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The IMF Impact on the Korean Crisis

Most commonly loans are disbursed during annual visits to member countries where the fund staff identifies emerging problems and situations which will require IMF assistance. .
             Internal Preparation.
             When a request for assistance is received, a "briefing paper" or program proposal is drawn up by the IMF; this paper usually consists of the ideas recommended by the IMF to the member country in order to qualify for the stand-by (loan). An IMF team is then required to fly over to the member country to finalize the "letter of intent".
             Negotiations.
             The IMF team will usually spend two to three weeks in the member country. The objective of this visit is to arrive at agreement between the Fund officials and the prospective loan recipient on many issues such as amount of restriction on domestic credit expansion and whether wages and prices should be frozen. These negotiations vary in difficulty depending on the complexity of the program. In most cases the letter of intent is drafted and signed by the member country and only requires the approval of the Managing Director. This letter of intent is a representation of the program of adjustments which the member country will attempt to implement.
             Internal Review of the Letter of Intent.
             The drafted letter of intent is then passed to the Fund's Managing Director for approval, the Director will decide whether the terms are acceptable based on comments from senior staff and the letter will then be sent to the Executive Board. At this point the decision is almost always final since the Board has to keep in mind all the expenses already spent on the project and very few letters of intent will be rejected this late in the procedure.
             Disbursement and Review.
             After the stand-by is officially approved by the Executive Board, the agreed upon funds are usually sent to the member country. Most of the time, half of the amount is available immediately while the rest will be sent in intervals of six months.


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