Facing its first annual loss in decades, the International Monetary Fund on Thursday turned to a group of international financial heavyweights to figure out how to pay its bills.
Managing Director Rodrigo Rato named a panel of advisers, including former Federal Reserve Chairman Alan Greenspan and European Central Bank President Jean-Claude Trichet, to evaluate how to finance IMF operations.
“I look forward to their offering recommendations that can command the support of the membership for a new financing model for the IMF that will allow us to continue to play our central role in the international monetary system,” Rato said.
The committee’s report is due in the first quarter of 2007.
The committee’s formation follows the IMF’s announcement this month that it would invest $8.7 billion in member-country bonds as a way to generate income for its expenses after its net income recently came in far below expectations.
The IMF uses interest from loan repayments to finance its operations. The decision of Argentina and Brazil this year to repay their multibillion dollar loans early has left the fund facing an operational shortfall of $110 million this year.
And Asian countries that were hit by financial crises in the 1990s have built up huge reserves so they would not have to resort to the IMF for bailouts should they encounter financial difficulties.
The committee will address ways to finance the fund’s operating costs rather than financing for loans to member countries, IMF spokesman Masood Ahmed said at a press briefing. Funds available for lending are at an all-time high of about $200 billion, Ahmed said.
In the past the 184-nation lending organization has resorted to selling some of its gold reserves to finance operations.
Other committee members are the chairman, Andrew Crockett, president of JP Morgan Chase International; Mohamed El-Erian, president and chief executive of Harvard University’s management company; Tito Mboweni, governor of the Reserve Bank of South Africa; Guillermo Ortiz, governor of the Bank of Mexico; Hamad Al-Sayari, governor of the Saudi Arabian Monetary Agency and Zhou Xiaochuan, governor of the People’s Bank of China.