Global Policy Forum

By C. Rammanohar Reddy

The International Monetary Fund will henceforth take into account each country's unique characteristics while putting together a loan package, said Mr. Horst Koehler, Managing Director of the IMF, an approach which, if put into practice, will mark a substantial departure from the institution's past practices.

Speaking to a group of journalists today, the last day of the 2000 Annual Meetings of the IMF and the World Bank, Mr. Koehler said a one-size-fits-all approach did not work for policy prescriptions. Each country had its own historical, cultural and institutional conditions which could not be ignored in giving advice or drawing up terms and conditions for IMF loan packages. "We must also take into account a country's ability to absorb all forms of technical assistance." Governments, economists and non-Governmental organisations had routinely criticised the IMF for offering the same kind of advice and laying down the same set of policy prescriptions for whichever the country and whatever the problems. This approach formed the core of the critique by the then chief economist of the World Bank, Mr. Joseph Stiglitz, of the IMF's aid packages during the East Asian crisis.

Mr. Koehler, whose selection as the Managing Director some six months ago, was the outcome of a bitter dispute between the U.S. and the European Union which left all other countries on the wayside, has since sought to mark his own stamp on the IMF. His approach to running the institution has been positively commented on by all countries. In Prague, he has made much the right statements on global inequalities, aid from the industrial countries and protectionism in the industrial countries, all of which he spoke about during the interview today as well.

After studying economics in the West, one could not fly down from Washington to offer advice on a country's budget or lay down a standard package of conditionalities, said Mr. Koehler, referring indirectly to the phenomenon of visiting IMF missions which have often caused resentment in developing countries. However, the centrepiece of Mr. Koehler's vision of what the IMF should be doing was the development of standards and codes in financial regulations and transparency in Government - an approach India criticised during the Prague meetings as running the risk of a boiler plate strategy which demanded that all countries, whatever their stage of development, adhere to the same set of standards and codes. Mr. Koehler saw the application of standards and the development of transparency as a critical element of a crisis- prevention strategy.

When asked if it would be easy for the IMF to change its past one-size-fits-all approach which it had followed for decades, the IMF chief first said rather tersely, "if I did not think I could change the organisation I would not be here." He then said it was not easy to change a bureaucracy. The IMF staff were told earlier that conditionalities were the right things to suggest and they could not change overnight. It would take time, but IMF staff were not, as the protesters said, people without a heart.

But a beginning had been made. Mr. Koehler said he would not give up on conditionalities but the IMF would not over-burden its loan packages with too many conditions. But even as he was speaking about the IMF not imposing micro-conditionalities on future loans, the IMF staff were giving press briefings in Prague on how the detailed conditions of IMF packages could contribute to reform and growth in the developing countries.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C íŸ 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.