[by Stephen Fidler in Washington - credited in print edition, not in web]
CALL FOR OVERHAUL OF IMF AND WORLD BANK EXPECTED
A special US congressional commission is expected next month to recommend a radical reduction in the roles of the International Monetary Fund and the World Bank.
It is likely to propose that the IMF focuses on short-term finance to resolve crises in emerging economies, and that the World Bank shifts towards providing poor countries with grants rather than loans.
The commission, chaired by Allan Meltzer, an economics professor at Carnegie Mellon University, is also expected to recommend the abolition of the International Finance Corporation, the World Bank's private sector arm, and MIGA, its political insurance unit.
It is also likely to call for the World Bank to pull out of Asia and Latin America, leaving the ground to two regional institutions, the Asian and the InterAmerican Development Banks.
The body, officially titled the International Financial Institution Advisory Commission, was established by Congress last year to report on the workings of the international institutions.
The commission must report to Congress by March 9. The broad thrust of its likely conclusions have been widely circulated in Washington, though the findings have only just reached the draft stage and may change. Its 11 members are due to meet next week to vote on the findings and it is not yet clear how large the majority voice will be.
It comprises six experts nominated by the Republican majority, including Mr Meltzer, a monetarist economist, and Charles Calomiris, an IMF critic from the libertarian Cato Institute, and five nominated by the Democrats, including Harvard professor Jeffrey Sachs and Fred Bergsten, head of the Institute of International Economics.
The recommendations are based on the large overlap the commission has found between the roles of the IMF and World Bank and between the World Bank and regional development banks.
The tentative recommendations would have the IMF focused on its responsibilities to resolve liquidity crises in emerging economies. It would provide short-term funds at very high interest rates but only against collateral. The Fund would pull out of Africa.
They propose that the World Bank's responsibilities should shrink to providing mainly grants to countries in Africa, eastern Europe and the former Soviet Union. The Bank should stop providing finance to countries with annual income per head of more than Dollars 2,500.
The political impact of such findings, which will be reported to at least five congressional committees and the US Treasury, are not yet clear.
However, the commission's work may open the way for increased pressure on the administration to push reform in the institutions. Congress is expected to vote this year on related legislation, for example, to provide US funding for debt relief for the poorest countries in Africa.