IMF Chief Announces Plan to Resign Next Year

Michel Camdessus, director of the International Monetary Fund, which found itself at the center of a global financial whirlpool in 1997 and ’98 but later claimed vindication for its policies, said Tuesday that he would step down next year.

Camdessus, 66, had two years left in his third five-year term at the world’s key lending agency. He had been widely expected to bow out following an exhausting series of crises that had eroded the agency’s support in Congress and much of the world in recent years.

Few perceived Camdessus as the person to lead the IMF in a new era, as political and financial leaders rethink its proper role in a changing global economy. Both the IMF and its sister institution, the World Bank, were created in the Mount Washington Hotel in Bretton Woods, N.H., in 1944, as pillars of the postwar financial order.

But while the IMF has been the target of fierce criticism for the budgetary austerity that it demands of struggling nations seeking its loans, it has taken pride in the emerging recoveries throughout Asia.

Citing “personal reasons,” Camdessus said he would leave the IMF in mid-February after the agency’s 24-member executive board has selected a successor. His third term at the IMF was scheduled to run until 2002.

“This is, I think, the right time. . . . It is hard for me to tell you this,” Camdessus told employees who hastily gathered in the IMF’s towering atrium. “The world economic outlook allows us to anticipate favorable trends for the world economy, so I see it as my duty now to suggest that you take advantage of these favorable circumstances to select my replacement.”

A genteel one-time head of the Bank of France, Camdessus has overseen sweeping changes in the global economy. When he took the job as managing director in January 1987, financial leaders were still mopping up the debt crisis of the 1980s, a crisis largely driven by defaults on credit that an assortment of rich-country banks had given to poor countries.

But more recently, the problems reflected the turbulence of a globalized financial world, in which panicky stampedes of private capital sent national currencies to the brink of disaster.

The IMF has long been known for prescribing painful medicine to the financially ailing countries it bails out, such as demanding that they keep government spending in line. Such measures may strengthen currencies and please investors, but may also cost ordinary workers their jobs.

This approach was followed in the IMF’s bailout strategy for countries caught up in the financial turbulence of 1997 and ’98. At the same time, countries throughout Asia toppled into recession like dominoes, sparking political instability and creating much bitterness toward the West.

Under Camdessus, the IMF also was widely criticized for operating too much in secret and conveying an aloof impression to the U.S. Congress, its key patron. More recently, Camdessus seemed to be trying to respond to the criticisms.

In an internal review released in January, IMF officials conceded they had made some mistakes in gauging the virulent financial crisis that began in Thailand 18 months earlier.

And at the IMF’s annual meeting in September, Camdessus went out of his way to emphasize the problems of the world’s poorest nations, and argued that the IMF should make fighting poverty a higher priority in its loan programs.

“The situation could have been much worse. The IMF has an incredibly difficult job to do--people really don’t appreciate how small the room to maneuver is,” said Lex Rieffel, senior advisor to the Institute of International Finance in Washington.

Rieffel added: “It would have been nice to have the IMF prevent the Mexican crisis, the Korean crisis or the Thai crisis. But it seems to me that would be unrealistic.”

Indeed, headaches for Camdessus did not end with the easing of the Asian financial crisis in late 1998. Congress has balked at his plans to sell part of the IMF’s gold stash in order to pay for debt relief for the world’s poorest countries.

In addition, the ongoing investigation of Russian money laundering in U.S. banks provided further pressures for the IMF, which has steadfastly insisted to skeptical reporters that it had no knowledge that its most recent loans to Russia have been mishandled.

U.S. Treasury Secretary Lawrence Summers praised Camdessus on Tuesday as doing “an outstanding job as the IMF’s longest-serving managing director.”

Among names that have been mentioned as possible successors to Camdessus are the head of the Bank of France, Jean-Claude Trichet; Italian Treasury Director General Mario Draghi; Andrew Crockett of Britain, who is head of the Bank of International Settlements in Switzerland; Mervyn King, deputy governor of the Bank of England; and Horst Koehler, head of the European Bank for Reconstruction and Development.