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Monday, September 14, 1998 Published at 20:27 GMT 21:27 UK

Business: The Economy

Clinton goes into bat for strapped IMF

The IMF's coffers are in urgent need of a cash injection

The International Monetary Fund (IMF) has been sapped of almost all its funds but US president Bill Clinton has reiterated its vital role in the global financial crisis.

He called on the US Congress to pass the stalled IMF funding bill that would substantially ease the IMF's cash squeeze.

The IMF has been left strapped for cash after lending record amounts to Russia and Asian countries facing economic and financial turmoil.

Only $5bn-$9bn are left in its regular reserve fund.

However, Brazil has said it is in no need yet of IMF assistance.

Brazil is the largest economy in Latin America, the region that appears it may be next in line to follow Asia and Russia into financial crisis.

Presenting the organisation's annual report, IMF Deputy Director Stanley Fischer said reserves have sunk to historically low levels.

$26bn lent by IMF

The last year saw member countries borrow $26bn - almost four times the amount lent in the previous year.

Mr Fischer said the organisation would consider using some of the money left for future loans but only if it knew that more resources would be available soon from the United States and other members.

The statement has been followed by the Clinton speech on Monday where the president laid out six key issues needed to be addressed to combat the emerging market financial crises that he says may threaten the West.

[ image: Clinton calls for Congress to fund IMF]
Clinton calls for Congress to fund IMF
Mr Clinton turned up the heat on the Republican-dominated US lower house, the Congress, to pass stalled legislation that would see the country pay its massive funding bill to boost IMF coffers.

President Clinton's administration has requested an extra $18bn for the IMF - $14.5bn as an increase in the US contribution and $3.5bn to boost the emergency fund.

Mr Clinton said as one of six vital steps to warding off the spread of financial disaster around the world he world "urge the major industrial economies to stand ready to use the $15 billion in IMF emergency funds to help stop the financial contagion from spreading to Latin America and elsewhere".

Latin America next?

Mr Fischer said: "Demands on our resources are not declining...everyone knows the fund's role in Latin America is at issue."

There are fears that Latin American markets could be on the brink of financial turmoil like that seen in Asia and Russia.

But Mr Fischer said no Latin American nation had, so far, requested IMF funds.

Meanwhile, the Brazilian government said Brazil does not need any assistance from the International Monetary Fund and has sufficient international reserves to defend its currency.

"Our reserves stand at around $50 billion and are all usable," Amaury Bier, Secretary for Economic Policy at the Brazilian Finance Ministry, told the Brazil-U.S. Business Council on Monday.

More emergencies pending

[ image: Stanley Fischer:
Stanley Fischer: "A functioning IMF essential"
Mr Fischer has said the IMF's commitments and possible future financial emergencies in other countries made it even more urgent for the US Congress to approve additional funding as quickly as possible.

"The international financial system needs a functioning IMF," he added.

Last week the US Senate approved the request in full, but a House panel would only authorise the money for the emergency fund.

The administration hopes negotiations between the House and Senate will lead to the full amount being approved.

Increases in the IMF's regular reserves and the emergency fund cannot be adopted without the approval of the United States, which is the largest contributor.

Mr Fischer said it was be premature to speculate on what would happen if Congress failed to support the IMF.

He said the IMF's substantial gold reserves could not be used because they assured members of the organisation's financial viability

He also said that the IMF could not borrow funds from international financial markets because it would mark a fundamental change in the way the fund has operated since it was created 53 years ago.

The report was published ahead of the annual meetings of the IMF and the World Bank on September 30.

Mr Fischer said the meetings would focus on strengthening the international financial system based the experiences gained from the Asian and Russian experiences.

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