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The International Monetary Fund is to overhaul its lending practices to distressed countries, including a credit line without a cap or conditions while boosting liquidity in the markets, IMF managing director Dominique Strauss-Kahn, said Tuesday.
It was an offer to cash-strapped nations to use as much of the IMF's funds as needed. But the IMF is being ostracized by the international community. Most member countries try to avoid turning to the IMF for money due to its negative image of being the favored lender of economically underdeveloped countries.
This has led to an ever decreasing amount of loans taken out by the IMF's 185 member countries. In 2003, there were 71.9 billion special drawing rights (SDRs). That amounts to around $107.8 billion since one SDR is worth around US$1.50. But that shrank to 9.8 billion SDRs in 2007 (worth around $14.7 billion). The IMF¡¯s loan balance rose again in February this year to 21.7 billion SDRs (worth around $32.5 billion), but this was due largely to a rise in loans following the outbreak of the financial crisis last year. The IMF¡¯s loan reserves are also shrinking. It presently has around $250 billion in loan reserves, just $50 billion more than Korea's own.
Countries around the world are turning to currency swaps instead to deal with a shortage of dollars, rather than turn to the IMF.
China, aiming to turn the yuan into a key currency, has been forging currency swap deals with Malaysia, Indonesia, Hong Kong and Korea, expanding its influence in the global financial markets. The situation is the same in the European Union. Faced with a crisis in Eastern Europe, the EU is dealing with the problem by forming its own funds, rather than turning to the IMF.
(englishnews@chosun.com )
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