Deficit finance and developing economies Implications and results

Abstract. This article discusses briefly various aspects and forms of deficit financing in modern economies. It deals with deficit financing (i) within countries and (ii) between the member countries of the International Monetary Fund (IMF} and that institution as aid provider to a member in difficulty. In (i) it elaborates on the use of deficit financing as an instrument to part fund development, role in crisis management and inflationary consequences. In (ii) it briefly sees deficit financing on a global scale, explain IMF conditionality and the sort of programs it envisaged the aid seeking members to follow; it presents illustration and critique of the instrument each case.. In conclusion it contains some observations including a few policy suggestions.Keywords. Deficit financing, Economic development, Inflation, IMF conditionality, Financial turmoil.JEL. E30, E31, F35