The IMF is under attack and in danger of losing its funding. Conservatives complain that its policies interfere with free markets; liberals cite the cut in social programs that IMF funding often requires; and others assert that the institution simply cannot effectively do the job it was designed to in the fast-paced global economy of today. Despite the barrage of criticism from all quarters, it seems that most people recognize the need for the IMF to exist - though perhaps conceding the need for some reform.
Even while Congress rebuffs President Clinton's call to renew funding for the IMF, Britain's Prime Minister Tony Blair has advocated increasing the Fund's current resources. In a speech on Wall Street in September, Blair also proposed that the IMF take the lead in developing international standards of accounting, and that it more actively regulate and supervise financial institutions worldwide. But he believes that the IMF should not be in the business of providing short-term loans to restore liquidity in a currency crisis, since the IMF is, in his opinion, better suited to longer-term economic development.
Financier George Soros echoed Blair's call for regulation when he warned of a global credit crunch and called for an international body to set a coordinated interest rate. Considering the cool reception the idea received from the G-7, however, an international interest rate is unlikely to happen soon. Soros decried the IMF's current bailout practices for the moral hazard they create in not fairly apportioning risk and reward. He cited the recent $2.2 billion package for Ukraine as a step in the right direction since the agreement granted a bailout to borrowers tied to financial reforms and forced lenders to accept a longer repayment schedule and a lower rate.
Two things seem clear from the economic events unfolding around us. First is that there is a need for an international body to regulate, coordinate, and occasionally step in to mend the fiscal and monetary well-being of economies around the world. Second is that the IMF in its current form has neither the scope nor the resources to adequately meet the demands being placed on it. Though the IMF is not perfect, it is the only institution capable of keeping worldwide economies more or less under control, and if the Congressional partisans think the $18 billion to restore current levels of funding is expensive, think how expensive a global depression will be.
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