Summers urges changes at IMF

[Robert Weissman <rob@essential.org>]

U.S. Urges Broad Changes At IMF 
                       By John Burgess 
                       Washington Post Staff Writer 
                       Wednesday, December 15, 1999; Page E01 
                       Treasury Secretary Lawrence H. Summers yesterday
proposed broad changes at the International 
                       Monetary Fund, saying it should focus on making
short-term emergency loans, demand better 
                       accounting by recipient countries and become more
open to public scrutiny.

                        The IMF "should not be a source of low-cost
financing for countries with ready access to private 
                       capital, or long-term welfare for countries that
cannot break the habit of bad policies," Summers 
                       said in a speech to the London Business School
yesterday that elaborated on remarks he made to 
                       reporters in Washington on Monday.

                        Summers proposed cutting back on the fund's
longer, three-year loans and raising interest rates on 
                       some short-term loans, to encourage countries to
repay them more quickly. "The IMF must be a 
                       last, not a first resort," he said, according to a
copy of the speech released in Washington.

                        The Washington-based IMF led the international
rescue operations that bailed out several Asian 
                       countries hit by financial panics in 1997. The size
of its loans--it now has about $90 billion 
                       outstanding--and the stiff conditions on which the
money was given, led many members of 
                       Congress to criticize it as too big and
unaccountable.

                        The IMF is owned by its 182 member countries;
roughly half of them have some type of loan 
                       outstanding. The United States, providing about 17
percent of the fund's capital, is its biggest 
                       single contributor.

                        One of the fund's most frequent critics in
Congress, Senate Banking Committee Chairman Phil 
                       Gramm (R-Tex.) welcomed Summers's remarks. "Having
a leaner, tougher agency is always 
                       good," he said in an interview yesterday. ". . .
Lending on a short-maturity basis is the way the 
                       IMF should function." He predicted that other major
IMF countries would support the changes 
                       Summers proposed.

                        In a statement, the IMF said yesterday that
Summers "has touched on a number of critical areas that 
                       need to be considered as we draw the lessons of the
recent crisis and prepare the fund for the 
                       future."

                        From London, Summers goes to Berlin to promote his
ideas at the first meeting of the "G-20," a 
                       group of countries discussing reforms in the world
financial system.

                        In his speech, Summers also said the IMF should:

                        

                       * Better promote the flow of reliable financial
information from foreign markets. For instance, he 
                       called on it to require and publish audits of
central banks that are receiving IMF loans. The IMF has 
                       demanded such audits from such countries as Russia
and Kenya but does not require them 
                       generally.

                        

                       * Help countries monitor their "financial
vulnerability," so that financial officials can track situations 
                       that can sneak up and cause crises, such as when
what may be thousands of loans come due.

                        

                       * Work more closely with private lenders through
formation of a Market Conditions Advisory 
                       Group. Private lenders, he said, should realize the
IMF will not always come in with rescue 
                       packages that will keep them whole.

                        

                       * Give the World Bank the lead role in a global
debt relief program for desperately poor countries. 

                       * Reform itself internally. The fund should create
a governing structure that is "more representative" 
                       and work more closely with outside interest groups.
It should publish its operational budget, which 
                       it has not done on the grounds that it would reveal
fund thinking about various currencies.

                        Summers did not propose blanket changes to the
controversial IMF practice of insisting that 
                       borrower governments undertake painful economic
changes before getting money. But he said 
                       requirements should be made case by case.

                        Aid groups have long alleged that IMF polices can
exacerbate conditions in poor countries.

                        Lydia Williams, policy adviser for Oxfam America,
responded positively to Summers's speech.