Camdessus and Soros on IMF and econ crisis

[Rob Weissman <rob@essential.org>]

The comments from Camedessus are absolutely essential to understand how he
hopes to use "IMF reform" to strengthen the stranglehold of the Fund and to
increase the pressure on Third World countries to undertake structural adjustment.



Asian crisis has allowed revolution at IMF: Camdessus
Date: Wed May 19 11:32:28 CDT 1999

   TOKYO, May 19 (AFP) - Asia's financial crisis has led to a "revolution"
in the way the IMF prevents economic crises and imposes the crucial virtue
of transparency, the Fund's chief Michel Camdessus told AFP Wednesday.
   Nearly two years after the crisis erupted in Thailand, east Asia has seen
the start of an economic recovery and structural reforms advocated by the
International Monetary Fund (IMF) are being put in place.
   Despite being heavily criticised at the peak of the crisis, which spread
across the world last year, the IMF and its managing director have now won a
modest victory.
   "Now I see the extreme discretion of people who were writing big
headlines in the newspapers and holding us up to ridicule only six months
ago," Camdessus said in an interview, shortly before he left Tokyo for Seoul
where he is due to meet President Kim Dae-Jung.
   But the real success is in the creation of a new international financial
architecture which renews and considerably re-enforces the role of the IMF.
   Hence the Fund's establishment on April 25 of a new lending facility, the
contingent credit lines, which provide another line of defence for nations
threatened with financial crisis as long as they follow strong economic
policies.
   Camdessus called that "a Copernican revolution" and said the credit lines
would be "unlimited."
   "It is the creation for the first time of a facility meant to act not
after the catastrophe but before it," he said.
   "Normally, if you read the IMF's constitution, we are there to be
firemen, not to provide promises for people of unlimited financing, in order
to protect them from contagion and guarantee they will not be carried off."
   The IMF will not become an international "lender of last resort," as some
would have it, because the credit lines will come "before the crisis,"
Camdessus said.
   Countries will only be eligible if they meet "demanding" conditions, both
macro-economic and monetary, as well as in the management of their banking
and finance sectors.
   "You see what a systemic effect such an approach could have, since as
each time a country becomes excellent, everyone benefits," Camdessus said.
   That drive for excellence would help the IMF chief considerably in his
crusade for transparency.
   "If I had only one thing to aim for, I would fight for that," he said.
   "Because if the Thais and the (South) Koreans ... had respected the need
to give us a weekly report on the state of their currency reserves and a
monthly report on their short-term debt, we might have been able to convince
them to change policy earlier and most importantly it would have weakened
the hold of the 'denial syndrome,' that refusal to see the true situation,"
he said.
   "People are laughing at me, saying Camdessus only has one idea:
transparency. But I believe that in the coming world, transparency will be
the most crucial virtue."
   The reform of the IMF will not stop there, he vowed.
   Camdessus said he was sure there would be an agreement to transform the
IMF's Interim Committee, a policy advice body, into a real council with
decision-making powers.
   "I believe we will create a council," Camdessus said.
   It was regrettable that "everyone saw ulterior motives in this," he said,
particularly "the Americans (who) saw in it a threat to their power."
   To those in Asia or elsewhere who see the IMF as an arm of the US
government, Camdessus said the United States "came to us with an articulate
vision for these problems, which was in general correct."
   The IMF also differed with Washington on issues, he stressed.    "America
only has this position of strength because the Europeans are isolated and
divided," he added. "The day when they speak with one voice, they will be
stronger than the United States."



Soros says financial crisis is over, proposes changes in IMF
Date: Fri May 21 20:21:26 CDT 1999

   CHICAGO, May 21 (AFP) - International financier George Soros on Friday
pronounced the global financial crisis to be over but called for a key
reform in the operation of the IMF to deal with future turmoil.
   Soros, in a speech at the University of Chicago, also reiterated what are
by now standard criticisms of the International Monetary Fund's response to
the Asian crisis.
   He faulted the IMF for imposing "punitively high interest rates" on
countries receiving its assistance, which may have stabilized exchange rates
but also plunged already troubled economies into recession.
   "When the crisis threatened the United States," he pointed out, "the
Federal Reserve lowered interest rates and the US economy escaped
unscathed."
   Nevertheless, Soros declared that "the global financial crisis is now
officially over," notably as "emerging markets in Asia and Latin America
have come roaring back."
   In response to the meltdown in Asia, he noted, there have been repeated
calls at the IMF and elsewhere for private creditors to assume a greater
responsibility for their operations in emerging market countries.
   On Thursday US Treasury Secretary Robert Rubin told Congress that private
creditors and investors should be prepared to accept debt restructuring
and -- in some circumstances -- even a temporary interruption in repayments
from crisis-hit countries.
   "The trouble," Soros on Friday, "is that the private sector does not make
sacrifices without charging for it, so in the end the costs will be passed
on to the borrowers."
   At present countries that adhere to certain IMF-prescribed standards and
practices are eligible to receive loans from the fund to stabilize their
economies and meet their debt obligations.
   "I propose that the IMF should go a step further and declare that in the
case of those countries which meet the required standards IMF programs would
not involve debt restructuring," Soros told his audience.
   The goal, he said, is to assure bondholders that they will be able to
recover their investment, which in turn would strengthen international
confidence in the country.
   "This would enable the countries concerned to borrow in the markets at
cheaper rates," according to Soros.
   "It would provide a powerful incentive to meet the required standards and
it would enable the IMF to act in a preventive manner."
   But it stressed that such IMF assurances would be confined to publicly
issued bonds rather than bank credit lines.
   "Providing banks with implicit guarantees has been at the core of the
trouble in the recent crisis," he said.