November 1, 2008

New Targets for IMF "Bail-outs"

The UK Telegraph writes under a headline: "Pakistan to receive $9bn from IMF in fight against bankruptcy".
Pakistan is to receive a $9bn (£5.5bn) bail-out loan from the International Monetary Fund as the country has three weeks to stave off bankruptcy.
Sound more like a bail-out of Pakistan's creditors. Pakistan will have just as much trouble paying to IMF as it has to its current creditors, and even more so after its public infrastructure, especially education, has been demolished by IMF demand. The same goes for Iceland and the others. Many earlier IMF clients would probably have done better by going bankrupt.

Now that the IMF is "aiding" both developed and developing countries at the same time, it will be most interesting to see it the same standards and conditions are applied for all, or if its demands for "tough medicine" are for developing countries only.

The demand for 18% interest rates for Iceland does seem to be quite insane tough. Expect a very hard landing indeed for the Icelandic economy. I guess the people in IMF will never learn from their experiences. What these countries need is debt relief and negotiations with creditors. Bailing out the creditors will just make sure that the same thing happens again and again and again...

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