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Outlook: IMF offers the wrong medicine

MUCH AS we might wish it otherwise, real life is not like one of those AA commercials where a nice man turns up in a yellow van just in time to avoid you having to change your flat tyre yourself.

Substitute the International Monetary Fund for the van with the flashing orange light and imagine one of those cold winter nights when every patrol is out on call. Everyone waits a long time to get service. That's how it is for the IMF right now - it has never faced larger or more pressing calls for its assistance.

Over the last 12 months the IMF has pledged the best part of $45bn of Western money in fighting the fires now raging around the world's financial jungle. So it is hardly surprising that when Moscow got on the line last weekend to ask for a further dollop of Western aid, the guys in Washington decided to leave the phone ringing.

The admission from Russia's central bank chief, Sergei Dubinin, that he had blown $3.8bn of IMF money on a fruitless effort to shore up the sinking rouble is one of the most astonishing stories yet to have emerged from the financial turmoil that has engulfed emerging markets.

Did the IMF know that this was how its money was being used and if it did, how on earth could it have sanctioned such waste after the lesson of what had happened to currency pegs in the Far East? And if it didn't know, why not? Should the IMF really be allowing our money to be squandered in this way?

Even before this, there was already a growing opposition in Congress to any further bankrolling of the IMF's activities. The immediate beneficiary of aid to the Far East has not been the people of those countries at all, but very solvent Western creditors, those easily capable of taking and surviving the hit. The immediate beneficiaries of the first tranche of support to Russia seem to have been George Soros and the other New York- based hedge fund operators who have been attacking the rouble.

The case for IMF support has always been that the consequences of the alternative, a complete banking collapse, are just too awful to contemplate. That, and the package of conditional reforms the IMF is able to impose on these troubled economies. What's now happening in Russia will greatly strengthen the voices of those arguing that this is the wrong medicine, that it would be better to let these countries go to the wall and damn the consequences.