Eli5 if IMF gives loan to a country, why they ask to impose tax on it’s people. What they want to achieve and how they come to know that the very country has achieved all the targets like tax collection, etc etc

Question

Eli5 if IMF gives loan to a country, why they ask to impose tax on it’s people. What they want to achieve and how they come to know that the very country has achieved all the targets like tax collection, etc etc

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Answer 1

If the IMF lends a nation money, they’re in big troubles and have already shown that they can’t handle tax money properly. So, the IMF agrees to lend a steady stream of money but only IF the one borrowing agrees to structural changes. Usually, the tax hikes are accompanied with the obligation to build =infrastructure or provide a basic economic safety net, altough that part is often ignored.

Nations who don’t want to accept that level of control can simply look elsewhere for their next loan if they don’t like it.