The Developing Countries Are Now Putting Pressure On The IMF

Category: Finance.

The International Monetary Fund incurred the wrath of Brazil and Argentina for its failure to predict the crash in the U. The economic experts and analysts from both the countries blamed the IMF for its negligence toward keeping a vigil on the richer countries along with the emerging economies.

S. subprime mortgage market. In fact the Group of 24, an assembly of officials and ministers from developing countries, called for equal treatment toward all nations. S. subprime mortgage scenario and the inability of the IMF to put a check on that. Finance ministers and investment bankers from the Middle East to Asia also expressed their antipathy towards the past conditions of the U. In the recently held annual meeting of the IMF and World Bank in Washington, the Brazilian Finance Minister echoed the discontent when he pointed out the irony and opined that those countries that were references for good governance, of standards and codes for the financial systems, are the very countries facing serious problems of financial fragility, putting at risk the prosperity of the world economy. S. subprime mortgage market.

In a pioneering initiative, namely Brazil, seven countries, Argentina, Bolivia, Uruguay, Ecuador, Venezuela and Paraguay agreed to establish Banco del Sur, an independent development bank in order to counter the adverse effect of the plummeting economy of the U. The participant countries are of the view that this institution would not inflict the same restrictions that the IMF does when it starts operating next month. The developing countries are now putting pressure on the IMF. As the perceived risk of emerging market investments in the mortgage industry has tumbled to a great extent. The G- 24 is reported to have urged the IMF to increase surveillance of advanced economies, putting as much focus in evaluating their vulnerabilities as it does in emerging- market economies. The Fund predicted that the U. It is to be noted that all such reactionary statements came after the IMF condensed its global growth forecast putting the onus on the intensifying American housing recession and the abrupt rise in borrowing costs it prompted in the month of August.

S. economy would inflate 9 percent next year, down from a July estimate of 8 percent. Not only by Brazil, the IMF was accused of a double standard by the Argentinean policy makers also. Mortgage defaults by Americans with poor credit histories prompted the collapse in June of two hedge funds managed by Bear Stearns Cos. and triggered an increase in borrowing costs for companies and consumers. They demanded that the Fund should put at least as much zeal into evaluating vulnerabilities in advanced economies as it does in emerging markets. S. debt as recently as September 2002, saw its average borrowing cost fall to 4 percentage points more than comparable U. Brazil, whose dollar- denominated debt yielded almost 25 percentage points more than U.

Treasuries in June, according to J. Morgan Chase& Co. S. mortgage mayhem has resulted in the yield on its debt to rise to 8 percentage points more than U. The U. S. debt on Oct. 1

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