--------- Begin forwarded message ----------
From: "Taylor-Kamara, Obai A." <OATaylor-Kamara@WLRK.COM>
To: LEONENET@MITVMA.MIT.EDU
Subject: NY Times Article
Date: Tue, 22 Sep 1998 12:33:58 -0400
Message-ID: <B7484198F92DD211AE7200805FBEF7AE68796C@mail3.wlrk.com>
September 22, 1998
THE UNITED NATIONS: BRITAIN
Remodel World Bank and I.M.F., Blair Urges
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Chaos (Sept. 19)
Forum
Join a Discussion on the Role of International Economic
Institutions
By AGIS SALPUKAS
EW YORK -- Prime Minister Tony Blair of Britain on Monday
urged a revamping of the way
the world's financial institutions deal with global
economic turmoil, and said the procedures of
the International Monetary Fund and the World Bank had to be
updated.
He noted that the IMF and the World Bank, set up 54 years ago
at a conference in Bretton Woods,
N.H., "were constructed for a world of fixed exchange rates
and capital controls, when capital flows
were much smaller."
"The current crisis illustrated the weakness of the existing
international financial system," Blair said. "It
needs to be modernized to meet the challenges of a new
century."
"Reform there has got to be," he said, departing from his text
and glancing up at the group of 24 top
executives and other officials in the ornate boardroom of the
New York Stock Exchange. Many
were sunk deep in leather chairs around a huge table, the
walls adorned with portraits of past
Exchange chairmen.
"We should not be afraid to think radically and
fundamentally," Blair told the group, which listened
silently, then rose to applaud him at the end and followed him
to a luncheon. He cut short his speech
since he was running late after speaking at the United
Nations, where he urged greater world
cooperation against terrorists.
The prime minister, who is the current chairman of the Group
of Seven leading industrial nations, said
he was considering calling a meeting of the group's government
leaders to push for the reforms.
Blair outlined a series of changes that he believed were
needed to deal with the current and future
global economic turmoil.
He said there was a need for greater openness and
transparency, which would include the setting up
of international accounting standards. He welcomed an attempt
by the IMF to come up with a code
on more fiscal openness.
He also called for improving financial supervision and
regulation and said that the IMF and the World
Bank needed to give this a much higher priority.
The world, he continued, had to develop better ways to respond
to a short-term crisis of liquidity
when a country has trouble converting its money into other
currencies.
"The IMF does not and cannot play this role -- the finance it
provides is strictly limited and is usually
provided in return for specific demands negotiated over a
period of time," he said.
The IMF, which has lent about $25 billion in the past year,
has run into sharp criticism in nations like
Thailand, Indonesia and South Korea, where its aid has been
coupled with requirements for tough
changes such as closing down weak financial institutions.
Interest rates have also been pushed up
sharply in those countries.
As a result, governments have been forced to cut spending,
which led to the killing of social programs
and public works programs.
Blair noted that the vast flows of capital in the current
economic crisis posed some new challenges.
"It is vital that global investors assess more carefully the
risks associated with their lending decisions
and price their loans accordingly," he said. "We need a new
mechanism to insure close and regular
contact between governments and the private sector that can
provide early warning of problems."
He also called for greater openness and accountability by
international financial institutions.
"I would like to see improved openness in procedures and more
systematic external evaluations of
IMF policies," he said. "It is important, too, that programs
should take full account of their impact on
the poorest sections of society."
He said that to put through the current reforms "we will have
to reach out to a wider community --
both the developing nations and outside experts -- including
financiers, economists and businessmen."
Blair said the resources of the IMF needed to be strengthened.
Last week some members of
Congress blocked a move by President Clinton to increase the
funding of the IMF.
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