Question

Why are some countries ineligible for IMF financing? Shouldn’t there be exceptions durian a pandemic? Any why is the IMF concerned about debt sustainability during the crisis?

Answer 1

Answer:

Some countries ineligible for IMF financing because Debt sustainability is an important factor for two related reasons. First, lending to the IMF in unsecured debt conditions would worsen rather than balance the debt and payments of countries. Second, since the IMF's debt is circulating, members must be in a position to repay their loans, so that in the future there will be sufficient funds available to lend to other countries that the IMF needs.

Therefore, before borrowing, the IMF must establish that the borrower's debt is sustainable and that it will be able to repay the loan as a result. When the IMF determines that a country's debt is unsustainable, lending (including emergency financing) is excluded unless the member takes steps to restore debt stability in real time. In such a scenario, resolving the debt burden and not burdening the economy would be a serious matter.

For example, imposing unrealistic financial targets through higher taxes and reducing public spending. However, it is up to the country's authorities to decide whether to go to their creditors to start discussions on lending, which will bring the necessary relief. The IMF can move forward with the loan (including emergency financing) once the sustainability of the loan is adequately guaranteed.