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World: IMF Director Advocates Reform

  • Breffni O'Rourke

The International Monetary Fund's new managing director, Horst Koehler, may wear the conservative gray suit of a banker. But he portrays himself as a zealous reformer eager to bring openness to his organization, which is frequently criticized as secretive and unaccountable. Koehler is now in Prague attending the IMF/World Bank series of annual meetings, and he spoke at a press conference at which he put forward some of his ideas. RFE/RL correspondent Breffni O'Rourke was there.

Prague, 21 September 2000 (RFE/RL) -- Horst Koehler, a German, is not a native English speaker. His English grammar may not be perfect, but his ideas are clear and sharp. And this is his message: the International Monetary Fund, or IMF, is changing..

At his Prague press conference yesterday (Wednesday), Koehler referred to what he called his "vision" for the IMF, which he described as meeting two major challenges:

First, to adjust the fund to the sweeping changes in global financial markets. Second, to make the fund an active and efficient component in getting the international economic system working for the benefit of all.

Koehler said his understanding of the IMF is that it is an open institution, learning from experience and dialogue. He referred frequently to what he called his "listening tour" earlier this year, during which he visited the poorer countries of Africa and Asia and spoke to many segments of society. He said he had learned much about how dialogue can enhance the work of the IMF.

He said a further sign of change in the fund is its setting up an external evaluation panel, which will be able to assess the IMF's activities from an independent viewpoint.

But at the same time the IMF will not be giving up its core character as a key financial institution which supports and advises member countries on the development of their economies according to free market principles. Koehler says:

"I do think that the direction we have to reform the fund must be clearly focused, and this means also to strengthen its monetary character. But on the other hand, its clear that if the fund does not define its role in the context of this major challenge of a global economy -- which is not working up till the present for the benefit of all -- the fund would miss its obligations."

That's quite an admission -- that the globalized economy is not working for the benefit of all. It corresponds to the perception which is expected to bring tens of thousands of anti-globalization demonstrators on to the streets of Prague in the coming days, when the IMF and World Bank will hold their formal board of governors sessions.

On the other side of the fences -- on the opposition side -- are people like Juergen Kaiser, who heads a coalition of debt relief activists called Jubilee 2000. Kaiser says the IMF has been talking a pro-reform language lately, but the results of that have yet to be seen in practice. He says:

"What we have seen in the past is that the IMF has had its troika of standard settings that it applies in a kind of 'one size fits all' recipe. And this is the liberalization and privatization approach and the fight against inflation -- these are elements which do have their merits in a process of macroeconomic stabilization, but it has been applied in the past at the cost of the very high vulnerability of the poor sectors." Kaiser says an example of how the IMF's traditional austerity policies hit the underprivileged is the question of getting loan money to the smallest units in society:

"For example, if it comes to questions of stabilization, there is credits supply, which especially for small-holders in poor countries is a very crucial issue, a matter of life and death, and in the past IMF programs have been very much to the detriment, have dried out credit supplies for small-holders, for cooperatives, by privatizing the whole banking sector." Kaiser says what is needed in such cases is more than conciliatory rhetoric.