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					EW 4-26 What do the maps show:

Use of IMF Credit
The maps show the upward global trend in use of IMF credit over the past three decades, representing the growing presence of the IMF in the international economic arena. Correspondingly, the maps show the growing importance of the IMF as an international economic regulatory institution, playing an increasingly large role in determining national economic policy and structure. According to World Bank data, the average overall use of IMF credit per decade increased, in real terms, by 21% between the 1970s and 1980s, and increased again by just over 22% percent from the 1980s to the 19912000 period (see figure 1). Average per country use of IMF credit over these time periods increases at similar rates.
Total World Use of IMF Credit 100 90 80 70 60 50 40 30 20 10 0

Billions of Constant 1995 US$

The intensity of use of IMF credit varies between regions over time. This indicator can, in some respects, serve as a proxy for the general economic health of a country or region, with rapid increases in the use of IMF credit corresponding to times of widespread economic crisis. Regional Observations: In Latin America and Sub-Saharan Africa, we observe large jumps in the average use of IMF credit between the 1970s and 1980s (see figures 2 and 3). These increases are directly attributable to the world debt crisis of 1982 and its aftermath. As illustrated in the graphs below, growth in the use of IMF credit in both Latin America and SubSaharan Africa is rapid between 1982 and 1987; the increase is particularly dramatic in Latin America. Following the 1982 debt crisis, use of IMF credit in Sub-Saharan Africa is sustained just below its peak in 1987, indicating ongoing economic hardship and continued adjustment in the region. Use of IMF credit in Latin America has been more volatile, with large increases associated with both the 1982 debt crisis and Mexico’s economic crisis in 1994.

19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

Figure 1: Total disbursements of IMF credit Data Source: World Bank, World Development Indicators 2002

Use of IMF Credit in Sub-Saharan Africa (1970-2000) 12

Billions of Current US$

10 8 6 4 2 0

Billions of Current US$

Figure 3: Use of IMF credit in countries in Latin America and the Caribbean Data Source: World Bank, World Development Indicators

In the 1970s and 1980s, countries in the East Asia and the Pacific regions drew a relatively smaller amount from the IMF than Latin America and Sub-Saharan Africa, particularly with regards to the size of the economies that encompass the East Asia region (including China, Japan, and South Korea). However, with the onset of the East Asian financial crisis in 1997 we observe dramatic increases in the use of IMF credit between the 1980s and 1990s on the maps (see figure 4). Of particular note are the increases in South Korea, Vietnam and Indonesia. We observe a decrease in average use of IMF credit in Malaysia between the last two decades because then Prime Minister Mahathir refused IMF assistance at the time of the 1997 East Asian Financial crisis. The increase in use of IMF credit in East Asia and the Pacific is even more dramatic when looked at on a year-to-year basis. The chart below illustrates the precipitous increase in funds drawn on from the IMF in 1997 and 1998 for the East Asian and Pacific Region as a whole.

19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

Figure 2: Use of IMF credit in countries in Sub-Saharan Africa Data Source: World Bank, World Development Indicators 2002

Use of IMF Credit in Latin America and the Caribbean (1970-2000) 30 25 20 15 10 5 0

Use of IMF Credit in East Asia and the Pacific 35 30 25 20 15 10 5 0

Billions of constant 1995 US$

Another noteworthy measurement is the relative size of the regional economies mentioned above in the world economy compared to the share of total IMF credits that these regions draw upon. According to World Bank data, Sub-Saharan Africa typically produces just over 1% of global economic output, comprising just under 1.2% of total world GDP between 1970 and 2000. During this same time period, Sub-Saharan Africa drew on an average of 15.7% of all IMF credit dispersals. Similarly, while Latin America’s share of world economic output averaged 6% from 1970 to 2000, the region absorbed 32% of all IMF credit dispersals during this phase. In contrast, Latin America and Sub-Saharan Africa contribute far less to funds at the IMF than the United States, Japan, and the EU. Distribution of IMF funds to the developing world can, in a sense, be seen as a transfer of subsidized loans from developed to developing nations. On the other hand, IMF credit dispersals are used in part to repay debts to private lenders from industrialized countries, and allow those with more control over the allocation of funds at the IMF a large say in how recipient countries set economic policies. Thus, control of IMF funds give industrialized countries leverage in economic policymaking decisions outside of their own national borders, and are used in part to bail out private international banks that invest in risky segments of the developing world. The following map shows the concentration of voting power at the IMF in the industrialized west, Saudi Arabia and Japan. See map: “voting rights in the IMF” http://gis1.ucsc.edu/~ericw/voting_rts_imf.gif

