Lender of last resort IMF burning up its own cash
Last annual meeting: Outgoing IMF managing director Rodrigo de Rato speaks at a news conference in Washington during the annual IMF-World Bank meeting yesterday. Picture: Reuters
Saturday, October 20, 2007
THE International Monetary Fund is burning up its cash reserves so quickly it risks hindering its ability to help countries in need, credit rating firm Standard & Poor's said yesterday.
The S&P report said the global institution seen as a lender of last resort to countries with troubled finances "will continue to lose money and risk hampering its ability to perform its role in the future if it fails to restore its finances".
The IMF lost about US$110 million in its fiscal year ending April 30, "and on current trends will lose twice that amount in fiscal year 2008", said John Chambers, chairman of Standard & Poor's sovereign rating committee.
S&P said the 185 IMF member states, which normally do not pay their "quotas" or dues in cash, should kick into a so-called reserve tranche totaling some US$84 million to shore up its finances.
The report said the IMF's reserves "will continue to erode without such a measure, reducing its capacity to absorb losses from its credit operations or to support growth should demand for its credit resurge".
"Ultimately, the IMF's financial position could hinder its ability to perform its central role of assuring international monetary cooperation," the report added.
The IMF has seen its finances deteriorate because of lower levels of lending and advance repayments by some debtor countries. Earlier this year, the IMF itself said that without any changes, its deficit would increase to US$224 million in the 2008 fiscal year.
The IMF still has some US$9 billion in reserves of gold and cash to keep it operating. But it has been considering the sale of some of its gold to get cash for other investments that could bring in additional income.
The IMF has more than 3,200 tonnes of gold as part of its financial stockpile. AFP
The S&P report said the global institution seen as a lender of last resort to countries with troubled finances "will continue to lose money and risk hampering its ability to perform its role in the future if it fails to restore its finances".
The IMF lost about US$110 million in its fiscal year ending April 30, "and on current trends will lose twice that amount in fiscal year 2008", said John Chambers, chairman of Standard & Poor's sovereign rating committee.
S&P said the 185 IMF member states, which normally do not pay their "quotas" or dues in cash, should kick into a so-called reserve tranche totaling some US$84 million to shore up its finances.
The report said the IMF's reserves "will continue to erode without such a measure, reducing its capacity to absorb losses from its credit operations or to support growth should demand for its credit resurge".
"Ultimately, the IMF's financial position could hinder its ability to perform its central role of assuring international monetary cooperation," the report added.
The IMF has seen its finances deteriorate because of lower levels of lending and advance repayments by some debtor countries. Earlier this year, the IMF itself said that without any changes, its deficit would increase to US$224 million in the 2008 fiscal year.
The IMF still has some US$9 billion in reserves of gold and cash to keep it operating. But it has been considering the sale of some of its gold to get cash for other investments that could bring in additional income.
The IMF has more than 3,200 tonnes of gold as part of its financial stockpile. AFP
Business Besides Oil
