The Global Crisis in Low- and Middle-Income Countries: How the IMF Responded

Abstract

Developing countries are the least to blame for the outbreak of the financial crisis, but they are destined to suffer the most dramatic and long-lasting consequences. This chapter focuses on the early responses of the International Monetary Fund to the present crisis in low- and middle-income countries. The IMF lending policy has been harshly criticized for being sensitive not only to the fundamental imbalances in the economic conditions of borrowing countries, but also to their lobbying capacity and to political-economy interests of the IMF's major shareholders, i.e., the USA and G-7 countries, which dominate the decision-making process and the Fund's view of good economic policies. Preliminary analysis of the 2008 and 2009 IMF arrangements shows that, notwithstanding the recent changes in the lending framework and the severity of the global crisis, the Fund's credit allocation is still mainly driven by the strategic interests of Western countries, instead of the macroeconomic conditions of recipients.

Keywords: Global crisis, IMF programs, Washington Consensus, growth

JEL Classification: F33, F34, F35, O11