IMF politics; UK's Tony Blair calls for IMF reform

[Robert Weissman <rob@essential.org>]

The Wall Street Journal Interactive Edition -- September 21, 1998
U.S. CONTRIBUTION TO IMF MAY DEPEND ON BOSNIA, OTHER NONECONOMIC MATTERS

 By GREG HITT 
 Staff Reporter of THE WALL STREET JOURNAL

 WASHINGTON -- How much the U.S. ultimately contributes to the
 International Monetary Fund may have more to do with North Korea and
Bosnia than economics.

 That is because lawmakers have punted the issue to a broader forum where
it no longer will be considered solely on its merits. Instead, President
Clinton's request for $17.9 billion in new IMF funding will be dealt with
during the next few weeks in negotiations over an array of spending
priorities for the new fiscal year. "It will be a problem," said Rep. Bob
Livingston (R., La.). "That's always a problem."

 To be sure, much attention will be paid to GOP demands for tough
restrictions on the long-sought money and reform of the IMF, and the
administration is ready to address those issues with Congress. But another
game is afoot as well..

 ''These guys are just playing a leverage game with the president -- to the
detriment of the economy,'' said Wisconsin Rep. David Obey, senior Democrat
on the House Appropriations Committee.

 The House foreign-aid bill includes $3.4 billion for the IMF, which
represents the U.S. contribution to an international effort to double an
existing IMF credit line to $48 billion. But the House blocked action on
another $14.5 billion that would be used to boost the fund's core capital.
The administration says the full $17.9 billion, which was approved by the
Senate, is needed to ensure the IMF is able to deal with the economic
crises in Russia and Asia, and the potential collapse of South America.

 The House's cautious approach to the IMF reflects the strength of GOP
conservatives, and their opposition to full funding will be difficult to
overcome in the waning days of this congressional session. Driving the
point home Friday, House Speaker Newt Gingrich (R., Ga.) scolded the
Clinton administration and took a personal shot at IMF chief Michel
Camdessus in an appearance before the Christian Coalition. "Quit
negotiating for money from the American taxpayer for the IMF because unless
we have serious, deep reforms and accountability, we're not turning $18
billion over to a French socialist to throw it away, which is what he's
been doing," Mr. Gingrich said.

 Treasury Secretary Robert Rubin is willing to concede a host of "reforms"
to win congressional approval for new IMF funds, including greater openness
about loan agreements and new requirements to ensure that nations that get
loans honor their trade commitments and don't discriminate between foreign
and domestic lenders during a financial restructuring.

 Most important, the administration would agree to a requirement that the
Treasury secretary "certify" that the Group of Seven industrialized nations
-- the U.S., Canada, Britain, Germany, Italy, Japan and France -- will push
the IMF to make reforms. The G-7 controls 44.8% of the votes at the IMF and
can usually prevail at the fund.

 Past IMF bills have only required the U.S. to use its "voice and vote" to
push for changes. Still, the administration would oppose any provision
requiring the Treasury secretary to certify that changes actually have been
made.

 The Republican Congress is expected to finish action on only six or seven
of the 13 bills needed to fund the government in the fiscal year beginning
Oct. 1. The remaining bills -- which cover transportation, labor and
foreign-aid accounts, among others -- will be wrapped into a massive
legislative measure that will become the vehicle for trade-offs involving
the IMF and other issues.

 The president's emergency-spending initiatives, including as much as $5
billion for the Bosnia peacekeeping operation, will figure in those talks,
as will the Republican's $80 billion election-year tax cut.

 Mr. Clinton can expect the IMF funding to be pitted against a range of
issues, including money for Bosnia and a proposal to block fuel deliveries
to North Korea, which Republicans claim hasn't lived up to an agreement to
scale back its nuclear-energy program.

 There is also the prospect that IMF funding will become tangled with
proposed limits on international family-planning programs administered by
groups like Planned Parenthood.

 "What should Rubin do, get on his knees and beg and blow up pink
balloons?" said Mr. Obey, an important White House ally in the final
negotiations. "Most of the guys giving Rubin advice can't spell
International Monetary Fund. The normal condition of congressional debate
is ignorance."

 -- Bob Davis contributed to this article. 

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.

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Dow Jones Newswires -- September 21, 1998
 U.K. BLAIR TO PROPOSE PARTIAL MERGER OF IMF, WORLD BANK -FT
 Dow Jones Newswires

 TOKYO -- U.K. Prime Minister Tony Blair will flesh out proposals to reform
the International Monetary Fund and World Bank in a speech to be delivered
later Monday in New York, the overseas edition of the Financial Times
reported Monday.

