The Hindu : Opinion / Editorials : STATUS QUO AT THE IMF AND WORLD BANK

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Wednesday, Apr 28, 2004

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STATUS QUO AT THE IMF AND WORLD BANK

THIS YEAR MARKS the 60th anniversary of the founding of the International Monetary Fund and the World Bank. While this is as good an occasion as any for a rethink on how the two institutions have been functioning, there was no evidence of such a review at their annual Spring Meetings in Washington last week. If anything the signs were of the Bretton Woods institutions continuing to function on the direction of the Group of Seven advanced economies and not the 184 countries that are the shareholders. Once more, the search for a new Managing Director of the IMF has been taking place not in an open and transparent manner but according to a tradition decided upon by the United States and west Europe: the chief of the World Bank would be from the former and of the IMF from the latter. The numerous calls from the governments of developing countries, academics and independent experts to make the selection process more transparent have fallen on deaf ears. Europe has gone ahead and nominated Rodrigo Rato, the former Finance Minister of Spain, for the job of IMF chief and this has naturally been endorsed by the U.S. and Japan. As the Group of 24 developing countries justly pointed out in a communiqué issued during the course of last week's meetings, the IMF preaches good governance, transparency, and inclusiveness to the developing countries but is not following the same standards in the selection of its chief.

The IMF projects the global economy to grow by as much as 4.6 per cent this year, a substantial acceleration from the 4 per cent it forecast last October. However, the larger picture at Washington was not the current pace of world economic growth but was provided by a World Bank overview of progress in achieving the U.N. millennium development goals (MDGs) in poverty, nutrition, education and health. There has been a substantial reduction in the global incidence of poverty over the past two decades, but, as the Bank's progress report presented in Washington points out, there is every chance of the world not achieving the U.N. targets for 2015 — universalising primary education, gender equality in schooling, and making significant reductions in maternal and child mortality. The World Bank's request for more aid to deal with these challenges was once again greeted with silence. There has been an upturn in aid flows in recent years but these funds have not been evenly distributed. The larger increase in aid flows has been to countries that Washington sees as being in the front lines in the battle against U.S.-identified terrorism.

Indeed, the U.S. concern with terrorism has thrust yet another responsibility on the IMF. The organisation has been looking to augment lendable resources and has had to close one lending facility, yet a decision has been taken to entrust it with the job of tracking money laundering and the financing of terrorism. Both challenges are no doubt important but this is a job more for the U.N. than for the IMF. A frequent criticism the U.S. makes of the IMF is that the organisation has diluted its mandate by taking on responsibilities far beyond its original charter of ensuring an adequacy of international liquidity. However, this is precisely what the U.S. is now obliging the IMF to do. Developing countries have been less than enthusiastic about the new tasks handed over to the IMF but, as in other matters, their reservations have been over-ruled.

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