2009/04/20

IMF, reform thyself, groups say

Haider Rizvi
Australia.TO

Ahead of the annual meetings of the world's biggest international financial institutions this weekend, calls are growing for the United Nations to take new initiatives on financing for development in poor countries.

UNITED NATIONS, Apr 20 (IPS) - Ahead of the annual meetings of the world's biggest international financial institutions this weekend, calls are growing for the United Nations to take new initiatives on financing for development in poor countries.

”There is an urgent need for an inclusive, effective and legitimate body to address the issue of systemic reform in the interests of justice and equality,” said John Foster of the North-South Institute of Ottawa, Canada.

At a news conference held here Monday, Foster other civil society leaders urged the U.N. to take charge of financing for development because the global financial institutions, primarily the World Bank and International Monetary Fund (IMF), have lost their credibility.

”Crucial reforms at the IMF are required before it can be effective agent in the global [economic] recovery,” said Jo Marie Griesgraber, executive director of the New Rules for Global Finance Coalition, based in Washington.

The civil society representatives also criticised the G20 for its lukewarm response to the current economic crisis, which mainly relies upon IMF loans for development projects in poor countries.

G20 is an acronym for the Group of 20 countries considered to play the most significant role in driving the world's economy. It is a mix of advanced industrialised nations and those seen as major economic powers in the so-called developing world.

At a major summit held in London early this month, the G20 leaders agreed to spend over one trillion dollars to rehabilitate the world's ailing banking system and reaffirmed past pledges to reduce poverty worldwide and protect the environment.

They also agreed that achieving the Millennium Development Goals (MDGs) by 2015 was a must. Set by the world community in 2001, the MDGs include substantive cuts in poverty, disease, illiteracy and environmental degradation.

Though pleased with the G20's resolve to provide funds for the MDGs, development activists say they have no hopes for positive results as long as the World Bank and IMF continue to function in the old-fashioned way.

”While the large sums made available to developing nations by the G20 are clearly urgently needed, the IMF should not be given a blank cheque,” said Neil Watkins of the Jubilee USA Network, adding that the IMF ”needs meaningful and deeper reforms.”

The IMF has been criticised by many independent aid and development organisations for years for imposing strict conditions on poor countries to receive loans. As a result, many countries fail to spend money on social development in order to show ”fiscal prudence.”

Like many other anti-poverty activists, Watkins is concerned that the financial assistance committed by the G20 in London came only in the form of loans, not grants, and world leaders at the summit did not make any commitment on debt relief for poor countries.

Jubilee, an umbrella group representing more than 70 organisations that promote debt cancellation for poor countries and a fairer global financial system, is currently lobbying U.S. lawmakers to demand IMF reforms.

Observers from civil society say the new commitments for development aid to poor countries should not be directed through the IMF unless it has introduced reforms that reflect a certain degree of democratic representation and transparency.

”There is widespread agreement among many noted economists that the IMF's fiscal austerity measures deepened the Third World debt crisis that erupted in 1992, the Asian crisis of 1997 and the Argentine crisis of 2001-2002,” said Griesgraber.

In her analysis, ”little has changed” since then. ”The G20 got it backwards; crucial reforms at the IMF are required before it can be effective agent in the global recovery,” she said.

Roberto Bissio of Social Watch, a network of non-governmental organisations (NGOs) based in Uruguay, who spoke at the U.N. news conference, held similar views.

”The negotiations on a new international and economic architecture need to be fully inclusive, therefore the U.N. must be at the heart of these negotiations,” he said. The U.N.-led talks must be aimed at introducing an ”equitable and sustainable financial” model.

In his view, both the G20 and G8 are ”not the legitimate forums” in which to resolve the current financial crisis” because they are failing to act in a democratic fashion.

To him and other civil society activists, it is time for the IMF to create space for the poor nations to take part in the decision-making process by introducing ”equal voting rights.” Currently, the IMF makes decisions based the strength of the economy of its members.

In agreeing with Bissio, North-South Institute's Foster said a strengthened financing for development process, involving the major international financial and economic institutions, would ensure ”accountability for the present and future decision-making.” In addition to next week's meeting involving the representatives of the World Bank, IMF, the World Trade Organisation (WTO) and civil society, the U.N. also plans to hold a major summit on the world's financial and economic crisis in June this year.

www.australia.to/index.php?option=com_content&view=article&id=8662:imf-reform-thyself-groups-say&catid=74:business-news

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