December 15, 1999
New Vision of the I.M.F. Is Proposed
By JOSEPH KAHN
ONDON -- The Clinton administration, which has defended the
International Monetary Fund against vocal critics at home and
abroad for many years, has proposed that the fund redefine its
mission, become less secretive, and end some lending programs --
changes that critics have long demanded.
The proposed changes, the most thorough rethinking of the IMF's
role in the world since the financial instability of the early
1970s, would limit its core mission to making emergency loans to
countries that face short-term currency crises. In recent years,
the IMF has assumed a broader role in advising and lending to poor
and developing countries, but has been widely criticized as
ineffectual in administering some longer-term programs.
Treasury Secretary Lawrence H. Summers, speaking at the London
Business School on Tuesday ahead of a Berlin meeting of both
advanced and developing economies, said the monetary fund should
phase out long-term lending and cede some of its aid to developing
countries to its sister agency, the World Bank. The fund should
also be quicker to step aside when a country has ready access to
private capital, Summers said.
"To say that the IMF is indispensable is not to say that we can
be satisfied with the one we have now," Summers said in a speech
outlining the proposals. "Going forward, the IMF needs to be more
limited in its financial involvement with countries."
The blueprint for change is intended to serve as a mandate for a
new managing director of the fund. Michel Camdessus, the current
managing director, announced his resignation before the end of his
term and will leave the IMF in February. Choosing a new managing
director, a post that has customarily been held by a European, will
be an informal topic of discussion at the meeting in Berlin
beginning on Thursday, American officials said.
The administration's plan appears to be a response to a growing
chorus of critics of the fund, including economists and members of
Congress, who have said that the IMF could have done more to
detect, prevent and contain the emerging-markets financial crisis
that began in mid-1997. Though the crisis has passed without the
worst fears of the IMF's critics having been realized, its lending
programs to a few countries, most notably Russia, were widely
considered to be failures.
Some members of Congress have tied their support for a highly
touted Clinton administration goal -- forgiving the debt of some of
the poorest countries -- to an overhaul of the IMF. Others have
called for changes similar to those Summers outlined Tuesday. Rep.
Jim Saxton, R-N.J., who monitors the fund, said that its long-term
lending programs are conducive to corruption in poor countries and
should be stopped.
In proposing the changes, Summers rejected calls for turning
back the clock on the IMF to a time when its mission was solely to
help countries shore up foreign-exchange reserves, a measure taken
to protect a currency from declining too sharply in value. The
Treasury secretary said the fund should still provide some
long-term credit and guidance to poor countries. He also said that
the fund deserves praise for how it handled the financial crises of
the last several years, even in Russia.
But he nonetheless prescribed a thorough revamping. Most
notably, he said the fund should phase out low-interest-rate
financing, forcing most countries to raise money from private
sources at prevailing interest rates. If that were carried out in
full, it would affect dozens of the fund's lending programs around
the world. Some programs, like the one for the Philippines, have
run as long as 25 years.
Summers also said the fund should become more open to the
public, by publishing its annual budget, for example. He said that
the fund should compel member countries to disclose many kinds of
financial data they now provide on the condition that it remain
secret. Though that change sounds simple, it would involve a
cultural revolution at the IMF, which has operated more as an
exclusive club of nations than a conduit of information to
The fund welcomed Summers' comments in a statement issued
Tuesday. "He has touched on a number of critical areas that need
to be considered as we draw the lessons of the recent crisis and
prepare for the future," the statement said.
But Camdessus, writing in an IMF publication that predated the
Summers speech, said the growth of the fund's lending programs was
in response to a need among poor countries. He said proposals to
drastically narrow the scope of the fund's work were misguided.
"This would obviously be a recipe for irrelevance in today's
world," Camdessus wrote. He could not be reached for comment on
Some critics of the fund said the proposed changes are on
target. But Jeffrey Sachs, who heads Harvard's Institute of
International Development and has been a vocal opponent of IMF
practices, said that the fund, often with American support,
continues to expand its mission in developing countries.
"In practice, the fund seems determined to hold on to a very
broad agenda that impacts the lives of hundreds of millions of
people," Sachs said. "The question here is whether we will see