Which organization acts as the global lender of last resort to prevent credit crises?

Which organization acts as the global lender of last resort to prevent credit crises?

• A. IBRD
• B. GATT
• C. IMF
• D. WTO

Answer: (C)

The global lender of last resort is an institution that provides emergency financing to countries facing balance‑of‑payments crises to prevent a financial collapse and contagion. The IMF fulfills this role by offering quick financial assistance to stabilize a country’s external position, restore market confidence, and buy time for policy reforms. It supports economies through various lending programs, such as short‑term arrangements for liquidity and longer programs tied to stabilization plans, with the amount and terms determined by a country’s needs and qualifications. Financing comes from member quotas and temporary borrowing, allowing the IMF to respond to crises across the world. The World Bank’s IBRD, in contrast, funds long‑term development projects rather than as a rapid stabilizer for currency crises. GATT and WTO focus on trade rules and dispute resolution, not on providing financial support.

The global lender of last resort is an institution that provides emergency financing to countries facing balance‑of‑payments crises to prevent a financial collapse and contagion. The IMF fulfills this role by offering quick financial assistance to stabilize a country’s external position, restore market confidence, and buy time for policy reforms. It supports economies through various lending programs, such as short‑term arrangements for liquidity and longer programs tied to stabilization plans, with the amount and terms determined by a country’s needs and qualifications. Financing comes from member quotas and temporary borrowing, allowing the IMF to respond to crises across the world.

The World Bank’s IBRD, in contrast, funds long‑term development projects rather than as a rapid stabilizer for currency crises. GATT and WTO focus on trade rules and dispute resolution, not on providing financial support.