Harmful effects of IMF aid.

ITEM: The International Monetary Fund (IMF) has agreed to let Colombia increase "its budget shortfall following the defeat of a [sic] austerity referendum," reported the BBC for November 14. "Plans by the government of President Alvaro Uribe to raise taxes sharply were 'appropriate,' the IMF said. The IMF also agreed that the county's budget deficit could widen to 2.8% from 2.5%...."

BETWEEN THE LINES: According to this, the IMF is telling a presumably sovereign government that raising taxes is a permissible way to remain on the international dole. But since the credit keeps flowing, there is little incentive--in Colombia or elsewhere--to abandon ineffective or corrupt financial practices.

Is the IMF's track record so successful that this trade-off is worth the price? Hardly. Its numerous deficiencies have been noted by a congressionally mandated watchdog, the International Financial Institutions Advisory Commission, chaired by Allen Meltzer of Carnegie Mellon University. This commission documented that the IMF devotes too many resources "to expensive rescue operations." The IMF's "system of short-term crisis management is too costly, its responses too slow, its advice often incorrect, and its efforts to influence policy and practices too intrusive."

This loan program has a price tag for Americans too, as a new study reveals. Written by Adam Lerrick of the Gailliot Center for Public Policy at Carnegie Mellon, Funding the IMF: How Much Does It Really Cost? says the IMF has cost the U.S. an average of $1.5 billion annually since 1991, and is even more expensive now.

Representative James Saxton (R-N.J.), vice chairman of the Joint Economic Committee, points out that Washington currently provides $27 billion for IMF operations on highly subsidized terms. The above study, says Saxton, shows that such subsidies now carry an annual cost to American taxpayers of about $2 billion. Moreover, "there is a portion of U.S. resources used by the IMF that receives no interest, at a cumulative cost estimated by the General Accounting Office ... to amount to nearly $3 billion."