Budget Accord Earmarks $18 Billion to Fund IMF

Eliminating one note of uncertainty in the confused global economy, the White House and Congress have settled on an $18-billion plan to finance the International Monetary Fund, which has played a highly visible--and widely criticized--role in the current financial crisis.

As part of the deal, President Clinton agreed to new rules for the fund, which is made up of 182 member countries and increasingly has served to fight global economic fires in the current episode of financial instability. The accord also paves the way for a $90-billion to $100-billion infusion into the fund from many donor countries that have been on the sidelines waiting for the United States to act.

U.S. Treasury officials late Wednesday declined to disclose the full details of the agreement, which remained subordinate to the larger budget deal that contained some details yet to be worked out. But the broad parameters have become apparent.

The two sides “are just about there” on funding the IMF, White House spokesman Joe Lockhart told reporters Wednesday, as negotiators continued to discuss final details.

House Majority Leader Dick Armey (R-Texas), a leader of efforts to impose reforms on the IMF, late Wednesday touted the deal as one of Congress’ major accomplishments. “The IMF will never again operate in secrecy,” Armey said.

The IMF breakthrough will end a standoff that embarrassed the White House during a recent series of global financial meetings in Washington and will pave the way for future IMF aid to other nations, including Brazil. The IMF has been assailed for various policies, which critics contend have worsened the economies it has tried to rescue in recent months.

Under the compromise, IMF practices would be altered in several ways:

* The large, bureaucratic institution would be required to provide fuller disclosure of its internal finances and more detailed reporting of its financial practices.

* Loans, including emergency loans, would be provided at costlier interest rates to borrowers, rather than the below-market rates currently available. Critics maintain that low interest rates have encouraged lax fiscal policies on the part of the emerging nations under financial siege.

* In another bid to impose discipline on borrowers, tighter deadlines would be required for repayment, perhaps in the range of 2 1/2 years or less.

Republican conservatives, long suspicious of the IMF’s growing influence, led the opposition to funding the agency. But some conservatives also described the compromise as a worthwhile start to achieving their aim of opening up the institution to more public scrutiny and imposing greater discipline on borrowers.

“We’ve made a half step--and a good one,” said Allan H. Meltzer, a professor of political economy at Carnegie Mellon University in Pittsburgh and a visiting scholar at the American Enterprise Institute in Washington. “But there’s still much more that needs to be done.”

Before the agreement, IMF officials said their coffers are down to less than $9 billion, having been depleted by recent bailouts in South Korea, Russia, Thailand and Indonesia. Other countries, meanwhile, have been asking for aid. Most prominently, a plan estimated in the range of $30 billion is being developed to protect Brazil’s beleaguered economy from further capital drain.

Some observers Wednesday applauded the accord as a constructive step forward for a global financial system that has seemed to run amok this year, with investors shifting money among countries with abandon, laying siege to national currencies and triggering recessions that have affected a growing portion of the world.

Bradley D. Belt, vice president for international finance and economic policy at the Center for Strategic and International Studies, said the deal “provides a needed boost to international investors’ fragile psyche, and should enhance” IMF openness.

In recent days, even IMF critics are wary of leaving the agency impoverished at a time of great financial volatility and growing fears that the U.S. economy is headed toward a downturn--exacerbated by the overseas distress that the IMF tries to combat.

The deal had a clear benefit for both sides, because the White House dearly wanted to fund the IMF, which it generally supports and in which it has great influence. For Republicans, the funding deal serves as insurance against future blame if a new financial crisis were to erupt and a strapped IMF were unable to help.

“Both sides can walk out of here on a white horse,” said Rep. Sonny Callahan (R-Ala.).