Why Is The Fiscal Policy Imposed By IMF Pro-cyclic?

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Executive Summary

The economies which appealed to the IMF loan faced difficulties related to financing the public and the private foreign debt. IMF imposed the promoting of a restrictive fiscal policy to the beneficiary countries, in order to decrease the budget deficit, even though they have already been in an economic recession and they would need to promote a new expansionary fiscal policy, which allows implementing the measures mentioned in the national anti-crisis plans. As a result, imposing new pro-cyclic fiscal policies will emphasize the recession within these economies, and this will contribute to decreasing the individuals' available incomes and, as a consequence, to the occurrence of social discontents (as in Latvia, Hungary, Ukraine and Serbia).

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