Friday, July 24, 1998

IMF is cheap insurance in global market

Satisfied that they have made their point - whatever it was - House Republicans have relented on the International Monetary Fund, approving $3.4 billion for immediate loans and promising to approve $14.5 billion in reserve funds down the road. The Senate has already OK'd the full $17.9 billion package.

The IMF money had been delayed, and its progress could still be gummed up, by Republicans who object to the IMF, either in its present form or existing at all, and who wanted to attach unrelated riders on family planning to the bill. The impasse was broken from a curious quarter, farm state lawmakers, most of them GOP, who are now among the most internationally minded members of the House.

While the IMF fight may seem remote, the IMF is the first line of defense against failing economies elsewhere in the world dragging down our own. IMF loans have bought time for South Korea, Indonesia, Thailand and the Philippines to get their financial houses in order. Even as the House was grudgingly coming around, so it seems was the Russian Duma which, with equal reluctance, took up a package of badly needed economic reforms - the price of a $22.6 billion IMF emergency bailout.

The IMF is not perfect. Critics say, with some justice, that its standard economic remedies - budget cuts, tax increases, devaluations - inevitably fall hardest on the poor while saving big international banks from the consequences of bad investments. But there is no other international financial agency with the economic clout and expertise to effect a bailout - basically a fancy form of debt consolidation - of an economy the size of Russia or an Indonesia.

International financial analysts took the House action as an important signal that Congress is not becoming as isolationist as they feared. For better or worse, the world looks to the United States for economic leadership, and in a global, interdependent, intermeshed economy, the IMF is cheap insurance, even at $17.9 billion.