IMF Greek Loan Decision May Counter Its Own Geithner-Approved Policy Guidelines

Wall Street Journal
July 8, 2011

The International Monetary Fund may bend its own lending rules to approve the next tranche a Greek loan, and likely won’t provide the details it normally requires for program financing, current and former IMF officials say.

The IMF board may counter the very guidelines for assessing a country’s debt sustainability approved by Timothy Geithner, who was head of the IMF’s policy development department in 2002 when the current policies were outlined. As U.S. Treasury secretary, he is now the fund’s most powerful governor and a backer of the IMF bailing out Greece.

The ability of a country to pay back its debt is a fundamental factor in IMF board approval of a loan program.

“They are changing the rules and will set a precedent” said Mario Blejer, former central banker for Argentina and a former senior adviser to the IMF. Although the board is widely expected to approve the fifth tranche of Greece’s loan in an effort to stem contagion into the rest of the euro zone, some board members from emerging-market countries have said they are skeptical the program is sustainable.

More