Rebuilding the IMF

Finance ministers from the Group of Seven major industrialized nations, meeting in Tokyo Saturday, will have to put the selection of a new managing director of the International Monetary Fund high on their agenda. Michel Camdessus, the current head of the IMF, is leaving next month, and the organization is up for a major overhaul. The nomination of Camdessus’ replacement cannot wait.

The flap last year over the nomination of a new head of the World Trade Organization should serve as a warning. For months, the governments of the world’s leading economies engaged in unseemly haggling, and when they finally struck a compromise it was too late to prepare adequately for Seattle, the WTO’s most important trade meeting in its brief history.

The seven richest countries, which have a controlling financial stake in the IMF, agree that the IMF needs mending and should be headed by someone with the financial genius of Jean-Baptiste Colbert, the Cabinet minister who bankrolled the reign of Louis XIV, and with the diplomatic skills of Benjamin Franklin.

So far, the only candidate put forward, by the German government, is Caio Koch-Weser, the country’s deputy finance minister, whose background as a 25-year veteran of the World Bank is in economic development rather than international finance. Even the European governments, which claim that tradition entitles one of theirs to the top IMF post, have not reacted to the German nominee with enthusiasm.

The new IMF leader will be under considerable pressure from Washington and some European capitals to slim down the organization and redirect its basic functions from that of a long-term lender bailing out governments that mismanage their economies to a manager of global financial crises and overseer of economic reforms.

The best candidate for such a job would be someone with the experience and stature of either a finance minister or head of a central bank. That is where the G-7 nations should be looking. The next financial crisis will require a strong IMF.