BUS187 Case Analysis

BUS187 Case Analysis - Dr. Reade BUS187 14 October, 2008...

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Dr. Reade BUS187 14 October, 2008 The Tragedy of the Congo 1. The goals of the policies set by the IMF were to stabilize the economy with large amounts of loans and devaluate the currency to increase exports and reduce imports. The IMF also raised the country’s taxes to balance budget, as well as place IMF officials in key positions at the Zairian central bank, finance ministry and office of debt management. The World Bank provided low-interest infrastructure loans to the government of Mobutu Sese Seko. I don’t think that the policies that were set in Zairian were appropriate for an impoverished nation because all they did were to take a country that was already in a hole and dug it deeper by putting into more debt and devaluating its currency. The IMF’s policies imposed tax hikes, cuts in government subsidies, and periodic competitive currency devaluations. The tax hikes made it so that the government’s budget deficit expanded making it difficult to pay the debt it was laid upon. The policy to raise import prices only put the country in greater deflation, which was
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