IMF "NEEDS INCREASE IN RESOURCES"

       The International Monetary Fund will need a "substantial increase" in resources in order to act as a guarantor of global economic stability, IMF chief Dominique Strauss-Kahn said yesterday.
       "If this process comes to an end, and it may take a long time... it will need a substantial increase in the resources of the IMF," he said after a meeting of the IMF's International Monetary and Financial Committee (IMFC).
       Strauss-Kahn said the IMFC, which represents the fund's 186 member nations, had opened the door for the fund to construct an international pool of reserves that members could tap when needed.
       In a communique, the policy-setting IMFC said: "The fund should continue to strengthen its capacity to help its members cope with balance of payments problemes, including financial volatility, and reduce the perceived need for excess reserve accumulatiion."
       The policy-makers asked the fund to study and report back in a year whether there is a need to offer "credible alternatives to self-insurance" after a meeting in Istanbul ahead of the IMF and World Bank meetings tomorrow and on Wednesday.
       Strauss-Kahn recalled that the fund's new Flexible Credit Line (FCL) had provided important support to emerging-market economies amid the global economic crisis, with Mexico, Poland and Colombia signing up earlier this year.
       But the FCL back-stop, where members pay a fee to have access to the institution's reserves whenever they want, is limited in scope and concerns only a certain category of countries, he said. "Now we need to reflect and think about an extension of this idea of insurance "to fix the so-called global imbalances where some countries accumulate huge reserves and others build up huge deficits, he said.
       "If you want to avoid countries, including China, to build such big reserves, contributing to global imbalances, we need to find another system," he said.
       An IMF pool of reserves that members could tap could serve as an international guarantee against financial shocks.he said.
       In a speech Friday in Istanbul, Strauss-Kahn said there was a clear need in the post-crisis global economy "for a stable international monetary system that is anchored by a global lender of last resort."
       He called for an increase in the IMF resource base.