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| Tuesday, 12 October 2004 |
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Call to make IMF resources more flexible Finance Minister Dr. Sarath Amunugama has urged the International Monetary Fund (IMF) to make its resources more flexibly available to support stabilisation, growth and poverty reduction efforts of its member countries, especially the developing ones. Dr. Amunugama made this timely call at the annual meetings of the Board of Governors of the IMF and the World Bank in Washington last week. The Minister's request should be considered in the context of the extremely high-profile role of the IMF and the World Bank in the global economy. Their assistance structures are sometimes very rigid and not all developing countries can match these criteria to the letter. There is a clear need for some sort of flexibility in dealing with the needs of these countries. For example, they may not be in a position to fulfil some of the conditions attached to the granting of assistance within a specified time frame. A measure of give and take on both sides can result in a viable compromise. As the Finance Minister has pointed out, international cooperation is vital in today's volatile economic scenario. No country, however developed it may be, can tide over these difficult times alone. Both developed and developing countries face enormous economic challenges - difficult fiscal positions, trade imbalances, current account imbalances and structural weaknesses are just a few. In this climate, the IMF and the World Bank have a major role to play in strengthening the world economy. They should strive to support efforts being made by the less privileged member nations to meet the Millennium Development Goals, a set of objectives which should ideally be realised at least by 2015. However, there is every possibility that the majority of countries would be unable to meet this deadline in the absence of proper economic programs and financial resources. This is where the more prosperous countries can lend a helping hand, especially through increased trade with the Third World. Developing countries have already called for drastic cuts in subsidies granted to farmers in rich countries, so that their agricultural products could be exported at competitive prices. Dr. Amunugama has made another apt suggestion: the setting up of a contingent facility, which could be applied to cover all major types of international contingencies, such as the current rise in crude oil prices. With a barrel of oil touching the previously unheard-of US$ 52 mark, the majority of countries are facing dire economic consequences. Asian countries, which traditionally maintained heavy fuel subsidies, are facing a severe strain as they try to contain fuel prices at the pumps. Many countries have reluctantly raised petroleum prices, risking the ire of consumers. Since most Third World countries are net importers of oil - on which their economies practically run - they have to bear the biggest burden. The cost of transport increases as oil prices are raised, which in turn impacts heavily on the Cost of Living in general. With no immediate prospects of the GDP going up drastically, Third World Governments are facing the unprecedented challenge of fulfilling their socio-economic and development obligations while allocating millions of dollars more for oil imports. An international contingency facility would have helped these countries to mitigate the ill effects of the oil price rise until the prices stabilised in the world market. The same logic applies in case of man-made or natural disasters (such as the prolonged drought in Sri Lanka's dry zone), financial crises (Ex: the Asian currencies crash of the last decade) and political upheavals. It is clear that both the IMF and the World Bank would need a significant expansion of their resource bases to implement the suggestions put forward by member countries. They should reach an agreement on this aspect in due course to reap the real benefits of globalisation. |
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