By Alan Cowell
March 29, 2000
London - Laying out his vision of the future of the International Monetary Fund, Horst Kí¶hler, the new managing director, said today that rather than shrinking as some critics have suggested, the fund should expand its role as "a crucial cornerstone" of globalization.
His remarks, in one of the first interviews he has given since his appointment this month, came amid a welter of conflicting proposals for overhauling the I.M.F., one of the world's important financial institutions, both in the United States Congress and the Clinton administration. The thrust of some of those arguments, notably in a report from a Congressional commission led by Allan H. Meltzer of Carnegie Mellon University, was that both the I.M.F. and its sister institution, the World Bank, should be radically pared back because they often do more harm than good in developing countries.
Secretary of the Treasury Lawrence H. Summers has opposed some of the commission's findings, and Mr. Kí¶hler, a 57-year-old former high official in the German finance ministry, sought in the interview to avoid an impression that he and Mr. Summers were on a collision course. "I do see a lot of commonality in the ideas expressed by Larry Summers," he said. But in the 45-minute interview at his office at the London-based European Bank for Reconstruction and Development, where he will leave as president to join the I.M.F., Mr. Kí¶hler made clear that his concept of reform would not limit the broad reach of I.M.F. influence that some critics want trimmed.
"My own vision is, in rather broad terms, that the I.M.F. should be even more than in the past a crucial cornerstone to secure growth and stability in the world, or in the global economy," he said. "Whatever we do with crisis management, aid to the developing countries, the most important thing to achieve is sustained growth in the world economy, and that's not only in developed countries but really in the global economy including the developing countries and the emerging markets. That's my most important thing." He acknowledged, however, that the huge capital flows that have come to be associated with globalization had implications both for the I.M.F.'s role as a lender and the relationship between its loans and those available on the international capital markets.
"I do think that after the experience with the crises in Russia and Asia," Mr. Kí¶hler said, "the I.M.F. should be the center of excellence for the international financial markets for the international financial and monetary system." To that end, he continued, the I.M.F. should "set up standards and codes for sound banking systems, sound behavior and, based on that, do more to prevent crisis."
But he made clear that this did not preclude a shift in the way the fund allocates its multibillion-dollar resources. "The I.M.F. also, of course, has to adapt to changes in the world economy," he said. And, reflecting the views of the Clinton administration, he said that in seeking to promote growth, "the biggest part should be done by the private capital markets." "I do think that there's need to review the focus of the I.M.F.," Mr. Kí¶hler said. "And reviewing the focus also means that we have to understand I.M.F. lending in principle as a temporary lending, and not as a permanent lending, which would substitute the possibilities of the private capital markets."
The German official is joining the I.M.F. after 18 months as head of the European Bank for Reconstruction and Development, an institution established in the early 1990's to promote private investment and market economic values in the countries of the old Soviet bloc. He took up that job within weeks of the Russian default in August 1998, and was obliged to write off a series of bad Russian debts. The experience has bred a degree of caution. Mr. Kí¶hler was one of the first Western officials to meet with Russia's president-elect, Vladimir V. Putin, as he gained prominence during the presidential election campaign that just ended.
While Mr. Kí¶hler said today that the I.M.F. should "remain engaged in Russia," and while he praised Russia's "progress in terms of adjusting to a market economy," he also urged Mr. Putin to avoid his country's past mistakes. "The lesson from some experience in the past," he said, "is that the I.M.F., like others, should judge Mr. Putin and the Russian government not just by their words but by their deeds. And I hope that President Putin will build up new confidence in demonstrating that he's able to take prior action before international support is coming in." Many of the issues he addressed coincided with American emphases, such as the idea that the I.M.F. should be prepared for greater transparency in its dealings with "civil society."
Asked about demands from some developing countries for the cancellation of their debts, he said that any debt cancellation should only be part of a broader strategy for third world economic recovery. He repeatedly emphasized that the I.M.F.'s lending should continue as a means of influencing the economic development of these countries, rather than concentrating simply on emergencies. Without lending to developing nations, he said, the I.M.F. would have little influence on economic policy. Mr. Kí¶hler was chosen for the top job at the I.M.F. after tortuous trans-Atlantic wrangling that soured relations between the Clinton administration and Germany's chancellor, Gerhard Schrí¶der. Mr. Schrí¶der lobbied first for one German candidate, Caio Koch-Weser, who was vetoed by President Clinton, then swung his weight behind Mr. Kí¶hler.
President Clinton's endorsement of Mr. Kí¶hler was depicted in Washington as a reluctant move principally intended to avoid further strains with Germany. Some European officials supporting different candidates raised questions about Mr. Kí¶hler's stature, despite his prominent role in designing the financial framework of German reunification and in setting up the European single currency. But Mr. Kí¶hler insisted that those circumstances would not undermine his authority as head of the I.M.F. "I think that the dust will settle after this rather heated debate," he said. "I'm quite confident that we'll do a good job."
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