The world’s lender of last resort is back in fashion

ON SEPTEMBER 4, Argentina’s finance minister will meet IMF Managing Director Christine Lagarde to discuss a plan to bail out the country’s creaking economy. Investors will be watching. Since April, the peso has come under pressure from investors worried about Argentina’s large budget deficits and soaring inflation. His government has already raised interest rates and secured a $50 billion line of credit from the IMF, but markets remain jittery. Last week, after Mauricio Macri, Argentina’s president, called on the IMF to speed up the disbursement of bailout funds, the peso fell 16% against the dollar. It is the worst performing currency in the world this year.

Argentina is not alone in seeking IMF assistance. Since the beginning of 2016, the fund has intervened more than ten times in countries in economic difficulty. The costs are starting to pile up. After falling for five years, total IMF lending is now 27% above its low point reached last May (see chart). It is expected to grow even more. In the coming weeks, economic difficulties in Pakistan and Ukraine could force them to turn to the fund as well. Together, their financing needs could reach $15 billion.

Since the IMF attaches strict political conditions to its loans, all of these governments are likely to pay a high political price for multilateral financing. Such conditions can be difficult to meet: Ukraine has already received $8.4 billion from a $17.5 billion IMF bailout agreed in 2015, but has lost access to additional funds. because it failed to adopt the reforms supported by the IMF. Mr. Macri has already made promises that he may struggle to keep. After agreeing in June to cut Argentina’s primary deficit (i.e. before interest payments) for 2019 to 1.3% of GDP, yesterday its government pledged to purely balance and simply next year’s budget.

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