In May in his first public speech as the new head of the IMF, Horst Köhler signalled that he agrees with recent calls for the IMF to be more focussed. Concentrating on macroeconomic stability should “lead to a focus in its advice on monetary, fiscal and exchange rate policies and financial sector policies.” He questioned whether it was appropriate for the IMF to try to act as an international lender of last resort and emphasised the need for “constructive engagement” with the private sector. A Capital Markets Consultative Group has been established to provide a forum for such dialogues.
The IMF should also be more independent from the US and other governments. “I know that’s very difficult because we have very strong shareholders and they want to exercise their interests – that’s very clear,” Köhler earlier remarked in the Wall Street Journal (29/3/00). “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 has established a task force of seven senior IMF managers to review the IMF‘s role. The review will look at the focus of the IMF‘s work in the areas of conditionality versus ownership; the Poverty Reduction and Growth Facility and use of other financing facilities; capital account liberalisation; private sector involvement in crisis resolution and surveillance. In particular the task force will consider whether the IMF‘s role should be streamlined and how the IMF relates to the World Bank. There are no plans to consult outside the Fund.
A draft report will be discussed by the Board in time for its conclusions to be revealed by Köhler in his speech to the Annual Meeting in Prague in September. Board members at a weekend retreat in July broadly accepted Köhler’s proposal, however, a Board member pointed out “there is still an awful lot of grey territory on what IMF core business really is.” Another commented, “there is a need for some adjustment in the way conditions are designed, and for more political judgement,” reported Reuters.
Poverty Reduction and Growth Facility Loans will also include more streamlined conditionality focusing on macroeconomic and governance conditions. This will effectively give the World Bank more responsibility to oversee structural reforms. This might involve new lending windows at the World Bank, and enable the Bank to provide adjustment loans to countries which are not receiving IMF support.