Ernest Sturc Memorial Lecture: IMF and World Bank face challenge of coordination and streamlining in next century
| Author | Lynn Aylward |
| Position | IMF External Relations Department |
| Pages | 380 |
Page 380
Krueger addressed an overflow audience on November 4, not surprisingly, since her topic was two large and prominent international organizations located just a few blocks away from the SAIS auditorium.
Krueger first addressed the World Bank, overviewing the evolution of the Bank from a lender to sectoral development projects to a leader of structural adjustment. Krueger noted that since middle-income countries can now finance development projects for themselves, the World Bank has a choice of lending to a smaller base of low-income countries, or embracing what she called "softer issues." She was quick to point out that by "softer," she did not mean social issues per se, because spending and reform in the health and education sectors had proved to be important and valid components of economic development. The term referred instead to the World Bank's taking on issues such as resettling indigenous peoples or requiring adherence to core labor standards-concerns where Krueger considered the link with economic development less clear. She suggested that this tendency of the World Bank to "go all over the place" could possibly contribute to the diminution of public support for the institution.
Turning to the IMF, Krueger suggested that for the monetary institution, the debt crisis in the 1980s was a key period that in some ways presaged the controversy that surrounded the IMF during the Asian financial crisis. During the debt crisis, the key was to keep the private creditors at the table, since IMF resources were low compared with the troubled countries' total external debt, and this same point is still relevant today. Krueger said that the starting point for any analysis of the IMF has to be the recognition that the institution simply does not have the resources to counterbalance international capital flows.
Three other issues came to the fore with the Asian crisis: the greater size and varied composition of private capital flows; the weightier role of the exchange rate regime; and the centrality of domestic financial sector issues-which "muddied the waters quickly." The key relationship, which is not understood by the IMF's critics, is that when a country has an unrealistic foreign exchange rate and banks have been-one way or another-encouraged to borrow overseas, then a balance of payments...
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