The IMF Runs a $300 Million Loss (This is a Good Thing)

The International Monetary Fund released its semiannual World Economic Outlook report yesterday projecting a very rosy world economy. “It would be fair to say to the world, ‘You have never had it so good,’ ” Raghuram Rajan, the IMF’s Chief Economist said. “But challenges are building in the background.”

Still, the most interesting news may be the projected $300 million shortfall in the IMF’s own income over the next three years. Why is the IMF losing money? Because the world economy is doing a lot better, and the IMF is giving out fewer and fewer loans. Which means the IMF is making less money from its primary business- charging interest in loans to various needy governments.

So the IMF’s budgetary shortfalls are a sign of the world economy’s strength, not its weaknesses. Countries are not having currency or inflation problems and so do not need IMF bailouts.

Although it is time to bask in its success, as a practical matter, the IMF needs a new business if it is going to stay afloat. Sounds like time to revise the IMF By-laws or maybe even the Bretton Woods Articles of Agreement themselves to redirect the IMF toward some new missions. The debate has already begun (as this Washington Post article details) and will be continuing over the next few years.