March 29, 2000
New Orleans - The International Monetary Fund is streamlining its lending rules and changing a plan which lets countries "pre-qualify''for financial help, but drastic reform proposals are naive, a senior official said. IMF Deputy Managing Director Eduardo Aninat, in a weekend interview with Reuters and Reuters Television, said controversial proposals from a Congressional commission would halt IMF loans to many countries and make it harder for poor countries to escape the poverty trap.
"To say that the IMF has to stop (lending to countries winning) HIPC (debt relief) is very naive because it takes away much of the momentum that ... Africa and other countries are looking for," he said. "It is like cutting an arm or a leg from an institution." The commission, chaired by Carnegie Mellon University economics professor Allan Meltzer, said in a report released earlier this month that the IMF should stop lending to poor countries and concentrate on short-term, emergency financing for a small group of countries.
The ideas have won support in the U.S. Congress, where many lawmakers are bitterly opposed to the IMF But the U.S. Treasury dislikes many of the proposals and IMF officials say they would not work. Aninat noted that the was already consolidating its broad range of lending dows and working out how to change its new Contingency Credit Line, which was designed as a sort of insurance for countries with strong economic policies.
The CCL, announced with much fanfare a year ago as a crucial weapon in the IMF's arsenal to counter financial crisis, has never been tapped and potential users say it is deeply flawed. "The CCL is not really a contingency plan because once you have got it but before you draw on it, you still have to go through the whole process of getting the money," said Daniel Marx, Argentina's deputy finance minister. Interest rates were high compared to those on other IMF loans and there were no real rules to help IMF staff decide when to grant the facility, he said. Argentina has asked the IMF for a regular standby loan rather than trying to tap the CCL although officials say they have no intention of drawing on the $7.2 billion credit, which was approved earlier this month.
Aninat said the CCL would be discussed at next month's meeting of the IMF's policy-making International Monetary and Finance Committee. "One of the important issues to be taken up at the IMFC in a very technical, professional way is how the incentives for the CCL window can be retailored so that we have a sort of powerful program there," he said.
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