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Washington press conference: Köhler addresses range of issues facing IMF, strategy for global economic reform

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 2000
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On March 17, Horst Köhler, then speaking as nominee for the post of Managing Director of the IMF, met with the press. Following are edited excerpts of that press conference. The full text is available on the IMF’s website (www.imf.org).

Köhler:I have come to Washington to introduce myself to the Executive Directors of the IMF. Yesterday, I also met with Stanley Fischer, the Acting Managing Director, and I had a talk with the U.S. Secretary of the Treasury, Larry Summers. It is now important for me to listen carefully before making any specific statements on the role of the IMF, to listen to the IMF shareholders and its staff, but also to outside experts.

I do think that in a globalized world, the IMF, with its universal membership, is a cornerstone for promoting growth and stability. I am fascinated by the expertise of the IMF, its staff, and management. I do think that with regard to the future work of the IMF, the focus should be even more on crisis prevention, and we should make the best use of the strengths of this institution. It also remains important to combine financing with adjustment and to stay engaged in all member countries.

Question: You have dealt with Russian President [Vladimir] Putin when you were at the EBRD [European Bank for Reconstruction and Development]. Do you feel you can deal with him now at the IMF? And what is ahead for Russia and the IMF?

Köhler: Indeed, I met and talked to Mr. Putin in December last year. We had a very frank exchange of views. I noted that the reform process in Russia is not strong enough and that is the main cause of the difficulties in Russia. Mr. Putin clearly admitted this was right. And he said that in his view Russia needs to have a strong state.

I confirmed that was right in terms of bringing more predictability to this state and country. But at the end, we will have to wait on concrete deeds and not just listen to words, because deeds count. But I would think that we should give Mr. Putin the benefit of the doubt and work together, and I am open to a constructive dialogue with him.

Question: The IMF, as you are probably aware, is viewed in some parts of this country as the devil incarnate. In the U.S. Congress and elsewhere, there’s been a lot of criticism of the IMF. How would you plan to address that and what directions would you see as priorities?

Köhler: Well, first, we should all know—management and shareholders—about the direction of changes or reforms in the IMF. Second, I am fully committed to an open discussion and dialogue with the U.S. Congress. We are meeting in a discussion about reforms. I have a good feeling that out of all these contributions and comments it will be possible to sort out structures and conclusions that will strengthen the IMF to do a good job in the future.

Question: Could you tell us a little bit more about your conversation yesterday with Mr. Fischer and whether you obtained assurances that he will stay on for the short or the long term?

Köhler: We had, indeed, very good and long discussions. I appreciate very much Stanley Fischer’s intellectual brilliance and his experience in working and guiding the IMF. I clearly told him that I would be interested that he stay, and he at the same time told me that he would like to stay. I am sure that he and I will work together very closely for some time.

Question: Mr. Köhler, the process that led to your selection as the next Managing Director has come under heavy criticism—in part because developing countries felt left out, in part because it gave new ammunition to the IMF’s critics, and in part because it was probably unfair to some people involved. As the IMF’s new leader, would you recommend that the process of selection of the Managing Director be reviewed, discussed, and changed?

Köhler: I agree that this process was really not the best and I have no hesitation in saying that it should be reviewed and improved.

Question: Could you talk a little bit about your meeting with U.S. Secretary of the Treasury Larry Summers and what was discussed? The United States finally came out in support of your nomination but at first it didn’t seem wholehearted. Did that come up at all?

Köhler: Well, before I met with Larry here in Washington, he called and told me that he would look forward to working with me. Here in Washington, we reviewed the work of the IMF and had an exchange of views about reform priorities. We agreed on most of these items. Of course, we couldn’t touch on everything in detail, but the talk was in substance very friendly. I know Larry Summers from one year of cooperation in 1993. He knows my working style is open, speaking candidly, but our experience is that it is the best way to find the best solution. I am really looking forward to working together with Larry Summers in more concrete terms.

Question: You had said you wanted to focus more on crisis prevention and would like to see the IMF focus more on crisis prevention. How is the IMF preventing crises today?

Köhler: Well, many items come into this. The most important axis for crisis prevention activities is the surveillance activity of the IMF’s Executive Board. And surveillance operates in two ways. First, macroeconomic stability surveillance gives advice to countries. But, second, structural issues underpin macroeconomic stability and sustained growth. And the work done, or in the process of being done, in the Financial Stability Forum is very important for bringing this critical discussion about the international financial architecture to very concrete conclusions. Here I would think is the main priority for the IMF to enhance its activities for crisis prevention.

Question: Will you be in office for the [April 16] spring meeting [of the International Monetary and Financial Committee]?

Köhler: I must say that the time between when I first talked to German Chancellor [Gerhard] Schroeder and today is less than two weeks. I have not yet even had a chance to organize my work in the EBRD. Going to Washington after the election is, of course, fascinating and challenging, but I would also go to Washington with a bit of a sadness, because the EBRD is a good and efficient institution. I don’t want to give the staff of the EBRD the impression that this represents a downgrading of their institution. So I am very interested in organizing an orderly transition, and I am urging shareholders of the EBRD to decide very rapidly on my possible successor.

Question: Would you support the cancellation of debts owed to the IMF by developing countries as was advocated last week in the Meltzer Commission?

Köhler: I don’t want to go into details today, but I can address a point of principle. Debt reduction, or debt relief, is and can and should be an element of a global strategy to secure global growth and fight poverty. But debt relief or debt reduction without growth, macroeconomic stability, and structural reforms makes no sense. It has to be combined with reforms and with macroeconomic stability.

Question: There is a discussion going on about how the IMF should use the information it gathers during the surveillance process. Some say that this is privileged information that should be communicated directly from the IMF to governments. Others say that perhaps the market should be used to bring influence to bear on governments via the IMF making this information more public. How much information should the IMF provide to the public and to the private market?

Köhler: The IMF should release information that enables markets and the public to better judge a country, its economy, and its problems. There is an area of information that has to be confidentially treated—for instance, in the context of private involvement—because these people want to keep their information. But, in principle, more disclosure of information and of IMF policy and IMF activities and approaches is the right direction to go at the beginning of this century.

Question: How are you going to approach the issue of developing countries in terms of their role in the global economy and their place in organizations like the IMF and the World Bank? How will you consult with and involve them in your new role?

Köhler: We are so often—and even maybe too often—talking about globalization. But if we are serious about globalization, we must understand that the developing countries are part of this globalized world. We are really one world. I not only met with the full group of IMF Executive Directors yesterday, I also met with the Executive Directors for the constituencies of the developing countries. We have to give more attention to developing countries to find strategies that are sustainable.

Question: There are probably going to be very large protests during the spring meetings. How will you approach public skepticism about the IMF’s intentions and its abilities?

Köhler: My intention is to have more open dialogue with the public and with NGOs [nongovernmental organizations]. It is our obligation to explain IMF policy and activities better maybe than we have done in the past. And we have to have a dialogue. But I also hope we are not embarking on a process where dialogue with the NGOs is weakening the democratic institutions in our societies and countries. There has to be a process of openness, more public disclosure, and more attention to these concerns and contributions to the discussion, but there must also be an awareness that our institutions have been given responsibility by elected officials, and this should not be weakened.

Question: What would you do to prevent the misuse of IMF funds?

Köhler: Experience reveals the need to be even more careful, and if something happens, to draw conclusions and to organize our own work so that it will not be repeated.

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