NCPA - National Center for Policy Analysis

IMF Dishes Out The Money, But Where It Goes Is Anyone's Guess

August 24, 1999

International Monetary Fund officials say their job is to make payments to central banks, not monitor where it eventually winds up -- claiming the agency doesn't have the resources or the mandate to audit funds once they pass beyond a country's central bank.

The IMF "doesn't ask a lot of probing questions," according to a banking consultant who works with the fund. "They don't try to embarrass anyone."

  • Law enforcement authorities are currently investigating whether Bank of New York Co. was one of a chain of banks that was a conduit for about $200 million possibly diverted from IMF loans to Russia.
  • The IMF says because the loans were paid into the Russian government's account at the New York Federal Reserve Bank -- and not to other Russian institutions -- it had neither the responsibility nor the authority to audit transactions involving those institutions.
  • Russia has received about $20 billion in IMF loans since 1992 -- but often fails to fulfill the economic promises it makes in order to get the loans, experts report.
  • Two recent audits of loans to Russia revealed that $1.2 billion in IMF money wound up at a firm in the Channel Islands, while part of a $4.8 billion IMF payment quickly evaporated as Russians cashed rubles for dollars.

In both cases, the fund asked for the audits only after allegations had circulated widely in the Russian and Western media.

Experts say that officials at private American banks customarily demand financial statements from borrowers, and will not disburse funds without evidence of where the loans will go.

Source: Bob Davis, "IMF Doesn't Watch Fund Disbursement," Wall Street Journal, August 24, 1999.

 

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