On from Toronto
The annual meeting of the top officials of the International Monetary Fund and the World Bank at Toronto this week could not have come at a more propitious time. Jitters about the state of the world economy are now widespread, sparked not just by Mexico's debt crisis but by fiscal problems in such key economies as those of Argentina and Poland. Moreover, rising unemployment is now commonplace in the major industrial democracies.
So when a top West German banking official (Manfred Lahnstein, West Germany's finance minister), tells conference members that ''the recent easing of US interest rates could become a major turning point'' in leading the world away from its current economic malaise, that can only serve as a reassurance to the world financial community. And when the managing director of the IMF, Jacques de Larosiere, urges the political and banking community not to retreat from providing the concessional and private banking loans necessary to ensure continued economic progress in both poor and developing nations, the financial community is reminded once again of the interrelationship of the world economy.
The challenge for world financial leaders - and the United States in particular - is clear in light of the Toronto meeting:
* Multilateral and bilateral aid programs must not be allowed to atrophy in the wake of the world economic downturn. In that regard, it is noteworthy that the US has committed itself to boosting the member-nation quotas for the IMF. A 50 percent increase seems reasonable. The US should also consider an increase for the International Development Association, the World Bank's soft loan agency that makes loans to the poorest nations. The US should join other industrial nations in increasing real contributions for the next three-year replenishment of IDA, starting in July 1985. That would increase the replenishment beyond the billion to $18 billion.
The US, unfortunately, has not lived up to its own commitment to IDA for the current replenishment.
The US promised $3.24 billion over a three-year period. Congress, however, stretched out the payment of outlays over a four-year period. The Reagan administration has asked for $945 million for fiscal year 1983, but, unless it pushes flat out for the funds, there is a danger that lawmakers will reduce the amount substantially. And to meet its overall pledge, the US would have to provide some $1.2 billion for fiscal year 1984.
Despite domestic fiscal pressures, the administration and Congress should act to fulfill this commitment. What must be remembered is that such aid money is not charity, but sound investment dollars for the future that will flow back to the US in increased trade and in a healthier international economy.
* The US is to be commended for proposing a new special fund for the IMF that could be used in the case of debt emergencies. That such a fund is needed is amply proven by the Mexican debt crisis of recent days.
* Commercial banking officials, as pointed out by Mr. de Larosiere, must not pull back on future financing just because of fears stemming from the Mexican situation. Granted, many nations have plunged too far into debt, in part because of the short-sighted belief that sales of commodities (particularly oil) would continue to return ample revenues to service mounting interest payments - a belief dashed by the current downturn.
World financial leaders have been given a challenge at Toronto: not to overlook the fundamental interrelationship of economies and not to withhold the international aid funds - and private bank loans - that can help ensure a return to world prosperity.
The task now is to follow through.