Greek lessons for the IMF

WITH Greece's longer-term adherence to the euro still in doubt, it is a good time for reflection on the lessons of the International Monetary Fund's unfortunate Greek lending programme. Never before has the IMF lent to a single member country on the scale that it has done to Greece. And never before has a significant IMF programme produced such disappointing results.

Under normal circumstances, IMF country lending is supposed to be limited to 200 per cent of a country's quota in a single year, 600 per cent on a cumulative basis. However, the past five years show that, under the IMF's "exceptional access" policy, there are virtually no limits on how much the IMF can lend. The IMF rules say it should not resort to exceptional access lending when a country's public debt is unsustainable or when the chances of programme success are not good. Yet the IMF has managed to lend to Greece around 1,860 per cent of its quota, more than three times the normal limit.

The IMF's outstanding loans to Greece are around US$30 billion, 15 per cent of Greek GDP and around half its total exports of goods and services. This has to raise questions on whether the IMF will in the end be repaid.