IMF, World Bank Take On Reviving Global Economy
RENEE MONTAGNE, host:
Finance ministers from around the world have wrapped up their meetings at the headquarters of the International Monetary Fund and the World Bank. Those institutions are carving out major new roles for themselves in the effort to revive the global economy, although first they'll have to decide how to divide up the responsibility.
NPR's Tom Gjelten has more.
TOM GJELTEN: The IMF and the World Bank exist to help countries in need. The Bank aims to reduce poverty, the IMF helps governments experiencing financial trouble. A world map showing countries with IMF loans has a cluster of pins in Africa - no surprise. But recently, some pins were added in unlikely places: Iceland, Latvia and Hungary, countries that were prospering until recently. The economic geography of the world is changing. Some developed countries now need help. Some previously poor countries, meanwhile, are now in position to provide it.
Last week, a journalist from India asked what role his country should play. Robert Zoellick, the World Bank president had this answer.
Mr. ROBERT ZOELLICK (President, World Bank): Over time, it will be helpful for India to look for ways where it can help other developing countries. And this may be in direct resources, indirect resources.
GJELTEN: This idea of India becoming an aid provider points out the challenge facing international financial institutions. The IMF and the World Bank were established when the United States and Europe dominated the global economy and therefore provided the lion's share of economic assistance. But the rise of countries like China and India and Brazil has produced a new economic lineup.
John Lipsky, the deputy managing director of the IMF, says his institution needs to adapt.
Mr. JOHN LIPSKY (Deputy Managing Director, International Monetary Fund): There are new players, and we need new processes and new rules to guarantee a more stable and more prosperous economy.
GJELTEN: At the Group of 20 Summit in London earlier this month, world leaders pledged to endow the IMF with more than a trillion dollars of loan resources. Among the countries asked to contribute were the new economic powers: China, India and Brazil.
But the finance meetings here ended yesterday without official commitments from those countries. The problem? While the emerging countries are contributing more to the global economy, they don't have more political representation to match. China has fewer votes at the IMF than Belgium, in spite of its much bigger economy.
The challenge for IMF officials like John Lipsky is to convince those countries to kick in more money now whether or not they have the voting power they deserve.
Mr. LIPSKY: Many of the countries that have become rather bigger players in the past decade or so in the global economy also, of course, are very interested in the ultimate changes in the governance arrangements in the institution. But right now, we have the issue of being able to provide the financial support for our members in order to overcome the crisis. And I think that's very well understood.
GJELTEN: A compromise of sorts emerged this weekend. The IMF is preparing to sell bonds to raise money, just like the U.S. government does. China, Brazil, India and the other rising economies could help the fund by buying those bonds, in effect loaning the IMF money on a short term basis. They help the IMF meet its lending challenge, but hold off on long term commitments until they get the governance changes they want.
Meanwhile, the IMF and the World Bank are moving as fast as they are institutionally able to help countries get through this economic downturn. One quick response, finance ministers this weekend agreed on a $200 million emergency loan to Mexico to help it deal with the swine flu.
Tom Gjelten, NPR News, Washington.
(Soundbite of music)
MONTAGNE: This is NPR News.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.