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There many countries that are in debts to the World Bank and the International Monetary Fund. When countries are facing financial constraints  and need funding to fix their economy they approach lenders of which these the IMF and World Bank fall into these group. I know that during the covid-19 pandemic the IMF loaned some countries money to solve the problem that came along with it.

Question
How does a country determined  which of these organizations to approach for funds. If these institutions are always availed to receive. Some countries are not going through these structures rather they borrow directly from the bank of another country. Which is better?

This depends on the availability of credits loans and the amount available for loan in the reserve of the international financial institution..
Second another thing lending countries consider is the amount in interest on the loans and the duration of ti.e for repayment.

But above all every country should avoid passing debts burdens to the next generations, so borrowing either with interest or not is a bad approach to solving countries economic crisis.

Everyone wants loans from the IMF and the world Bank.
That's why despite his bravado on Twitter Bukele is still trying to get a loan from the IMF and holds talks even as we speak

https://www.bnnbloomberg.ca/el-salvador-bonds-soar-after-nayib-bukele-tells-investors-he-s-working-with-the-imf-1.2029628

Both of them have lower interest rates, they can offer longer periods for the loan, you can enter at any time discussions on changing the terms, the durations, the repayments but the problem is that while they don't take collateral they demand you take actions to ensure you're paying back and usually people who have gone into debt or have ran their country into debt are not the most likely to take those measures.

Also, while in a normal personal loan, it's you and the bank, when it comes to politics, it's your country, your voters, and the bank, and just like an unhappy wife you're risking your election by agreeing to terms that might not be popular with the voters, so when the IMF asks you to cut social programs that while getting you votes empty the coffers and drag the country in debt, what are your going to do?  ;)

How would Satoshi answer this question?   ;D

The IMF and World Bank should not even exist, so direct borrowing is probably the answer.

The choice of where to borrow from will depend on the purpose for which the loan is required.

The IMF, World Bank and other lenders have requirements that make borrowers eligible for a loan.


Direct borrowing may not have so many requirements for eligibility,  so maybe countries do direct borrowing when they know that they are not borrowing for capital projects or policy actions.

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source 1 (https://en.m.wikipedia.org/wiki/World_Bank#:~:text=The%20World%20Bank%20is%20an,purpose%20of%20pursuing%20capital%20projects.)

source 2 (https://www.imf.org/en/About/Factsheets/IMF-Lending#:~:text=Typically%2C%20a%20country's%20government%20and,integral%20part%20of%20IMF%20lending.)

I'm just speculating but I think that most of these organizations are the ones that will approve which country will get a loan, the countries are all filing for loan or something like that, and these organizations are the ones that would see if they can lend them some money, they check what the country offers to them and the countries that are a part of the organization and if they see that those borrowers will give them the most benefit then they approve of the loan. Most of the time, they don't mind the money not getting paid back quickly, they just want the favor or the benefits from that country more than ever.

It’s difficult to say which one is better because just like us people we tend to look for a better loaner based on their terms and conditions. How much will we borrow? How long will we pay it for? The interest and our credit scores, and etc.

This goes the same for countries as well. From what I’ve read, if the country needs the money as soon as possible they might go to IMF. If they need the money for a much longer time period then they go to world bank instead.

There are many countries that benefit from government borrowing for their development. The agency has sought further reforms to finalize the international monetary fund's request for a loan from the IMF to deal with the economic crisis. There is no end to criticism these days against the World Bank and the IMF, for good reason. A major criticism of this has long been centered around the political power disparity in its administrative structure.

The countries that are seeking loans from the IMF are going this because they can't get loans from banks or from issuing government bonds.
Those countries usually have a very bad debt structure and no bank is going to give them a loan with a decent interest rate.
A country, that has good finances would never seek loans from the International Monetary Fund, because the IMF loans come with very harsh requirements, like tax reforms, cutting government costs, privatization and other kinds of political reforms.

