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Setting the Record Straight on IMF Funding

© Bryan Johnson

[ Editor's Note: There have been several articles on the global economy and the IMF to appear in Political Economy. For previous articles on the IMF, see Bretton Woods Revisited: IMF; Congress Gears Up For IMF Funding Debate; Congress Deals IMF Major Setback; IMF Skepticism Grows in Congress; New IMF Strategy Emerges in Congress; Congress Tackles IMF Tax Subsidy Issue; American Farmers Fall In Love With IMF; Congress Requests More Information on IMF; Congress Moves Closer to IMF Funding; Russia Likely to be next IMF Recipient; A Checklist of IMF Reforms; and IMF Dealt Second Major Setback; GAO: IMF Not in Liquidity Crisis; Congress Moves to Approve Funds for IMF; Congressional Committee Averts Full IMF Funding; Congress Votes to Restrain Full IMF Funding; Russia, the IMF, and Reform ; Saving the Global Economy: A Personal Reflection on the IMF Debate ; IMF Finally Gets its Money ; and Congress Shoves Reform Down IMF's Throat - Editor - BTJ .]

Congress passed the 1998 Omnibus Appropriations Act which included $17.9 billion for the International Monetary Fund on October 23, 1998. In addition, the bill outlines a number of actions that must be taken by the Secretary of the Treasury and the U.S. Executive Director to the IMF prior to funding, including preventing subsidies to U.S competitors in Korea through IMF assistance, requiring the Secretary of the Treasury to instruct the U.S. Executive Director to "vigorously promote" a number of policies through voice and vote, gaining access to IMF materials for an annual audit of the IMF by General Accounting Office (GAO).

The Secretary of the Treasury and Chairman of the Federal Reserve must also certify that the Group of 7 major industrial democracies (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) have agreed to urge the IMF to adopt specific reforms. Specifically, they must agree to urge the IMF to require borrowers to eliminate government subsidies and directed lending, reduce restrictions on trade, and enact bankruptcy laws that "treat foreigners fairly," increase IMF transparency, and establish a minimum interest rate and reduce repayment schedule.

THE SHORTCOMINGS OF THE IMF REFORMS

The reforms contained within the Omnibus bill fall far short of having a significant impact. The very fact that the Secretary of the Treasury and the Chairman of the Federal Reserve were able to meet the requirements necessary to release the IMF funds less than two weeks after Congress passed the legislation is testament to their weakness.

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