IMF cuts hundreds of jobs amid deficit fears

The International Monetary Fund faces the biggest internal shake-up in its history. The new managing director, Dominique Strauss-Kahn, has announced plans to cut up to 15 per cent of the organisation's staff to try to stabilise the Fund's finances as demand for its loans continues to evaporate.

They will be the first round of redundancies since the IMF's foundation in 1949. Mr Dominique Strauss-Kahn will axe 300 to 400 jobs out of more than 2,600. Compulsory redundancies are likely, he said. The Fund is facing a deficit of $400m a year by 2010

The IMF was set up with the aim of assisting countries experiencing difficulties under a regime of fixed exchange rates, at a time when private capital markets were less well developed. Today, emerging markets such as China are able to fund their economic development through the amassing of large trade surpluses of their own.

The IMF's critics have suggested it is increasingly out of touch. The Fund's governance has also come under attack for being dominated by the United States and western Europe to the virtual exclusion of emerging economies and poorer, developing economies.

Mr Strauss-Kahn said the cuts were part of his strategy to win backing for a plan under which the Washington-based institution would sell its gold and invest the proceeds to generate income. "All this is possible only if ... I have the commitment by different governments" he said.