The International Monetary Fund
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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.
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Chapter 5: Participation in IMF programs

Graham Bird and Dane Rowlands


As shown in Chapters 1 and 4 the use of IMF credits is episodic. IMF lending was low in the mid-2000s but rose sharply toward the end of the decade and in the aftermath of the global financial and economic crisis in 2008–09. Some relatively rich Eurozone countries with balance of payments problems entered into programs with the Fund. In contrast and following the East Asian crisis in 1997–98 some emerging economies may have sought to run balance of payments surpluses in order to accumulate large reserves and avoid the need to participate in IMF programs. Unfortunately the factors that shape the pattern of participation remain unclear. Many contend that participation reflects the political influence of the Fund’s most powerful members. More specifically allies of the United States are suspected of receiving programs more easily, and on better terms. Others argue that while political factors may be important in some cases, it is invalid to claim that IMF lending is purely political in nature. Their argument is instead that there are a number of economic factors that lie at the heart of participation. Our purpose in this chapter is to investigate the range of economic and political factors that may in principle be associated with participation in IMF programs.

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