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International Monetary Fund

IMF loans are meant to help member countries tackle balance-of-payments problems, stabilize their economies, and restore sustainable economic growth. This crisis resolution role is at the core of IMF lending. At the same time, the recent global financial crisis has highlighted the need for effective global financial safety nets to help countries cope with adverse shocks. A key objective of recent lending reforms has therefore been to complement the traditional crisis resolution role of the IMF with additional tools for crisis prevention. Unlike

International Monetary Fund

Unlike development banks, the IMF does not lend for specific projects but instead to member countries that experience balance of payments difficulties, to give them time to rectify economic policies and restore growth without having to resort to actions damaging to their own or other members’ economies. IMF financing is meant to help member countries tackle balance of payments problems, stabilize their economies, and restore sustainable economic growth. This crisis-resolution role is at the core of IMF lending activities. In broad terms, the IMF has two types

International Monetary Fund. Secretary's Department

Unlike development banks, the IMF does not lend for specific projects but instead to member countries that experience balance of payments difficulties, to give them time to rectify economic policies and restore growth without having to resort to actions damaging to their own or other members’ economies. IMF financing is meant to help member countries tackle balance of payments problems, stabilize their economies, and restore sustainable economic growth. This crisis-resolution role is at the core of IMF lending activities. In broad terms, the IMF has two types

International Monetary Fund

IMF loans are meant to help member countries tackle balance-of-payments problems, stabilize their economies, and restore sustainable economic growth. This crisis resolution role is at the core of IMF lending. At the same time, the global financial crisis has highlighted the need for effective global financial safety nets to help countries cope with adverse shocks. A key objective of recent lending reforms has therefore been to complement the traditional crisis resolution role of the IMF with additional tools for crisis prevention. Unlike development banks

International Monetary Fund

IMF loans are meant to help member countries tackle balance of payments problems, stabilize their economies, and restore sustainable economic growth. This crisis resolution role is at the core of IMF lending. At the same time, the global financial crisis has highlighted the need for effective global financial safety nets to help countries cope with adverse shocks. A key objective of recent lending reforms has therefore been to complement the traditional crisis resolution role of the IMF with additional tools for crisis prevention. Unlike development banks, the

International Monetary Fund
The global crisis has underscored the need for effective global financial safety nets to protect countries with sound policy frameworks from adverse outcomes. Complementing the traditional crisis resolution role of the IMF, which has been instrumental during the recent crisis and is expected to remain dominant going forward, further strengthening instruments to prevent crises and mitigate contagion in systemic events would contribute to the IMF’s mandate to secure global stability. This paper proposes specific reforms of crisis prevention instruments, and separately presents further considerations for strengthening the IMF’s toolkit for dealing with systemic crises. The proposals, which have benefited from feedback from policymakers and other stakeholders, build on last year’s major overhaul of the IMF lending toolkit and the reform options considered earlier this year by the IMF Executive Board in the context of a broader review of the institution’s mandate.
Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

“The IMF’s Role in the Prevention and Resolution of Sovereign Debt Crises” provides a guided narrative to the IMF’s policy papers on sovereign debt produced over the last 40 years. The papers are divided into chapters, tracking four historical phases: the 1980s debt crisis; the Mexican crisis and the design of policies to ensure adequate private sector involvement (“creditor bail-in”); the Argentine crisis and the search for a durable crisis resolution framework; and finally, the global financial crisis, the Eurozone crisis, and their aftermaths.

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. The origins of the 1980s Debt Crisis can be traced back to the acute shocks to the international monetary system in the 1970s: the collapse of the Bretton Wood system; the major oil prices hikes; and the substantial liberalization of international finance. The associated build-up of imbalances and vulnerabilities during this period ended abruptly in the early 1980s, and the IMF had to deal with its first systemic debt crisis. Given the novelty of this event, it took time for debtors, creditors, and the international community to understand the magnitude of the problems faced by these indebted economies. Reforms to the crisis-resolution framework occurred gradually and often in a piecemeal fashion. But the reforms made during the 1980s set the foundation for the IMF’s policies and principles today, remaining robust despite a continually changing landscape.

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. The debt crisis ended along with the 1980s, and 1989 saw interest rates drop and prospects for economic growth brighten. With the 1990s, private capital began flowing again to emerging and developing countries. This renewed interest in investment was bolstered by liberalization of international capital flows and widespread deregulation of financial institutions and capital markets. As the recipient economies found, however, the speculative inflows were subject to sudden capital flow reversals and stops.

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. In 2001–02, Argentina experienced one of the worst economic crises in its history. The severity of the crisis, and the economic/political complexity for debt crisis resolution made it particularly important to examine what lessons could be learned from it [40]. The circumstances of the crisis highlighted the need to establish a better framework for countries to exit in a timely fashion from unsustainable debt dynamics. In the aftermath of the crisis, the IMF focused its work particularly on two areas aiming to promote a more orderly system for the resolution of sovereign debt crises: rethinking the framework for committing exceptional levels of IMF resources, and considering methods for addressing collective action problems. On the latter, the IMF considered in parallel both statutory and contractual approaches.