Catalysis or direct borrowing: The role of the IMF in mobilising private capital

The layout of the paper is as follows. Section 2 briefly provides an analytical framework by discussing the mix between adjustment and financing in dealing with current account balance of payments deficits and the design of balance of payments policy. It offers a simple classification of countries on the basis of their principal source of external financing and discusses the extent to which binding constraints on external financing may force countries to pursue sub-optimal, and possibly self-defeating, adjustment strategies. Section 3 briefly outlines why indirect catalysis is unlikely to be sufficient to deal with external financing constraints. Section 4 provides an analysis and assessment of the arguments for having the Fund provide higher levels of finance itself, with the resources being made available by borrowing from private capital markets. The adequacy of Fund resources and past borrowing activities are briefly discussed in Section 5. A final section offers some concluding remarks and places the foregoing discussion in the context of the depate about the role of the IMF in a new international financial architecture.