By Nicola Bullard
“The IMF bill is a hot-potato, and as we get closer to the November congressional election everyone wants it out of the way,’’ says Carol Welch from Friends of the Earth -US. But, so far, the IMF funding bill shows no sign of going away, having been sidetracked yet again in its uncertain progress through the US Congress.
On 15 July the Foreign Operations Appropriations Sub-Committee approved $3.4 billion in New Arrangements to Borrow (NAB) which will go into a special fund to help the apparently cash-strapped IMF deal with future crises. The additional $14.5 billion approved by the Senate and heavily backed by the Clinton administration was voted down by the Sub-Committee.
Just one week later the bill was shuffled off to the full appropriations committee where it was put on hold until September. Although some see this as a strategic move for the IMF-backers to gather their troops in the next weeks, others say that deferring the vote is a sign of just how sensitive the issue has become, and what it represents.
Opposition to the $18 billion package – already endorsed by the White House – has come from radical free market Republicans and the liberal left.
The right say the IMF stands in the way of the market, and like the UN and other pervasive international organisations, undermines US sovereignty. They are also tough on transparency, and are pressing for the IMF to release information such as Executive Board minutes.
Opposition from the left takes in broader sweep of issues, including lack of transparency and accountability, the social and environmental impact of IMF programmes, the extent to which the Fund promotes the interests of its major shareholders and the neo-liberal policy mix pushed by the Fund. Others argue that the Fund has overstepped its mandate to such an extent and with such devastating effects, that it must be radically reformed, if not removed.
In the great sweeping middle ground are those who believe that US interests, to say nothing of global economic and financial stability, is dependant on the Fund having enough money to do its job – the problem is that a whole lot of people think it’s doing a bad job! Yet, lobbyists for farmers and business are working overtime to convince the stray sheep of Congress that the US risks not only losing a useful leverage point for international trade and investment liberalisation, but that a further deterioration of the Asian economies will have a devastating impact on US interests both domestically and abroad.
Meanwhile, the potentially formidable coalition of left and right (who last year stripped Clinton of his hitherto automatic entitlement to ‘fast-track’ US trade policy) is holding together, although a few Democrats defected early in the year persuaded to show a united front with Clinton to assure a Democrat victory in the November vote.
The coalition base is also broadening in reaction to wording in the present bill which requires borrowers to “liberalise restrictions on trade in goods and services and on investment, at a minimum consistent with the terms of all international trade agreements of which the borrowing country is a signatory”.
According to the Washington-based Public Citizen Global Trade Watch, “the adoption of this policy in the context of the IMF would undercut some of the progress that citizens in the US and around the world have made recently in rejecting fast track negotiating authority; stalling the Multilateral Agreement on Investment (MAI); and raising awareness on the World Trade Organisation”.
In addition the present bill requires borrowing countries to cut subsidies and government lending programmes, and for foreign and domestic creditors and debtors to be treated equally. This last point could win support from IMF critics who argue that the Fund promotes moral hazard by providing a bail-out for the banks. It seems unlikely, though, that the intention of the IMF bill as presently drafted is intended to sanitise the public from the spillover of the private sector’s bad decisions. More likely it is intended to ensure that ‘foreign’ debtors don’t get off the hook.
Bill could go through the back-door
If the bill gets past the Appropriations Committee in September it could go one of two ways: either directly to the Congress where it is likely to face a barrage of amendments, if the Rules Committee adopts an ‘open rule’ which would allow consideration of individual amendments. Some likely candidates include linking IMF funding to environment, debt relief, transparency and institutional reform, opposing capital account liberalisation, requiring banks to ‘take a hit’, and winding-back the IMF to its original mandate. Road blocks designed to slow the bill, and improve the IMF should they through.
Or, the bill could go straight to ‘conference’ – the place where bills go when there is disagreement between the Senate and the House. And this is where the debate could be lost. Whatever emerges from Conference has to be voted up or down, as a full package with no amendments. This would allow the ‘conference’ to include the IMF funding as part of an omnibus bill containing other, vital funding items.
Meanwhile, the list of individuals and institutions calling for reform, reversal or, at the least, caution in IMF policy prescriptions continues to grow.
Analysts with giant US-based investment bank Merrill Lynch say that the “IMF was slow to understand the market dynamics of the Asian crisis and recommended raising interest rates as a way to stabilise currencies. This exacerbated and hastened the collapse of the real sector, without supplying much in the way of stability to the currency.” (Bangkok Post, 25 June 1998).
Robert Wade, political economy professor at Brown University (US) says the Fund’s interest rate policies and insistence on banks meeting Basle standards “is the immediate cause of the wave of insolvency, unemployment and contraction that continues to ricochet around the region and beyond.” (Bangkok Post, 26 June 1998).
Privately, foreign bankers in the region agree that the Basle capital adequacy standards should be phased in over a longer time to ease the liquidity crunch. A representative of the Asian Development Bank, speaking after IMF Asia-Pacific Director Hubert Neiss’ press conference in Jakarta on 30 May 1998, commented that the ADB and the World Bank disagree with the Funds interest rate policy and will be taking a ‘united stand’ on this issue.
Even the impeccable Institute of International Finance – whose members comprise more than 285 of the world’s largest financial institutions – has publicly noted, in their 8 April 1998 policy letter to Minister Maystadt, Chairman of the IMF Interim Committee, that “We [the IIF] believe that private investors and lenders should absorb losses commensurate with the risks they take. They should not look to official financing to mitigate losses or escape the consequences of their actions.”
On capital account liberalisation, they urge caution:
“A year ago the Interim Committee agreed to amend the IMF’s articles to require all members to liberalise controls on capital movements. The private financial community supports the prudent and progressive liberalisation of capital account transactions but it is clear now that liberalisation should be approached with care and complemented by steps to strengthen domestic financial systems.”
The letter continues “the case has not yet been made that an amendment to the IMF Articles is necessary.”
In a letter to the same committee in the lead-up to the IMF and World Bank Annual Meetings of 1997, addressing the same issue of capital account liberalisation, the IIF “encourages the Interim Committee to initiate public discussions of the full range of issues involved before its next spring meeting.”
Sound advice, but then again, it seems that the IMF is not very good at listening to sound advice, even from friends.
