International Issues

Bailouts Strain IMF

So heavy has been the demand on the International Monetary Fund over the past few months that for the first time analysts are questioning whether it has enough money left to cope with future crises.

In the last few months, the fund has had to come to the rescue of Thailand, Indonesia and South Korea. It has also had to attempt to keep the Asian upheaval from destabilizing Japan, Russia and Brazil -- as well as the entire world economy.

The 181 nations that are members of the fund constitute the lender of last resort to tottering economies.

  • Under IMF leadership, international institutions and individual countries have pledged more than $100 billion in aid to propping up Asia.

  • After accounting for the cost of the South Korea bailout -- of which $21 billion will come directly from the fund -- it will have immediate access to only about $44 billion to cope with future crises.

  • In addition, the IMF may be able to access another $25 billion from 11 industrialized countries, including the U.S.

  • The U.S. is the fund's largest shareholder -- at 18 percent -- due to its substantial financial contributions.

Political observers say that Congress is becoming increasingly skeptical over demands for more U.S. taxpayers' money being pumped into the IMF. Capitol Hill leaders are also irked by the fund's poor track record of spotting potential problems in troubled countries before they develop into full-fledged crises.

In attempting to answer its critics, the IMF has imposed tougher standards on South Korea than on other recent recipients -- down to imposing stricter accounting standards -- and has made banking- and financial-sector restructuring the heart of its reforms.

Source: Richard W. Stevenson and Jeff Gerth, "I.M.F.'s New Look: A Far Deeper Role in Lands in Crisis," New York Times, December 8, 1997.

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