Dancing around the International Monetary Fund

Last March, Lebanon requested to use $77 million (25% of itsquota) of IMF financing as Emergency Post-ConflictAssistance (EPCA) for the first time since it joined thisinternational financial institution on April 14, 1947. TheIMF’s principal function is to provide balance of paymentssupport, particularly when reserves fall to a critical levelthat could jeopardize financial stability, and to monitorreform commitment that supports use of its resources. The IMF Board in May approved the government’s request whichcoincided with a level of reserves close to $12 billion,equivalent to 20% of deposits; certainly one of the highestin the world in relation to the size of the economy. Thisamount can hardly make a dent in the above quantity ofreserves. Clearly, the incentive for the arrangement is two-fold: tohave a solid commitment from the government toward itsreform agenda and to provide assurance to donors thatmacro-economic adjustment are adhered to and monitored bythe fund. EPCA then constitutes a catalytic