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Social and Economic Policy IMF, World Bank Face Mounting Attacks
House Presents Bills to Alter Debt Plan to Poor Nations
By Michael M. Phillips
Wall Street Journal
October 26, 1999Washington -- Lawmakers on both ends of the political spectrum are intensifying their attacks on the International Monetary Fund and World Bank, whose loans to Russia, China and Chad have been mired in controversy. In the past month alone, House members have introduced five bills designed to force the IMF or World Bank to radically alter the way they aid developing countries. The assault comes from both conservatives, who see the IMF in particular as a waste of taxpayers' money, and from liberals, who would like less emphasis on painful economic reforms and more on environmental and social issues.
"The institutions have promised changes, but changes have been slow to come," says Andrea Durbin, director of international programs at Friends of the Earth, an environmental group. "It has reached the point where Congress is ready to put its foot down and say enough is enough."
The conflict has even leaked into the 2000 presidential campaign, where two Republican hopefuls, Steve Forbes and Gary Bauer, have said that, if elected, they would shutter the IMF.
The timing couldn't be much worse for the Clinton administration. It wants $370 million from Congress to pay the U.S. share of an international effort to reduce as much as $90 billion in debt that poor nations owe rich countries, the IMF, the World Bank and other aid agencies. The administration also seeks congressional permission to use IMF gold to finance some debt relief. Already, Congress has slashed 22% from the $803 million White House request for the World Bank's low-interest loan program. President Clinton has since vetoed the funding bill as inadequate.
On Friday, Treasury Secretary Lawrence Summers urged Congress to meet the president's request. "By supporting these programs," he said, "we help to sustain American global economic leadership, and to promote changes overseas that reflect core American values like free markets, strong property rights and open borders."
Foreign aid "is probably the least popular part of the budget politically," says Matt McHugh, a former Democratic congressman who now advises World Bank President James D. Wolfensohn. "It's always a tough sell, especially when domestic programs are in danger for one reason or another." He blames this year's troubles on partisan wrangling over broader spending caps.
But the World Bank and, even more so, the IMF have come under increasing criticism since the bipartisan consensus over the value of U.S. foreign aid broke down at the end of the Cold War. These days the assault is particularly heavy. That is partly due to opposition to two World Bank loans: One to resettle ethnic Chinese on traditionally Tibetan lands, and another to build an oil pipeline connecting Chad and Cameroon.
IMF criticism has centered recently on loans to Russia, although no evidence has surfaced confirming claims that corrupt officials stole IMF money. "The IMF is a force promoting the wrong economic advice around the world as a condition for financial aid," says Mr. Bauer. "And I think that with the fiasco in Russia -- where money has been clearly ripped off and ended up in the pockets of thugs -- that the desire for reform is even greater."
But while Mr. Bauer describes IMF policy advice as "socialist," critics on the left accuse the lender of excessive orthodoxy for the austere monetary and fiscal prescriptions it has urged upon countries from South Korea to Brazil. "I don't count myself among the number ganging up on foreign aid," says Rep. Cynthia McKinney (D., Ga.), whose bill would cut U.S. funding for the IMF until it forgives debt from the poorest countries and abandons harsh economic medicine. "I believe in the role of multilateral institutions, but that role doesn't need to hamper the development of basic institutions and values that I believe we as Americans ought to foster," including human rights and equal economic opportunity.
Despite the ferment on Capitol Hill, the administration still hopes to secure substantial help for the IMF, World Bank and debt relief, while trying to rebuild the collapsed foreign-aid consensus. "Our strategy is to work for broader reforms in the IMF and World Bank that will help ensure that these countries are able to allocate scarce resources to reducing poverty and delivering health care and education," says Treasury Undersecretary Timothy Geithner.
One likely vehicle is a debt-relief bill sponsored by Reps. Jim Leach (R., Iowa) and John LaFalce (D., N.Y.), which could come to a committee vote in the next few weeks.
Accompanying Article:
Under Attack
Key Provisions and Main Sponsors of Recent House Bills Affecting the World Bank or IMF
By a Staff Reporter of the Wall Street Journal
Ecosystem and Indigenous Peoples' Protection Act
Rep. Christopher Cox (R., Calif.)
Requires U.S. to cut funds if World Bank violates environmental and social policies
Debt Relief and IMF Reform Act of 1999
Reps. Jim Saxton (R., N.J.) and Dennis Kucinich (D., Ohio)
Forces U.S. to oppose IMF's low-interest loans to poor countries
Debt Emancipation to Enable Democracies Act
Reps Cynthia McKinney (D., Ga.) and Dana Rohrabacher (R., Calif.)
Forces IMF to forgive debts owed by poorest nations without tough economic reforms
Foreign Money Laundering Deterrence and Anticorruption Act
Rep. Jim Leach (R., Iowa)
Forces U.S. to oppose IMF and World Bank loans to corrupt countries
Russian Economic Restoration and Justice Act
Reps. Curt Weldon (R., Pa.) and Neil Abercrombie (D., Hawaii)
Creates joint U.S.-Russian push for IMF reform
More Information on the International Monetary Fund
More Information on the World Bank
More Information on Financing for Development
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