The International Monetary Fund

The International Monetary Fund

Distinguishing Reality from Rhetoric

Graham Bird and Dane Rowlands

There is no shortage of opinion about the International Monetary Fund (IMF). Some see it as the agent of austerity, being manipulated by wealthy nations and forcing poorer countries to pursue economic policies that suppress growth and development. A sharply contrasting view regards it as bailing out such countries with large amounts of soft finance, allowing them to avoid necessary adjustment. The challenge is to evaluate the alternative arguments and to distinguish reality from rhetoric. In this book, the authors undertake a careful and detailed empirical analysis of the underlying issues, covering participation in IMF programs, their implementation and effects on economic growth, and on the willingness of international capital markets to lend.

Chapter 4: Aggregate IMF lending

Graham Bird and Dane Rowlands

Subjects: economics and finance, financial economics and regulation, international economics, politics and public policy, international relations


The global financial crisis of late 2008 and beyond has had numerous and far-reaching implications for a large range of micro, macro and international economic issues. One of them has involved a reassessment of the world’s premier international financial institution, the International Monetary Fund (IMF). Although the Fund had previously claimed that the challenges of globalization made it indispensable, by the beginning of 2008 some were arguing that it had in fact lost its importance. To them the IMF seemed to be increasingly irrelevant, as illustrated by its apparent inability to exert a discernible impact on global economic imbalances through its multilateral surveillance and consultations. Even its bilateral surveillance of emerging and low-income countries was losing significance, as some of these traditional users of IMF resources emigrated away from it. The largely benign global economic environment had allowed many of the IMF’s former client countries to build up their own holdings of international reserves and thereby to self-insure against future economic crises. By early 2008, the Fund had only a limited portfolio of outstanding loans. Even amongst poor countries there was a shift away from the IMF’s provision of direct financial assistance. At the beginning of 2008, the Fund’s outstanding credit was only about SDR 9 billion, in comparison to more than SDR 70 billion at the beginning of 2004. Consequently, the Fund’s adjustment role was also reduced, as it lacked the leverage to compel members to follow its advice on economic policy.

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