Until recently the International Monetary Fund had not played a central role in the financial crisis, Forbes reported. Moreover, IMF`s relevance and scope of operations have long been questioned. But this has changed radically with the crises in Iceland, Ukraine and Hungary (with Serbia, Belarus, Pakistan and Romania likely to follow).

Solid mandate. Contrary to what has happened in previous crises, the IMF has a firm mandate to react quickly and creatively:

--Leaders gathered during the Asia-Europe Meeting held in Beijing on Oct. 24-25 stated that the IMF should play a lead role in aiding countries.

--The U.S.--by far the biggest Fund shareholder (16.8% of voting shares) and the only country that can single-handedly block any important decision--will almost certainly support any radical course of action.

Lending amounts. A common feature of the loans for the three countries--likely to be replicated systematically--is that amounts are well above the formal limit set by the Fund (300% of the country`s quota or contribution per year). Moreover, amounts are significantly above what had been originally signaled to, or expected by, the markets.

Catalytic effect. In addition, as in many previous crises, the IMF is playing a significant role as a catalyst, with its imprimatur signaling to other potential public and private lenders (and donors, in the case of low-income countries) that a credible economic program is in place. Often that lending is quite superior to that provided by the Fund itself.

Flexible conditionality. Although the Executive Board has yet to approve any program, there are few doubts that the respective conditionality will be limited to what is essential on a macro-economic level, while at the same time showing flexibility. Icelandic Prime Minister Geir Haarde stated that he found the conditions requested by the Fund acceptable.

Running on empty? An increasing worry is whether--with $250 billion of liquidity before it started the recent lending spree--the Fund has enough resources to face the global crisis.

U.K. Prime Minister Gordon Brown suggested on Oct. 28 that China and the Gulf States should help with contributions. The same day, IMF Deputy Managing Director John Lipsky stated that if world problems continued, the question of additional resources would be addressed. The problem is that every five years the IMF`s membership determines whether to increase the institution`s capital. The last two meetings, in 2003 and early 2008, considered that no increase was necessary. However, given that the IMF`s relevance is rapidly gaining, it is probable that a mechanism to replenish resources quickly would be implemented.

The IMF is clearly breaking away from its long-established schemes, in terms of swiftness, loan amounts and--in a new lending format to be approved soon--conditionality. It is running potential risks from lending to politically unstable members such as Ukraine, and lending so massively that it may run out of resources.

However, the Fund has no option but to follow radical actions, if it is to fulfill and strengthen its role as international lender of last resort. It has a strong mandate from its members, and its leadership is skilfully using it to the fullest extent possible.

Forbes referring to Oxford Analytica