By Nicole Winfield
Ottawa CitizenJanuary 29, 1999 United Nations (AP) - The United Nations has proposed a host of initiatives to reform international financial oversight, including a suggestion to let developing countries control money flows in good and bad economic times. In a report released Friday, a UN committee said more money must be made available to countries before crises hit, and suggested the creation of strong regional reserve funds that could also be used for development.
The report by the UN Executive Committee on Economic and Social Affairs was prepared in response to the Asian financial meltdown that began in July 1997 and subsequent calls for a revamped system of financial oversight to contain it and prevent another one.
The International Monetary Fund has stepped in repeatedly, promising aid in exchange for economic reforms. But the UN report says the IMF's actions are often counterproductive or do not go far enough. The IMF acts more as an organizer than a provider of funds and attaches conditions for aid that are "not always appropriate to the problems faced by countries in distress," the report says. The IMF also has displayed very little ability to stop crises from spreading to other countries, according to the report.
"World events since mid-1997 have made painfully clear that the current international financial system is unable to safeguard the world economy from financial crises," the report says.
Nevertheless, a reformed IMF is still seen as a main institution to help prevent a financial crisis in one country jumping to another. The IMF needs more money to help countries in need but also must be revamped and subject to public scrutiny, the report said.
The report also suggests a new "world financial authority" that would set international standards for financial regulation and supervision.
Among the more controversial suggestions in the report are its call that developing countries be allowed to impose controls on capital coming into the economy and out of it. Taxes could be used to discourage massive investment during economic surges, while investment banks and mutual funds could be required to maintain minimum amounts of money in the country during economic crises, the report suggests.
It also said the IMF shouldn't impose conditions on needy countries to force the governments to adopt a specific type of exchange-rate mechanism.
The report also said debtors and creditors should be brought together during bad economic times to reschedule debt.
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