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.