The IMF Washington enacts a new doctrine to govern its exceptionally high loans to heavily indebted countries.
Last week, the International Monetary Fund (IMF) had already announced the end of the “systemic exception” that was established to bail out heavily Athens despite doubts about debt sustainability and in order to avoid a reaction bad string for the European economy.
In a report released Friday, the institution recognizes that this controversial rule failed to prevent “contagion” of the crisis, it posed a risk to the IMF’s resources and it encouraged creditors to pay inordinately countries playing on the implicit guarantee they will be reimbursed from public funds.
This mechanism, decried by some emerging countries, who saw a favor against Europeans, was also in the sights of Republican US lawmakers who demanded its removal.
The new scheme introduced Friday endorses death and focuses on a zone called “gray” when the debt of a country is not deemed viable “with a high degree of certainty” -a golden rules but IMF- where a frontal debt reduction would be too risky.
In this case, the IMF can commit financially to the condition that the country receives in parallel, public and private creditors, important enough funds to facilitate a return to debt sustainability and ensure that the institution in Washington will be refunded.
A debt restructuring (extension of maturities, rescheduling repayments …) will not “automatically” required but could be considered depending on the circumstances, ensures the IMF in an explanatory note.
If the country lost access to capital markets, this solution would be “appropriate” and so would the economy measures demanded by the IMF in return for his help are less “binding” said the institution.
In the event that a restructuring but would pose too many risks to financial stability, the IMF could do without the condition that other public creditors can relax their terms of repayment to give oxygen to the country.
The latter reference echoes the current negotiations on the third plan of aid to Greece which the IMF does not want to participate as long as Europeans alleviate the country’s debt.
Some Member States of the EU had a moment denied this possibility by ensuring that European treaties forbade them any debt erasure.
(afp / nxp)