Why cronies don’t cry? IMF programs, Chinese lending, and leader survival

Andreas Kern (), Bernhard Reinsberg () and Patrick E. Shea ()
Additional contact information
Andreas Kern: Georgetown University
Bernhard Reinsberg: University of Glasgow
Patrick E. Shea: University of Glasgow

Public Choice, 2024, vol. 198, issue 3, No 2, 269-295

Abstract: Abstract Many countries in the Global South have increased their exposure to Chinese debt in recent years. With the COVID-19 pandemic and the US interest rate hike, many countries have struggled to meet their debt repayment obligations. As a result, they have turned to the International Monetary Fund (IMF) for emergency assistance. We argue that the involvement of the Fund wipes out much of the political benefits of China loans for executive leaders of borrowing countries. IMF conditionality requires countries to increase fiscal transparency, which threatens the viability of kickback schemes and increases the likelihood that corrupt leaders will be called out on their misdealing. As a result, we expect corrupt leaders with China debt to leave office earlier when they try to address debt defaults with IMF loans than when they avoid them. Using survival analysis on a dataset of 115 developing countries between 2000 to 2015, we find that leaders indebted to China that go under an IMF program leave office earlier compared to when they do not go under an IMF program. In line with our argument, this effect is strongest in more corrupt regimes. Our argument and analysis contribute to understanding international finance’s political economy, specifically how mixing creditors can be politically risky for leaders.

Keywords: China loans; China debt; International Monetary Fund; IMF program; Leader survival; Corruption (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11127-023-01114-4 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:pubcho:v:198:y:2024:i:3:d:10.1007_s11127-023-01114-4

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11127/PS2

DOI: 10.1007/s11127-023-01114-4

Access Statistics for this article

Public Choice is currently edited by WIlliam F. Shughart II

More articles in Public Choice from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().