[stop-imf] Koehler Reshaped IMF In Own Image Amid Turmoil In 2001

[Robert Weissman]

January 2, 2002
Dow Jones Newswires
Koehler Reshaped IMF In Own Image Amid Turmoil In 2001
(This article was originally published Monday)
by Damian Milverton

 WASHINGTON -- The silence at the International Monetary Fund during
Argentina's startling economic and political collapse this month is
itself instructive when reviewing how the IMF fared during a tumultuous
2001, for it starkly reflects the imprimatur of Managing Director Horst
Koehler.

 For Koehler, 2001 was his first full calendar year as the paramount
executive of the 183-member IMF, and a brief review of the Fund's
activities during these past 12 months suggests that he has revamped the
Bretton Woods institution to a vision reflecting his own character.

 However, while the horrific events of Sept. 11 and the need to rebuild
in Afghanistan might have tempered globalization criticism for the
moment, Koehler's handling of Argentina in the first months of the new
year - and not his success with internal reforms - might well determine
how strongly the antiglobalization movement rediscovers its voice.

 Koehler himself is energetic, pragmatic and plainspoken to the point of
bluntness, traits that served him well during his years at the German
finance ministry and the European Bank for Reconstruction and
Development.

 Alongside these attributes is a reputation for stubbornness and a
disdain for diplomacy that fueled gossip that his personal style was
behind the October departure of the widely-respected Stanley Fischer as
IMF first deputy managing director.

 Regardless, the Fund itself in 2001 performed much in the manner of its
helmsman. Indonesia was ground down during months of negotiations until
it finally accepted the IMF's insistence that it undertake a range of
crucial fiscal and banking reforms.

 In July, the IMF virtually frightened Turkey's political establishment
into accepting the need for reforms when it postponed a crucial board
meeting that was to consider a $1.5-billion loan installment.

 And finally, in December, the IMF very publicly turned off the loan
spigot to Argentina, just four months after agreeing to increase its
loan arrangement by $8 billion to $22 billion.

 Within the IMF itself, Koehler has overseen a near revolution in an
attempt to make the Fund more relevant to the global economy, and less
vulnerable to critics, whether Capitol Hill committee chairmen or
23-year-old antiglobalization protesters in Ottawa.

    Finding A Voice As Senior Ranks Are Revamped

 The past 12 months have seen the creation of what Koehler touts as an
independent Evaluation Office to oversee IMF policies, and an
International Capital Markets department tasked with ensuring the IMF is
more aware of market developments and possible dangers.

 Koehler also has overseen a new process of review within the IMF to
whittle down the conditions on IMF loans to a more focused core of
demands and goals, a popular step with the developing countries among
the IMF's 183 member nations.

 Going into 2002, Koehler also has a significantly revamped executive
and senior management team behind him.

 Anne Krueger, a Stanford economist, has replaced Fischer as Koehler's
deputy and she has moved quickly to establish herself as a voice in the
intellectual debate over the need to revamp the international financial
system.

 Only weeks into her tenure at the IMF, Krueger last month raised
eyebrows in the private sector with a call for an international
bankruptcy system for sovereign debtors, much along the lines of the
Chapter 11 laws that protect stricken U.S. companies.

 Deeper within the heart of the Fund, a youthful but widely experienced
Timothy Geithner is settling in as director the Policy Development and
Review Department, having replaced the outgoing Jack Boorman. Geithner
served a lengthy stint at the Treasury department, rising through the
career ranks to become under secretary for international affairs in the
waning months of the Clinton administration.

 Rounding out the changes in the upper echelons at the IMF, Harvard's
Kenneth Rogoff arrived in 2001 as the chief economist, replacing the
entertaining - and therefore, given the world of economics,
controversial - Michael Mussa.

    IMF Approach To Argentina Crucial As 2002 Unfolds

 Altogether these appointments represent a complete revamp of the most
high-profile positions at the IMF. Geithner and Krueger are expected to
provide the intellectual heft and extensive experience to aid Koehler is
his crusade to steer the IMF to his vision of a Fund better at detecting
financial flaws and addressing them before they flare into national or
international crises.

 If the list of IMF actions over the past 12 months suggests anything,
it is that Koehler's tough love approach isn't a mere experiment,
reaching its zenith during the Argentina debacle.

 The IMF in September cut Zimbabwe off from IMF loans as the government
there pursued politically expedient land reform at enormous cost to the
real economy.

 Wayward borrowers have been publicly rebuked for their failures and
Koehler has even shown a willingness to clash with the Fund's most
powerful members, as shown during jousts with Japan over its banking
sector, and with the Europeans over interest rates.

 Koehler, however, continues to adhere to the IMF's mission to support
its members as much as is practicable, reaching significant new deals
with Turkey, Indonesia, Pakistan, Ecuador and Brazil, while risking his
own credibility in efforts to stave off what many regarded as an
inevitable collapse
 in Argentina.

 Indeed, the IMF might well be repaid with considerable criticism and
protests during 2002 because Koehler sought to encourage Argentina to
stick with itsIMF program - and its conditions of spending cuts and debt
deals - up to the  last minute.

 -By Damian Milverton, Dow Jones Newswires; 202-862-9272;
 damian.milverton@dowjones.com