IMF s Liquidity Gap

IMF's Liquidity Gap I S G SO the crunch has finally come. The International Monetary Fund has decided to suspend new negotiations on balance of payments support in view of, what has been described as, the Fund's "commitment gap". The timing of the suspension Ls itself bound to attract notice since it has occurred just before the Fund-Bank Annual Meeting. However, the Fund's 1983 Annual Report, released earlier this month, has been at pains to underline how the sharp escalation in the demands on its resources has "placed the Fund's financial resources under pressure". So the knowledgeable ones might well have guessed already what the "build up" in the Report was likely to lead to, or might even have been privy to the Fund's strategy. All the same, the matter the Fund's liquidity is serious enough to deserve notice regardless of the heroics. Let us rule out for our present purposes the possibility that the Fund action is an inspired stunt to pressurise the developing countries into inaction on issues of basic monetary reform or at least into an agreement on keeping the Fund supreme in the international financial arena.