IMF endorses program to improve crisis-prevention methods
WASHINGTON – The International Monetary Fund, prodded by the Bush administration, endorsed a program Sunday to establish better procedures to prevent a repeat of the 1997-1998 Asian currency crisis that plunged two-fifths of the world into recession.
The IMF’s policy-setting committee approved a nine-page statement declaring that ”strong and effective crisis prevention” should be a top priority for the agency. The panel instructed IMF Managing Director Horst Koehler to proceed with efforts to overhaul the agency’s procedures.
”The IMF needs to work even harder to put crisis prevention at the heart of its activities,” Koehler said in a statement released at the end of the daylong discussions.
As the IMF was concluding its discussions, about 200 protesters with banners and puppets demanded that the financial institutions work to erase poor countries’ debt.
”The World Bank has got to go,” the protesters shouted as they asked for ”global justice … now.”
The peaceful nature of the rally – and the size of the crowd – was in sharp contrast to the protests at last spring’s IMF-World Bank meetings, when riot-clad police used pepper spray to subdue the demonstrations. More than 1,200 were arrested during the protests last year.
IMF policy-setting International Monetary and Financial Committee, composed of finance ministers and central bank presidents representing the 183 nations that are members of the lending agency, accepted recommendations on crisis prevention that had been put forward by the Bush administration.
U.S. Treasury Secretary Paul O’Neill, since taking office, has voiced criticism with the IMF’s handling of the 1997-98 Asian currency crisis, which plunged a number of countries into steep recessions and forced the agency to assemble more than $100 billion in rescue packages.
O’Neill told the gathering Sunday that improved early warning procedures should mean that the IMF will have to respond ”less frequently because it has succeeded in preventing crisis from developing in the first place.”
Koehler also announced that the IMF has reached an agreement in principle to extend new financial support to Turkey and Argentina, two countries currently facing economic troubles.
”The remaining details will be sorted out in the next few days,” he said at a late afternoon news conference.
Echoing the view of finance ministers and central bank presidents from the world’s seven richest countries, the IMF policy panel said it was optimistic that the current global slowdown, the most severe since the 1997-98 currency crisis, would not be an extended one.
”While we recognize that the short-term prospects have weakened considerably, we believe the slowdown will be short-lived,” Gordon Brown, Britain’s chancellor of the exchequer and the chairman of the group, told reporters.
Responding to the concerns raised by protesters, the IMF panel endorsed proceeding with efforts to cut the debts of the world’s poorest countries but stopped far short of the total debt forgiveness demanded by protesters.
”Instead of retreating from global cooperation, we are strengthening it and it is by strengthening global cooperation that we are better placed to deal with difficulties as they arise,” Brown said.
In the area of crisis prevention, the policy group encouraged Koehler to proceed with a program to strengthen the IMF’s understanding of how massive capital flows can disrupt countries and to move forward with publication of better early-warning indicators for individual countries.
Underscoring the magnitude of the poverty problem, the World Bank said Sunday that of the world’s 6 billion people, 1.2 billion are still living in extreme poverty on less than $1 per day.
The report said rich countries such as the United States should increase foreign aid and eliminate trade barriers for poor nations’ goods – steps that could increase support for poor countries by $200 billion annually.
The IMF communique said that there was a ”need for global action” in the fight against AIDS and other infectious diseases but left details of the effort, which could result in billions of dollars in new financial support from wealthy countries to be worked out.
A senior U.S. Treasury official, briefing reporters on condition of anonymity, said the administration was interested in the AIDS proposal but wanted to make sure such an effort would ”accomplish real change for real people.” It could be approved at this annual economic summit of the world’s seven wealthiest nations in Genoa, Italy, in July.
French Finance Minister Laurent Fabius raised the possibility during discussions that the World Bank should convert at least a part of its giant poverty loan program to outright grants as a way to provide assistance without building up more debt.
That is a recommendation being advanced by a congressional advisory panel championed by Republican conservatives who want to make radical changes in both the IMF and World Bank.
Turkish Finance Minister Kemal Dervis told reporters Sunday that his country and the IMF were ”very close, very close” to finalizing a new $10 million loan package.
Argentine Economy Minister Domingo Cavallo sought to put to rest worries that his country’s economic troubles will force his nation to default on its foreign loans.
”We strongly oppose such a destructive idea,” Cavallo said. ”Getting the economy moving again is our critical task.”
On the Net:
U.S. Treasury Department: http://www.ustreas.gov/
International Monetary Fund: http://www.imf.org
World Bank: http://www.worldbank.org
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