IMF faces growing pressure to reform

THE INTERNATIONAL Monetary Fund must modernise its reaction to financial crises and become more independent of political influence from the US, according to a hard-hitting academic report published today.

Demands for reform of the IMF, jut ahead of its annual meeting later this month, were echoed by Mervyn King, deputy governor of the Bank of England. Speaking in New York, Mr King said the IMF's present role, lending large sums of money without being able to avert financial crises, was not sustainable.

The report, published jointly by the Centre for Economic Policy Research in London and the International Centre for Monetary and Banking Studies in Geneva, criticises the IMF for applying unsuitably tough policies to Asian countries affected by the global crisis. It said old-fashioned monetary and fiscal policies were not appropriate for the type of banking crises now affecting emerging markets.

More fundamentally, however, the report calls for greater independence and accountability for the IMF, in a parallel with the growing independence of central banks. Charles Wyplosz, one of the co-authors, said: "Political interference is a very serious blow to the credibility of the IMF."

The report recommends greater powers of oversight for the so-called Interim Committee, an originally temporary committee of finance ministers given a voice in IMF policy 24 years ago. The recommendation, which supports an existing French government proposal, comes as reports emerged that Gordon Brown, the chancellor, will be the next chairman of the committee.