By Chris Cermak Jun 6, 2009, 0:24 GMT
Washington - The International Monetary Fund, which in many ways has become the globe's answer to a worldwide recession, has come under some tough criticism in the United States as legislators consider whether to boost US contribution to the crisis lender.
US President Barack Obama, who promised a 100-billion-dollar loan to the IMF at an April summit of world leaders, is meeting stiff resistance from lawmakers in both parties who want him to focus on rescuing the US economy - not the world's.
Congressional approval was in doubt Friday after a vote in the US House of Representatives was postponed. The Senate approved the funds last month.
John Boehner, the top Republican in the House, has derided the IMF loan as a 'global bail-out,' which the US cannot afford as it runs record deficits to stimulate its own struggling economy.
Democrats and Republicans have said the US could end up funding hostile regimes, or even terrorists, by giving the IMF money that it would lend to governments facing a budget crunch. A group of 11 Democrats have sent a letter urging Obama to bar the funds from going to Iran or Lebanon's Hezbollah.
'Handing over billions to the IMF not only saddles young Americans with more debt but could fund terrorist activity - a complete affront to our troops combating terrorism across the globe,' Eric Cantor, the second-ranking Republican in the chamber, said this week.
Left-leaning lawmakers are taking a more traditional line of attack: They fear the IMF's reputation for attaching strict conditions to its loans, which some economists argue has actually damaged the economies of poor countries it has lent to in the past.
'We urge you to ensure that the IMF is not given a blank cheque,' a group of 33 House Democrats wrote in a letter to Obama last month, urging greater transparency and accountability.
All this comes as the IMF is dramatically expanding its role as a lender and watchdog for the global economy. The Group of 20 (G20) nations summit in London in April pledged a 500-billion-dollar boost to the IMF's lending resources.
Previously-skeptical emerging countries including China, Russia, India and Brazil are all in talks to make contributions to the IMF for the first time in their history.
Supporters argue the IMF is the only institution that has enough clout to loan to troubled governments while keeping their spending levels in check. They point to measures taken by the IMF over the course of this year to relax its toughest restrictions on lending.
Fears that the IMF loan would raise the US deficit are also misplaced, according to the Obama administration. The loan would involve an exchange of financial assets that is likely to cost taxpayers no money at all. The non-partisan Congressional Budget Office has put the cost of the loan at 5 billion dollars.
But the US opposition shows that the IMF still has a long way to go to improve its standing, after a series of botched rescue attempts in Latin America and Asia in the 1990s.
Talk of the IMF financing terrorism is a 'distraction,' Mark Weisbrot, co-director of the Washington-based Center for Economic Policy Research, told the German Press Agency dpa. But Weisbrot said Congress should be using the legislation to push through much-needed reforms of the IMF's lending practices.
Aware of the US unpopularity, the White House and Democratic leaders have tried to sneak the funds through Congress by attaching them to legislation funding the US wars in Iraq and Afghanistan.
'They can't make a case on the merits,' Weisbrot said. Despite the recent upgrade in its role, 'the IMF doesn't have that much credibility in the world.'
The tactic may have failed: While the Senate approved the measure last month, the White House has come up against a perfect storm in the lower House. Republicans have been united in their opposition to the IMF loans, while some leftist Democrats are opposing an expansion of funding for the war in Afghanistan.
The White House and Democratic supporters are now working furiously to bring enough skeptical lawmakers over to their side. But a vote in the House on the war supplemental, originally set for Friday, has been postponed amid the sharp discord.
Your Talkback on this Story