IMF Standby Facility - Update 1

I've taken it upon myself to keep myself updated on a day to day basis on the negotiated IMF bailout of 2 Billion dollars. Most of this would be copy/paste + some of my concerns and observations. I beleive we should all be aware of the implications of taking money from the IMF, some of which i hope to write in future posts, in this regard i greatly appreciate some of the statements made by the president that we will not be selling off our national treasures in the process. The President playing hard ball is good. But is this just an act? or is it a genuine attempt that is hopelessly out of place given our reserves position?? we will find out in time.

Transcript of a Press Briefing by David Hawley, Senior Advisor, External Relations Department, International Monetary Fund - imf.org

QUESTION: I wanted to know what you can say about the conditions—the IMF may be considering on the loan to Sri Lanka, a nearly $2 billion loan and there's some discussion of whether they could use it to support the rupee. I also wanted to know whether there's any consideration by the IMF how funds are using given the current military conflict in the country.

MR. HAWLEY: Thank you. Discussions are still ongoing with Sri Lanka and are expected to continue over the next few weeks. They're focused on achieving the government's—in order words, Sri Lanka's policy goals which include rebuilding reserves, reducing the budget deficit and bringing about balance of payment sustainability.

QUESTION: I guess maybe this is kind of a naïve question, but in countries that are involved in—at the U.N. where I usually report from they had a Security Council meeting about the conflict and humanitarian effects of it. What sort of follow through or restrictions are placed such that it isn't—since money is fungible is not used for—or of support to military action?

MR. HAWLEY: I'm sorry. I haven't understood the question.

QUESTION: Since the country is involved currently in a military offensive in the northern part of the country that's given rise to at least one briefing at the U.N. Security Council, what provisions are in place to make sure that such a loan doesn't indirectly simply support military action?

MR. HAWLEY: Let me say—let me repeat what I just said. Our discussion are still ongoing with the Sri Lankan authorities on a possible program, so let us wait for the outcome of those discussions. Thank you very much—and because you were a late arrival, it's 10:30. Thanks a lot.

The Poverty of Nations

What started off as yet another random conversation about the system we live in ended up in arousing an interest in me to actually work for the World Bank and somehow eradicate unbalanced growth in today’s global economy…. Someday…..

The gist of the conversation I had with a haut Muslim blogger starts off like this….

Based on this movie, where it questions the current banking system which lends money to burrowers and expects an interest on the capital we can effectively say that if an amount X is injected into the system an amount X+ Interest is demanded back from it, (Think circular flow of money) meaning if the global economy is looked at in its entirety an amount is demanded back from it which previously did not exist. From where does the extra money come from??

You guessed it; the only way is for individual burrowers or beneficiaries of this financial system to pay back Capital plus interest is to take from the others to pay off their own debt. This system guarantees that some will default, foreclosures are a given and the players who know to play the system best wins. The rules of the game are created in the form of economic policy where one country maneuvers its way to prosperity at the cost of another. How well you know to play this system called capitalism will determine how rich you become. This is why continental Africa will almost never prosper, the current world order does not see itself benefitting by helping the continent boom. Instead it ravages its resources in such a way that maximum benefits are bestowed upon its own economies.

The bottom line is, some will be better at this game than others. This creates what the World Bank calls ‘’Unbalanced Growth’’. They even try to eradicate it I’ve learnt. As sad it seems entities like the World Bank and the IMF play a huge role in shaping the global economic landscape. Maybe there will be room for couple more economists who want to work towards the betterment of LDC’s.

From a macro level, economic policy and implementation will determine the injections and leakages of each individual country and the structure of it, either benefitting the country or being detrimental to it. At a micro level it gets even more interesting, corporations reap profits at the cost of consumers driven by greed who default on their mortgage payments or credit card bills. Is this not a system, capitalism…. Which ensures some will succeed and others will surely fail??

While my fellow blogger was more intent on finding a solution to this system and creating a better world, I have to admit I was more interested in mastering the system in its current form. However, working towards eradicating the inefficiencies of this system as a World Bank or IMF employee globe trotting across exotic countries does appeal to me…. Hhmm…