19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

Data Source: World Bank, World Development Indicators 2002

Caveats and Methodological Issues of the “use of IMF credit” indicator A caveat associated with using the “use of IMF credit” indicator is that it does not describe the conditions upon which a country is allowed to draw on funds at the IMF. Using IMF funds does not necessitate a structural adjustment program, and many countries drawing on IMF funds need not enact any policy reforms in order to be approved to receive funding. To view a map showing current types of IMF arrangements, see: < http://gis1.ucsc.edu/~ericw/imf_arr123103.gif > A methodological problem associated with this data set involves deflating prices into “real” as opposed to “nominal” terms to allow for an accurate comparison of the indicator between decades. The data available was given in nominal terms - a measure called “current US dollars”. This measure indicates the number of dollars dispersed to countries at the time of arrangement, but fails to take inflation into account and therefore distorts the results by not accurately reflecting the purchasing power of the credit issued. To deflate the data the UC Atlas of Global Inequality uses an indicator called the US “Consumer Price Index”, or CPI. This allows us to look at the data in “real”, or inflation adjusted terms that make the dollar value of the data equivalent for every year. There is an additional methodological issue associated with this method, however. Deflating data by US CPI shows us what US citizens must give up to provide credit, but does not necessarily accurately reflect what the recipient country is able to purchase with the aid. In order to show this, the data would have to be put in terms of the currency of the recipient country and deflated by the recipient country’s CPI. Due to a lack of data, we were unable to run this calculation. The data, however, still accurately displays the relative intensity of IMF lending in different countries and regions over the past three decades.

Current IMF Arrangements

What does the map show: The map shows the geographical distribution of IMF arrangements at the end of 2003. It provides insight into which countries are currently undergoing a range of economic problems. Countries involved in Stand-by Arrangements (SBAs) are undergoing moderate, short term economic problems, usually involving mild foreign exchange or trade issues. Countries in Enhanced Fund Facilities (EFFs) arrangements are facing more difficult economic problems, involving short term crises or structural problems. Poverty Reduction and Growth Facilities (PRGFs) are only granted to countries facing prolonged economic crises and deep structural problems. The majority of countries currently engaged in PRGFs are found in Africa. There is a strong correlation between countries receiving PRGF loans and those that fall under the category of Highly Indebted Poor Countires (HIPCs).
http://gis1.ucsc.edu/~ericw/current_arr%20copy.gif http://www.worldbank.org/hipc/about/map/map.html

More information on these lending arrangements is available below. A larger presentation on the work associated with PRGFs, namely Poverty Reduction and Growth Facility Papers (PRSPs) and the HIPC initiative is available at <link to Kea’s text> What are the three types of lending arrangements shown on the map? Poverty Reduction and Growth Facility (PRGF): Formerly known as an Enhanced Structural Adjustment Facility (ESAF), the PRGF replaced the ESAF in 1999 as the IMF’s long-term, low interest rate concessional loan available only to the poorest member countries. According to the IMF, the transition from ESAF to PRGF was made in order to place a greater emphasis on poverty reduction and growth. Eligibility is provided primarily on the basis of per capita income. In 2001 a member country could obtain loans under PGRF only if their per capita GNI was below $875. In September of 2003, there were 77 member countries eligible to receive PRGF loans. In order to receive a loan under PRGF, the borrowing country must submit a Poverty Reduction Strategy Paper (PRSP). The PRSP is prepared by the government of the borrowing country and its partners, then submitted to the Executive Boards of the IMF and World Bank for review. Once the PRSP is approved, the country seeking assistance is eligible for PRGF concessional lending and debt relief under the Heavily Indebted Poor Country (HIPC) Initiative. More on PRSPs is available at <link to Kea’s text> Stand-By Arrangements (SBA): SBAs are the most common loans granted by the IMF. They are short term loans intended to provide support to member countries facing shortterm balance of payments problems.

Extended Fund Facility (EFF): EFFs are longer term loans than SBA loans, but shorter term than PRGF loans. EFFs are provided to countries with deeper balance of payments and structural problems than those that obtain funds under a SBA. Sources: http://www.imf.org/external/np/exr/facts/howlend.htm http://www.imf.org/external/np/exr/facts/prgf.htm http://www.imf.org/external/np/exr/facts/hipc.htm

Outline:

Use of IMF credit 1.) 1982 debt crisis: dramatic increase in use of IMF credit between 2.) sustained use of IMF credit through 2000 3.) link to text on 1982 debt crisis 4.) graphs/tables a. total use of IMF credit - TS b. use of IMF credit by region - TS c. line graphs showing Afr, LatAm, SE asia – look for spikes in use of IMF credit 5.) caveats: a. encompasses use of all types of IMF credit – use of IMF credit does not necessitate SAP b. current US$ makes it more difficult to interpret data. Current facilities 1.) Africa using PRSPs – indication of large debt burden relative to capacity to finance 2.) Descriptions of each program type (home PC??) Voting rights in the IMF 1.) make bar graph showing – aggregate into categories similar to those that Sutcliff uses. 2.) Describe how voting in the IMF works, who has veto power, etc. (e.g – what nation(s) control the decisions made by multilateral lending institution as powerful as IMF Growth in IMF membership (# of member countries)

source: imf.org


				
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posted:11/1/2009
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