The IMF‘s Contingency Credit Line (CCL), agreed during the Spring meetings, will not help developing countries facing financial crisis because the qualification conditions are too demanding. This is a credit line for countries that are least likely to need it.
Some countries are worried that joining the CCL could signal to private investors that the government is concerned about a currency collapse. Once a country accepts the CCL there is no way out because leaving could precipitate a confidence collapse. IMF staff have warned that “there is a real danger that such arrangements can be destabilising rather than stabilising”. The Financial Times said the CCL sets a precedent for pre-qualification for IMF support. This would lock countries into IMF-approved policies regardless of whether they draw on its funds, whilst creating a pariah class of countries not willing to follow the IMF‘s prescriptions.
A review will be made in a year’s time.
