It may be panic stations for the world’s emerging markets, but every cloud does have a silver lining. This time perhaps it’s for the IMF?
It was only in April that the Fund’s board agreed to a major cost-cutting drive because a revenue shortfall was seen breaking its own finances. Back then, many were even questioning the institution’s raison d’etre.
As the Economist wrote in April 2008:
With crisis lending down, the fund has not been generating enough income to cover its $1 billion budget. By 2010 its deficit will be some $400m a year. It has enough reserves to tide it over. But ultimately it needs its own financial rescue plan…
Is the doughty IMF to become an international version of a sovereign-wealth fund ready to help recapitalise American banks or invest in a private equity fund? Hardly. Conflicts of interest would be legion, so the investments will be made slowly and conservatively. Buying assets beyond government bonds requires a change in the fund’s Articles of Agreement, which demands parliamentary ratification in many of the IMF’s 185 member countries.
Presuming it still has the funds to help, the latest emerging market crisis puts the IMF in a much better future position. As of today its client list looks to be growing apace:
At the last count:
- Hungary in talks for a loan
- Belarus has requested $2bn
- Pakistan is seeking help (seen needing up to $5bn)
- Iceland expected to announce agreement on $6bn of assistance
- Ukraine looking for a loan of between $10-14bn
Related links:
Iceland to announce $6bn IMF-led rescue – FT
Pakistan seeking IMF help- FT