Will Meltzer Sink Or Swim?

14 June 2000

The debate on the roles of the Bank and Fund looks set to accelerate. Official reactions to the Meltzer report (see Bretton Woods Update 16) have generally been that the institutions need some fixing but they are not fundamentally broken. There is little support for taking the IMF out of developing countries but there has been considerable discussion about the need to streamline it, and for improving the distinction between the Bank and Fund. The US Executive Director has warned that Congress could try to attach reform conditions to its funding for the Heavily Indebted Poor Country (HIPC) debt Initiative, particularly since the demonstrations in Washington have raised more public interest in the institutions. Ministers remarked that it would not be helpful to cut resources to Africa. Already IMF and WB assistance was too low and too slow. Mr Barro Chambrier, African IMF ED, noted that although African countries would like to graduate onto normal IMF financing this would take time and in the meantime African countries still needed concessional finance from the IMF for short term stabilisation.

Ministers also remarked that the Poverty Reduction Strategy process was adding extra layers of conditionality and they were concerned that their countries would not have sufficient resources to prepare Poverty Reduction Strategy Papers (PRSPs) properly. Such a task was “easier said than done.” They also were concerned that the IMF does not have the expertise to judge a good poverty strategy.

Mr N’Golo Coulibali, Minister of Finance for Cote d’Ivoire, commented that previous IMF policies had not taken into account the mass of the people which had led to discontent and the eventual overthrow of the previous government.

Commenting on the IMF‘s governance structure they urged that it was important to increase Africa’s voice in decision making processes, particularly because they are the most frequent users and recipients of IMF advice and money. Although the allocation of basic votes should be increased vis a vis those votes allocated based on economic might, Africa benefited from consensus decision making and this should be preserved. Mrs Moholo, Governor of the Central Bank of Botswana, suggested that African governments could advise the IMF on conditionality and access to resources, and pointed out that many developing countries are contributing financially to the Poverty Reduction and Growth Facility, so they should be involved in how it is used.