NCPA - National Center for Policy Analysis

Nobody Wants An IMF Credit Line

August 13, 1999

During last year's global financial crisis, the Clinton administration came up with the idea of having the International Monetary Fund offer large pre-approved lines of credit to shield prudent developing countries from potential investor panic. The president announced the plan with great fanfare, as proof that the administration was doing something constructive about the crisis.

Now, the plan is regarded as a major embarrassment because no country has come forward to apply for the credit line. It seems countries fear that doing so would signal to investors that they have financial and economic problems on the horizon. So they're shunning the offer.

  • The program was supposed to be an IMF seal of approval and a signal that investors could leave their dollars, yen or euros in a country despite turmoil elsewhere.
  • Ideally, a country would never even have to draw on the IMF loan; but developing countries fear that even asking for the credit line would send investors heading for the exits.
  • Unsure of how such a move would be interpreted in financial markets, no country wants to go first.

Potential contingent-credit recipients were thought to be Mexico, South Africa and South Korea.

Source: Michael M. Phillips, "IMF Credit Program Has Everything But a Client," Wall Street Journal, August 13, 1999.


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