IMF chief vows tough response

Dominique Strauss-Kahn: the fund is back

  • By Anthony Rowley
  • 09 Oct 2008
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The IMF is “ready to face any demand from any country” needing help as a result of the financial crisis, managing director Dominique Strauss-Kahn declared yesterday, indicating that the institution expects to be back in business soon as a lender as well as advisor. The Fund has “hundreds of billions of dollars” at its disposal, and access to more if this proves to be insufficient to meet crisis demand, he said.

Strauss-Kahn announced that he had “activated emergency procedures to streamline IMF conditionality”, so that loans to borrowing countries could be made in a “maximum of two weeks” rather than months. The moves also enable the IMF Board to make loans “up front” to meet emergencies arising from balance of payments or other problems as the crisis spreads. The IMF saw its outstanding loans fall from a peak of nearly 72 billion special drawing rights (SDRs) in 2003 to under 14 billion SDRs in 2007, as many emerging market economies repaid loans and turned to private capital markets for funds. The Fund was perceived to be sidelined, and faced potential problems in funding its operations as loan income dropped.

Charles Dallara, managing director of the Institute for International Finance told Emerging Markets: “It’s obvious that IMF facilities do not lend themselves well to addressing the current crisis in any real sense. You have to ask yourself: what do they have? They have coordination power, analytical firepower,” he said.

But the rapid deterioration in the global economic environment could give the institution a new lease on life as a lender. “There are reasons for concern going forward and I would hope that someone would be prepared to step in if it became necessary,” Dallara said. Former IMF chief economist Ken Rogoff told Emerging Markets “the fund will soon be back in business”, given what he sees as the high probability of balance of payments crises in the next two years.
 
Former US Treasury under secretary for international affairs Tim Adams told Emerging Markets in an interview: “I think the IMF will be back in business as a result of the crisis.” A former critic, who had earlier accused the IMF of being “asleep at the wheel,” Adams praised its current leadership, and said the IMF had an important role to play in lending as well providing advice and technical assistance.“If the IMF not already back in business, it will be, in short order,” said Adams. “I think it can help lead an intellectual thought process on what the new global financial architecture looks like and how we regulate and manage it.”

The Fund is already cooperating with the Financial Stability Forum to bring about reforms but there is much still to be done, Strauss-Kahn emphasised at a press conference. Central banks governors need to think about how to “puncture asset bubbles in good time,” he said, and “linkages between the financial sector and the real economy” need to be better understood. “ The financial architecture has failed to adapt to the global markets” and needs reform, he added.

Strauss-Kahn said that “no country will be immune” from the clearly “global” crisis. He suggested that advanced economies will see “zero” growth this year, and that projected 3% global growth will all come from emerging economies such as China. But “modest” recovery should be possible from mid 2009, he said. Strauss-Kahn urged European countries in particular to work together in crisis resolution, adding that “there are no [purely] national solutions.”

  • By Anthony Rowley
  • 09 Oct 2008

All International Bonds

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1 JPMorgan 146.87 505 10.08%
2 BofA Securities 118.80 407 8.15%
3 Citi 111.85 400 7.68%
4 Goldman Sachs 88.56 255 6.08%
5 Barclays 76.05 307 5.22%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $bn No of issues Share %
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1 Deutsche Bank 8.33 35 7.21%
2 UniCredit 7.05 32 6.10%
3 BofA Securities 7.00 27 6.06%
4 BNP Paribas 5.58 37 4.83%
5 Citi 5.31 23 4.60%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $bn No of issues Share %
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1 Credit Suisse 3.10 7 10.46%
2 Morgan Stanley 2.55 14 8.61%
3 JPMorgan 2.53 18 8.54%
4 Goldman Sachs 2.43 15 8.19%
5 Citi 2.07 16 6.98%