On April 27, senior officials from the IMF, the World Bank, and the U.S. government, and others briefed the Bretton Woods Committee on key developments at the IMF and the World Bank, and called for increased public understanding of their contributions. Speaking at the annual meeting of the nonprofit committee—which is based in the United States and was organized to advance public awareness of international financial and development issues—were IMF First Deputy Managing Director Stanley Fischer; U.S. Secretary of State Colin Powell; U.S. Representative James Kolbe, who heads the Foreign Operations Subcommittee; Angel Gurría, Mexico’s former Minister for Finance and Public Credit, who cochaired a recent commission on the role of multilateral development banks; World Bank President James Wolfensohn; and Inter-American Development Bank President Enrique Iglesias.
Refocusing the IMF
Fischer reviewed the changes under way to refocus the IMF, emphasizing that promoting transparency and adherence to international codes of good practices is central to the new agenda. He also highlighted the importance the IMF attaches to updating its armory of lending facilities and its new, broad-based initiative to engage the private sector in crisis prevention. “In recent months, the IMF has deepened its analysis of capital markets as an integral part of the IMF’s surveillance activities, with the objective of contributing to crisis prevention,” he noted. The organization also has given priority to changing how the IMF applies conditionality. “Notwithstanding the importance of structural policies in the countries to which we lend, there is general agreement,” explained Fischer, “that our conditionality in this area has sometimes become unduly detailed and restrictive.” The new objective is to “confine conditionality to areas that are critical to a program’s success,” he said, “but drawing the lines between critical and merely useful is not easy.” The challenge, he added, is to help countries reach a point at which their programs are both locally owned and of high quality.
The broad tone of the meeting was set by Powell, who indicated that “the United States’s prosperity and well-being are linked ever more closely to expanding growth and stability worldwide. That is why strong U.S. leadership in the IMF, the World Bank, and the WTO [World Trade Organization] is so crucial to the United States’s future and the world’s future,” he said. “Globalization, free trade, open markets, the technology revolution, and economic and political reforms—the potential they hold for humankind is incredible, and the Bretton Woods institutions and the WTO can help the world’s people realize it,” Powell said. He also endorsed the value of IMF conditionality, noting that “it is only by ensuring that countries are following appropriate, sustainable policies that we know they will make the best use of IMF resources.”
Addressing relations between the Bretton Woods institutions and the U.S. Congress, Kolbe voiced strong support for the IMF and the World Bank. Continued public support, however, was another matter. Flagging U.S. congressional interest directly reflects local constituency lack of interest in the two institutions and belief that their programs are neither vital nor beneficial to the people of the United States. Combating these tendencies will require new political coalitions able to make a strong and effective case for the Bretton Woods institutions on and off Capitol Hill, he said.
Support for rescue packages
Gurría highlighted some of the main conclusions of a recent commission he cochaired with former U.S. Federal Reserve Board Chair Paul Volcker on the role of the multilateral development banks. Gurría defended the World Bank’s involvement in financial rescue packages. “What could be more ‘developmental’ than helping countries get out of crises?” he asked.
Wolfensohn and Iglesias addressed the challenges of poverty alleviation. Such efforts have borne limited fruit in Latin America, Iglesias said, and population growth continues to pose a major obstacle to long-term reductions in the absolute number of poor people in the region. But he also reminded the largely corporate audience that successful poverty reduction has the capacity to create a larger, more broadly based community of consumers and producers.
Wolfensohn’s remarks on poverty alleviation gave pride of place to IMF-World Bank collaboration. Citing a recent trip to sub-Saharan Africa with IMF Managing Director Horst Köhler in which they met with 22 heads of state from the region (see IMF Survey, March 5, page 69), he praised the joint approach undertaken by the Bretton Woods institutions. The challenge and opportunity lie in their joint efforts to devise more collective approaches to meeting their common objective.