A Forex View From Afar

IMF Is Preparing For A Bad Period Ahead

The International Monetary Fund, the organization that monitors the global financial markets, is planning to borrow $100 billion from Japan and another $150 billion through its first bond sale.

The IMF has played a key role in the latest financial crisis, some even saying than was necessary. During the Asian currency crisis, in 1997, the IMF was seen by many as being guilty for the magnitude of the crisis. The Asian Financial Crisis also remains in historical terms as the IMF Crisis.
However, it was the IMF that provided the funds needed for the Asian economies to recover. The same thing happened in the past year, when Iceland, together with other eastern European states, knocked at the fund’s gate for additional cash reserves.

Now that things appear to be going from bad to worse, the IMF tries to raise more cash, as it seems more countries might need to access money from the IMF. In the last few months, there were some intense speculations that Romania would need to borrow up to $6 billion to cover some of their current expenses. However, it looks like the Romanian government is going to take the needed money from the European Union, from a recently created fund to help the emerging economies. Adjusting from the Asian Crisis experience, the IMF imposes some strict fiscal and monetary rules that might not be approved (or accepted) by all governments.

The IMF hunt for cash and liquidity means that the fund is preparing for another wave of countries nearing bankruptcy. From time to time, a look over the emerging currencies might not be so bad, because they tend to drop very fast. In the last half year, the Hungarian forint, Romanian RON and the Polish Zloty lost at least 40%.

No Comment | Posted in » economic preview, forex