IMF Programs, Chinese Lending, and the Political Economy of Leader Survival. Working Paper #118

Kern, A., Reinsberg, B. and Shea, P. E. (2022) IMF Programs, Chinese Lending, and the Political Economy of Leader Survival. Working Paper #118. Working Paper. AidData at William & Mary, Williamsburg, VA.

Abstract

In times of global financial turmoil, the International Monetary Fund (IMF) often lends todistressed countries. Recently, a new lender-of-last-resort has emerged: China. How does the presence of both lenders affect leader survival? Our premise is that a significant portion of Chinese loans is linked to kickback schemes that directly benefit leaders and elites. IMF demands for greater transparency undermine the viability of such loan deals and ultimately threaten the political survival of leaders. Leaders face a trade-off between long-term political survival and short-term financial relief when enlisting the support of the Fund. We argue that especially corrupt governments undergo IMF programs to signal to citizens (and investors) that they act in a nation’s best interest. Relying on a dataset of 122 countries between 1981 and 2015, we find that entering into an IMF program secures a government’s tenure in office when it sits on a pile of Chinese debt. However, our findings indicate that the most corrupt governments among Chinese borrowers seem to leave office shortly after the onset of an IMF program. Intriguingly, it is these countries that also report larger deposits in offshore financial sinks.

• Item Type: Research Reports or Papers (Working Paper)
• Status: Published
• Glasgow Author(s) Enlighten ID: Reinsberg, Dr Bernhard
• Authors: Kern, A., Reinsberg, B., and Shea, P. E.
• College/School: College of Social Sciences > School of Social and Political Sciences > Politics
• Publisher: AidData at William & Mary