Need for speed: The lending responsiveness of the IMF

Abstract

How responsive a lender is the International Monetary Fund (IMF)? In this paper, I introduce new data on IMF loan approval periods: The days that transpire between when a borrower submits a “Letter of Intent” to the Executive Board requesting a loan and when the Board approves that request. The data reveal considerable variation across requests. Why are some loan requests approved swiftly while others wait much longer for approval? I argue that the financial interests of the G-5 economies drive variation in responsiveness contingent on when a request was made. I expect that during much of the 1980s, as G-5 commercial bank exposure increases, borrowers will face longer waits for approval. In such cases, the G-5 should have been more likely to press for the use of the “concerted lending” strategy. This protected G-5 financial systems by catalyzing private financing on behalf of those countries, but it also delayed loan approval. Into the 1990s, global capital flows grew more complex and catalyzing private capital flows required a swift response. Thus, during these years I expect increased G-5 bank exposure to be associated with shorter waits for approval. In such cases, the G-5 should have been more likely to press for accelerated approval. A quick response would have the best chance of attracting back private capital and reduce the threat posed by the crisis. Statistical analyses of 275 loan requests from 1984–2012 support these expectations.