At the crossroads

THE INTERNATIONAL MONETARY Fund and the World Bank have frequently faced criticism but at no time in the past half century have they been besieged on so many fronts. A committee of the U.S. Congress, which authorises the largest contributions to the two bodies, has suggested major changes in their structure and activities which if implemented will vastly reduce the size and power of the two organisations. Professional and highly regarded economists have condemned their functioning, especially that of the IMF. And members of non-government organisations from around the world are gathering in Washington to protest against what they see as the role of the Bretton Wood twins in furthering the interests of global capital at the cost of people's lives. With the spotlight from so many directions turned on the two organisations the usually placid Spring Meetings are likely to provoke a great deal of introspection.

The IMF, in particular, has been in turmoil. It has just come through a messy process of selecting a new managing director, which has shown once more the lack of transparency in its functioning. It has also had to face considerable criticism that huge loans it has given to some countries have been used for neither macro-economic stabilisation nor poverty reduction but have disappeared into the bank accounts of corrupt politicians and officials. But the most sustained attack has been on the quality of its advice and the conditionalities it attaches to loans. Almost three years after the East Asian crisis erupted and a year after most of the affected economies began to recover, the IMF is still reminded that its recipes may well have prolonged rather than cured the recession in these countries. Dr. Joseph Stiglitz, who until recently was the Chief Economist at the World Bank and publicly disagreed with the IMF on many important issues, has produced a damning critique accusing the IMF of an inadequate understanding of the problems of the developing countries, a one-size-fits-all approach for all countries and for all problems and the use of out-dated tools of economic analysis. There is little that is common in the many criticisms of the IMF by the U.S. Congress, the NGOs and the economist community. But instead of responding to each of them the IMF has chosen to address only some of the concerns expressed by the U.S. Congress. It still insists that it did right in East Asia and that it is as equipped as the World Bank to address poverty issues. And the IMF's response to accusations of misappropriation of its loans has been to draw up guidelines which are intrusive even by the organisation's own standards. Ultimately, no reform is possible without support from the U.S. which has veto power on major decisions. But that is unlikely to happen because for decades the U.S. Treasury has used the IMF as a handmaiden to promote the global interests of what Prof. Jagdish Bhagwati has described as the ``U.S. Treasury-Wall Street complex''.

The World Bank is only marginally less under public scrutiny than the IMF. The NGOs demonstrating in Washington have targeted the organisation for the very slow progress in implementation of the programme to write-off the debts of the world's poorest countries. Though public pressure has led to a dilution of some of the stringent terms of the Heavily-Indebted Poor Countries (HIPC) Initiative, the conditions remain stiff and finances (especially from the U.S. and Japan) are still not forthcoming in sufficiently large amounts. The result is that more than three years after the HIPC Initiative was launched less than a handful of countries have qualified for a waiver. The official agenda for the Spring Meetings does not reflect the tremendous pulls and pressures being exerted on the two organisations. But no longer can the Bretton Wood twins afford to ignore either the demands from the main donors or the concerns of the citizens of the countries which receive their loans.

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