[stop-imf] Excellent NYT editorial on Meltzer Comm'n

[Robert Weissman]

New York Times
March 9, 2000

I.M.F. and World Bank Blueprint

More than half a century after their creation, the International Monetary
Fund and the World Bank could use some fresh thinking about their
operations. Thanks to a Congressional commission that unveiled its
recommendations about the institutions yesterday, there are some bold new
ideas to consider. Some of the suggestions are ill conceived, but others
deserve serious consideration by the United States and other nations that
belong to the two organizations.

One of the biggest and best ideas in the report is a call to cancel the
crushing debt of the world's poorest countries. If the commission does
nothing else but spur the United States and its allies to get behind this
plan, it will have accomplished a lot.

The 11-member, bipartisan commission voted unanimously to strip the I.M.F.
of all but one task: extending emergency loans to countries whose
currencies come under attack. The job of fighting poverty would be turned
over to the World Bank. This is a sound idea that would produce a clearer
division of responsibilities.

The commission would end the current practice of making I.M.F. bailouts
contingent on the acceptance of strict and sometimes harmful economic
policies dictated by the fund after a country falls into financial crisis.
Instead the fund would require countries to qualify for future loans by
opening up their banking systems and taking other steps that could help
prevent a crisis. This would have the added advantage of allowing the fund
to react more quickly when trouble develops.

These recommendations are constructive, but go too far. Countries that do
not pre-qualify for assistance would be unable to get loans in a crisis. A
less drastic reform would allow the fund to extend loans to wayward
countries, but at a higher interest rate. The report also errs in limiting
emergency loans to eight months. Neither of these defects would be hard to
fix.

As for the World Bank, the commission would justifiably eliminate lending
to countries whose credit ratings permit them to tap private capital
markets. It would concentrate the bank's money on fighting poverty in the
world's 80 or so poorest countries. The commission also recommends that
the bank use grants rather than loans to pay for its programs. To
vaccinate children, for example, the bank would solicit bids and pay for
the vaccines itself as they are actually delivered. The idea is to reduce
corruption and waste. Switching to grants would require more money from
the donor countries -- which the report strongly advocates. This may be
possible, but is far from assured.

Congress is not expected to act on the report soon. But some politicians
are already denouncing the commission, wrongly, for dismantling the I.M.F.
and the World Bank. The danger is that political squabbling will squander
an opportunity for Democrats and Republicans to reach an important
agreement. The I.M.F. and World Bank need to sharpen their focus and
improve their programs. The first step toward these goals is to lift the
debts that keep desperately poor countries trapped in poverty.


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