A few moons ago, I described the need for the IMF to structurally adjust itself as very few developing countries are borrowing from it. Without interest income to fund its operations due to a shortage of loans outstanding, the IMF has fallen under hard times, indeed. I almost missed this, but the Economist has more news on the recent fate of the controversial institution. It has already laid off 380 staff members, and the axe may fall on yet more employees. Sell off the gold stash, perhaps? It seems austerity measures are much in vogue in DC. From arch-villain of globalization to rather irrelevant international organization in the space of a mere decade. It's funny how things have changed at the IMF:And just as he is touting stimulus abroad, [IMF Director-General] Strauss-Kahn is demanding austerity at home. For the IMF finds itself in a big fiscal hole. Its $1 billion budget is traditionally funded by the small profit it makes on lending money to cash-strapped countries. But IMF lending has collapsed in recent years as developing countries have improved their economic management. As a result, the fund looks set to run a deficit of some $400m a year for the foreseeable future.
The organisation still has a fat cushion of reserves to draw on, but clearly its business model needs to change. Last year a group of “wise men” suggested creating an endowment to fund the IMF's expenses by selling some of its large gold stocks. Such a move requires the approval of the fund's member countries, which means a vote by America's Congress. Mr Strauss-Kahn, it seems, reckons he has a better chance of achieving that if the IMF develops its own cost-control plans quickly.
So the fund is downsizing. Some $100m is to be saved by getting rid of 380 staff, a reduction of around 15%. Preliminary documents obtained by The Economist suggest big cuts in most departments, and particularly among managers. Many departments, it seems, need to reduce their headcount of “B” level staff by 30-40%.
Addressing employees this week, Mr Strauss-Kahn said he hoped many departures would be voluntary. Few insiders think that is likely: the pay-offs, they moan, are too stingy, and with financial markets in turmoil, alternative employment options look grim. But for outsiders it is hard to resist a wry smile. The dispensers of fiscal rectitude are finally getting a taste of their own medicine.
