As financial crises continue to shake Asia, some experts are asking whether the international system set up to deal with them is up to the task.
"As we stand at the moment, the International Monetary Fund's liquidity position is satisfactory," an IMF spokesman says. The IMF is the world's chief line of defense against financial chaos. It is drawing on its member nations to patch together rescue loan packages for several troubled nations in Asia, most recently South Korea.
But some economists aren't so sure that the IMF and other international institutions will come up with enough money to calm financial markets.
Fear of financial instability continues to rile markets. Tokyo's Nikkei stock index fell 5.1 percent Nov. 25, a day after the failure of a major Japanese brokerage house. The yen fell to a five-year low against the dollar. South Korea's key stock market gauge fell 2.5 percent to its lowest level in a decade. Hong Kong dropped 2 percent. In the United States, the Dow Jones Industrial Average was down 113.15 points Nov. 24, or 1.44 percent.
In Vancouver, where the 18-member Asia Pacific Economic Cooperation forum wrapped up a summit Nov. 25, President Clinton described Asia's problems as serious but resolvable. He had earlier dismissed the situation as "a few little glitches."
Meanwhile, economists were looking closely at the IMF. "We don't know if the [IMF] funding is adequate yet," says Robert Hormats, director of Goldman Sachs International, a New York investment banking firm. "It will be tested."
"This one is not over yet," says Princeton University economist Peter Kenen, a veteran expert on international monetary affairs. "The risks to Japan are serious."
There is also the possibility of trouble moving outside Asia into countries like Brazil or Argentina.
Though the Asian mess has swelled in recent weeks, economists don't expect it to badly damage the US economy. They estimate it may knock 0.2 to 0.5 percentage points off growth in national output next year. That would still leave the economy growing a real 2 percent or so. And the drag might be welcomed by the Federal Reserve, worried that an overheated economy could revive inflation.
The goal of IMF packages is three-pronged. First, it provides loans that can buy time for a nation to get its financial house in order. It also requires recipient countries to make significant financial and fiscal reforms in exchange for the loans. And it aims at restoring confidence so that the crisis does not spread to other nations.
But rescue missions in recent months for Thailand, the Philippines, and Indonesia have not stopped what is being called the "domino" effect.
The crisis reached South Korea in mid-November, with both its currency, the won, and corporate stocks plunging in value. Finance Minister Lim Chang Yuel announced Nov. 21 that his nation would seek $20 billion in IMF loans, plus an additional open line of credit.
IMF officials have arrived in Seoul to negotiate a rescue package. Experts guess it could reach $75 billion.
But now economists are asking if the IMF will have the financial resources to bail out South Korea and meet its earlier commitments.
The IMF has some $50 billion of its own resources available at the moment. It can borrow up to $23.5 billion from 11 major industrial nations under a 1962 agreement. The IMF also has a $2 billion line of credit with Saudi Arabia.
But the resources of the fund have not grown in tandem with world output or world trade. Nor have IMF quotas - the money member nations contribute to the fund to enable it to carry out its mission of world financial stabilization - grown "to meet the kinds of needs we see in the world today," Mr. Hormats says.
Last January, the IMF's executive board approved a plan for new arrangements to borrow from 25 nations for up to about $47 billion.
But that deal was put on hold when the US Congress refused to appropriate the American contribution of $3.5 billion. It is expected to come up again when Congress reconvenes in the new year.
An IMF package usually involves a mix of funding. In the case of the $23 billion Indonesia package, for instance, $10 billion came from the IMF, $4.5 billion from its sister institution, the World Bank, $3.5 billion from the Asian Development Bank, another multilateral institution, based in Manila, and $5 billion from Indonesia itself.
The IMF packages for Thailand and Indonesia took about a month to complete.
The sum available from the IMF is loosely tied to a nation's quota. Both Indonesia and Thailand got about 500 percent of their quota from the IMF. In 1995, Mexico got 700 percent.
One problem in Korea, says Washington economic consultant Harald Malmgren, is that the internal accounting system for Korea's banks and corporations is "really primitive." So the cost of a bailout is "a terribly big unknown." It could range from $20 billion to $100 billion, he says.
Mr. Malmgren thinks the Asian crisis could last for a few years, with the possibility of some nations having to come back to the IMF for more funds.