IMF Plans Huge Credit Line for Poor Nations

Wave of defaults in developing world could imperil global economy
By Jason Farago,  Newser Staff
Posted Oct 24, 2008 6:11 AM CDT
IMF Fund Managing Director Dominique Strauss-Kahn, right, and World Bank President Robert B. Zoellick speak during a news conference at IMF headquarters in Washington Sunday, Oct. 12, 2008.   (AP Photo/Jose Luis Magana)
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(Newser) – While the financial crisis is leading the West into recession, other parts of the world from Hungary to Argentina face an even worse fate: default, market panic, and possibly social upheaval. Now the IMF is working to build a giant line of credit, funded by rich nations, to provide emergency capital to nations on the brink. "The tsunami has only just reached their shores," said one international banker.

Japan and several oil-producing nations would probably bankroll the program, although the US has expressed interest. Most of the countries under threat did not take part in the mortgage-backed securities binge; rather, the drying up of liquidity has hit them hard, sending currencies plunging and exacerbating foreign debts. "Right now, it’s a liquidity problem," an economist observed, "but if it goes on long enough, it can become a solvency problem."