I.M.F's Inimical Interest or Beneficial Bail-out?

The Wall Street Journal Tuesday, August 31, 2010

The IMF (International Monetary Fund) appears to anticipate a crisis in some developing countries in the near future. Hence its anxious announcement on Monday that it is preparing to extend a helping hand in the form of a new ‘precautionary credit line’. This line of credit doesn’t expect a country to use the money and rack up interest charges, unless it needed the financing at one go. This program envisages offering of loans as much as five times a country’s quota with a condition for some policy changes on the part of borrowers. It is little enigmatic too to note that IMF loans at times carry reportedly a ‘stigma’ in the market place.

With a view to circumventing the stigma of borrowing, the IMF is now contemplating a different loan, the “global stabilization mechanism” which would be available to groups of countries at a time.

If a country wants to avail a ‘flexible credit line’ without going through the necessity of effecting changes in policies, it has to earn a good reputation in the eyes of IMF over a period of time by following a set of policies wholeheartedly endorsed by it.

IMF credit or the World bank funding, as sought after by many central and provincial governments in different countries, adds its own measure of success or failure in the context of a country’s economic and social development on the basis of their own ability to use it economically, whether supervised properly or not by the donor, in a specific period of time with the least cost of implementation. If timely and properly utilized, it amounts to be a beneficial bail-out or else it proves to be an inimical intervention.