Traditionally, “You should go to the IMF” is not something you would say to a friend. Over the past few decades, the IMF has become associated with excessive fiscal austerity and extreme political insensitivity. Countries borrowed from the IMF only when all else failed and when there was no other way to pay for essential imports. For Iceland in autumn 2008, for example, the only alternative to IMF financing was to eat locally sourced goods—mostly fish.
But the IMF has changed a great deal in recent years under the auspices of Dominique Strauss-Kahn, its managing director. Strauss-Kahn, a former French finance minister and possible Socialist candidate for the French presidency, has pushed through changes that allow the IMF to lend without conditions in some circumstances, and to give greater priority to protecting social safety nets. He has also moved the Fund away from its obsession with fiscal austerity measures (a big mistake—with traumatic consequences—in Indonesia and South Korea in 1997).
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