The IMF Is Shocked, Shocked, at Greece’s Fiscal Failure. Should It Be?

The IMF last week told the Greek government to get with the program—specifically, the economic adjustment program that Greece agreed to as a condition for receiving loans from the Fund.  Greece is indeed way off target, but that’s apparently par for the course with such programs.  In 2003, the IMF’s own independent evaluation office looked at the difference between actual and projected changes in fiscal balances in countries receiving funds from its Extended Fund Facilities (EFF) and so-called Stand-By Arrangements (SBA).  As shown in the graphic above, nearly ¾ of market-based countries (that is, countries not in transition from central planning) receiving funds from the EFF or SBA underperformed their targets in the second year of their program.  By this standard, Greece looks like a normal ward of the IMF. However, Der Spiegel reported on Monday that the Troika of official Greek lenders (the European Commission, ECB, and IMF) was now pegging Greece’s budget deficit at €20 billion.  If accurate, that would put Greece on track to miss its IMF fiscal deficit target by €13 billion, or a whopping 6 percent of GDP – making it an extreme target-underperformer even by the standards of the many past underperformers.

Der Spiegel: Troika Nearly Doubles Estimate of Greek Shortfall

IMF: Statement on Mission to Greece

Geo-Graphics: Does “More Europe” Mean More Pro-Cyclical Fiscal Policy?

IMF Evaluation Report: Fiscal Adjustment in IMF-Supported Programs