IMF Finally Gets Full U.S. Funding
To this, they were largely successful. Not only were IMF opponents in Congress correct in saying that the IMF did not need more resources to meet its current obligations (as became evident when the IMF expanded its Asian bailout and finalized the Russian bailout), but they also were successful in delaying the vote long enough to allow for international public opinion to turn on the IMF (see last week's column).
But not only will the IMF have to deal with mounting global calls for a new international conference that could very well spell the eventual end of the IMF altogether, but in the meantime, they will have to accept a serious number of reforms that will be pushed upon them by the U.S., the U.K., Germany, France, Italy, Japan, and others.
These reforms, according to congressional sources, are likely to take the shape of:
1. Market-based interest rates. At least some of the new IMF loans likely will impose an interest at, or higher than, the average of the rates in the five largest economies. This will provide a strong disincentive to borrowing.
2. Shorter loan periods. Unlike past IMF practices, countries will be increasingly forced to pay back their loans on shorter timetables.
3. Transparency. Last summer, Joint Economic Committee Chairman James Saxton received evidence that the IMF had conducted an internal investigation that determined that the IMF actually may have caused the Asian financial crisis to spread, as well as increased investor panic. But the very same U.S. policymakers being asked to vote for more money for the IMF could not view these internal reports. Thus, an issue was made about how secretive the IMF is, and its lack of transparency. Now, it seems like the world's largest economies will effectively require the IMF to be more open about its proceedings and internal reports.
The final list of reforms was not yet publicly available at the time of this writing. However, it is likely that several more reforms may be added at the last minute.
What is important about these reforms are not the reforms themselves (for they are likely to have little short-term impact on the IMF), is that the IMF, after 53 years of unhindered operations, will no longer be allowed to conduct itself as it has over the past 53 years. Instead, in order for the U.S. funds to be transferred to the IMF, the President of the United States
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