| BUSINESSWEEK ONLINE : OCTOBER 4, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- SPECIAL REPORT
Will Congress Turn Off the Money Spigot? (int'l edition) Since the Asian economic crisis erupted more than two years ago, policymakers around the world have been debating whether the International Monetary Fund should play a reduced role in the global economy. And nowhere is the debate more intense than in Washington. The Fund has attracted numerous enemies there, ranging from fiscal conservatives concerned about tax dollars going to waste to international-conspiracy theorists who mistrust multilateral efforts of any sort. But now even moderate Republicans who normally support it are glum. ''I would have to cast a vote of no confidence in the IMF and [its] activities,'' says Representative Douglas K. Bereuter (R-Neb.), normally a booster of multilateral lending. The upshot of such criticism: IMF Managing Director Michel Camdessus and his colleagues must constantly ward off attempts to starve them of new funding. The Clinton Administration won a major battle last fall, when it got Congress to approve $18 billion in new funding for the IMF. But the recent outpouring of criticism means that future funding is at risk. Clearly, some of the IMF's woes in such places as Russia and Indonesia are institutional. Once it lends money, the IMF doesn't routinely track how the funds are used. Unlike money allotted by other multilateral agencies for projects that are easy to monitor--such as buildings and roads--IMF cash disappears into recipients' foreign exchange reserves. ''The accountability of the IMF needs to be strengthened,'' says Allan H. Meltzer of Carnegie Mellon University in Pittsburgh, who chairs a congressional commission that is evaluating international institutions like the IMF. In place of a full-blown monitoring system, the Fund has relied on ad hoc audits of how its loans are put to use. Even that system turns up some hair-raising results. In 1996, for example, an audit by PricewaterhouseCoopers found that Russia had misreported its reserves to the Fund. It discovered that IMF money had in fact been funneled through an offshore company called Financial Management Co., a subsidiary of Russia's central bank. However, a separate PWC audit in 1998 didn't turn up any evidence that any IMF loans had been stolen, as some critics have alleged. ''LAVISH LIFESTYLES.'' Now there are questions whether the Clinton Administration turned a blind eye to corruption. In March, House Majority Leader Richard K. Armey (R-Tex.) and Representative Jim Saxton (R-N.J.) wrote to then-Treasury Secretary Robert E. Rubin expressing concern that IMF lending might be ''financing the lavish lifestyles of Russian oligarchs.'' In May, Rubin passed the buck, replying that the Administration was aware of the allegations and had asked the IMF to investigate. But that wasn't enough to keep the issue from becoming the hot potato in Presidential politics that it is now. With the probe into the alleged corruption still under way, some U.S. lawmakers want the IMF to withhold a $640 million payment to Russia scheduled for late September. That could be the least of the IMF's problems. Unless the IMF develops tighter controls and wins new allies on Capitol Hill, Congress will be even more reluctant to vote more funding. By Laura Cohn in Washington _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS Fixing the IMF (int'l edition) CHART: The Markets Need to Lend More Again A Big Brouhaha in the Banking World (int'l edition) Will Congress Turn Off the Money Spigot? (int'l edition) INTERACT E-Mail to Business Week Online | |||