 The FT said Blair, currently chairman of the Group of Seven leading
industrialized nations, will call for a partial merger of the IMF and World
Bank in order to create a single institution in charge of supervising and
regulating the world economic system.

 Blair will also suggest there may be a need for major private-sector
funds, such as those controlled by George Soros, to publish details of
their exposures to individual economies, the FT said, quoting Blair's
official spokesman.

 In his speech, Blair also will call for the creation of a code of fiscal
and financial conduct for all states seeking the help of the IMF, according
to the FT.

 Blair has consistently criticized the IMF and World Bank for their
handling of the crisis that swept across Asia during the last year, calling
for reform of the two institutions in order to make them better able to
confront problems afflicting the global economy as a result of faster
flowing capital.

 Regarding the proposed code, the spokesman said it would require
governments to publish their countries' net foreign currency exposure on a
monthly basis and include a breakdown between short-term and long-term
debt, the FT said.

 Common accounting standards would be imposed for the public and financial
sectors, and there would be a requirement for securities and banking
markets to adhere to common prudential standards, the FT said.

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.

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Dow Jones Newswires -- September 21, 1998
U.K.'S BLAIR CALLS FOR RAPID OVERHAUL OF IMF, WORLD BANK
 Dow Jones Newswires

 LONDON -- U.K. Prime Minister Tony Blair Monday called for a rapid
overhaul of international financial institutions such as the World Bank and
the International Monetary Fund.

 Rapid reform of these bodies is essential to enable them to respond to
financial crises such as those in Asia and Russia in the last year, he said
in a text for delivery to the New York Stock Exchange later Monday.

 "This is not a matter of a few technical changes," said Blair. "We should
not be afraid to think radically and fundamentally. We need to commit
ourselves today to build a new Bretton Woods for the next millennium."

 Bretton Woods, New Hampshire, was the site of the conference at which the
World Bank and the IMF were founded 54 years ago.

 Blair set a deadline of one year to come up with reforms to these
institutions.
 Echoing Chancellor of the Exchequer Gordon Brown, Blair called for greater
openness and transparency in the international financial system, with
international codes of conduct on monetary and fiscal policy, as well as
corporate governance and international accounting standards.

 "I have no doubt that promoting greater accountability and openness will
strengthen the incentives on governments to pursue sound policies, will
enable markets to price risk more accurately and should help all countries
to manage more effectively the risks of global integration," he said.

 Blair said the 54-year-old institutions "were constructed for a world of
fixed exchange rates and capital controls, when international capital flows
were much smaller."

 "The current crisis illustrates the weaknesses of the existing
international financial system," he said. "It needs to be modernized to
meet the challenges of a new century," he said.

 Blair called for improvements in international financial supervision and
regulation, adding that the IMF and the World Bank need to give this issue
a much higher priority and work more closely together as well as with the
main international regulatory organizations.

 Global investors need to assess more carefully the risks associated with
their lending decisions and price their loans appropriately, said Blair,
adding: "We need new mechanisms to ensure close and regular contact between
governments and the private sector that can provide early warning of
problems."

 The World Bank and the IMF themselves need to be more transparent and
open, Blair said. "More discussion of their programs and explanation of
their advice will help to build a public consensus behind reform."
 He said finance ministers and central bank governors from the Group of
Seven leading industrial nations should take these issues forward "as a
matter of urgency" when they meet in Washington next month and firm
proposals should be set before G-7 leaders at their summit next year.

 Blair said he will meet with Japanese Prime Minister Keizo Obuchi later
Monday and will welcome "the efforts that have been made towards resolving
the major problems in Japan's banking sector".

 He added that "swift and strong fiscal action" to boost domestic demand in
Japan and further measures to strengthen that country's financial system
"would provide the biggest single boost to investors' confidence in Asia
and beyond".
 Blair said Japan is "crucial" to the world economy and has a special role
to play in rebuilding confidence and stability in Asia.

 Blair said that in response to the global financial crisis G7 countries
"need to recognize that in an increasingly interdependent global economy
the policies of one country can have major impact on the economies of
others and on
 the world economy as a whole."

 Blair said no country should interfere with the interdependence of their
central banks but he added that the major economies "must remain vigilant
and work closely together to ensure that growth is sustained".

 In the face of the crisis currently griping Asia and Russia, emerging
markets and developing countries should press ahead with reform, said
Blair. But he added "countries must put in place the right policy framework
- monetary policy targeted at low inflation, sound and sustainable fiscal
policies and structural reforms designed to improve the supply side
performance of the economy".

 "This applies with particular force to Russia", said Blair.

 "If the process of reform resumes, we must of course continue to provide
financial and technical support..."

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.