IMF Subsidies, Cancellations, and Resumptions: New Empirical Evidence

16 Pages Posted: 28 Mar 2013 Last revised: 9 Apr 2014

See all articles by Adrian Urbacza

Adrian Urbacza

Commerzbank AG

Roland Vaubel

University of Mannheim - Department of Economics

Date Written: January 15, 2013

Abstract

For a long time, the International Monetary Fund has been criticized for subsidizing its credits. According to Walter Bagehot (1873), a lender of last resort ought to “lend freely but at a penalty.” Otherwise moral hazard results (see Dreher and Vaubel 2004). Bakker and Schrijvers (2000) and the Saxton Report (2002) have presented estimates of the subsidy element in IMF lending. In this article, we present an improved and updated calculation.

We also present evidence on another criticism of IMF policy: that it fails to enforce compliance with policy conditions. The IMF claims that it cancels its programs if debtor governments do not honor their policy commitments. We show that cancellations due to noncompliance tend to be followed by new programs very soon.

Keywords: IMF loan repayment, International Monetary Fund, international monetary institutions, global economy, international development

JEL Classification: F00, F33, F34, F35

Suggested Citation

Urbacza, Adrian and Vaubel, Roland, IMF Subsidies, Cancellations, and Resumptions: New Empirical Evidence (January 15, 2013). Cato Journal, Vol. 33, No. 1, 2013, Available at SSRN: https://ssrn.com/abstract=2240265

Adrian Urbacza

Commerzbank AG ( email )

Germany

Roland Vaubel (Contact Author)

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

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