Throughout the history of IMF lending, the institution has had preferred creditor status (PCS) — that is, distressed countries borrowing from the IMF are expected to give priority to meeting their obligations to the IMF over those to other (private or official) creditors. The value of the IMF’s PCS is not often questioned, yet changes to the IMF’s practices during the euro crisis cast PCS in a new light. This brief starts with a short history of the IMF’s PCS. It then examines new issues concerning PCS that arose in the euro crisis and the questions they have raised about the viability and basis for PCS. The final section draws conclusions.
Susan Schadler is a CIGI Senior Fellow. She is a former deputy director of the International Monetary Fund’s European Department, where she led surveillance and lending operations to several countries and managed a number of research teams working on European issues. Her current research interests include the sovereign debt crisis, global capital flows, global financial institutions and growth models for emerging market economies.