Mistaken analysis--the IMF staff half-believes the line that the possibility that it will provide future loans creates moral hazard, and as a result it wants to make it really painful to a government to draw on IMF resources.
The first thing to realize is that the IMF's money made Korea's ride through the crisis a lot better than it would otherwise have been: less unemployment, lower domestic interest rates (because the IMF has provided you with more reserves and so you don't have to bid high enough to attract private capital immediately), a faster recovery. Even with the conditions, the fact that the Korean government went for the deal the IMF offered suggests that it was a good deal for Korea--a much better deal than no conditionality and no IMF loan would have been.
Shouldn't the Koreans be allowed to choose whether they want to deal with the IMF or not, rather than having you decide it for them by zeroing it out? If there is such a fundamental conflict between the IMF's policy and the interests of the countries it lends to, why haven't borrowing governments realized it?
When I debated Marc Weisbrot on this, he responded by trying to delegitimize Fernando Cardoso--to say that Brazil's government was not democratic, and that Cardoso was a tool of the North...
Brad DeLong