IMF Criticizes Emerging Markets' Economic Reform Efforts, Calls for More Progress

Emerging markets' efforts at economic reform have been described as "meant well, tried little, failed much" by Anne Krueger, the International Monetary Fund's (IMF) number two executive. Despite improvements in public finances over the past few decades, many emerging markets still have a long way to go in reducing their vulnerability to debt crises. The IMF has also come under fire for its past leniency in dealing with reform recidivists, failing to use its influence to pressure governments to implement meaningful reforms.

Key Takeaways:

• Emerging markets' public debt stocks remain high outside of Asia, with many countries facing significant vulnerability to debt crises.
• The IMF has a history of failing to effectively pressure governments to implement reforms, instead continuing to lend to countries that have repeatedly failed to meet their commitments.
• Rapid improvement in bond spreads for weak performers like Venezuela highlights investors' lack of discrimination, which is a concern.
• The IMF should focus on reducing vulnerability to debt crises and supporting more liberalisation, rather than simply sitting back and enjoying the supportive external environment.
• Effective privatization is crucial for reform, as demonstrated by the botched privatization programs in Latin American countries which led to reform fatigue.
• The IMF must do more than just wring its hands when private pressure to reform fails, as seen in Argentina, and should consider more severe measures to pressure governments into implementing reforms.
• Anne Krueger emphasized the importance of private pressure in persuading reluctant governments to follow through on their promises.

Statistics:

• The public debt stocks of many emerging markets outside of Asia remain high.
• Bond spreads for weak performers like Venezuela have rapidly improved.
• The IMF has a history of continuing to lend to countries that have repeatedly failed to meet their reform commitments.
• Argentina's experience demonstrates the dangers of fiscal laxity and reliance on commodity exports.
• Privatization programs in Latin America have been identified as a key factor in reform fatigue.

Sources:

• "Meant well, tried little, failed much" - Anne Krueger, International Monetary Fund.
• The Financial Times - October [year] (exact date not provided).
• The IMF's past leniency in dealing with reform recidivists has been noted.
• The impact of rising commodity prices on emerging market economies has been observed.
• The risks of bubbles forming in emerging market asset prices have been noted.