Tuesday, July 01 16:55:51
The International Monetary Fund continues to be seen as a club for rich countries, limiting how much other nations trust its advice as objective, the IMF's own auditor said in a report today.
The Independent Evaluation Office's report analyzed its own studies over the past decade to see common patterns when the IMF falls short. The IEO also criticized how well the IMF's executive board oversees and guides the organization, a global multilateral lender with 188 member countries.
The auditor found few cases of outright "asymmetric treatment" and noted it was hard to measure what objectivity means in practice. However, many of the IMF's members still believed the lender treated its bigger shareholders, including the United States and Europe, more leniently than others, it said.
The auditor found that IMF staff sometimes exercised self-censorship to avoid candid messages about risks to advanced economies - in contrast to their advice to smaller, poorer nations.
That perception was magnified when the IMF lent billions of dollars to euro zone countries in distress, including Greece, Ireland and Portugal, with loans that were much larger than the countries' economies.
"The Euro Area programs had created the perception that European member countries had excessive weight in the IMF's decisions relative to their economic power," according to the report.
Developing nations have longed viewed the IMF with suspicion for promoting disastrous privatizations that complicated the transition from communism for some emerging nations in the early 1990s, and for pushing budget cuts that exacerbated debt crises in Asia and Latin America a few years later.
That suspicion has been compounded by a power structure that gives greater weight to many European countries compared to the size of their economies. The IMF is based in Washington and is traditionally headed by a European.
Reforms to the IMF's structure meant to give more power to emerging markets have been held up by the Congress of the United States, the IMF's biggest and most powerful member.
"Ultimately, the perception of lack of evenhandedness is rooted in the uneven distribution of decision-making power within the IMF," according to the IEO report.
The IEO also said the IMF's 24-member board sometimes does not provide clear guidance or oversight of the IMF's strategic direction, as board members are caught between acting on behalf of the IMF or following the interests of the countries they represent.
The auditor suggested the IMF should do a better job of dealing with these persistent problems, instead of treating the IEO's advice as a "box-ticking exercise" that does not get to the heart of the problems. (Reuters)