On The Financial Crisis, The Imf Conditional Lending Facility

Under the background of globalization, financial crises are often beyond the ability of crisis countries, and cause serious damage to the world economy. In order to lessen its impact, international assistance is always desirable. International Monetary Fund (IMF) is the most important international financial institution responsible for rescuing financial crises. Hence, in order to improve the IMF's capability of preventing and solving financial crises, studying its conditional crediting mechanism of financial crises is of important theoretical and practical meaning. This paper studies the current IMF conditional crediting mechanism and summarizes its features and shortcomings, at last provides insights into how to improve it's conditional crediting mechanism, thus strengthening IMF status and capability in the international sphere.IMF conditionality means the IMF's assistance with Stabilization Program as a precondition. The theory basis under Stabilization Program, the monetary approach to the balance of payments, is an age-old liberal economic theory stressing the economy's auto-adjusting ability. The introduction of IS-LM-BP model constructs the basis for analyzing the outcome of Stabilization Program, and makes it possible to further study the impacts of IMF program on the economy of crisis country. Now we can summarize the features of the current crediting mechanism, which are as follows: 1.The mechanism fails to appreciate exactly the causes of balance of payments disequilibria. 2. Stabilization Program leaves great impact on the domestic economy. 3. The mechanism is activated by political incentives under the control of developed countries. 4. Lack of revenue strength, IMF rescuing action often falls short of its own desire. Financial crisis always suddenly breaks out and brings terrible damages, and counter-crisis measures are often harmful to the economic development at least in the short term, in some cases, these policies are even counter-productive, so the domestic prevention of crisis is the best solution. It is advisable for IMF to absorb the reasonable elements from the criticisms for a better role in the international monetary system.