Thursday, May 13, 2010

IMF Borrowing Crisis

The graph shows 10 largest borrowing arrangements by International Monetary Fund (IMF). Recent $140 billion rescue package for Greece is one of the largest cradit loan arrangements in the 21st century. The fund's contribution to Greece has surged the overall indebtedness of the Euroarea. During the financial crises IMF usually extended credit lines to the countries in trouble. Recently IMF extended borrowing arrangements to Latvia and Iceland. Before Greek rescue aid, IMF's contribution to Iceland's rescue package was one of the largest borrowing expansions ever given to such a small country. In the future, as emerging economies will further grow, IMF will have to be keen on the possibilities of systemic crises in these countries. The IMF should not extend the rescue loan to every country as this is not always effective in the end. The main purpose of the IMF is to help counties facing balance-of-payments crisis and not being the borrower of the last resort as in the case of Greece.

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