Line between IMF, WB continues to blur

By Janet Guttsman

WASHINGTON (Reuters): The lines between Washington's two main multilateral lenders blurred further at their annual meetings this week as both sought a role in the tricky task of saving the world from poverty.

The boundaries were becoming less distinct even before Asia's financial crisis brought the world to the brink of economic disaster last year.

During the 1997-1999 crisis the World Bank -- an unwieldy institution focused on alleviating poverty with loans for specific projects -- did some of the work of the cash-strapped International Monetary Fund (IMF) with multibillion dollar credits to the countries in trouble: Thailand, Indonesia, South Korea, Russia and Brazil.

This week, declaring these problems to be over and forecasting stronger growth, the IMF muscled in on the bank.

IMF officials, used to imposing tough conditions on borrowing countries that critics say hurt the poor, coined World Bank-style phrases about listening to "the voices of the poor" and promising to policies to foster growth.

"It is the honor of the IMF, even if it is not a development institution, to try continuously to help governments, to be responsive to the cries of the poor," IMF Managing Director Michel Camdessus said in his keynote address to ministers, central bankers and bankers at the meeting.

"The time has come for a new and more decisive start."

World Bank officials greeted the comments with optimism and a touch of skepticism, and many delegates welcomed the IMF's new focus on poor countries, cemented also by agreements on how to pay for expanded debt relief programs for poor countries.

"We must now strengthen the activities of the Bretton Woods institutions by giving them a more clearly defined social focus, and by incorporating education and health programs into these activities, since these have a considerable impact on the poorest communities," said Belgian Finance Minister Didier Reynders.

The IMF and the World Bank were set up in Bretton Woods in New Hampshire in 1944. The fund initially concentrated on the needs of a system of fixed exchange rates, while the bank provided capital to help development poor countries.

But both institutions have had to change. The fixed exchange rate system collapsed in 1971, and the World Bank has recently concentrated on social sector lending where the profit-oriented private sector is reluctant to get involved.

They are now trying hard to work together, promising at these meetings to issue joint policy documents on how poverty can be reduced, and use these papers as the basis for both the bank and the fund to decide whether to lend to a poor country.

"This is intended to provide a comprehensive framework in which both institutions will operate, each dealing with their areas of expertise," IMF First Deputy Managing Director Stanley Fischer told a seminar on labour law.

Officials say the new papers should reduce duplication. Countries have often complained that they brief IMF officials, only to find that World Bank experts are lining up to ask the same questions.

"On the one hand, each institution should focus on its own area of expertise, but on the other the knowledge and experience should be shared between the two and integrated into respective policies and documents," said Russian Finance Minister Viktor Khristenko, whose country has received billions of dollars from each of the lenders.

"However the mandates of the two institutions remain different...The IMF is charged with a special surveillance mandate...The bank's role is to provide resources for development and poverty alleviation," Khristenko added.

Some delegates were less than enthusiastic about a new IMF drive to help the poor, fearing the IMF was easing up on its mandate to push for a stable world financial system.

"It is very important that the two institutions keep separate mandates and do not compete with each other," said Juergen Stark, deputy head of the German central bank.