By BOB DAVIS Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- The International Monetary Fund
failed to prop up the Russian ruble this
past weekend because it didn't have enough money --
raising questions about the scope and
effectiveness of future bailouts.
During the past year, the IMF has committed
about $47 billion to Indonesia, South Korea,
Thailand and Russia. By U.S. calculations, the
fund has less than $10 billion for future
rescues. To cobble together an additional
$11.2 billion for Russia last month, the IMF had to
tap a credit line of about $24 billion, which hadn't
been used since 1978, to obtain $8.3 billion
of the money. (Roughly $16 billion in remaining
credit could also be used for future rescues
under specific conditions.)
Hard Pressed
According to one IMF official, the fund would be
hard-pressed to assist in another large
bailout. Indeed, during the past weekend, it turned
down Russian officials who informally
were seeking more money to prop up their battered
currency. The most important reason,
officials involved in the discussion say, is that the
IMF couldn't afford the $15 billion to $20
billion that Russia analysts have argued was
necessary to bolster confidence.
The IMF's financial problems don't preclude it from
working with the World Bank, Asian
Development Bank and major industrial nations to
formulate new crisis programs to deal with
problems that broadly threaten the world economy. The
fund's available credit line could be
used for problems of that scale. Rather, the fund might
have to cut back on smaller programs
that are aimed at heading off potential crises in such
nations as South Africa or Turkey, an
official said.
Forcing Change
Morris Goldstein, researcher at the Institute
for International Economics and a former IMF
senior economist, said a cash crunch would force
the fund to change how it does business.
Without IMF money, he predicted, more nations
would default on their debt and reschedule
payments, and foreign currencies would become
even more volatile. "If the money isn't
there," Mr. Goldstein said, "you'll have to use
the instruments that are available."
The U.S. Treasury Department has campaigned, without
success, for congressional approval
of $18 billion to boost the fund's reserves. Part
would help double the fund's credit line to $48
billion; another portion would be pooled with
funding from other nations to boost usable IMF
reserves by about $60 billion.
"Quite simply, not to invest in an effective IMF
would be like canceling your life insurance
when you have just gotten sick," said Deputy
Treasury Secretary Lawrence Summers earlier
this month in a speech to the National Governors
Association. But the administration's IMF
request has bogged down in the House.