IMF emerges with its authority enhanced

IMF emerges with its authority enhanced

WASHINGTON (AFP): The International Monetary Fund, the target
of sharp criticism during the Asian financial crisis, has emerged
from the ordeal a more transparent institution and with its
authority enhanced.

The Asian meltdown, which erupted in Thailand with the
devaluation of the baht July 2, 1997, sparked a veritable
"revolution" in the way the IMF does business, its managing
director, Michel Camdessus, told AFP in a recent interview.

The crisis forced the Fund to improve its strategy for
preventing financial upheavals and to open itself more to public
scrutiny.

As market unrest spread from east Asia across the Pacific to
Brazil and Russia, the IMF stepped in to organize international
bailout packages worth more than 100 billion dollars for
Thailand, South Korea and Indonesia.

Of this total the IMF committed US$35 billion of its own
resources, as well as $18 billion approved last December to shore
up Brazilian defenses against the global contagion.

At the height of the turbulence, the IMF was pilloried,
notably in academic circles and in the United States Congress,
for having failed to foresee the threat to once-booming Asian
economies.

Its rescue initiatives were then denounced as misguided
attempts to compensate imprudent overseas investors and
creditors.

IMF initiatives favoring budget cuts and higher interest rates
were seen in other quarters as imposing recessions on the
recipient countries and harming the interests of the poor.

Today, however, the crisis itself is in recession and modest
recoveries are under way in some of the worst-hit economies.

For Camdessus, the events of the past two years have
highlighted the critical need for transparency, both among IMF
members and in the operations of the Fund itself.

Prodded by the U.S. Congress, which for years has complained
about IMF's penchant for secrecy, the Fund has taken steps to
improve its communication skills.

The annual evaluation of member economies by the IMF executive
board, program letters of intent and the state of IMF finances
are now made part of the public record, an effort bolstered by
access to the Internet.

The Fund has even called in a public relations firm to improve
its image.

IMF member governments are now strongly urged to make
available macroeconomic data for tables published by the Fund on
the Internet. The IMF in addition develops and publicizes
transparency standards for central banks.

Parallel with the new emphasis on candor is an accent on
preventive measures.

At its April general meeting the IMF approved a new lending
scheme called "contingent credit lines," under which assistance
is mobilized for countries that have been faithful in pursuing
IMF reform measures but who nonetheless find themselves
threatened by external instability.

The goal, according to Camdessus, is "to act not after the
catastrophe but before it" and to convince vulnerable countries
to put in place sound debt management policies and realistic
exchange rates.

The IMF has likewise examined its own structure and is
considering transforming its interim committee, which provides
policy advice, into an actual council with decision-making
powers.

The transformation, actively promoted by France, would
"demonstrate that governments are taking full responsibility for
their policies," according to Camdessus.

But consensus on the move is far from assured. The idea in
particular is opposed by the United States, fearful -- according
to some analysts -- that it will weaken its influence in the
Fund.