It would be difficult to see any country whose debt burden is not passed on to the next administration. What I have seen over the years is that the debt burden is either reduced or higher if the outgoing administration was financial prudent or reckless. Nevertheless , there must be the passage of debt. In my country I remember one administration lobbying one of these world financing organization either the IMF or the world Bank to write off their debt. It worked because at that time we had a reputable leader of the economy however so subsequent leaders only added more and more debts to the economy.

The country will have to consider the conditions of the loan to determine which one is more friendly. Some international lending bodies give some conditions that are usually difficult to meet. There are some loans with conditions that can make the borrower lose some basic assets in their country if they default. Another important consideration is the interest on the loans and the repayment plans. Some organizations offer lower interest rates. But these nations shouldn't look only at the interest rate but the conditions. Chinese loans usually give low-interest loans but the conditions of the loan are usually draconian.

I think it all depends on the interest rate and other stuff, for example, you as a country borrowing funds from a bank, not from some IMF or other entity, what if that bank is also taking a loan from the IMF, what if the interest rate in that bank is higher, what if the loan you took from the bank is not enough to solve the temporary problem you are facing (for which you took the loan to solve it). In these situation, its better to have alternative solutions, as when there are more competitors in the market, we as borrowers and lenders, see good offers.

Speaking of my country, we took loan from friendly countries first, but our leaders took the loan and did corruption, so friendly countries are not giving any more loans now, so now the governments have moved to other lenders, we have a huge loan taken from IMF, China and other countries and it seems hard for us to pay them back.

It's true that some countries have to take loans from World Bank and IMF when they can't run their economy properly but that's the last option. When a country faces financial issues, then first they try to ask for loans from those countries that are close to them, and they have good bilateral relations.

But, when those countries don't give them loan then they move towards World Bank and IMF for loans. The IMF and World Bank loans are collateral free but when a country takes loan from those institutions then they demands those countries to follow their instructions by increasing rates of energy, fuel and etc.

The country that took highest amount of loan from IMF is Argentina with around $31B in debt. Egypt comes 2nd in that list while the country with lowest amount of debt is Vanuatu. All of those countries have to fulfill the demands of IMF unless they return the loan.

You see IMF and World Bank, that two institutions has destroyed a lot of countries than they have helped all this while. These two institutions wouldn't borrow any country money until they meet their terms and conditions. On a norms, it's their right to give you conditions for a loan either with collateral or no collateral or base on mutual ground but you see that condition of making countries do as they want is a no for me. If IMF and World Bank don't like the way you tax your citizens, they will tell you to do as they want you to do.

Recently, Nigeria has been trying to take loan from World bank and it seems it's due for approval very soon by June 13 as seen on blog but what that institution did was they instruct the government to remove subsidy on electricity, pms and dollar and they increased the taxes among this hardship everyone is under going, I will never take loan that will make me push my people to the extreme.

If you have a good standing you create bonds. Debt letters if you will.
Those can be traded.
None in this forum is a governmental clerk so it's save to assume that we won't ever get in the situation to decide.
All depends on your standing, whose conditions are best.

I am not an expert in those kinds of deals, but I would say it is very depending on the circumstances of each country and the way they would like to manage their debt. If a country have specially good relationships with another country, then it would be better to go for a direct loan approach and opt out from asking money to the IMF and the world bank. The biggest example which comes to my mind is China as lender to African countries and Latin American countries, though, many economical experts believe China has done nothing but to push for credit to developing nations as some kind of economical and political estrategia to trap the people of those places into debt in the long term.
I also recall Argentina asked for a loan to Qatar, which was granted, in that case it was very likely Argentina did not have access to the IMF and World Bank, so had to seek for a country willing to take risks and lend the money needed.
The best scenario is obviously avoid debt, but somehow the western economy has devolved into some strange entity which depends much on debt and the management of it.

You have to differentiate between IMF and the World Bank, the World Bank is a development institution and gives money for development first without imposing conditions on how to pay them or interfere in governments, but loans are limited and for specific purposes while IMF is similar to banks gives loans to obtain benefits or apply the policies they see It is necessary for the countries to be careful with IMF loans.

