Page 196 - DMGT545_INTERNATIONAL_BUSINESS

Unit 9: International Financial Institutions-I

14. In August 1950, ............... was founded by the efforts of the World Bank with a view to notes
providing financial assistance and foreign currency to India.
15. ............... has been a founder member of World Bank along with that of International
Monetary Fund.

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Case Study What the imf has Done?

CELAND called in the IMF two years ago following an unprecedented meltdown in
the country’s banking system. Today, the island nation remains mired in problems,
Iwith the IMF estimating that 63pc of loans to households and businesses are
non-performing. Last month, about 8,000 Icelanders took to the streets to voice their
grievances. The economy, the world’s fifth-richest per capita as recently as 2007, contracted
6.8pc last year and shrank an annual 8.4pc in the second quarter of 2010. The country’s
prime minister Johanna Sigurdardottir is trying to protect the 39pc of households that are
technically insolvent. The IMF does not want her to force lenders to forgive $2bn (€1.46bn)
in mortgage debt but she is still looking at some form of debt-forgiveness. Her government
is also pushing a bill that will allow bankrupts to walk away from their debts after two
years. It also presented a foreign-lending bill that will reduce each household’s debt burden
by $13,500 (€9,870), leaving lenders liable. She extended by five months a moratorium on
foreclosures, breaching the IMF agreement.

HUNGARY
Population: 10m
Currency: Forint
10-year yield: 7.01pc
Unemployment rate: 11.4pc

S&P rating: BBB-
HUNGARY received a bailout in 2008 to prevent default.
Recently, the country has ended special corporate taxes in an effort to bring down the
deficit through 2012 and introduced a flat personal-income tax rate. The country’s prime
minister, Viktor Orban, has also imposed a three-year tax regime on the financial, energy,
telecommunications and retail industries. The European Union country will cut as many as
30,000 public sector jobs next year to help cut the fiscal gap to 2.94pc of GDP from 3.8pc this
year, and will use revenue from private pension savings to reduce the country’s debt. The
government has taken a red pen to pensions and has stopped paying into private funds
until the end of next year at least. It also pledged in September to narrow the gap to 3.8pc
of GDP this year and below 3pc in 2011, abandoning a fight with the IMF and EU over
the same targets. Hungary plans to use new taxes to finance a reduction in the personal-
income tax rate to 16pc, a move designed to help boost growth.
LATVIA
Population: 2.27m
Currency: The Lat
10-year yield: 5.12pc

Unemployment: 15pc
S&P rating: BB+ Contd...

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