As IMF Puts on a New Face, Question Is ‘Why?’

WASHINGTON

In the poorest reaches of the globe, it is often viewed as a Scrooge, a heartless dispenser of bitter fiscal medicine, the hated symbol of all that seems unjust in a world of haves and have-nots.

But at its annual meetings last week, the International Monetary Fund put forth a decidedly different image. IMF officials, long associated with demands for excruciating budget cuts and towering interest rates in the countries it aids, instead stressed the problem of poverty in emerging nations.

The global lender supported an international push to forgive the debts of the poorest countries. It pledged to link its key loan program for the needy more tightly to anti-poverty policies than ever before. Managing Director Michel Camdessus even took to waving around a pocket-size pledge card that called for “reducing extreme poverty,” among other humanitarian goals. The IMF, Camdessus declared at one point, must “be responsive to the cries of the poor.”

To its many critics, however, the IMF is simply scrambling for political support, which has been ebbing in Congress and in other parts of the world after a tumultuous string of global events. Detractors blame it for everything from worsening the financial turmoil of 1997 and ’98 to wasting taxpayer money on loans to Russia--and more generally for being arrogant, secretive and increasingly obsolete.

“It’s an overstretched, underperforming institution trying to hold on to turf and buff its image,” says Jeffrey Sachs, an emphatic IMF critic who directs Harvard University’s Center for International Development. “The IMF is under tremendous attack right now--and justifiable attack--for not having done its job right in many parts of the world. It hasn’t helped in Africa; in Russia it has a disaster on its hands which it doesn’t understand. It did a bad job of handling the Asia financial crisis. This institution is weakened as never before.”

Activists who gathered at the annual meetings of the IMF and World Bank--an autumn ritual in which the capital is jammed with even more motorcades, embassy receptions and jittery security officials than usual--complained that the traditionally aloof institution was struggling to fill a role for which it is utterly miscast.

“We wonder why the leopard is being asked to change its spots,” said Ann Pettifor, a founder of the Jubilee 2000 movement, which is urging wealthy nations to forgive all debts of their needy counterparts. “We don’t believe it can change its spots.”

Yet such skepticism, although common, is not universal. More sympathetic observers say a greater emphasis on poverty makes sense both as public policy and as public relations. Just one year ago, the world was braced for a financial cataclysm: Asia was reeling and turmoil was threatening to spread into the Western Hemisphere. Today much of Asia seems to be on the mend, and the feared spread to South America seems less likely.

Now, IMF leaders say, the time is right to intensify efforts to combat poverty. Moreover, they say it has been a goal all along. “The extent of poverty still present at the end of a century of affluence is intolerable,” Camdessus declared last week in a typical example of the new oratory. “. . . It is time to respond.”

As one part of its response, the IMF recently announced plans to revalue 14 million ounces of its vast gold supply to current market values, a gambit that will raise more than $2 billion for the effort to ease the debts of the world’s poorest countries.

Yet some of the emphasis hints broadly of public-relations advisors, busily working behind the scenes.

As an image move, it has renamed a decade-old loan program for the neediest borrowers, formerly known--in classic IMF-speak--as the Enhanced Structural Adjustment Facility. Nowadays Camdessus refers to it as the slightly warmer-sounding Poverty Reduction and Growth Facility.

In the future, Camdessus said, countries that get loans will have to set forth “comprehensive” economic policies to reduce poverty as a condition for participating in the loan program. At the same time, the IMF has no plans to reverse its traditional approach, which often relies on government cost-cutting to stabilize ailing economies and presumes that the poor will be lifted by a rising tide of economic growth.

The idea: Economic growth remains the best weapon against poverty, but the IMF is more willing to recognize socially oriented, anti-poverty policies as keys to promoting economic growth. “The benefits are starting to trickle down,” an IMF spokesman maintained. “What we want is to make this trickle-down into a flood so the poorest members of society can enjoy the benefits that others do.”

The IMF’s increased emphasis on the needs of the have-nots became a source of some bewilderment at last week’s meetings. Some officials pointed out that the approach sounded more like that of the IMF’s sister lender, the World Bank, which aims to help nations with their development needs. The IMF was created after World War II with a different mission: overseeing the world monetary system and helping countries get through short-term financial woes.

World Bank President James Wolfensohn felt compelled to address a question raised by Brazilian Finance Minister Pedro Malan about whether lines were starting to blur: “I know Mr. Malan is worried that the bank will become the fund and the fund will become the bank, but I do not think that is very likely.”

Indeed, as some see it, the IMF may be embarking on a reasonable course after being battered for two years in the media and Congress. The growing attention to fighting poverty, they say, may be both a public relations exercise and a response to global realities: that the social safety nets of many of its clients are riddled with holes and that fiscal conservatism alone will not pull them into the affluent world.

“It certainly doesn’t hurt for them to put on a human face,” said Robert Litan, director of economic studies at the Brookings Institution. “They’ve sort of been in the position of the doctor prescribing castor oil for the last two years. They can legitimately claim that the castor oil has worked in a number of the countries--but that doesn’t make the castor oil go down any easier.”