[stop-imf] IMF exec fight; Mozambique update; Meltzer Comm'n

[Robert Weissman]

This summary is prepared by the External Affairs Department of the World
Bank. All material is taken directly from published and copyright wire
service stories and newspaper articles.

For more news go to http://www.worldbank.org/news To subscribe or
unsubscribe go to http://www.worldbank.org/devnews

(Excerpted) Headlines for Tuesday, February 29, 2000:
                                                                                
 - EU FINANCE MINISTERS NOMINATE KOCH-WESER TO HEAD IMF, US OPPOSED.            
 - UK, NORDICS STEP UP STORM AID TO MOZAMBIQUE.                                 
 - US COMMITTEE REPORT SEEKS IMF,WORLD BANK ROLE CURBS.                         
                                                                                


EU FINANCE MINISTERS NOMINATE KOCH-WESER TO HEAD IMF, US OPPOSED.

After months of hesitation, the EU on Monday selected Germany's Caio
Koch-Weser as their candidate to head the IMF-only to have President
Clinton reject him as unqualified, reports the Wall Street Journal
(p.C14).  Clinton's decision immediately threw the already-confused
succession process into further disarray. It could also further strain
US-EU economic relations, already tense over a series of trade disputes.

In a call to German Chancellor Gerhard Shroeder on Saturday, Clinton "told
Chancellor Shroeder that the US is not prepared to support the German
candidate," said White House spokesman Joe Lockhart, saying Koch-Weser
doesn't have sufficient stature or support for the job.

Meanwhile, Reuters reports German Finance Minister Hans Eichel said on
Tuesday the EU was definitely sticking with Koch-Weser as its candidate.  
Asked if the EU would continue to propose Koch-Weser for the job, Eichel
told reporters, "Yes, certainly...We have an excellent candidate and we're
all going to keep campaigning for him."

Eichel said Washington should not dictate to the EU who the European
candidate for the IMF presidency should be and accused the US of
encouraging developing countries to oppose Koch-Weser.  "The US does not
have the right to say who the European candidate for the IMF presidency
should be," Eichel said.  He criticized the US for calling on developing
countries to oppose Koch-Weser on the one hand while simultaneously
calling on the EU to win their support for Koch-Weser.

The New York Times (p.C1) also reports, noting that the American position
leaves the selection process in limbo, raising the prospect that none of
the three candidates nominated for the job will ultimately get it.  
Publicly, there are no other European contenders for the job.  But were
European officials to withdraw Koch-Weser's nomination, the speculation is
that they would be inclined to nominate someone of significantly higher
political stature, in part to save German face.  Among the list of
possible replacement candidates are Gordon Brown, Britain's current
chancellor of the exchequer; Giuliano Amato, the Italian Treasury
Secretary; Mario Draghi, the Italian treasury director; and Andrew
Crockett, who heads the Bank for International Settlements.

EU finance ministers yesterday chose German Deputy Finance Minister Caio
Koch-Weser as the EU candidate for IMF managing director in a challenge to
US and Japanese candidates, reports Agence France-Presse.  The choice to
succeed Michel Camdessus at the helm of the Fund was announced by the
Portuguese presidency of the EU after Germany had pushed hard to ensure
that the other 14 EU countries would accept its candidate in the face of
some strong misgivings.

While the US, the IMF's largest stakeholder, has yet to make its official
preference known, US officials have been less than enthusiastic about the
candidacy of Koch-Weser, reports the Financial Times (p.8).  The US
intends to support "a European candidate who commands broad support," the
International Herald Tribune (p.1) adds.

The IMF's executive board is expected to convene in the next few days, and
perhaps as early as Tuesday, for an initial straw poll of candidates, but
this seems unlikely to prove decisive, the story says.  There is no
established procedure for choosing an IMF managing director, the FT
continues. The US, which carries 17.35 percent of the votes on the board,
could in theory be out-voted by the Europeans voting en bloc, who command
about double the US vote.  Pointing out that the head of the World Bank
was an American, German Finance Minister Hans Eichel said the head of the
Fund should remain a European.

German government sources have warned it might not be in the interests of
Europe to have US citizens occupying the top spots at both the IMF and the
World Bank, which have their headquarters in Washington, AFP says.  
Koch-Weser's candidacy has also received the backing of China, notes the
FT, while Interfax reports that a Russian government official said
yesterday Russia had not yet defined who it will support.

Note: The discussions to select the Fund's next managing director is
widely reported by international media.
                                                                                
                                                                                
                                                                                


UK, NORDICS STEP UP STORM AID TO MOZAMBIQUE. Britain yesterday pledged a
further $1 million in aid for Mozambique, as experts warned that new
storms are likely to bring further destruction in the next few days,
reports the Guardian (UK, p.15).  "We stand ready to provide further
assistance," said International Development Secretary Clare Short, warning
that the situation in Mozambique would get worse before it could get
better.

