News / Economy

IMF Says Its 'Negative Image' Steers Countries Away from Borrowing

Reuters
Many countries are hesitant to rely on the IMF's new lending instruments because of a perceived “stigma” attached to taking money from the global financial institution, the International Monetary Fund said on Wednesday.

The IMF has launched a series of new lending programs in recent years that it hoped would appeal to countries with generally good economic policies, but that still needed some protection from market contagion. The Fund's traditional lending programs are meant for countries with an urgent crisis, and come with stringent conditions attached.

But only a few countries have been interested, surprising IMF staff who had thought the program would be popular during the period of market stress after the global financial crisis, and during the recent rout in emerging markets tied to the Federal Reserve's slowing pace of asset purchases.

In many cases, countries needing insurance against outside shocks have accumulated reserves, expanded bilateral swap lines, or launched regional financing arrangements instead of turning to the IMF.

“To a large degree, this reflects the degree of political stigma related to Fund engagement that prevents some members from seeking pre-emptive Fund financial support,” IMF staff members said in a policy paper.

“Policymakers' reluctance to come to the Fund appears to stem largely from the persistently negative image that the Fund has among many civil society opinion leaders, NGOs, and the general public, particularly in countries affected by past crises,” the paper added.

For example, the IMF's reputation in Asia remains tarnished by the policy advice it dispensed during the Asian financial crisis in the late 1990s. At the time, it recommended deep budget cuts and tight monetary policy, which critics say exacerbated the economic downturn.

Countries in the region have amassed some $6 trillion in foreign exchange reserves in part to ensure they will never again have to seek an IMF bailout.

The IMF said it would strive to reach out to a broader group, beyond just governments, in order to improve its reputation.

“When countries do have to seek fund support it's better that they do it promptly and don't feel inhibited from doing so by ... perceptions that Fund support is going to be damaging to their economy,” a senior IMF official told reporters, speaking on condition of anonymity.

The paper focused on three instruments the IMF launched since the global financial crisis. At the height of the crisis in 2009, the IMF rolled out the Flexible Credit Line for well-run emerging market economies constrained by the global credit squeeze. But only Mexico, Poland and Colombia signed up.

Two years later, it launched a six-month liquidity line aimed at countries with solid policies that might have been at risk from market jitters, such as the debt crisis in the eurozone. So far, only Morocco has asked for that instrument, called the Precautionary and Liquidity Line.

Another new program, called the Rapid Financing Instrument, also remains untested. This type of support, which is now seen as one of the options for helping Ukraine, is meant for nations with urgent balance of payment needs caused by outside shocks.

The IMF paper said the Fund would work on clarifying what countries must do to qualify for these types of programs, which could encourage more of them to sign up.

You May Like

Anti-Terror Drills Highlight China’s Push Into Central Asia

China, Russia, several central Asian countries wrap up massive anti terrorism military drills in Inner Mongolia More

Erdogan’s First Step: Secure More Power in New Role in Turkey

Erdogan was sworn in as Turkey's first popularly elected president on Thursday; he picked former foreign minister Ahmet Davutoglu as PM More

Pakistan Army Fails to Break Political Deadlock

PM Sharif claims he didn't ask army to defuse crisis; military rejects claim More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Ukraine Battles Pro-Russia Rebel Assaulti
X
Daniel Schearf
August 29, 2014 9:30 PM
After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.
Video

Video America's Most Popular Artworks Displayed in Public Places

Public places in cities across America were turned into open-air art galleries in August. Pictures of the nation’s most popular artworks were displayed on billboards, bus shelters, subway platforms and more. The idea behind “Art Everywhere,” a collaborative campaign by five major museums is to allow more people to enjoy art and learn about the country’s culture and history. Faiza Elmasry has more.
Video

Video Chinese Doctors Use 3-D Spinal Implant

A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video India’s Leprosy Battle Stymied by Continuing Stigma

Medical advancements in the treatment of leprosy have greatly diminished its impact around the world, largely eliminating the disease from most countries. India made great strides in combating leprosy, but still accounts for a majority of the world’s new cases each year, and the number of newly infected Indians is rising - more than 130,000 recorded last year. Doctors there say the problem has more to do with society than science. Shaikh Azizur Rahman reports from Kolkata.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.