Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

rogoff186_Carol SmiljanNurPhoto via Getty Images_argentinemoneywallet Carol Smiljan/NurPhoto via Getty Images

The IMF After Argentina

It’s high time to ask how to refocus the International Monetary Fund’s mandate for dealing with emerging-market debt crises. How can the IMF be effective in helping countries regain access to private credit markets when any attempt to close unsustainable budget deficits is labeled austerity?

CAMBRIDGE – In case you blinked, the Argentine government built up a pile of debt out of almost nothing with surprising speed, and then proceeded to default on it almost as quickly. Compared to the country’s slow-motion 2002 default, the latest crisis feels like 60-second Shakespeare. But in both cases, default was inevitable, because the country’s mix of debt, deficits, and monetary policy was unsustainable, and the political class was unable to make the necessary adjustments in time.

And in both cases, loans from the International Monetary Fund seemed only to postpone the inevitable, and, worse, to exacerbate the ultimate collapse. So, after the second debacle in Argentina in less than a generation, it’s high time to ask how to refocus the IMF’s mandate for dealing with emerging-market debt crises. How can the IMF be effective in helping countries regain access to private credit markets when any attempt to close unsustainable budget deficits is labeled austerity? The only answer is to increase substantially the resources of international aid agencies (the IMF is a lender). Unfortunately, there seems little appetite for that.

Why was the IMF willing to pour resources into a situation that – at least with the benefit of hindsight – could be resolved only through stronger fiscal adjustment (more austerity), a debt default, more foreign aid, or a mixture of all three?

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/d8h5JaM;
  1. pisaniferry106_Mark WilsonGetty Images_phase one agreement trump china  Mark Wilson/Getty Images

    Explaining the Triumph of Trump’s Economic Recklessness

    Jean Pisani-Ferry

    The Trump administration’s economic policy is a strange cocktail: one part populist trade protectionism and industrial interventionism; one part classic Republican tax cuts skewed to the rich and industry-friendly deregulation; and one part Keynesian fiscal and monetary stimulus. But it's the Keynesian part that delivers the kick.

    0
  2. yu49_ShengJiapengChinaNewsServiceVCGviaGettyImages_G20trumpjinpingshakehands Sheng Jiapeng/China News Service/VCG via Getty Images

    PS Say More: Keyu Jin

    Keyu Jin assesses the “phase one” US-China trade deal, questions whether the US can ever accept China’s development model, and highlights a key difference in how the Hong Kong protests are viewed inside and outside China.
    0