Global Policy Forum

The United States on Wednesday signaled its intention to push for more reforms at the International Monetary Fund and World Bank, of which it is the biggest shareholder.

U.S. Treasury Under Secretary John Taylor told lawmakers changes at the multilateral lenders had been "substantial" since their creation 60 years ago, which had meant a fundamental policy shift for both institutions.

But with no sign of an immediate or looming financial crisis that needs the instituations' attention, now was the time to consider longer-term reforms, he added. "Now seems like an opportune time to move ahead," Taylor said in testimony before the U.S. Senate committee on banking, housing and urban affairs. He said there was no reason to change the goals of the institutions -- to increase economic and financial stability and boost economic growth that would reduce poverty.

Among the reforms implemented was the creation of limits to borrowing from the IMF, the increased use of grants instead of loans at the World Bank, a new system for measuring results at the bank, and a focus on core expertise at both institutions.

Taylor said, however, the world economy and financial markets had changed dramatically and the fund and bank had to keep up. "Effectiveness at these institutions requires that they also adopt such changes, including managing for results with clear accountability and incentives," he said.

Looking ahead, Taylor said it was vital the IMF focuses its programs on a small number of core economic issues and leave the rest to its sister organization the World Bank, to avoid overlap. "Good progress is being made here too, but many programs, especially in very poor countries, still have IMF structural conditions that should be left to the World Bank," he said. Taylor said the United States, which is the biggest shareholder at both institutions, had called for a review to determine new direction for both the fund and the bank.

Discussions were underway, he said, pointing to the possible creation of a new non-borrowing IMF facility where a country would manage the design of the program, a new surveillance system that would operate independently from IMF lending systems, and an increase in the amount of grants to poor countries from the World Bank.