“Truman doctrine” could boost IMF firepower
– Paul Taylor is a Reuters columnist. The opinions expressed are his own –
The day before he returned to the U.S. Treasury for six weeks to help the understaffed Obama administration, Edwin Truman published a proposal to give the International Monetary Fund more firepower to fight the financial crisis.
Truman’s idea — a one-off $250 billion allocation of Special Drawing Rights (SDRs) to IMF member states — looks like the quickest way to put a safety net under developing countries and avert financial contagion. The Group of 20 world leaders should embrace it at the meeting in London on April 2.
U.S. Treasury Secretary Tim Geithner has not endorsed the plan in public, but the British minister preparing the summit confirmed it is one of the options under consideration. It could supplement a proposed doubling of the IMF’s resources and get around the reluctance of surplus countries such as China and Saudi Arabia to contribute more for now.
SDRs are international reserve assets, calculated in a basket of major currencies, that are allocated to the IMF’s 185 members according to their quota of the Fund’s capital. A special issue would be a bit like a global central bank printing money to help countries with payments difficulties.
A G20 endorsement would show financial markets that world powers are cooperating to overcome the crisis by supporting developing nations starved of credit by the collapse of international bank lending.
THE BENEFITS
Poor countries do not need to be economically and politically crushed with the burden of more debt. Instead of advancing $250 billion, why doesnt the IMF just FORGIVE $250 billion in existing debt??? Listen up all you politicians — the public is worn out on all this funny money stuff that does nothing but increase our collective tax burden.