What are the recommendations of the IMF for a nation which is in trouble?

Expert Solution

The major recommendations of the IMF for the nation in trouble i.e. facing balance of payment crisis are following:

Decrease the government deficit, these expenditures can be in the form of huge borrowing to finance day to day operation of the government. The government may be having high expenditure in form of pension payment, social security etc. IMF recommends the government to reduce the expenditure and adopt some austerity measures. Example Greece debt crisis.
Devalue the currency: The Second recommendation by the IMF for the government is to devalue the currency, which will make the exports more competitive and help the nation increase its aggregate demand and allow the foreign currency to come in.
Reduce taxes on imports: IMF always recommends the nation to open the market and integrate into the world market better. This will allow the nation to import cheaper goods and benefit the consumer.
Increase taxes and reduce subsidy: This is overall to help the government meet its expenditure.

Rahul Sunny answered 2 years ago

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