The IMF provided a $60 billion bailout package to South Korea in 1997 during its financial crisis. The package included conditions like increasing exchange rate flexibility and structural reforms. While the reforms were difficult, they helped recovery as foreign investment returned and the economy grew 30% within months. However, the IMF program in Egypt in 2016 that aimed to spur private sector growth and attract investment ultimately failed as poverty and unemployment did not improve. Critics argue IMF-mandated liberalization sometimes benefits Western investors over domestic economies, and structural reforms lack controls over government spending. However, the IMF has successfully helped some countries like Tunisia and Mexico recover from crises.

1. IMF as a tool for survival of
poor countries?
By Malomuzh Iaroslav, Pecherytsia Vladyslav and Mirjon Gegvataj

2. What Is IMF
The IMF works to achieve
sustainable growth and
prosperity for all of its 190
member countries. It does
so by supporting economic
policies that promote
financial stability and
monetary cooperation,
which are essential to
increase productivity, job
creation, and economic
well-being.

4. Key facts

5. Key facts

7. https://www.fdiintelligence.com/content/news/the-imfs-top-10-biggest-debtors-81405

8. So,
IMF helps?
Or just closes the
desire of the biggest
contributors?
Lets
find out together!

9. We took a few examples
And tried to understand, what
had happened after IMF gave
loans to these countries

10. In 1997 the Asian financial crisis broke out and affected
countries such as Singapore, the Philippines, Indonesia,
Malaysia, Thailand and finally South Korea. The economic crisis
in Korea was caused by a combination of factors.
 Over-capacity led over-borrowing. On the average, the
top 30 conglomerates debts are four times greater than
their equity bases. Korean chaebol overbuilt in the areas of
auto, steel, petrochemical and semiconductor industries.
 Currency crisis in another Asian countries led capital
outflow from Korea.
 Corrupt government-chaebol strategic alliance
contributed to the crisis. Politicians needed money for their
political campaigns, and chaebols needed funding for
their expansion.
Korea's 1997 Financial Crisis: Causes

11.  (60%) of short-term debt from foreign banks affected liquidity
negatively.
 The inability of the Korean government to respond early to
potential crisis made the crisis worse. Korean government
officials' attempt to cover up their lack of foreign reserve to
prevent the government's popularity from falling apart.
 30 savings and loans institutions were allowed to borrow from
foreign sources. These institutions borrowed recklessly on a
short-term and loaned to Korean chaebol companies.
 Continued trade deficit (accumulated 30 bilion) for the last
three years in a row reduced Korea's foreign currency reserve
to a dangerous level.
Korea's 1997 Financial Crisis: Causes

12.  In early 1997, there were the bankruptcies of Hanbo
Steel and Sammi Steel, two of the largest
conglomerates in the country.
 In the same year, the Moody's financial rating institute
decided to downgrade Korea from level A1 to level A3
and, subsequently, to level B2 due to the negative
trend in which the Asian markets were channeling and
due to the request from the giant Korean Kia Motors of
an emergency loan.
 Western banks therefore decided not to roll over their
loans to Korean companies, severely limiting vital
capital inflows and crippling the economy.
Korea's 1997 Financial Crisis: Causes

13. Korean Crisis and Recovery - International Monetary Fund
In late November 1997, an IMF economist team was brought
to Seoul to discuss a "bail out package" that was worth $60
billion and included several conditions that were to help
restore the health of the country's economy. The bailout had
conditions that forced Korea to go through restructuring
policies and programs, such as:
 increased flexibility of exchange rates
 a temporary tightening of monetary policy to stem
balance of payment pressures
 structural reforms to remove features of the economy that
had become impediments to growth (such as monopolies,
trade barriers, and nontransparent corporate practices)
 opening and maintaining lines of external financing

14. Korean Crisis and Recovery - International Monetary Fund
 the closure of unviable financial institutions (and close
supervision of weak ones)
 the recapitalization of undercapitalized institutions
 increased activity of foreign players in the domestic
financial market (the ceiling of foreign investment in Korean
companies was raised from 26% to 100%).
 slash government expenditure
 raise interest rates
 liberalize trade
 stop Korean conglomerates from expanding, in the hopes
of stopping inflation and increasing foreign reserves

15. The effects of the Korean economic crisis
 The South Korean won, meanwhile, weakened to
more than 1,700 per U.S. dollar from around 800, but
later managed to recover.
 However, like the chaebol, South Korea's government
did not escape unscathed. Its national debt-to-GDP
ratio more than doubled (approximately 13% to 30%)
as a result of the crisis.
 By May 1998, 80% of households had suffered from
lower incomes.
 Unemployment more than tripled from 2.05% in 1997
to 6.96% in 1999.

