Alex Brummer and Larry Elliott
Radical changes in the operations of the International Monetary Fund (IMF) and World Bank are to be proposed by finance ministers at a meeting in London later this month in response to the Asian crisis.
The plans for adjusting the role of the IMF and the World Bank, to put them in tune with globalised and open capital markets, will be discussed at Lancaster House in London, on February 21, and could form the core of the agenda for the Birmingham summit, to be chaired by British Prime Minister Tony Blair in May.
Officials preparing for the first Group of Seven meeting under the chairmanship of Chancellor Gordon Brown have dubbed the ideas ”Halifax II”, a reference to the changes in the structures of the international financial institutions put in place in Halifax, Nova Scotia, after the economic meltdown in Mexico at the end of 1994.
The following changes are being proposed:
* tightening data requirements for member countries so there is clearer, up-to-date information on capital market positions;
* an improved communications mechanism for the IMF which will allow it to voice concerns and force changes in policy in a more public way;
* updating the IMF’s mandate so that its role in resolving problems in the capital markets and banking ranks alongside sorting out balance of payments imbalances;
* developing greater expertise at the IMF and World Bank in the workings and operations of banking systems which have been at the core of the Asian problem; and
* making use of the World Bank’s guarantee powers in capital market crises. This might provide an alternative to global banks pulling out credits and hastening the financial collapse.