The IMF meeting is fast approaching and it will be very interesting to see if the 185 member countries will actually expand the IMF’s resources to provide credit, as it has been promised in the past G7 and G20 meetings.
The issue is very important, since the latest reports of the institute compares today’s emerging economies with the ones seen during the 80’s and the late 90’s when Latin America defaulted, and Eastern Asia saw its own currency crisis (which by the way was doubled as the “IMF crisis”).
“Most likely, the report is referring mainly to Eastern Europe, to which most European countries have a sizable exposure. Countries like Austria, Italy, Belgium, Sweden, and to some extent France and Germany will experience the full consequences of a crisis in Eastern Europe,” TheLFB-Forex.com Trade Team notes.
“Add to that Latvia and Lithuania just saw their debt rating downgraded by Moody’s, and both countries have a negative outlook. If Latvian debt gets downgraded again, it will reach speculative or junk grade, meaning that the country has a limited chance of issuing bonds to fund its deficit,” TheLFB-Forex.com Trade Team added.
The IMF should intervene in such cases, and has done up to now for Latvia and the rest of the Eastern European countries. However, the IMF is running out of funds, something that may compromise the institute’s future plans.