Magazine article Foreign Policy in Focus

Problems with Current U.S. Policy

Magazine article Foreign Policy in Focus

Problems with Current U.S. Policy

Article excerpt

In August 1997, the IMF released guidelines regarding its role in governance issues. According to then-Managing Director Michel Camdessus, "a much broader range of institutional reforms is needed if countries are to establish and maintain private sector confidence," and "every country that hopes to maintain market confidence must come to terms with the issues associated with good governance." The IMF announced plans to evaluate countries' governance practices and to condition its loans on good governance. The fund then flexed this new muscle when it withheld a loan to Kenya because of corruption concerns.

This new interest in good governance is ironic, given the fund's history. Kenya received IMF assistance throughout the early 1990s, and IMF lending may soon be resumed, despite protests from Kenyan civil society and political opposition leaders who claim that corruption continues. The fund loaned billions to Russia in the 1990s despite rampant evidence of corruption, as Russia's political and business elites reaped the spoils from IMF-mandated privatization schemes. The U.S. Treasury Department has strongly supported these IMF loans for its own political reasons.

The politicization of IMF lending decisions is created by its flawed voting structure, which is based on each member's contribution to the fund. As the largest financial contributor to the IMF, the U.S. has the largest share of votes--17%. Together the G-7 nations control nearly half the votes and thereby wield a heavy hand in setting the IMF's agenda. In addition, many of the IMF's most important decisions, such as amendments to its Articles of Agreement or use of the fund's gold reserves, require an 85% majority, thereby giving the U.S. veto power over the most critical decisions.

The U.S. has used its influence within the IMF as a way of promoting U.S. foreign policy through a multilateral facade. The IMF'S ever-expanding mandate--from macroeconomic stabilizer to development fund to good governance expert--has enabled the U.S. to exert its agenda in ever-increasing ways. In a break from the past, U.S. Treasury Secretary Lawrence Summers has recently acknowledged the IMF's expanding mission and has called for a "refocusing" of the fund's role. In practice, however, business seems to continue as usual, and debt relief for desperately poor countries is delayed by the mantra of preconditioned good governance reforms.

As an institution promoting good governance, the IMF itself is still too secretive. …

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