Summers Calls for IMF to Alter Focus
- By Knut Engelmann
- Dec. 15 1999 00:00
WASHINGTON -- U.S. Treasury Secretary Lawrence Summers arrived in Europe on Tuesday with a proposal to switch the focus of the International Monetary Fund to emergency lending for countries in financial trouble.
Summers was scheduled to visit London and Berlin, where he will attend a meeting of the new Group of 20, a forum for major industrialized nations and key developing nations to talk about financial reforms.
Before leaving Washington on Monday, Summers told reporters the IMF needs to get away from long- and medium-term financial aid, which too often makes recipients dependent on outside help, and instead focus on real emergency lending.
Heartened by increasingly clear signs of recovery in the global economy after almost 2 1/2 years of turmoil, Summers is eager to discuss ways of making sure it will not happen again.
A key challenge was managing the flow of capital so that it is stable and sustainable between the industrial and the developing world, Summers said.
"One of the major changes that needs to accompany the tremendous increase in private sector flows is some reduction in the IMF's role as a steady provider of medium- or long-term finance," Summers said.
"The IMF can best supplement rather than supplant private sector capital flows," he added.
Summers was to lay out the key parts of his IMF reform agenda in a speech at the London Business School on Tuesday.
The U.S. initiative to overhaul the IMF comes just as the Fund is looking for a new managing director after its current head, Michel Camdessus, announced last month that he plans to step down early next year.
The IMF's top job has traditionally been filled by a European, and Germany has been quick to lobby for its deputy finance minister, Caio Koch-Weser.
Germany says the former World Bank official has gained the support of 14 of the 15 European Union members. But at the U.S. Treasury, Koch-Weser has received a somewhat cool reception.
Summers did little to dispel that notion.
Koch-Weser has worked for years at the World Bank, which focuses mainly on development lending, and Washington officials doubt that he really fulfills all their criteria. As the IMF's biggest shareholder, the United States effectively pulls the strings at the Fund. But Summers declined to be drawn on any specific candidates. "I'm sure in the end the world will reach a consensus on a strong candidate f that's the process we want to be part of," he said.
While the issue is not formally on the agenda for the G20 meeting, it is sure to come up in private conversations between the ministers and central bankers during the one-day session.
The G20 comprises the Group of Seven leading industrial nations f Britain, Canada, France, Germany, Italy, Japan, and the United States f plus 11 emerging and other economies, including Russia, Argentina, Australia, Brazil, China, India, Mexico, Saudi Arabia, South Africa, South Korea and Turkey.
EU Central Bank chief Wim Duisenberg and Camdessus will also attend.