For the first time in its history, the International Monetary Fund has suspended all new negotiations for loans to needy countries in the wake of its own cash shortage and the refusal of wealthy European nations and Saudi Arabia to provide an emergency $6 billion advance.
IMF Managing Director Jacques de Larosiere told the fund's executive board last week that after the conclusion of the IMF's joint annual meeting with the World Bank--scheduled to start next Tuesday--the agency would have to discuss reductions in about $2.7 billion worth of loans in process. Letters of intent had already been signed for some of those loans, but none has yet reached the board for final approval.
The IMF has played the lead role in helping to manage the 1982-'83 international financial crisis arising out of the inability of major Third World countries to meet their payments on an estimated $600 billion to $700 billion in debt to banks and governments in the industrial world.
The belt-tightening will not for the moment affect the rescue efforts in Mexico, Brazil and Argentina, the three largest Third World debtors, which have largely concluded their arrangements with the lending agency.
But the loans still in process reportedly includes a proposed $2 billion advance to Nigeria, which, like the others, may be subject to a form of "rationing," designed to stretch out remaining funds available to the IMF.
De Larosiere told the board that it was more prudent to take conserving measures now than to be forced to close down operations altogether at some later date.
De Larosiere reportedly painted this bleak picture to the executive board:
As of now, the IMF has total lendable resources of about $10 billion, which will dwindle to $6.5 billion by the end of the year. It has made specific loan commitments of about $3.5 billion, a figure expected to rise to about $6 billion by the end of 1983 or early 1984.
Thus, unless the IMF is able to borrow additional money to cover what de Larosiere calls the "commitment gap," virtually its entire prospective "bank account" at the end of the year would have to be drained to cover the anticipated commitments.
"To put it simply," said one official, "we would be broke. We would have no more uncommitted money. The increased quotas additional deposits by each nation of its own currencies, due to go into effect in 1984 would not be in effect at that time. We would have no more uncommitted money to continue our normal operations."
The Europeans insist that the IMF tends to exaggerate its liquidity problems. They argue that the IMF quota increase should pour at least $15 billion to $20 billion in hard currencies into the IMF some time in 1984, assuming that the United States takes up its share.
The IMF's own financial crisis makes certain that the annual meetings, and the preliminary sessions that start this weekend, will focus on the critical issue of long-term resources for the international lending institutions, and the related question of what "access" borrowing nations will have to those funds.
A high source told The Washington Post that it would be "impossible" for these intricate questions to be solved during the annual meeting next week. A minority view was that a last-minute deal, at least in principle, might be made if major nations are assured that "access" that is, borrowing rights--would be sharply restricted.
De Larosiere's step followed a decision by the major European nations, meeting last week in Basle, Switzerland, and Paris, to reject the IMF official's plea for a $3 billion loan. Since another commitment of $3 billion from Saudi Arabia was conditioned on the $3 billion from the industrial group, the European veto was tantamount to aborting the whole $6 billion.
A policy of trying to borrow about $6 billion a year, to supplement the normal resources, had been agreed upon by all of the member nations in 1980. Carrying out that policy, de Larosiere borrowed $4 billion from Saudi Arabia and $1.5 billion from the central banks associated with the Bank for International Settlements in 1981.
In 1982, he was able to get $4 billion from the Saudis, but none from the Europeans. Because of the huge demands of Mexico and Brazil, he sought $6 billion worth of help this year, split between the Saudis and the European central banks.