IMF Support Helping Restore Growth but Key Risks Ahead
The financing provided by the IMF helped countries stabilize their economies at a time when their access to financial markets was seriously curtailed.
But risks remain, the study finds. Many countries need further fiscal consolidation, job creation is lagging behind the recovery, and the political will to implement further difficult reforms is flagging―at a time when more reforms are urgently needed to restore competitiveness.
A second group of countries approached the IMF for financial support in 2010–11. This group of countries, which includes Greece and Ireland, face significant challenges. Further fiscal consolidation to reduce high public debt will be needed for years to come, and reforms to improve the growth potential of the economies will require strong social cohesion and national unity.
The study, conducted by the IMF’s Strategy, Policy, and Review Department, encompassed 29 countries with IMF-supported programs (see box for details).
In an interview, James Roaf, Advisor in the Strategy, Policy, and Review Department, discusses the findings of the study.
During the 2007–09 global economic crisis, countries ranging from Iceland to Pakistan turned to the IMF for assistance. Since the start of the crisis, the IMF has committed more than $250 billion in loans to its member countries, an all-time high.
Countries in central and eastern Europe were among the first to turn to the IMF for assistance; countries in Latin America and Asia also sought help. Many low-income countries also made use of the IMF’s concessional lending facilities but these cases are not covered by the current study.
As the global crisis abated, a new wave of countries requested IMF support—often because the crisis had exacerbated problems of fiscal sustainability. These included two members of the euro area, Greece and Ireland. Most recently, Portugal has asked for financial assistance.
First wave of countries seeking IMF assistance (2008–mid-2009): Armenia, Belarus, Bosnia & Herzegovina, Costa Rica, El Salvador, Georgia, Guatemala, Hungary, Iceland, Latvia, Mongolia, Pakistan, Romania, Serbia, Seychelles, Sri Lanka, and Ukraine.
Second wave of countries seeking IMF assistance (late 2009–2011): Angola, Antigua and Barbuda, Dominican Republic, Greece, Iraq, Jamaica, Maldives, Moldova, Honduras, Ireland, Kosovo, and Macedonia.
Separately, Flexible Credit Lines (FCL) were granted to Colombia, Mexico, and Poland. The FCL is a precautionary credit line for countries with very strong track records in policy performance.
IMF Survey online: What are the key findings of your study?
Roaf: We found that countries that entered into IMF-supported...
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