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IMF to focus on stability
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April 16, 2000: 8:53 p.m. ET
Fund should help boost global economic growth, implement reforms, ministers say
By Staff Writer M. Corey Goldman
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WASHINGTON (CNNfn) - Solidifying the global economy and ensuring that more countries get the benefits of freer trade and integrated markets should be principal roles of the International Monetary Fund, the International Monetary and Financial Committee said Sunday.
In a statement following meetings with finance ministers, central bank and IMF officials agreed that the role of the fund, founded more than 50 years ago to help assist countries in financial trouble, should be more focused on stabilizing the global economy and ensuring that programs are put in place that address financial flare-ups before they become crises. Officials admitted that achieving such roles would require much work in the months ahead.
The conclusions of the IMF's International Monetary and Financial Committee (IMFC) - a group headed by Britain's Chancellor of the Exchequer Gordon Brown that advises the IMF on how it should spend its money and what kind of programs it should implement - came during one of the strangest and most turbulent days in the IMF, and Washington's history.
From before daybreak, demonstrators protesting against what they believe are global policies and practices that hurt, rather than help developing countries, beat drums, chanted slogans and blockaded streets within a 50-block radius of the IMF headquarters, forcing many officials and journalists to get creative in how they made their way into the meetings.
Protestors acknowledged
Brown did acknowledge the 10,000 or so protesters that had taken over downtown Washington for the day, noting the same thing that many of his colleagues had noted throughout the week - that the objectives of the IMF and the objectives of the activists were one and the same. At the same time, he said that the protests did not disrupt the meetings of the Group of 10 industrialized nations or the IMFC.
 "The meeting went on as normal. It started on time and it was completed in a normal way," Brown told a news conference. "Our message to those people who have been demonstrating is that the way forward for those people who want to reduce poverty and ... and to see a diffusion of prosperity around the world is not to advocate turning our back on the global economy and not to advocate a retreat from international economic cooperation."
The group, comprising many of the IMF's 182 member countries, pointed out the need for transparency among nations when it comes to their finances and monetary policy - an issue that has led to several nasty surprises for financial markets in recent years when countries unexpectedly reveal that they are in worse financial shape than they let on.
"I think it's been recognized in every meeting we've had, the need for continued vigilance, the need to be absolutely sure that the macroeconomic foundations, the stability of the economies is assured," Brown said, "and that's why so much focus is being on strengthening the transparency and reporting that is done by the International Monetary Fund."
Positive economic outlook
As with the other groups meeting this week, the panel acknowledged the rapid economic recovery of the world economy and the prospect of even stronger growth in 2000. At the same time, it cautioned in its statement that, at least for the United States, "monetary and fiscal policies will need to remain prudent, and fiscal surplus policies should not be relaxed. National savings will also need to increase further."
 The IMFC also gave an upbeat assessment for other economies, noting that growth in Asia, China, India and Latin America had improved. For Russia, the panel said growth will only be sustained "if major strides are made to strengthen institutions, especially the rule of law, and to create an attractive environment for domestic and foreign investors." For the nations of the Middle East and Africa, the panel noted that rising oil prices were providing support.
Policy makers also welcomed tighter controls on IMF lines of credit - a move that would eventually make it more clear exactly who the fund is lending to, how much, for how long at what kind of terms. The credit would also only be extended if countries applying for it prove that they are putting the money to proper uses.
Starting mid-year, the fund will require independent audits of central bank financial statements for all countries with current and future loans, the IMF said. An evaluation of central bank controls will also be required for new loans, starting in the second half of 2000.
Coming clean
"While episodes of misreporting of information to the fund or allegations of misuse of fund resources have been few, such incidents are nonetheless extremely serious," the IMFC committee said. "The Committee stresses that the forceful application of the strengthened framework is critical to enhancing the integrity of the fund's financial operations."
That initiative comes after several countries, namely Russia and Ukraine, both misreported their respective central bank reserves, encouraging the fund to hand over credits that might otherwise have been declined. In a separate set of circumstances, Pakistan fudged budget figures.
Debt reduction also figured large among the committee's discussions, including a commitment to ensuring that the Heavily Indebted Poor Countries, or HPIC initiative, be accelerated to get debt relief to countries as fast as possible. IMF acting managing director Stanley Fischer said the fund is still planning to seek approval from Congress to sell its 5 million ounces of gold, a move that would bring in roughly $1.3 billion in additional debt relief financing.
"We are determined to move forward our poverty reduction strategies, we are determined to get fast and effective action as we can on debt relief, and of course we are determined to reduce the risks from financial crises that are borne by the poor in so many cases," Brown said. 
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