In a more challenging international liquidity and world economic environment, they will need very large-scale IMF financing to cover their deficits and to repay their creditors.
The main reason to believe that the international borrowing environment will soon sour is that the world’s major central banks will have to start raising interest rates in earnest to curb inflation.
If the Fed indeed has to raise interest rates this year more than the three times that it is currently anticipating, one must expect a strong reversal of capital away from the emerging market economies as has occurred on so many previous Fed tightening cycles.
A serious problem for the IMF is that the renewed demand for its large-scale support will becoming at the same time that the IMF will be having trouble in getting repaid by Argentina, recipient of the IMF’s largest loan on record.
Especially now that the emerging market economies account for around half of the world economy, one has to hope that the IMF can mend its ways in a manner that reassures its main shareholders.