In conclusion of this paper it is mentioned that:

There is a robust and positive relationship between democracy and economic growth

We know that, the final goal of IMF is to establishing peace, with a developed economy.

Can IMF prolong the deadline of loans, or give some grants to developing countries in exchange of some democracy development?

I know, there are already some criticism against IMF for manipulating developing countries, but it could be a potential solution for spreading democracy in the world.

This paper mentions that:

dictatorships are more likely than the other authoritarian types to enter into an agreement with the IMF, while single party regimes are most likely to receive funding.

This is surprise for me, since the IMF is mostly used by dictators rather than spreading democracy.

  • What counts as democracy, though? – xuq01 Jul 1 '18 at 10:25
  • 2
    www-personal.umich.edu/~jkhanson/resources/… A paper on this topic. – James K Jul 1 '18 at 10:46
  • @Salman What precisely is the question? Are you trying to determine if the IMF, which is a creditor, can somehow be the impetus to the establishment of a democracy in a nation which is not a democracy? – guest271314 Jul 2 '18 at 17:11

Short answer

The mission of the IMF does not include "democratic development". In its top ten members (by voting power) you have China and Russia. So it would be somewhat surprising to see those reforms in a near future.

Long answer

The truth is that a reform towards democracy is not the mission of IMF whose main objective is international financial stability and monetary cooperation:

The International Monetary Fund, or IMF, promotes international financial stability and monetary cooperation. It also facilitates international trade, promotes employment and sustainable economic growth, and helps to reduce global poverty. The IMF is governed by and accountable to its 189 member countries.

You should also be aware that IMF was created little after the Great Depression with the specific purpose of avoiding the decline of international trade, namely by making sure debts kept getting paid (wikipedia):

There were two views on the role the IMF should assume as a global economic institution. American delegate Harry Dexter White foresaw an IMF that functioned more like a bank, making sure that borrowing states could repay their debts on time. Most of White's plan was incorporated into the final acts adopted at Bretton Woods. British economist John Maynard Keynes imagined that the IMF would be a cooperative fund upon which member states could draw to maintain economic activity and employment through periodic crises. This view suggested an IMF that helped governments and to act as the United States government had during the New Deal in response to World War II.

This is not part of your question but the reason for this is that unpaid debts tend to have a cascading effect with considerable collateral risks for other economies (I mean other than the indebted one). In this sense the mission of the IMF is relevant and within your own description of "establishing peace".

Nevertheless the IMF has been heavily criticized both in the past and today. Their structural adjustment programs tend to dictate the economical policy of the targeted nation usually by requiring privatizations, austerity measures, or cuts on subsidized sectors. This has often lead to the creation of private monopolies (where before there were public monopolies), rising inequality (short and medium term at least), and sometimes inability from the targeted nations of ever (or only temporarily) getting out of the programs. However notice that in general the success of the programs is considered adequate (in the sense of economic growth) for most cases (Schadler, 1996; Nelson & Wallace, 2016):

(Schadler, 1996)

In broad terms, the study concluded that the basic three-pronged approach was appropriate. The approach did place a strong emphasis on achieving balance of payments objectives, but this was inevitable in light of limited access to external resources and the generally dire balance of payments problems that brought countries to the IMF for support

(Nelson and Wallace, 2016)

The findings presented here suggest that fears about the deleterious impact of the IMF’s lending arrangements on democracy scores are misplaced.

There was also a lot of criticism in the past about the influence of the US in IMF decisions. This has been somewhat reformed in 2015 but the quota system still remains problematic (the quota system is what gives the quantity of influence a member has over IMF decisions). Due to this and other reasons the IMF is still very much at the will of its stronger members (and in those top ten you have Russia and China). For these reasons I consider unlikely that in any foreseeable near future the IMF will start requiring "democratic development" as exchange for some boon.

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Interesting question. The premise by necessity includes the premise that "democracy" is or can be manufactured, bought and sold; and conversely, that the IMF could arbitrarily insert terms in the loan contract which mandated "fascism" be instituted by the "rulers" of the nation state.

The very nature of the simplest definition of "democracy" according to a rudimentary search of the term is

a system of government by the whole population or all the eligible members of a state, typically through elected representatives.

which would mandate that the people themselves agree to a loan from the IMF, or any other external monopoly capital interests or concerns.

"democracy" is rule by the people themselves. Some would define "representative republic" (e.g., the system implemented by the United States) as a "democracy", though careful reading of the Federalist Papers provides ample evidence that the Founding Fathers of the United States did not intend for the fledgling U.S. to be a "democracy", as they feared mob rule. The Founding Fathers considered themselves "natural elite", the "haves", and the People the "have nots", which must be guarded against in a system based on unequal distribution of wealth.

When you run in debt; you give to another power over your liberty. -Benjamin Franklin

There are two ways to enslave a nation. One is by the sword. The other is by debt. -John Adams

I go on the principle that a Public Debt is a Public curse and in a Republican Government a greater than in any other. -James Madison

To answer your question directly, the IMF could theoretically "encourage countries to Democracy". However, true "democracy" is just that, government by the People, thus, the People would have to agree to be contracted into loans from the IMF in the first place, which is on its face contrary to self-determination and "democratic" self-governance - as the People would become debtors to external creditors - which no sovereign "democratic" People would rationally choose to become except for extraordinary circumstances; for example mass starvation, not due to the idea of "developing".

The People themselves need to "encourage" their own country to "Democracy". Once the "democracy" is formed and stable, then the People can decide whether or not to become debtors to external creditors.

Therefor, becoming indebted to the IMF, or any other external or internal capital interest is contrary to the very core principals of "democracy", and should avoided at all costs to preserve the "democracy" and sovereignty of the nation state, and the People themselves.

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  • This answer appears to just use the question as a pretext to philosophize about the theoretical definition of democracy and not to actually explain how the IMF exerts political influence in reality. – Philipp Jul 2 '18 at 11:57
  • @Philipp The answer clearly states that the People themselves need to form their "democracy". Thus, whatever political influence the IMF could have in steering a nation towards "democracy" is irrelevant. It is the People themselves which must establish their own form of democracy, while ideally avoiding becoming debtors to the IMF, or any other creditors during the process, which could easily lead to the failure of their newly formed "democracy". – guest271314 Jul 2 '18 at 16:19

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