[stop-imf] FT: Fresh blood at the Fund

[Robert Weissman]

Financial Times
May 22 2001

Editorial comment: Fresh blood at the Fund

The International Monetary Fund's operations in Argentina and Turkey are a
legacy of an age now passing into history. With three senior officials,
who together provided the IMF's intellectual core, due to leave, this
important institution has the opportunity to reshape itself to fit a
changed global situation.

Of those departing, the most important by far is Stanley Fischer, the
highly capable outgoing first deputy managing director. During his period
at the IMF, its most visible activity was large-scale assistance to
countries needing to achieve macro-economic stability or unable to sustain
their fixed exchange rates. Today, the agenda has changed. Most middle
income countries have achieved modest rates of inflation and adopted
floating exchange rates. The heavy handed involvement of the IMF in the
details of economic programmes has come under heavy criticism. Many also
condemn the moral hazard created by massive IMF assistance.

In response, the IMF's shareholders are planning a somewhat different
role.

The IMF will still need to intervene when there are systemic risks. But it
must also bring the private sector into debt workouts. Overseeing the
impact of capital markets on countries' economies is a third objective. A
final goal is clarifying the IMF's role in poor countries.

It is no longer enough therefore for the first deputy managing director to
be a sound macro-economist. He, or she, must also possess a grasp of the
financial markets, and be sympathetic to the IMF's new direction. It is
particularly important for the new appointee to be a world-class
intellectual leader, so complementing its managing director, Horst Kohler.
He or she must also be able to resist the political pressures upon the
IMF.

This is a tough job description. Filling it with the right candidate is
made particularly difficult by the convention that the first deputy is
always an American, just as the head of the IMF is always a European. The
row over the appointment of the successor to former head Michel Camdessus
showed how outdated this cosy arrangement has become. An open contest
would bring forward a much better range of high-calibre candidates. It
would also help to dispel some of the resentment towards the IMF felt by
the developing world.


President George W. Bush would give the IMF's credibility a huge boost if
he were to waive the requirement that the first deputy must be an
American.  If he is unwilling to do that, the US administration and Mr
Kohler need to agree on a candidate who is unquestionably worthy of the
job and as politically independent as possible. Otherwise they would
merely reinforce the impression that the US views the IMF as an arm of its
own foreign and financial policies.