UK Secretary of State for International Development Clare Short told the Financial Times in April:
“We are in a very silly situation. The international institutions are meant to be complementary, but the IMF keeps charging around taking other peoples’ jobs in areas where it is not necessarily competent”.
She argued that the IMF should deal with macroeconomic stabilisation and leave the World Bank to address micro reforms such as regulation, corporate governance and social programmes. Both should have poverty reduction as their overall aim.
At the Spring meetings Clare Short and the other Bank and Fund governors agreed that the institutions should collaborate more closely. The IMF created unnecessary tension by not properly consulting with the Bank over the Asia bailout. The IMF conditioned its financial packages to South Korea, Thailand and Indonesia on financial market structural reforms – areas for which the Bank is normally considered responsible. In Indonesia, IMF insistence that ailing financial institutions be closed triggered a domestic banking panic.
Old Bank-Fund rivalries and disagreements are supposed to be laid to rest by better information exchange, joint missions and a clear definition of the division of labour. The governors also agreed that the IMF‘s surveillance function should be extended to monitor national financial systems and that, given this wider remit, the IMF should draw on the Bank’s expertise, including through joint missions, to ensure financial markets are restructured appropriately. A proposal to create a joint unit for the Bank and the Fund to deal with financial sector issues was proposed by Gordon Brown, UK governor of the Fund. The Bank and Fund will examine options including a possible joint secretariat.
