Problem

Interference of transnational banks in domestic economic policies

Nature:
Transnational banks generally seem to prefer to lend to a country that is in agreement with the International Monetary Fund about the policies to be pursued under stand-by agreements. There are two reasons for this. First, lending to a nation that is in compliance with International Monetary Fund arrangements helps the transnational banks with their home country banking authorities. Second, without directly setting economic policy, the banks can be reassured that it meets the rather well-known requirements of the International Monetary Fund for balance-of-payments solvency. When a nation is unwilling to submit to International Monetary Fund stand-by agreements and commitments, however, the banks very often make their exposure conditional on commitments as to the particular economic policy that the borrowing country will put into effect in order to secure further loans.
Problem Type:
E: Emanations of other problems
Date of last update
01.01.2000 – 00:00 CET