MY POINT OF VIEW

As I sat on my working desk the other evening, a couple of scary thoughts ran through my mind and the most frightening but obscure amongst them was that on seeing the International Monetary Fund (IMF) going bankrupt in the midst of the current financial crisis. What will it mean to the rest of the world to see the money power House (which is now the only hope to many countries caught up in the current financial mess) go bankrupt?

The IMF, though hated by many countries that have been victims of its brutal policy conditional lending programs, has played a vital role in the management of the world exchange rates, adjustment for balance of payments and other stabilization programs.

However, its meddling in internal issues such as defining what and how should reforms be executed has until this day been a point of contention with many of its customers. Going to the IMF for assistance means you are willing and ready to execute whatever policy reform it demands of you, even when they are unpopular and unwelcomed by the country policy makers. But its might and influence has made it the most powerful and influential monetary institution in the world. Its vaults are filled up with Gold and its saves piled with hard currency needed by many desperate nations.

Interestingly, given the turn of things amid the current financial crisis, which have shook the foundations of its major donors, one is left to wonder what will happen if the IMF runs out of cash to meet the current high demand. One could hurriedly give an answer; Stop lending! But are the ramifications from such a policy?

Recently bankrupt countries such as Iceland, Estonia, Latvia, Lithuania, Ukraine and Serbia are all expecting billions of dollars from the IMF to remain afloat, and there are speculations many more countries will join the list sooner than later.

Pakistan has made known its intension of seeking more than 10 billion USD from the Fund, provided the strings tied to it are not too tight. Even if the Fund was to prescribe the most unfriendly policy reforms to keep the countries away, there is still a potential fear that it could run out of reserves.

If that should happen then, the world could just be entering another new era where history will have to be re-written, given that the IMF will have to go out seeking for new donors other than its traditional founders and funders.

Saudi Arabia, Russia and other major oil exporting countries that are reported to have made trillions of dollars from the recent oil shocks are potential destinations where the IMF could go knocking for assistance. And again given that most are not even feeling the heat radiating from the financial crunch, their economies are doing well, with little or no fears from the threat of recession as it is the case with most western nations today.

 China, with its large arsenal of reserves in USD could also become a potential player within the IMF rang. This may sound as some fiction, but there is a high probability of this happening. This could mean that the IMF will have to re-write its rules, depending on what the new donors will request in return.

While anti capitalist nations will receive the news of a Bankrupt IMF with great relief and joy, many developing countries, especially those dependent on IMF conditional loans (like all of Sub Saharan Africa) will receive the news with mix feelings given their dependence on the IMF. But if it goes bankrupt and the new rules happen to reduce the amount of strings attached to its loans as a result of the new influence, then one would immediately picture out their reactions to that breaking news.