Bloomberg News

Nations with Unsustainable Debt Can’t Get New IMF Credit Line

December 07, 2011

Dec. 7 (Bloomberg) -- Countries whose debt level is not sustainable will not qualify for the new credit line created by the International Monetary Fund last month, a description of the program shows.

The Precautionary and Liquidity Line, which comes with few conditions attached, was approved by the board as part of the fund’s efforts to encourage countries to turn for help when facing outside shocks.

The IMF will not approve such a line for members facing “a public debt position that is not sustainable in the medium term with a high probability,” according to a document on the decision dating Nov. 21 and released today.

Other hurdles include “sustained inability to access international capital markets, the need to undertake a large macroeconomic or structural policy adjustment” unless it was started before approval and “ widespread bank insolvencies.”

The new line enables countries that pre-qualify to request IMF funds without having to make as many policy changes as with traditional loans and comes as Europe’s crisis threatens to spread to France and Spain.

--Editors: Kevin Costelloe, Carlos Torres

To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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