Question

Often crisis countries end up seeking bail-out packages from the lender of the last resort like IMF or other large economies, such as the US or EU. The bail-outs come with loan conditionalities. Do your group think that achieving these conditionalities made the crisis countries better off?

Answer 1

These conditionality include opening up of the troubled economy, removal of trade barriers and liberalization of the economy so that MNCs can operate in the country with ease, along with strong and strict austerity measures for the economy. On this basis, the economy will better off in the short run, as country gets funds to resolve immediate problems and help it put back to the path of economic recovery. But, in the long run, it is going to hurt the economy as it has the scope of destroying domestic industries, increase cases of economic rent and exploitation of resources.  Though, it is the development of regulatory framework in the country, that can limit the negative impact of the mentioned conditionalities. So, the group thinks that economy can better off in the short run, but suffer in the long run.