As financial
ministers and central bank governors from around the world
gathered in Washington this weekend for two days of discussions
on how to revive the slumping global economy, an issue was
brought up again - - the reform of the international financial and
monetary architecture.
"The IMF (International Monetary Fund) is being given a bigger
role in the crisis. But it has hardly reformed," a press release from
the Third World Network (TWN) said here on Saturday. The TWN
is an independent non-profit international network of organizations
and individuals involved in issues relating to development, Third
World and North-South affairs.
The statement referred to the early April pledge by G20 leaders
in London to boost support for the IMF, the World Bank and other
international lending organizations by 1.1 trillion U.S. dollars to
combat the global recession.
But the biggest chunk of that amount -- 500 billion U.S. dollars
for an emergency lending facility at the IMF -- is still short of the
goal, reports said.
"There is thus the danger that its policies will do more harm to
developing countries," the press release said.
Meanwhile, IMF officials said: "Developing countries need more
flexibility to choose the macroeconomic policies that will best create
jobs, reduce poverty, and meet health and education goals."
LEADING EXPERTS IDENTIFY NEED FOR IMF POLICY
REFORM
Dr. Robert Pollin, professor of economics and co-director of
the political economy research institute at the University of
Massachusetts-Amherst, said: "The overall impact of (the IMF's
policy agenda) in developing countries is now clear -- it has led to
slower economic growth, greater inequality, more speculative
financial markets and severe bouts of financial instability."
"The priority now needs to be to supplant IMF-directed
neoliberalism with policies focused on promoting economic growth,
the expansion of decent employment and fighting poverty," he said.
Professor Georgia Saitoti, the Kenyan minister of state for
provincial administration and internal security, said: "It is becoming
more urgent now for additional resources to be mobilized in order
to target critical sectors like education for effective mitigation of the
HIV/AIDS epidemic."
"Unfortunately the strict macroeconomic policy encouraged by
the IMF undermines the capacity of poor countries such as Kenya
to fight the challenges and invest in health and education," said
Saitoti, who was also former Kenyan minister of education. "The
caps on overall national spending, enforced by the IMF policy, limit
the hiring of additional teachers."
During the previous financial crises in the 1980s and 1990s,
governments in developing countries were forced to cut spending
on infrastructure projects and social programs, Robert Zoellick, the
World Bank president, said on Friday.
The IMF board agreed to double the borrowing limits for 78 of
the poorest countries in an effort to meet the needs of developing
nations hit by the current economic downturn, the worst since the
Great Depression.
"The developed world, including the Bretton Woods Institute,
must remove the contradiction that exists between global targets for
education for all and the restrictive policies," Saitoti said.
"There should be urgency, therefore, to relax the conditionalities
and allocate more resources to the developing countries in order to
enable them to effectively meet health and education needs," he
said. "Africa has a lot of potential for contributing to the
international development. Let us examine existing policies that limit
its capacity to thrive."
PROPOSED AREAS FOR REFORM
The TWN listed key points on the reform of the international
financial and monetary architecture, saying that to enhance the role
of the IMF, the following reforms to the international fund should be
undertaken:
-- The reform of governance and voting: significant and
meaningful increases in voice and quota for developing countries on
an expedited basis than the 2011 review agreed to in the G20
communique, issued in London early this month.
-- An end to undemocratic leadership: the head of the IMF
should be selected on an open merit-based candidacy open to all
member nationalities, as committed to in the G20 communique.
-- The reform of IMF staff: the staff of the IMF are mainly from
one school of thought (neo liberal). A significant proportion of staff
should be from other schools of thought.
-- Elimination of procyclical policy-based lending: the IMF's
balance-payments loans should not come attached to policy
conditionality that is contradictory and procyclical, constraining
development objectives and needs.
-- Limited mandate of IMF: the IMF's role should be to provide
liquidity in times of payments crisis. It should end its disastrous role
in formulating and imposing policies involving trade, investment,
privatization, sectoral policies, structural policies in the international
financial field.
Although the importance of and the need for IMF reform is
increasingly recognized in the wake of the current global financial
crisis, various players do not agree on the program and focus of the
reform, observers here said.
The IMF reform is a complicated and sensitive issue and it will
not generate any major specific progress in this regard at the end of
the two-day annual spring sessions of the IMF and the World Bank,
which started on Saturday.