US urged to increase its ante for world financial aid
Some important elements of the international business community in the United States are concerned, perhaps even alarmed, by Washington's cool attitude to the International Monetary Fund (IMF) and the World Bank.Skip to next paragraph
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The latest sign of this concern is a report of the Economic Policy Council of the United Nations Association of the USA. The report, for instance, concludes, ''. . . after careful review of the private sector's objectives in overseas operations, that . . . a reduction in World Bank lending could pose a direct threat to US economic and strategic interests and could undermine the carefully constructed network of multilateral economic cooperation.''
Looking at the IMF, the ''international financial institutions panel'' of the council called for at least a doubling of the current level of the fund's quotas. The IMF has 146 countries as members, each with a quota of money it contributes to the fund. The fund's pooled money is lent on a relatively short-term basis to member nations having trouble paying their international bills.
The Reagan administration figures some increase in quotas is justified, but not to the extent argued by the Economic Policy Council, or, for that matter, by most members of the IMF itself. The quota issue is expected to be a hot one at the annual meeting of the IMF and the World Bank in Toronto next week.
The council has timed its report to appear shortly before the meeting, presumably to have its greatest impact on administration thinking. The 26 members of the council panel are a mixture of mostly academics and high-level businessmen, some liberal, some conservative. The co-chairmen are James R. Greene, president of American Express International Banking Corporation, and John B. Petty, president of Marine Midland Bank.
''This is not a mushy, humanitarian group,'' one participant on the panel noted. ''We are concerned about our self-interest.''
Besides the quota issue, the panel was bothered by the tendency of Congress to delay already-promised American contributions to the International Development Association, the arm of the World Bank that makes soft-term loans to the poorest of nations.
''The needs of these poor nations are already urgent,'' the report stated, ''and since the private sector is reluctant to invest or lend in these countries , the proposed cutbacks in official assistance will affect them greatly.''
The Reagan administration has argued that private international investment could fill the gap, should multilateral aid decline.
This UN study group, including both Republicans and Democrats, cheered the idea of promoting private investment and lending to the developing countries. ''We are convinced that collaboration between private and official sources of finance can harness for development a very fruitful combination of know-how and capital,'' the report states.
''But,'' it added, ''these incentives are unlikely to induce the private sector to generate the additional flows of capital necessary to compensate for proposed cutbacks in multilateral lending.''
The Economic Policy Council described the IMF as the ''guardian of stability in the international monetary system.'' It urged the US to help the fund ''to maintain the resources necessary to preserve its effectiveness as a surveillance and adjustment institution.'' In other words, the fund should have enough money to help a nation make an orderly transition from balance-of-payments deficits to greater balance in its international accounts. It is often argued that the fund needs large amounts to make it worthwhile for a nation to make the politically unpopular adjustments in its economic policy that will balance its international payments.
But the group also said the fund's aid must be linked to ''conditionality.'' That means the fund must, as conditions for its loans, require a government to make appropriate economic adjustments, such as tight fiscal and monetary policy, or the reduction of subsidies to food or railways.
''Conditionality should be geared toward promoting economic efficiency and should be tight enough to assure adjustment,'' the report states, ''but not so tight as to inhibit countries from approaching the fund. We propose this view as an alternative to that of the administration, which has sought to tighten conditionality in all circumstances.''
Only last week, Beryl Sprinkel, undersecretary of the Treasury for monetary affairs, was quoted as saying that another recommendation for an increase in IMF quotas, by the Institute for International Economics in Washington, from $67 billion to $110 billion, was ''too much.'' The council talked of raising the quotas even more - to $141 billion.
Quotas, the council report notes, equaled about 12 percent of world trade in the mid-1960s. They now equal only about 3.5 percent of that trade.
Study groups such as the council are frequently sounding their opinions in international economic affairs. Whether they have any effect on the thinking of government officials is hard to say. Perhaps the fact that some important business members of the panel share the report's views will be considered. Next week's Tornto meeting could tell.