IMF Quotas Tangled In Election Politics

`THE Bush administration is dominated by a short-run political mentality and putting in danger the foreign policy successes of the last few years," says John Sewell, president of the Overseas Development Council, a Washington think tank.

This charge is similar to that made this week by former President Richard Nixon. Mr. Nixon wrote of the "pathetically inadequate response" of the United States to the opportunities and dangers arising from the crisis in the former Soviet Union.

Mr. Sewell is concerned with the failure of the administration to fully back its own legislation increasing the "quotas" of the International Monetary Fund. That quota increase would enable the IMF to make loans to Russia and the other former Soviet republics to help them through their economic transition to a sounder economy - provided that those republics carry out various fiscal, monetary, and social reforms.

The IMF has always been tough in the conditions it has attached on loans to various nations with international payments difficulties. Riots in Egypt and elsewhere attest to that hard-nosed effort to prevent its loan money being wasted. In recent times, those conditions can include social matters. If Russia is to get a loan, it likely will require its government to implement an adequate safety net for, say, pensioners that have been hard hit by high inflation. In Venezuela, the IMF has been pushing for a more equal distribution of income by insisting that the taxation system enforce adequate taxes on the well-to-do. In many Latin American countries, the rich are experts at dodging taxes.

So we have a new phenomena - the IMF as a social reformer.

The governors of the IMF, with US backing, adopted a resolution in June 1990 providing for a 50 percent increase in the total of members' quotas from 90.1 billion special drawing rights (a type of international credit) to 135.2 billion SDRs (about $190 billion). These national quotas provide funds to the IMF for making loans to nations in financial trouble.

Under the plan, the US would need to ante up another $12.2 billion. With this money and that provided by others among the 156 IMF members, the fund could lend as much as $14 billion to Russia and the other republics. That money would be loaned in discrete chunks as various reforms were carried out. The goal would be to transform these republics to a more productive, democratic, free-enterprise economic system.

That plan has gotten tangled in the US election and a public disenchantment with foreign aid. Republican presidential candidate Pat Buchanan has been attacking the IMF and its sister institution as subsidizers of "socialism" abroad. As a result, President Bush has sent Treasury Secretary Nicholas Brady up to Congress to back the IMF quota legislation; but the president has not spent any of his own political capital in pushing the bill.

Democratic leaders recall that when the Democratic-controlled Congress approved an increase in funds for the World Bank - at the request of the Republican administration - the Republican National Committee was quickly attacking them for their profligacy.

"They got sandbagged by the Republicans," says Mr. Sewell.

Not wanting a repeat, the Democrats won't move the bill along until it has the full, visible backing of Bush.

In Sewell's view, the $12.2 billion appropriation for the IMF shouldn't be in the federal budget, since the money provided the Fund remains an asset of the US.

He sees a danger of the US abdicating its world leadership role at a time when economics dominate international affairs. "The administration doesn't have an international economic policy," he says. "It makes the 'new world order' sound hollow."

Eleven of the 15 former Soviet republics have applied for membership in the IMF. Some of these applications will be considered at a meeting of the policymaking Interim Committee April 27. The 22 finance ministers on this committee will review these applications.

The three Baltic states, Russia, Ukraine, and Belarus are expected to be admitted by late spring. A few other republics could get in by autumn. Their combined clout within the IMF will be less than that of France.

Whether the IMF will be able to help remains problematic.

You've read  of  free articles. Subscribe to continue.
QR Code to IMF Quotas Tangled In Election Politics
Read this article in
QR Code to Subscription page
Start your subscription today