Folks,
This is culled from the International Herald Tribune 29 March 2000. I
hope it will give you a flavour of the task ahead of Koehler. For those of
you with the Meltzer Report, I will appreciate you sharing your comments
with those of us following this story. Meanwhile, happy reading. sidi
sanneh
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IMF CHIEF EXCLUDES TOTAL REDESIGN by Tom Buerkle
LONDON--- The newly designated head of the International Monetary Fund
distanced himself from proposals for a radical overhaul of the Fund’s
programs Tuesday, saying the IMF needed reform rather than restructuring.
“We should not attempt to devise a completely new grand design for the
IMF,” said Horst Koehler, the German who currently serves as the head of
the European Bank for Reconstruction and Development. “What is needed now
is to take stock of the many reform proposals, draw concrete conclusions
and gain the broad support of the Fund’s shareholders and the public for
these conclusions,” he said. In his first significant interview since
winning appointment as the next managing director of the Fund last week, Mr
Koehler also expressed frustration over the bungled, politized process that
led to his selection, but he insisted he did not feel “scared or damaged”
by the affair. The United States blocked the first German candidate for
the job, the deputy finance minister Caio Koch-Weser, saying he lacked the
stature and experience to lead the Fund. President Clinton’s
administration is widely believed to have endorsed Mr. Koehler less out of
enthusiasm for him than for fear that a second rejection would damage US-
German relations. “I feel myself qualified for the job in terms of
experience, training,” said Koehler, who prior to the European bank headed
the German Savings Bank Association and who helped prepare for Group of
Seven summit meetings as the “sherpa” of German chancellor. “For me, he
added, “being a minister in itself isn’t clout.” The selection of the
Fund’s head will always be a political process Mr. Koehler said, but he
said the personal criticism of Mr. Koch-Weser was “extremely unfair.” He
urged Fund member governments to “really reconsider how they act” in future
successions. But he welcomed the attention that the succession had drawn
to certain Fund issues, such as the tradition that European countries
control the top job while the United States decides who run the World
Bank. Japan took advantage of the succession dispute to put forward its
own candidate, the former Finance Ministry official Eisuke Sakakibara, and
to press for increased Fund quota for Japan and Asian countries to better
reflect their role in the global economy. “I feel this discussion is god
because I want those political considerations to come into the public,” Mr.
Koehler said. “It must be possible to talk about change in the quotas.”
Mr. Koehler will need all his political skills when he goes to Washington
to take up his new job in May. The spread of financial crises in recent
years, from Mexico to much of Asia and Russia, has put important demands on
the Fund’s resources. It also has left the Fund open to attack. Many
developing countries contend that Fund adjustment programs actually worsen
recessions. Critics in industrial countries complain that the Fund, by
bailing out Western banks and investors, encourages sloppy lending—what is
referred to as “moral hazard.” Mr. Koehler promised to hold early meetings
with members of the U.S. Congress “not because I feel weakened by this
‘lukewarm’ reception, but because I feel it’s necessary.” He also said a
major factor in the Fund reform debate would be the so-called Meltzer
report released this month, which was commissioned by Congress and which
recommended that the Fund restrict its lending mostly to solvent countries,
and at punitively high interest rates. Mr. Koehler said he supported moves
to focus the Fund’s activities on short-term funding for countries facing
financial crisis rather than long-term lending, a goal set out recently by
the U.S. Treasury secretary, Lawrence Summers. But he noted that more than
70 percent of Fund lending already was short-term. He differed with the
Meltzer report’s recommendation that the Fund lend mostly at punitive
interest rates to discourage borrowers from becoming dependent on official
aid. There was a good case for the Fund to lend at advantageous rates to
countries pursuing sound economic policies but threatened by financial
contagion, he said Mr. Koehler will wrap up his own tenure at the European
bank and does not plan to attend the spring meeting of the Fund and World
Bank in Washington in April. He does intend to travel to Latin America,
Asia and Africa in his first month on the job, however, to signal his
commitment to the needs of less developed countries. “I really want to
take developing countries, emerging-market countries very seriously, he
said FIN
sidi sanneh
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