WASHINGTON: After squabbling in recent months over their roles in assisting the world’s poorest countries the World Bank and the International Monetary Fund are close to an agreement that delineates their functions more sharply, their officials said today.
The L.M.F.’s board has already discussed the outlines of the pact, which establishes areas of primacy for each institution. Bank officials said they expect to send the accord to their board soon.
The disputes have arisen from an overlapping of functions in recent years. The World Bank has begun making short term loans to help countries over immediate balance of payments problems an area that had been the domain of the IMF. For its part the IMF has been moving into the bank’s territory by dabbling in longer term development financing.
“It is desirable to have this fully resolved in connection with our debt function,” a senior bank official said.
This weekend the 151 member Governments of both Washington based agencies are sending finance ministers and central bankers here for a review of global economic issues, including a new strategy for helping ease the debt burden of third world countries. The IMF and the World Bank are expected to play essential roles in the new strategy.
The tensions between the IMF and the World: Bank which reached a crucial stage last year over a World Bank loan to Argentina have been an embarrassment to both organizations which were founded after World War II to promote global economic growth.
Both prefer to settle their differences rather than have an accord imposed from the outside which could involve a merger, something the organizations have resisted for years.
The agreement follows lines laid down by a committee of senior finance officials of the 10 leading industrial countries headed by Lamberto Dini, governor of the central bank of Italy. The committee recommended that the IMF retain primacy in exchange rate fiscal and monetary matters, while the bank lead in investment areas.
The bank traditionally makes loans at below market interest rates for the basic investment needs of poorer countries, like schools, hospitals, farms roads and ports. But increasingly it has been making shorter term loans to aid a nation’s general economy. These loans have conditions attached about the nation’s economic policy.
The IMF which traditionally helps countries deal with short term problems with their balance of payments has recently been providing loans for economic development also with policy conditions attached.
Article extracted from this publication >> April 14, 1989
