The Africa Report - - LETTERS -

Your in­ter­view with Chris­tine La­garde [TAR103 Sept. 2018] rightly high­lighted the progress the IMF has made in re-ex­am­in­ing its tra­di­tional or­tho­dox­ies and be­com­ing more aware of the so­cial im­pacts of its pre­scrip­tions. The fund, how­ever, could use more in­tro­spec­tion in its role cre­at­ing moral haz­ard in the re­gion; par­tic­u­larly the per­ceived “an­chor­ing” ef­fect that Fund pro­grams can pro­vide for gov­ern­ments who are then able to run up com­mer­cial debts that later turn out to be un­sus­tain­able. The rise of in­dex in­vest­ing in emerg­ing mar­ket bonds means that it takes lit­tle pol­icy cred­i­bil­ity for a gov­ern­ment to bor­row in the ex­ter­nal com­mer­cial mar­kets. Coun­tries that ben­e­fit from the im­plicit pol­icy back­stop of an IMF pro­gramme have found it par­tic­u­larly easy to bor­row in the eu­robond mar­ket, which is ironic given how of­ten the pro­ceeds have not been used for eco­nom­i­cally pro­duc­tive pur­poses.

Brian Holmes, Fi­nan­cial an­a­lyst, UK

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