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IMF funding makes progress
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October 7, 1998: 12:59 p.m. ET
House may soon approve $18M for IMF, could give emerging markets a boost
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NEW YORK (CNNfn) - After battling with Congress for nearly a year, President Clinton may finally have convinced lawmakers to approve $18 billion in new funding for the International Monetary Fund.
But such approval, which would give emerging-market equities a much-needed boost, may also require changes in how the global lending institution doles out its money.
U.S. House of Representatives Majority Leader Richard Armey said Wednesday that progress has been made on the funding issue, but no final agreement has been reached. Armey is an advocate for IMF reforms, and has suggested limiting the organization's ability to lend money at below-market rates, among other things.
"We've had some progress in our discussions on the reform package, we haven't gotten to a place where we're in agreement yet," the Texas Republican said.
Clinton has requested $17.9 billion in new funding for the International Monetary Fund, for use in rescuing troubled emerging markets, including Asia and Russia. Doing so, he argues, will help restore economic stability in those regions and keep their financial troubles from spilling over onto U.S. shores.
"We cannot remain an oasis of prosperity in a world in which so much of our growth depends upon trade, and in which so many of our trading partners are experiencing economic turmoil," Clinton said on Friday. "Every day Congress delays (IMF funding) increases our vulnerability to crisis, decreases confidence in global markets and undermines our prospects."
His request has been largely unpopular among the Republican-led House of Representatives.
But according to the Wall Street Journal, House Speaker Newt Gingrich is now pushing for a compromise on Clinton's request.
Gingrich is advocating a package that goes far beyond the $3.4 billion the House already has approved, according to the report. The Senate also has reportedly approved the $3.4 billion in funding, along with another $14.5 billion that would boost the fund's core capital.
According to the Journal, Gingrich said he envisions a funding level that "could be as high as $18 billion." Such a package, however, would come with strict conditions on use of the money and requirements for changes in the IMF, the Journal said.
Gingrich's package, however, has a long way to go before winning full party support.
Stock markets at home and abroad have taken a beating in recent months due mostly to the devaluation of the Russian ruble and the continued economic recession in the Pacific Rim.
Investors, harboring fears that emerging-market volatility will further weigh down corporate earnings, have traded in their riskier equities for the relative safety of U.S. Treasurys.
The benchmark 30-year Treasury bond, which has rallied in recent month, was down 1-16/32 Wednesday afternoon for a yield of 4.81 percent.
Just last week, U.S. Treasury Secretary Robert Rubin blamed investor "herd mentality" for contributing to the recent broad-based losses in emerging markets and other asset classes.
While Japan's efforts to bolster liquidity in its markets are important, Rubin said the government should make jump starting its struggling domestic economic its top priority.
And earlier Wednesday, Federal Reserve Chairman Alan Greenspan warned that the economic outlook for 1999 has weakened "measurably," due largely to global market volatility.
Approval of IMF funding, which would be used to support a global economic rescue package, could give investors something to hang their hopes on.
Clinton has vowed to work with the IMF and other Group of Seven industrialized nations to provide funds for nations battered by the global economic crisis. 
-- from staff and wire reports
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