It would be best if no country had to get into the situation of borrowing money in ways that are not financially correct or under conditions that could have very negative consequences for the people living in that country. @stompix explained nicely what can happen when a country takes such a loan, and now it's just a question of how a government perceives such things and how much it cares about people's well-being in relation to its positions and the power generated by those same positions.

Such loans can be used for political blackmail and directing the country in the direction someone else wants, and we have seen many examples of how great powers first try to impose themselves politically, then economically, and finally, if they fail, sanctions or even military operations.

In the end, money is a means to achieve goals, whether it is to those who lend it, or to those who will use it to try to improve their economic situation.

Well it is unfortunate that not a lot of countries can afford to not get loans. Some countries if were to rely solely on their domestic revenues, they might not be able to develop more.

Sometimes loans are beneficial as it helps a country invest on itself. Infrastructure, health and education are only some of the sectors that can be improved by taking out loans. These loans just need to be utilized better and we will soon see countries improve.

I think that most countries are more concerned about which of them that will give them loan without a problem, I don't think that most politicians are bothered about making the best choice that'll benefit their countries, they're more interested in getting the money. Politicians will collect loans from these global financial institutions, mismanage and embezzle the funds, then leave the responsibilities of repayment to the coming administrations, the moment they leave office, it's no longer their responsibilities to repay the loans that their administrations collected. I've heard of some African countries that collected loans from China, and they're not able to repay, China, is now in charge of some of their parastetals, to recover their money.

I believe it's all a matter of preference and whether or not they are in good credit standing with the banks in question (of course) as with all credit providers the IMF and the World Bank do not provide loans to countries who they deem unable to pay their loans, based on their economic standing (although rarely), their credit behavior (which is why they can't give out loans to North Korea, the fucking country still owes Sweden $300 million to this day for all the VWs they loaned) and whether or not they are politically stable.

Some countries rely upon their neighbors or allies, wherein they turn towards export or flat out loans, and although very rarely, they are provided such loans with prerequisites to follow. The IMF has always given out loans even during the harshest of times so it's got a good standing among many a government, but the World Bank is definitely up there when it comes to helping countries recover during harsher local financial and economical struggles. So since they are often times always available anyway, it all just boils down to which one's more accessible at the time.

They are not borrowing for policy actions, they require policy actions before lending.
It's pretty simple why and how it works
- country A is in debt, and nobody is sane enough to loan them, they ask the IMF for a loan
- the IMF says, ok, but you don't offer collateral and we don't take it, you're going more in debt, and you have no change on the horizon so we will lend you if you implement changes that will allow you to pay bacK
Let's assume you have a friend who is a gambler and asks you for money, isn't the first question you're asking him about putting a stop to gambling and taking a serious job so he can pay you back?


You have a country in debt and with such a bad economy somebody else is offering to lend you money, don't you think it's reasonable to ask for changes before lending?

Anyhow, funny how nobody has said a word about Salvador
So, can Bukele fans offer me a valid explanation as to why is he still in talks with the IMF and why he is desperately asking for billions?

I'm not a fan although I'd like that some of his policies would be applied in the country I choose to live in. How do you get to "he is desperately asking for billions"?

He asked but desperately?
No one knows about San Salvador's finances, well Ok the Finance minister might. But he is not a member of Bitcointalk. He has some advisors from Venezuela and that although he once blasted them

Yup, it's coming close to the last stage of FAFO
https://archive.ph/V6s83
https://www.globalcapital.com/article/2d44tmst4n3d8s0mkk4jk/people-and-markets/comment/el-salvadors-bond-is-innovation-for-all-the-wrong-reasons


Unless he gets financing he will have to pay:


Bet you won't see him mentioning this between laser eye pics on Twitter   ;)
Greece had less to pay back in the days than what Salvador is going to.

Many 3rd World countries carry a grudge with the IMF, World Bank, USA due to earlier dealings with mostly arrogant clerks.
Something the Chinese know how to make good use off so it looks. Add to that some nationalism and you have the tenor that article complains about.

Few people in the 1st World know what their civil servants did abroad. A publik excuse could go a long way.