What is an International Monetary Fund to Do?

The IMF finds itself with apparently little to do these days, in the Economist.

Apart from generating reams of analysis, the fund’s job is to furnish foreign exchange to countries that have temporarily run short. It can call on about $220 billion of hard currency in the first instance. That sounds like plenty. But some of its former customers now have big, shiny fire-engines of their own. South Korea, for example, has $217 billion in its vaults. Between them, eight East Asian countries (Japan, Singapore, Indonesia, China, Malaysia, the Philippines, Thailand and South Korea) command reserves worth about ten times the IMF total. These countries have even begun to pool a small fraction of their combined hoard, under what is called the Chiang Mai Initiative.

Lately no one has been calling on the fund’s own supply. Brazil and Argentina have both repaid their debts. Only Turkey and Indonesia still owe it money on any scale. Quiet times are lean times for the IMF. Like any bank, it covers its running costs (which will amount to over $900m in the year to April 2007) from the interest it earns on its loans. But this financing model “is no longer tenable”, Mr de Rato’s report says. By its own projections, the IMF will live beyond its means by almost $300m in 2009-10. The belt-tightening this implies has not gone down well with staff, who show little taste for the austerity they are notorious for prescribing to others.

There are lots of ways to plug this gap (the fund sits on 103m ounces of gold, for example). But is the fund worth the price?