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IMF rebuffs US report pushing reform

WASHINGTON: Radical proposals to refocus the International Monetary Fund would rob poor countries of money they urgently need and make it harder to set conditions to ensure that IMF lending works, the fund's acting boss said on Wednesday.

IMF Acting Managing Director Stanley Fischer, in his first response to a controversial report, told a news briefing it would be wrong to scrap low-interest loans for poor countries -- one of the key suggestions in the document.

It would also be wrong to eliminate the conditions that currently accompany IMF lending, Fischer added, lashing out at another recommendation in the report by a commission chaired by Carnegie-Mellon University professor Allan Meltzer.

"This institution is too valuable to be treated as something that could be got rid of very quickly or whose nature should be fundamentally changed," Fischer said.

The Meltzer Commission, in proposals which have won a friendly reception from opponents of the IMF in the U.S. Congress, also suggested reducing the length of IMF loans, raising the interest rates charged by the IMF and curbing the number of countries eligible for IMF cash.

Some lawmakers want to incorporate the ideas into new legislation to reform the global lender, which put together rescue packages worth tens of billions of dollars as economies crumbled in the face of the world economic crisis of 1997-99.

But Fischer said reforms already under way had transformed the IMF, increasing the volume of information available about the fund and about the economies of its members. "It's part of a revolution in the way the IMF does business," he said.

The pre-crisis IMF had been stingy with information, arguing that it could not release confidential economic data from member countries to a wider audience.

Fischer said the IMF was also streamlining the types of loan which countries could apply for, removing some items from a complicated menu of options.

Most recent loans have been relatively straightforward standby arrangements, which pay out every few months provided the borrower meets economic conditions agreed with the IMF.

Fischer also rejected ideas from the commission that the IMF abandon its traditional policies of linking its loans to these macroeconomic targets and lend almost exclusively to countries which "pre-qualified" for financial help.

INFLATION BUSTING

Under these rules, loans to countries like Turkey would not have been possible, Fischer said, describing Turkey's inflation-busting IMF loan and economic reform programme as an important way to "finally stabilise" the economy.

Core inflation has been falling in Turkey since the IMF approved a $4 billion loan there last December.

He said structural reforms and efforts to improve the climate for investment were the main priorities for Russia, the IMF's biggest single borrower.

He said it was too early to say what would happen to a stalled IMF loan after Russia's presidential election this weekend, but noted that many Western visitors to Russia had been impressed by acting President Vladimir Putin, who is widely expected to win the March 26 vote.

"What is clear is that many people who have met President Putin have been impressed by what he wants to do," he said. "It is clear in Russia now that the understanding that macroeconomic stability is good is deep in the system and they have also done very well in securing it."

The Meltzer report is one of the most radical in a string of recent proposals to restructure the IMF, which has been under strong pressure for its response to the world financial crisis of 1997-99.

Fischer said he backed many of the ideas of U.S. Treasury Secretary Lawrence Summers, who wants the global lender to concentrate on emergency funding, but says it should not abandon poor countries.-Reuters