Critics circle as IMF questions its role
Sunday 12 April 1998
The meeting coincides with a meeting of the World Bank and a semi-annual meeting of the finance ministers and central bankers of the G7 leading industrial nations. These, too, will grapple with the IMF's role in the world economy.
G7, IMF and World Bank officials are expected to review what went wrong in responses to the Asian financial crisis and discuss how better to anticipate and prepare for future crises.
"The IMF is initially going to focus on ways to improve transparency, more timely information about countries and how to get it, and how to make sure it is valid," said Robert Litan, senior fellow at the Brookings Institute.
Critics are calling on the international lender-of-last-resort to explain its actions - and inaction - in Asia, and to say why governments should pay dues to a secretive organisation they claim failed to prove its worth in the Asian crisis, and that may have bailed out reckless investors along with innocent bystanders.
The meetings come six months after the crisis hit, forcing the IMF to pull together economic aid packages of $57bn for Korea, $40bn for Indonesia and $17bn for Thailand.
The IMF intends to push countries harder to share economic information, to gather more and better information on its own and to disseminate that information more widely so market participants can see future crises in the making. To that end, the Fund will submit a proposal to its Interim Committee to create a "code of conduct" for disclosing economic information from member countries.
The IMF's sometimes harsh prescriptions for recovery are also coming under greater scrutiny. "The over-zealous demands for deflation are an example of sticking to an old prescription for a new illness," said Veena Siddharth, a policy adviser at Oxfam International. "There is also the question of governance which the Fund deals with in only the most abstract way."
The IMF defends the conditions of its bailout packages, and says necessary adjustments are made during each quarterly review of progress made by the governments. But Indonesia won IMF approval to maintain subsidies for food and other necessary goods, which the IMF had initially banned. The IMF also agreed to allow Thailand to have a 1.6 per cent GDP deficit instead of the agreed 1 per cent.
All this comes against the backdrop of a political war in Congress over US money to replenish IMF coffers. Congress has been debating whether to approve President Clinton"s $18bn request for the IMF. Last autumn the US agreed to provide $3.5bn for the IMF's "New Arrangement to Borrow", a reserve line of credit from leading industrial nations, and $14.5bn for the fund's general resources account.
Congressional critics accuse the IMF of excessive secrecy and arrogance towards those who demand that it reveal more about internal decision-making.
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