The news comes as the Dagens Nyheter (Sweden) reports that Sweden is
sending $2 million to assist Mozambique, a decision taken yesterday by the
Swedish development agency and Development Minister Maj-Inger Klingvall.  
The agency will also speed up the disbursement of $12.5 million already
budgeted for development aid to Mozambique.  Some $6 million will go to
pay principal and interest on Mozambique's debts, and the other half will
go for budget support.

Most of Mozambique's budget still goes to debt service rather than
development, says the Hufvudstadsbladet (Finland), noting that the country
was recently granted billions in debt relief as a reward for the
government's sound policies, which included the swift privatization of its
parastatals.

The Norwegian Foreign Ministry also decided yesterday to give another $1
million in foreign aid to Mozambique, reports Aftenposten (Norway), noting
that the World Bank and the IMF suggest the economic impact of the floods
will be limited to about one percent of GDP, because the emergency
situation will bring large, exceptional transfers of money and economic
activity to Mozambique.  "All donor countries are now looking for extra
development funds for Mozambique," a Norwegian embassy spokesman in
Mozambique is quoted as saying.  "I don't think it will reverse the
economic progress the country has made."

Short yesterday pledged that Mozambique would be fast-tracked through the
Highly Indebted Poor Countries (HIPC) debt relief initiative by the end of
next month, and that Britain would collect no more payments from the
country, the Guardian continues.  Debt campaigners welcomed the move, but
warned that even after Mozambique has had its debt reduced under the World
Bank and IMF debt relief scheme, servicing its loans will put impossible
strains on the devastated economy. "Unless there are real improvements to
the IMF debt reduction package agreed last year, Mozambique will still be
paying $1 million each week to lenders in the West, instead of rebuilding
the shattered lives of its people, said Jubilee 2000 director Ann
Pettifor.

Mozambique's annual debt payments have already been reduced under an
earlier World Bank/IMF debt reduction package, says the story. But even
after they receive the extra tranche of loans reductions next month,
annual debt payments will still be more than two-and-a-half times what the
country spends on primary healthcare.  "Debt servicing will still be
absorbing around 10 percent of government revenue," said OXFAM senior
policy adviser Kevin Watkins. "Tinkering with the current initiative in a
situation where the health system and education system are being destroyed
is like fiddling while Rome burns."

In a letter to editor of the Times of London (2/28, p.17), Pettifor also
says that Mozambique qualified before the G7 summit in Cologne for debt
cancellation, having carried out years of strict economic austerity
measures under the IMF. Receiving the G7's promised further debt
cancellation should have been a slick process.  In the hands of Western
creditors it has turned into a cumbersome series of excuses and delays.  
World Bank President James Wolfensohn said the hold-up in debt relief for
the poorest countries was "delay for delay's sake". Meanwhile, this
situation in Mozambique-half a million homeless, the threat of epidemics
caused by water-related diseases, the devastation of thousands of acres of
farmland-can only get worse.  It is the creditors' turn to fulfil their
obligations and at the very least deliver on promises made last June.
There is no excuse for delay.
                                                                                
                                                                                
                                                                                


US COMMITTEE REPORT SEEKS IMF,WORLD BANK ROLE CURBS.
 A report by a US congressionally appointed committee to be released early
next month recommends drastic curbs in the roles of the World Bank and the
IMF and says the money saved should be given back to member states,
reports Reuters. The highly critical draft report seeks shake-ups in both
institutions, limiting World Bank lending to poor countries that cannot
raise money in the private sector and changing the IMF's lending rules.

"The IMF has given too little attention to improving financial structures
in developing countries and too much to expensive rescue operations. Its
system of short-term crisis management is too costly, its responses too
slow, its advice often incorrect and its efforts to influence policy and
practice too intrusive," the document says.  "High cost and low
effectiveness characterizes many development bank operations also.

Some "minor revisions" are likely before publication and panel members are
expected to add dissenting views, says the paper, written by a bipartisan
commission chaired by Carnegie Mellon University economics professor Allan
Meltzer.  "It's still a draft, and it's still under debate," said panel
member Fred Bergsten, who admitted he did not share all the conclusions
from his commission partners.  "The IMF has gotten too broad and has
gotten into areas like poverty reduction which are traditionally the role
of the World Bank so a clear delineation between the Bank and the Fund is
not at all a bad idea," he said. "But on the flip side you do not want to
eliminate the Bank's ability to help the millions of people who happen to
live in poverty even though their country has a relatively high per capita
income level."

The report, which seeks a smaller IMF to provide short-term loans at "a
penalty rate" and which would scrap most of the IMF's existing lending
windows, also proposes merging the IFC into the rest of the Bank, which it
would rename the World Development Agency. MIGA, says the report, should
be scrapped.

The commission says in the report its proposals for the World Bank would
allow money to be returned to national treasuries. The US, the largest
shareholder for both the Bank and the Fund, would receive some $10
billion.