Congress split over IMF, World Bank** By Stephen Fidler A report calling for a sharp contraction in the International Monetary Fund and World Bank unleashed a strong partisan reaction in the US Congress yesterday. The report, from an advisory commission to Congress chaired by Allan Meltzer from Carnegie-Mellon University was released at a press conference on Capital Hill yesterday. Two leading Republican congressmen - House speaker Dennis Hastert and majority leader Dick Armey - had earlier called a press conference to welcome the report. The tenor of the report has alarmed officials in both the World Bank and the IMF, which have argued that much of the analysis on which it is based is flawed. Moreover, officials from these organisations suggest there has been a disingenuous attempt to portray the report as s relatively innocent effort to portray the report as a relatively innocent effort to return the institutions to their original purpose- when the fact it would gut them, and hurt many economies in the process. The report suggests slimming down the IMF to focus on lending to pre- qualifying countries during financial crises and proposes that the World Bank be turned into a provider of grants for the world's poorest countries. But it was attacked by Democratic lawmakers. Richard Gephardt, the House minority leader, said the report "illustrates an extreme neo-isolationist attitude" towards the IMF and World Bank. "Instead of proposing thoughtful reform, the report takes a slash-and-burn approach," Mr. Gephardt said. The political impact of the report is not clear, but the welcoming of it by Mr. Armey, a long-standing IMF critic, suggests the Republicans may try to use it to attach further conditions on the IMF. This they may do as they consider legislation that would help fund a debt relief initiative for the world's poorest countries. Jeffrey Sachs, one of two Democratic appointees on the 11-man panel who signed on the majority report, which was approved by an eight-to-three majority, has said that the administration made strong efforts to discredit the report by trying to have it dismissed as a partisan affair. He has rejected this, describing it as a good basis to begin examining the reform of the institutions. One official said the report's recommendation to turn the IMF into a lender of last resort only to countries that have met certain financial preconditions would have made the IMF unable to deal with many aspects of Asian crises. Another said the report's suggestions would create bizarre anomalies. For example, Brazil's strong financial sector would- under the report's proposals- have pre-qualified it for more than $100bn of IMF lending during its crisis in 1998, without imposing fiscal or monetary conditions on that lending. Fund officials also rejected the idea that the IMF should withdraw from poverty lending in Africa and in other poor countries. An IMF official said that aid was almost never effective when the macroeconomic framework in the recipient country was weak. ** Financial Times, Thursday March 9 2000 ---------------------------------------------------------------------------- To unsubscribe/subscribe or view archives of postings, go to the Gambia-L Web interface at: http://maelstrom.stjohns.edu/archives/gambia-l.html ----------------------------------------------------------------------------