1976 IMF Crisis

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The 1976 IMF Crisis was a financial crisis in the United Kingdom in 1976 which forced James Callaghan's Labour Party government to borrow $3.9 billion ($16.8 billion in 2017)[1] from the International Monetary Fund (IMF),[2] the largest loan ever to have been requested from the IMF.[3]

History[edit]

The IMF Crisis took place during James Callaghan's term as Prime Minister,[4] and caused the Bank of England to withdraw temporarily from the foreign exchange market.[5] After the defeat of the public expenditure white paper in the House of Commons in March 1976 and the resignation of Harold Wilson, many investors became convinced the pound would soon lose value due to inflation. By June 1976, the pound had reached a record low against the dollar.[3]

Outcome[edit]

The IMF loan meant that the United Kingdom's economy could be stabilised whilst drastic budget cuts were implemented. Even with the loan's security, the Labour Party had already begun unravelling into camps of social democrats and left-wing supporters, which caused bitter rows inside the party and with the unions. Many believe this may have contributed significantly to Margaret Thatcher's 1979 Conservative victory.[6]

References[edit]

  1. ^ Federal Reserve Bank of Minneapolis Community Development Project. "Consumer Price Index (estimate) 1800–". Federal Reserve Bank of Minneapolis. Retrieved January 2, 2018. 
  2. ^ "National Archives". Retrieved 17 December 2015. 
  3. ^ a b "Sterling devalued and the IMF loan". The National Archives. Retrieved 17 December 2015. 
  4. ^ "BBC On This Day". Retrieved 17 December 2015. 
  5. ^ Rogers, Chris (2009). The Politics of Economic Policy Making in Britain: A Re - assessment of the 1976 IMF Crisis (PDF). University of Warwick. p. 17. 
  6. ^ "1976 government papers". BBC News. Retrieved 24 December 2015. 

Further reading[edit]