To hear the figures bandied about, one would think the International Monetary Fund is spending money like the Sultan of Brunei - money it doesn't have - to bail out the world's ailing economies.
Last year it was Asia: More than $100 billion for Thailand, South Korea and Indonesia. This year it is Russia, $22.6 billion in extra credits on top of $9 billion worth of loans already approved, and $6 billion more for Indonesia, over and above its $41.2 billion rescue package.However, much of the money has not been disbursed. It is doled out in tranches a little at a time or consists merely of pledges for future years. Also, the funds come not only from the IMF but also from the World Bank and international donors.
Take Russia's bailout.
The IMF will actually provide Moscow with $11.2 billion this year, with half the amount to be disbursed immediately after the Russian parliament approves a crisis plan prepared by President Boris Yeltsin's government and the rest later. As of this writing the legislature is still quibbling.
Beginning in 1999, the IMF will give Russia an additional $2.6 billion annually for the next three years. The World Bank will supply $4.25 billion through the end of 1999 and Japan, itself in the midst of a severe recession, will provide $1.5 billion in loans by the end of next year.
Likewise, the extra money for Indonesia will be provided not only by the IMF but also the World Bank, the Asian Development Bank, Australia and China.
Even so, the amount of money doled out by the IMF has put a severe crimp in its liquidity. Its reserves have slipped below $10 billion and, for the first time in 20 years, it will have to use its General Arrangements to Borrow to finance most of the Russian bailout.
The GAB, a supplementary financing mechanism devised in 1962 to counter problems that threaten the stability of the international monetary system, allows the IMF to borrow funds from 11 industrial countries and Saudi Arabia at market rates. One of those industrial countries is ours.
Treasury Secretary Robert Rubin says it is "critical" for Congress to approve a long-delayed $18 billion in extra funding for the IMF, requested by President Clinton last year, because "financial instability is a risk the world cannot take and should not take."
But the IMF has few fans in either the House of Representatives or Senate. "A blind race horse running the wrong way and dragging taxpayers with them," is how House Republican leader Dick Armey of Texas describes the institution.
Some lawmakers accuse the IMF of being too lax, fostering a "bailout psychology" that encourages nations to be fiscally irresponsible. Armey, for example, says the IMF was partially responsible for Russia's economic crisis.
Other lawmakers believe the IMF is too strict, demanding unpopular austerity measures that hinder economic growth and undermine the governments in countries it seeks to help.
Says Sen. Richard Lugar, R-Ind.: "Congress has never understood precisely how the IMF works, what its principles are or to what degree the United States has control of the process."
The global lending institution is, in fact, a U.S. creation, set up with the idea that international prosperity helps achieve the American ideals of democracy and peace. And while many of the criticisms leveled against the IMF are valid, the global economy has become so intertwined it does, at times, need a global bailout mechanism.
If Asia crashes it would send our economy reeling. And no one wants instability in a nuclear-armed Russia.