The International Monetary Fund's executive board has agreed in principle that after members' quotas--deposits of national currencies--have been increased next year, the enlarged borrowing privileges of recent years will be trimmed back.
In essence, the IMF's target will be to allow each member nation to maintain about the same quantitative borrowing level as it had before, or modestly higher.
Unless access to the IMF's pool of money is limited in this way, the managers of the institution fear, it will soon run out of the cushion to be provided by the anticipated increase in quotas from the equivalent of $64 billion to $96 billion.
At the same time, the IMF staff has produced a new internal study paper examining the pros and cons on the question of a new issue of special drawing rights (SDRs) for distribution to member nations. Jacques de Larosiere, IMF managing director, is required to recommend to the annual meeting--which will be in Washington in September--whether or not an issue of SDRs, a paper asset, is justified.
This year, given fading U.S. resistance, the prospects for issuing SDRs, now worth about $1.04 each, may prove to be better than in many years. Since 1967, about SDR 21.15 billion have been issued. They are much in demand by Third World nations, since they can be exchanged for hard currencies. The last issue was in 1979, and the last allocation was made in January, 1981.
The proposed change in the IMF rules on borrowing stems from the fact that to tide them over recent emergencies, member nations were given extraordinary "access" to IMF resources. Instead of the normal fund rules allowing borrowing up to 100 percent of their own quotas, members were given the right to borrow up to 150 percent per year, or 450 percent over a three-year period.
Thus, a nation with a quota in its own currency equivalent to $100 million could borrow up to $450 million over three years from the IMF.
The IMF's member countries, subject to approval by their legislatures, last February voted to boost quotas an average of 48 percent, from the equivalent of $64 billion to $96 billion. The U.S. share of the enlarged quotas is $5.8 billion, one part of an overall authorization of $8.4 billion still pending in Congress.
After studying the problem, the IMF management and leading IMF members, including the United States, concluded that allowing 450 percent of the enlarged quotas would be much too generous. Moreover, there is likely to be an effort to put an overall limit on the total amount of money any nation can borrow from the fund, whether through regular advances related to quotas, or through special subsidized accounts.
The IMF executive board last week approved a plan recommending that the 150 percent of quota allowance be phased down by 1986. For the average quota boosted by 48 percent, 102 percent would be roughly equal to 150 percent of the old ones. But since some nations' quotas were increased less than the average, the experts have concluded that 110 percent will entitle almost every country to at least as much in volume terms as 150 percent did before. On this basis, the three-year limit would be 330 percent of quota, instead of 450 percent.
Failure to adjust the 150 percent downward would quickly run the IMF out of its additional funds, U.S. and IMF officials agree. But this cannot happen "overnight," according to Treasury Undersecretary Beryl Sprinkel.
The poorer nations at the IMF session, meeting as the Group of 24, are expected to argue for a more generous access figure than 110 percent at the policymaking Interim Committee meeting that precedes the annual session. They will point out that for a few smaller countries whose quotas are increased by only 33 percent, an allowance of 125 percent of quota annually is needed to maintain their access.
Whether or not an allocation of SDRs will be approved at this year's annual meeting remains to be seen. The United States, after strongly resisting a new issue for the last couple of years, on the ground that it would be inflationary, may be easing away from its opposition, recent comments by Treasury Secretary Donald T. Regan suggest.
Regan points out that global inflation is less of a problem now, and that an issue of SDRs might add to global liquidity.