Greece just joined Somalia, Sudan, and Zimbabwe in defaulting on the IMF

Dark days ahead. (Reuters/Yannis Behrakis)

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 It’s official: Greece has defaulted on a $1.7 billion loan repayment to the IMF, earning it the dubious honor of being the first advanced country to stiff the international financial institution, and setting a new record for the size of a missed payment. (Step aside, Sudan.)

At a stroke, the IMF’s “overdue financial obligations” have nearly doubled.

Greece now joins Somalia, Sudan, and Zimbabwe in falling into arrears with the IMF. The IMF’s procedures for dealing with late payers are not the same as a private lender’s, though. The fund will now enact asomewhat convoluted procedure (pdf, p. 139) that features warnings, declarations, meetings of the board, and much else besides.

Credit-ratings firms do not consider a missed payment to the IMF as a bona fide default, and Greece’s other lenders—namely, the rest of the euro zone—are unlikely to call in their loans (as they are now allowed to do) and trigger the immediate bankruptcy of the country. But Greece’s current bailout deal with fellow euro zone states has just expired, taking billions of much-needed euros in potential aid with it. Now, it will need to agree to a completely new deal to unlock further funds.

The IMF’s rules require that it limit contact with Greece as long as the country is in arrears. The fund says a last-minute request from the country—does Athens ever do anything on time?—to extend the payment deadline will be considered “in due course.”

In the meantime, the IMF will hope that Athens and its other creditors can work out their differences. Greece still owes the fund around $26 billion in total, with loan repayments scheduled to come due from next month out until 2030. If Greece can’t get its repayment schedule back on track, that would make the IMF’s difficulties during the 1980s, when at its peak 26 countries were in default and arrears rose above $5 billion at current exchange rates, pale in comparison to the potential damage that just one nation could do to the balance sheet now.

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