Do IMF-supported programs impose austerity on countries in financial crisis?
A. No. A country in financial crisis is likely to face a period of austerity whether it approaches the IMF or not. An IMF program reduces the extent of the belt-tightening needed and aims at bringing about a quicker rebound in incomes than would otherwise be the case. Countries seek IMF loans when, through some combination of external events and domestic vulnerabilities (such as a high level of public debt), they have already run into deep financial difficulties. The fact is that the IMF’s financial support, which is normally made available at interest rates well below those that the private markets would charge, reduces the extent of the austerity and adjustment that the country would have to make otherwise.
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- Do IMF-supported programs impose austerity on countries in financial crisis?
