IMF faces fresh pressure for internal reform

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The Independent Online
FRESH PRESSURE for internal reform of the International Monetary Fund has built up at this week's meetings of the Fund and the World Bank in Washington.

The spring cleaning could result in the departure of Michel Camdessus as managing director of the IMF before its annual meetings at the end of September.

The meeting of the Fund's Interim Committee - in effect its supervisory board - also expressed concern about the state of the world economy.

Robert Rubin, the US Treasury Secretary, said: "Serious challenges remain and I believe the balance of risks for the global economy remain on the downside."

Gordon Brown, the Chancellor, said that although some earlier worries had not materialised, there was a "workman-like" approach to the challenges.

The Interim Committee discussed proposals for its own restructuring yesterday. Although there is no consensus about specific measures yet, the reforms will make the IMF more accountable to a broader range of member countries, especially the developing countries.

It has already been agreed that in future the president of the World Bank will attend IMF Interim Committee meetings. Other measures that will give the committee, currently not much more than a talking shop on the international scene, greater influence over Fund decisions are likely.

The dissatisfaction with the Fund's handling of the world financial and economic crisis over the past two years was reflected in the communique issued by the Group of 24, a grouping of developing nations.

It urged greater flexibility in IMF policy prescriptions and emphasised "the need for developing countries to have an equitable representation" in the process of crisis management.

Ministers from the emerging economies have also expressed concern about the pressure on them to publish IMF assessments of their economies. The need for greater transparency is at the core of the G7's proposals for international reform, but the G24 warned: "Publication of Fund staff surveillance reports is likely to compromise the quality and candour of discussions with member countries."

The reports could help trigger crises if they moved the financial markets adversely. At the very least, the IMF will have to improve its own record on transparency and accountability, as its senior echelons acknowledge.

Mr Brown reaffirmed the importance of greater transparency. In his remarks to the Interim Committee he also said growth in the UK would be slower this year than last but would strengthen into 2000.

Yves-Thibault de Silguy, the EU's monetary affairs commissioner, said the euro's depreciation against the dollar had been "relatively modest" and the result of slower growth, adding, "even if there is room for an appreciation of the euro".

Kiichi Miyazawa, Japan's finance minister, defended his government's economic policy, saying it was responding "forcefully" to difficult conditions.