Ministers poised to back IMF crises plan

Date: 15/04/1999

By Tim Jones

AN ITALIAN plan to widen membership of the International Monetary Fund's key ministerial panel looks set to win guarded approval from EU finance ministers when they meet in Dresden this weekend.

If agreed by IMF members, the plan to nip the kind of financial crises which recently engulfed Asia and Latin America in the bud would amount to the most significant overhaul of the institution in 25 years.

Under the 'double hat' proposal which will be formally presented to Union finance ministers by Italian Treasury Minister Carlo Azeglio Ciampi this Saturday (17 April), key external policy-makers would be co-opted on to the IMF's interim committee when emerging markets issues were discussed.

The IMF's interim committee, which is next due to meet on 27 April, brings together finance ministers from the fund's 182 member countries to discuss the latest monetary and financial market developments.

Those co-opted on to the panel would include representatives from the World Bank, which lends money for specific development and infrastructure projects; the Basle Committee, which sets minimum capital levels for banks world-wide; and agencies tasked with setting accounting standards for companies and governments. The 'stability forum' to coordinate policies towards global markets, which met for the first time yesterday (14 April), would also have a seat.

EU ministers are, however, expected to soft-pedal on two more radical proposals: one from French Finance Minister Dominique Strauss-Kahn and another from Nigel Wicks, the UK treasury's top international policy official and former chairman of the Union's monetary committee.

The French plan would transform the interim committee into a full-blooded ministerial council with decision-making rather than consultative powers; an idea supported by leading IMF officials and permissible under the fund's articles of agreement.

However, several EU governments feel the proposal fails to address the question of outside agencies and how to coordinate crisis response with the World Bank, the stability forum and the Basle Committee.

Wicks' radical plan would abolish both the interim committee and the IMF's development committee, which deals with poorer countries' concerns, and replace them with a new over-arching panel concerned with all fund business and involving other agencies. The new panel would have three subcommittees dealing with poor countries, emerging markets and classic IMF business.

" This approach would reflect globalisation - the idea that all markets are now heavily interrelated - and it would replace the interim committee which, as its name implies, was only set up as a temporary body," said an EU monetary official.

Several member states are sceptical about the chances of the Wicks plan winning support from other IMF members, as it may lead to turf battles between finance and development ministers.

In Dresden, ministers will also consider how to involve the private sector in crisis prevention and management. "The main aim is to persuade private investors to take greater account of risks and that risks should be better reflected in prices," said another official.

Related url: http://www.imf.org.