Ideally, which countries or organizations would provide the economic support for a government that needs a bailout? Is the IMF the ideal organization to bail out a country? Is it ethical for the IMF to bail out countries that repeatedly make bad economic and fiscal decisions? Is it ethical for the IMF to have significant requirements attached to its loans?

The International Monetary Fund

Discussion: The International Monetary Fund

For a long time, the International Monetary Fund (IMF) has had its supporters and detractors. In this discussion, you will have the opportunity to consider some of the IMF’s actions and determine whether they were beneficial as well as ethical.

To help frame this discussion, consider the IMF’s actions in Greece. Greece spent a decade in economic turmoil starting in 2009. The IMF provided financial assistance to “bail out” Greece multiple times during the crisis. Their loans came with requirements that Greece needed to meet. Some argue that the IMF made the crisis much worse, whereas others feel the IMF provided timely support to Greece not long after the global financial crisis of 2008.

In your initial post, address two of the four bulleted questions below.

• When should a government, economy, or country be bailed out, if ever? Justify your answer with specific examples and how the bailout or lack of bailout would impact the global economy and the future of globalization.
• Ideally, which countries or organizations would provide the economic support for a government that needs a bailout? Is the IMF the ideal organization to bail out a country?
• Is it ethical for the IMF to bail out countries that repeatedly make bad economic and fiscal decisions? Is it ethical for the IMF to have significant requirements attached to its loans?
• What lessons should be learned from the Greek debt crisis for countries with debt obligation issues and for organizations such as the IMF?

In your responses to two or more of your peers, address the following:

• The IMF is considering creating a digital currency. Assuming that we are in a world where there is a single digital currency, who would ideally create a global cryptocurrency? Would you trust the IMF to create one? Or would you prefer one created by a global bank such as JPMorgan Chase or one backed by a country?
• What are the ethical implications of cryptocurrency?

Peer 1: Hannah 

Governments and economies usually face the option of bail out when things have gotten completely out of hand and the needs of the people are not being met. Although bailouts can be helpful, often times, the money goes into the wrong pockets and large corporations see the money rather than the citizens. When the IMF is asked for a bailout by a country, they must meet certain criteria, not only for where thy are currently at, but what their plan is to move forward. “The overarching goal is always to restore or maintain balance-of-payments viability and macroeconomic stability while setting the stage for sustained, high-quality growth and, in low-income countries, reducing poverty.” (IMF. 2021) Countries that fall into the requirements should receive a bailout in order to keep the global economy going. Countries that need to go to the IMF for a bailout could easily impact the global economy by defaulting on loans and not having the economy to support exports and imports, which would have a trickle down affect on the entire global economy. Even critics can see the IMF’s, ” role in Brazil in 2002 as positive: an early recovery there after intervention allowed IMF loans to be repaid ahead of schedule.” (Masters, Chatzky, Siripurapu. 2021)

Ideally, when a country has an economic crash that needs a bailout, a stable country that is a trade ally is a great option as a lender. This keeps the flow of products moving and ensures that both economies stay profitable. The IMF is a great, although not perfect, resource for bailing out a country. They establish requirements for paying back the loan that encourage building the economy back up. Some say that the IMF should be questioned for attempting to loan to a country more than once, but the country’s that are eligible for the loan are not required to take the loan. Still, some would say, ” there is also a criticism that bailing out countries with large debt creates moral hazard. Because of the possibility of getting bailed out, it encourages countries to borrow more.” (Pettinger. 2022) In order to prevent this, the IMF has placed many requirements in place to build a stable economy under a country that is taking a loan out. This is the meaning behind all of the requirements to borrow from the IMF.

Countries going to the IMF for a loan must realize that it does not come freely. The regulations put in place can seem overbearing and invasive to citizens. This was the experience felt in Greece and therefore should be considered by all who need financial assistance. ” for countries to be willing to overcome the stigma of going to the IMF, they must have confidence in there being light at the end of the tunnel.” (Chryssogelos, Oxenford. 2018) That will be the consideration of all nations moving forward that consider this resource.

IMF (2021) IMF Conditionality. International Monetary Fund. https://www.imf.org/en/About/Factsheets/Sheets/2016/08/02/21/28/IMF-Conditionality

Masters, J. Chatzky, A. Siripurapu, A. (2021) The IMF: The World’s Controversial Financial Firefighter. Council on Foreign Relations. https://www.cfr.org/backgrounder/imf-worlds-controversial-financial-firefighter

Pettinger, A. (2022) Criticisms of IMF. Economics Help. https://www.economicshelp.org/blog/glossary/imf-criticism/

Chryssogelos, A. Oxenford, M. (2018) Greek Bailout: IMF and Europeans Diverge on Lessons Learnt. Chatham House. https://www.chathamhouse.org/2018/08/greek-bailout-imf-and-europeans-diverge-lessons-learnt