16. The economic recovery after IMF intervention
 A few months after the IMF intervention and the
implementation of the reforms requested by the IMF
itself, the won strengthened by more than 30%.
 The Korean stock market also grew 30% in just a few
months.
 More importantly, foreign direct investment and
portfolio investment began to flow back into the
country.
 The Korean economy finally recovered, albeit slowly,
walking away from the financial disaster.
Despite the great sacrifices made by the Korean
population, the IMF bailout of Korea was a success.

17. Egypt case – IMF 2016 program
 In 2016, the International Monetary Fund (IMF) lent
Egypt $12 billion, launching a program of economic
reform and austerity.
 The 2016 IMF program had a series of objectives:
 to facilitate inclusive private sector-led growth
 increase labor force participation
 attract FDI
 strengthen macroeconomic stability.

18. Egypt case – IMF 2016 program
 6-years past shows that 2016 program failed on almost all
objections:
 poverty rate didn’t change (29.7% in 2022 compared to
27.8% in 2015)
 labor force participation declined (15% in 2020 comp. to
23% in 2016)
 private sector-led growth didn’t materialize
 FDI outside of oil and gas was very limited
 macroeconomic stability and creditors’ trust didn’t much
improve
 In 2022 Egypt returned to IMF for restructuring, as the program
failed its goals

19. Egypt case – IMF 2016 program –
Why failed
 Egypt government
 COVID and War in Ukraine?
 Government failures (vanity projects, military spending)
 Excessive government spending
 Expansion of state-owned enterprises
 Corruption
 IMF Oversights
 Failure to set benchmarks for poverty assistance programs
coverage
 No controls over transparent competitive public tenders
 Control revenue from the sale of public assets
 No measures to improve rule of law and independence of
the judiciary

20. Criticism of the IMF intervention
 The IMF would have exposed economies with high saving rates to the
volatility of foreign capital. (Joseph Stiglitz)
 The IMF allegedly poured large sums into the coffers of troubled
countries to repay Western creditor banks, causing further damage to
already troubled economies. (Joseph Stiglitz)
 International institutions did not welcome the Eastern development
model, in open contrast to Western liberal policies. (Joseph Stiglitz)
 The "structural reforms" requested by the IMF would have had as
their objective the liberalization of the capital market for the benefit
of Western investors. (Nouriel Roubini)
 Liberalisation and deregulation in low‐income countries, like Haiti,
may actually reduce the rate of economic growth.

21. IMF Success cases
 Tunisia, Morocco, Jordan and Even Egypt in the 1990s
 Crisis aid to Mexico and East Asian countries in the
mid-1990s
 The IMF Debt Relief Program
 COVID Crysis: IMF provided more than $100 billion in
financial assistance to more than eighty countries

22. Conclusion
● IMF does assist poor courtiers by providing loans to poor countries that otherwise suffered crisis
● IMF requirements don’t always provide for effective controls over spending of aid | governments
prone to improper use
● IMF "structural reforms" requested by the IMF oftentimes have objective the liberalization, but
instead benefit only Western investors
● Liberalization and deregulation in low‐income countries, like Haiti, may actually reduce the rate
of economic growth.
So, we see that the IMF is often a "life jacket" for many countries in difficult times. But the structure
itself needs changes and decentralization. Because, for now, who pays the piper calls the tune.

23. Bibliography
• https://web.stanford.edu/class/e297c/trade_environment/global/hkorea.html
• https://www.nytimes.com/1997/12/04/business/crisis-south-korea-bailout-package-loans-worth-55-billion-set-for-
korea.html
• Financial Crisis and in Korea and IMF: Analysis and Perspectives, Keun S. Lee, 1998
• https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp012198a
• https://merip.org/1999/03/how-tunisia-morocco-jordan-and-even-egypt-became-imf-success-stories-in-the-
1990s/