolizes the IMF’s newly stated commitment to poverty alleviation in the poorest countries. What is symbolically implied is that the IMF and other international economic heavyweights such as the U.S. Treasury Department now recognize that the IMF impacts on poverty. They realize the deep-rooted problem that poverty poses for the global economy, and the complexity of the factors that influence it. While there are still significant differences in how these actors and civil society groups view the proper response to the poverty problem, this recent shift implies that there is a new acceptance that policies must be geared first and foremost toward poverty reduction. Whether and how effectively this new approach is applied is the next challenge.

In much of this new thinking, however, there is a major missing element: the environment. For years, environmentalists around the world have been concerned about the impact of the IMF and World Bank’s economic development approach on the global environment. While the World Bank instituted policies to incorporate environmental considerations in its project lending, it has not extended these policies to structural adjustment policy lending, which today represents more than half of its portfolio. The IMF claims to defer to the World Bank on environmental matters, but promotes export-led development that has major environmental impacts without asking the World Bank for any formal assessment of the environmental implications of its approach. The World Bank has failed to provide environmental guidance to the IMF, and is even delinquent in assessing the environmental impacts of its own structural adjustment loans. A recent internal World Bank study found that fewer than 20 percent of World Bank adjustment loans included any environmental assessment. Nor does the IMF require any written, public environmental analysis from the World Bank or other knowledgeable institutions. The IMF plays a critical role in setting countries’ economic frameworks and indicating to other donors, such as the World Bank and bilateral donors, the health of a country’s economy. Though the IMF is not an environmental institution, its role in setting economic stabilization and structural adjustment policies means that it has a major impact on the environment. These impacts must be taken into account in advance of formulating country programs. This report is intended to provide a snapshot of how the IMF’s economic policies have led to increased pressure on the environment, and jeopardized the potential for sustainable development in various countries. The report looks at cases across the globe where the IMF’s programs have helped lead to reductions in environmental spending, increases in natural resource exploitation, and weakening of environmental laws. * The report identifies how the IMF’s programs affect the environment and why environmental issues need to be at the core of issues evaluated. We conclude the report with a series of recommendations that the IMF and its member governments should institute in order to begin to rectify this problem.

The IMF and World Bank have claimed that structural adjustment is too complex to accurately assess. They assume that any policy changes will achieve economic stability and thereby promote sustainable development. While economic instability is admittedly a threat to sustainable development, the IMF’s approach to economic reform has generally promoted and rewarded short-term monetary improvements in export performance and budget balances, and thereby encouraged unsustainable development. The result—too many economic policies that promote environmental degradation and too few policies that promote positive environmental gains.

The IMF’s economic policies affect the environment in various ways. One major goal of structural adjustment programs (SAPs) and stabilization programs is to generate foreign exchange through a positive trade balance. To meet the IMF’s ambitious targets for currency...

* Determining the IMF’s exact policies in a given country is difficult. It has only been in the last two to three years that loan program documents have been made available on a regular basis. Furthermore, these documents can be very general, lacking details, for example, on exactly how a forestry or mining code is being made more “conducive for investment.” However, to the extent possible, IMF policies were derived from actual program documents, as well as staff country reports and IMF press releases.