International bailouts - The IMF's role

The large international bailouts of the 1990s have been criticized for gene rating moral hazard at the expense of the global taxpayer. We argue that th is criticism is misleading because international bailouts create no, or ver y few, costs to the international community. Instead, the problem is to ens ure that bailouts are not used to facilitate bad domestic policies, thus cr eating moral hazard at the expense of domestic taxpayers. This may require a shift towards ex ante conditionality, in the sense that the availability and size of official crisis lending need to be conditional on government po licies before the crisis.