IMF to Offer Buyouts to About 500 Employees

Under pressure to cut costs, the International Monetary Fund is embracing one of the austerity measures it has long prescribed for countries in fiscal crisis: trimming the payroll.

The IMF announced yesterday that it would offer voluntary separation packages to almost 500 employees -- including a host of senior managers and administrative support staff members -- in part to address concerns that it has grown top heavy and outsized. Of those, 380 employees, or about 13 percent of the fund's workforce of 2,900, will not be replaced. The vast majority of the cuts will be made in the fund's Washington headquarters, with a small portion to come from field offices worldwide.

The staff reduction is part of an attempt to reduce costs and restructure the fund's mission. In the fast-changing global economy, a growing number of developing countries no longer need or desire IMF loans. This has cut into the fund's cash flow, which is largely based on the interest collected from its shrinking loan portfolio.

"I am pleased that this outcome will allow us to achieve our restructuring goals with the least possible uncertainty for staff and disruption of service to our membership," said the fund's managing director, Dominique Strauss-Kahn. "It will also help us to bring the process to closure quickly, which is important."

The fund has estimated that, absent the reductions, it could face a budget shortfall of about $400 million by 2010. To address that, the IMF is seeking to cut $100 million in expenses, largely through the staff reductions but also by consolidating some of its offices overseas. It is also seeking to generate more income, in part by selling a portion of its gold reserves to create a $6 billion endowment.

Officials said the separation packages were offered in late March with the aim of finding at least 380 volunteers. The response was larger than anticipated -- 591 staff members volunteered -- relieving the fund of having to take the more drastic step of layoffs. In addition to the 380 positions the IMF hopes to permanently eliminate, it will accommodate an additional 100 to 125 employees and executives who have requested the separation packages.

The restructuring will result in a major shakeup of the fund's top management. Six of the IMF's department heads have decided to leave, including Asia director David Burton, Middle East director Mohsin S. Khan and policy development director Mark Allen.

The large response to the offer will also allow the fund to increase the number of jobs dedicated to areas closer to its changing mission, officials said.

For years, the fund had focused primarily on its role as a crisis lender to low- and middle-income countries as they struggled to build market economies. But, increasingly, its role is becoming that of an adviser rather than of a banker. At the same time, the IMF is attempting to shift its focus to areas that include how governments interact with financial markets, as well as to such hotly debated issues as currency imbalances.

"I see it as an adjustment to the reality that their mission is being redefined, whether they like it or not," said Nancy Birdsall, president of the Center for Global Development. "The economic issues facing the world are changing; the epicenter of the recent financial crisis, for instance, is in rich countries like the United States, not the developing world. What we do see is that the IMF is recognizing that."