What it shows and teaches about 32 defaults in history

Currently, the IMF does not record any case of “prolonged assets” since mid-2021 when Sudan canceled arrears that had been in arrears since the mid-1980s, thanks to a bilateral loan from France. Moreover, on June 29, IMF President, Kristalina Georgieva, and David Malpass, President of the World Bank, when celebrating the latest developments for Sudan, noted that “it was a historic day for the IMF, as the arrears with it have been cleared.” Indeed, as of today, for the first time since 1974, there are no countries with long arrears with the IMF.” Something similar happened in the case of Somalia, which with the help of Italy canceled a delay in the start of the global pandemic in 2020.

naturally When one looks at the list of countries that faltered in dealing with the IMF for at least 6 months, apart from the cases of Egypt and Cuba, in the 1960s, the rest are countries that obviously seem very far from the socio-economic potential of ArgentinaFor example, in the 1980s, cases were linked to countries such as Honduras, Haiti, Congo, Panama, Somalia, Sierra Leone, Jamaica, Zambia, Gambia, Zambia, Tanzania, Liberia, Sudan, Vietnam, Chad, Guyana, Nicaragua and Peru. In the seventies, the case of Cambodia was registered. While the rest took place in the 1990s, Afghanistan, Bosnia, Yugoslavia, Congo, Dominican Republic, Iraq, and again Haiti. Among all these cases, the case that lasted the longest was that of Sudan (about 37 years), followed by Somalia at about 33 years and Liberia With more than 23 years. like others Zimbabwe, Iraq, Cambodia and Chad lasted between 10 and 16 years. The average of the 32 cases is about 8 years old.

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However, with regard to the amounts involved, it was noted that they were not relevant at all. The worst time for arrears with the IMF was in the early 1990s when defaults amounted to about 3.6 billion SDRs (US$5 billion) and represented 10% of the Fund’s total loan balance. Overall, it equated to just over an average of 125% of each country’s quota in the IMF. Therefore, the case of Argentina stands out broadly for the amount of the loan (which is almost a third of the total IMF portfolio), how much it represents in terms of its share in the organization and the overall dimension of the country. Because the economies of countries that have arrears with the IMF in general do not reach or even reach the heels of Argentine GDP.

The issue of arrears with the agency was already an issue after the global financial crisis but it has recently returned to the internal discussion table. In a 2016 IMF working paper “Arrears to the IMF – The Ghost of the Past?” , the economists Anne Oking and Marius Somlinsky analyzed the determinants and dynamics of default in the IMF and concluded that among the macroeconomic and institutional variables, they found that this default with the IMF in the past five years, import reserve coverage and institutional quality are among the most important Factors that correlate with occurrence of arrears.” Regarding the duration of extended arrears, we find that credit owed from the IMF, real GDP growth, incidents of civil unrest, and the percentage share of exports to advanced economies, correlate with the time a country remains behind with the IMF. International criticism,” they explained. “The historical narrative also suggests the role of political factors: they appear to be important for the occurrence and duration of arrears.” They emphasized that “based on the analysis, we recommend that more attention be paid to frequent reforms and political events.”

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Of course, each delay case has its own “trigger”. For short-term delinquency, identifying (and correcting) it can be as simple and easy as miscalculating the days before the obligation is due. Whereas in the case of long arrears, identification of triggers can be more complex.

Freddie Dawson

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