By Nathaniel Harrison/AFP
IMF policymakers on 14 April are to press on with a campaign to save their 60-year-old body from irrelevance at a time when their sister institution, the World Bank, has been shaken by a pay scandal involving its president, Paul Wolfowitz.
The International Monetary Fund’s steering committee, representing the Fund’s 185 members, is struggling to implement far-reaching reforms against opposition from richer powers that fear a loss of influence.
The committee’s one-day meeting in Washington is also competing for attention from a burgeoning scandal at the World Bank, its partner in international finance and development, which has riveted global financial circles.
Wolfowitz, after a stormy two-year tenure at the bank, is facing a barrage of calls from bank staffers and advocacy groups to resign despite having won the backing of the US government.
He stands stands accused of helping arrange a massive pay hike for his Libyan-born girlfriend, former World Bank communications specialist Shaha Riza, when she was transferred to the US State Department in 2005.
Wolfowitz on 12 April admitted to errors in the procedure under which the pay package was approved and on 13 April received the support of President George W. Bush, for whom as a deputy secretary of defence he helped plan the Iraq war.But he still faces an open revolt from outraged World Bank employees pressing for his departure.
Bank policymakers are due to convene on14 April, after which Wolfowitz is scheduled to address a press conference alongside IMF counterpart Rodrigo de Rato.
The weekend meetings of the Fund and the Bank were preceeded on 13 April by a gathering of Group of Seven finance chiefs, who threw weight on 13 April behind an ongoing reform drive aimed at preserving the “relevance and legitimacy” of the IMF.
They said the overhaul, the first stage of which was approved by the IMF at a meeting in Singapore last September, should ensure that dynamic emerging market economies are better represented.
The Fund last September agreed to increase the voting power in the IMF of China, South Korea, Turkey and Mexico as a first step.
The G7 officials, representing Britain, Canada, France, Germany, Italy, Japan and the United States, at their meeting on13 April in addition contended “the voice of low income countries should be enhanced” as well.But analysts have cautioned that the reform drive actually appears to be confronting a roadblock.Rato admitted this week that no breakthrough was on the horizon for the global financial policeman’s planned revamp.
“The problem is some political decision(making),” he said, expressing hope that the IMF can “narrow down” a new voting formula for its members by the autumn and then get down to detailed changes.
Under US and European domination since its inception towards the end of World War II, the IMF has traditionally been a lender of last resort to countries embroiled in financial crisis.
But 10 years after crisis swept through East Asian economies, the IMF is seen as barely relevant to fast-emerging powers like China.In a second phase of reform, Rato hopes for a broader redistribution of votes while preserving the say of its poorest countries. But that means some countries, such as the United States and European powers, would have to lose out.
“They’re rearranging the deckchairs on the Titanic,” said Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington, who argued that the IMF faces an inexorable loss of power.
“This is an institution that’s been controlled by the US for 60 years. They’re not going to give that up,” he said.Talk of an Asian monetary fund has revived, while Latin American countries are moving ahead with their own multilateral lending initiative.
Meanwhile, a slew of countries such as like Argentina and Brazil have been paying off their IMF debts early, eager to escape the Washington institution’s economic tutelage.