IMF MUST FOCUS ON SHORT-TERM LENDING, NOT RADICAL REFORM: KÖHLER.
Newly appointed IMF Managing Director Horst Köhler said yesterday the Fund should refocus its efforts on short-term lending, but was not in need of radical reform, the Financial Times (p.16) reports. Köhler, who will take over at the IMF in May, said he would reassess the Fund's role, but that there was no need for "a new grand design" for the IMF. "There is no need to turn the IMF upside down," he is quoted as saying in London yesterday.
In one of his first detailed public statements since his appointment, Köhler questioned the role of the extended Fund facility, a longer-term lending program whereby repayment can take as long as 10 years. "In principle, it is right to refocus the IMF and go back to more short-term lending," he said. "It is important that recipient countries do not get used to borrowing from the Fund."
The tone of his comments was similar to the views of US Treasury Secretary Lawrence Summers, the story notes. Like Summers, Köhler stopped well short of agreeing with the US congressional advisory commission chaired by economics professor Allan Meltzer, whose recent report advocated radical reform of the IMF, including an end to all except short-term crisis lending. "The Meltzer report gave a very critical assessment of the Fund's achievements," Köhler said. "I feel the extension of markets and democracy over the past 50 years should be credited to the IMF."
The New York Times (p. C4) adds Köhler made it clear that his concept of reform would not limit the broad reach of IMF influence that some critics want trimmed. "My own vision is, in rather broad terms, that the IMF 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."
Also reporting on Köhler's comments, the Wall Street Journal Europe (p.1) and the Wall Street Journal (p. A2) quote him as saying, "I totally agree with Larry Summers." IMF lending "should really be temporary-long-term lending should be for the World Bank." But Köhler also pointed out that more than 70 percent of Fund lending was already short term, notes the International Herald Tribune (p.13).
Köhler would like the IMF, which provides loans and economic advice to financially troubled countries, to resist when its major shareholders-the US and the rest of the powerful G7-try to mold IMF lending policies to fit their political interests, the WSJE and the Wall Street Journal continue. "I know that's very difficult because we have very strong shareholders and they want to exercise their interests--that's very clear," he said. "But I would like to embark on a dialogue where I advocate an understanding of the independence of the Fund-not that it is independent of its shareholders, but that it not be pushed around like a yo-yo by daily events or by, say, national agendas."
Köhler also said he retained an open mind on the IMF's lending program to the poorest countries that underpins the high-profile international debt relief effort, notes the FT. The New York Times adds that he said any debt cancellation should only be part of a broader strategy for third world economic recovery.
Commenting on Russia, the designated IMF chief said the Fund should "remain engaged in Russia," and while he praised Russia's "progress in terms of adjusting to a market economy," he also urged Putin to avoid his country's past mistakes. "The lesson from some experience in the past," he said, "is that the IMF, like others, should judge 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."
In what may be seen as a concession to Japan, which has demanded greater influence at the Fund, Köhler said he was open to the idea of increasing Asia's voting weight.
"I really want to take developing countries, emerging-market countries, very seriously," the IHT quotes him as saying. Although he does not plan to attend the spring meetings of the IMF and the World Bank in Washington in April, he intends to travel to Latin America, Asia, and Africa in his first month on the job to signal his commitment to the needs of less developed countries.
Die Welt (Germany, p.14), the Frankfurter Allgemeine Zeitung (Germany, p.1), Handelsblatt (Germany, p.11), and the Süddeutsche Zeitung (Germany, p.25) also report.