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As Global Recession Deepens, IMF's Profile Rises

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As Global Recession Deepens, IMF's Profile Rises


As Global Recession Deepens, IMF's Profile Rises

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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It's MORNING EDITION from NPR News. I'm Steve Inskeep in Detroit.


And I'm Renee Montagne at NPR West. Not long ago, the very mission of the International Monetary Fund was in question. But going into its annual spring meeting this weekend in Washington, the IMF has a new sense of purpose. That's because the world's leading economic powers have given it a central role in fighting the global downturn.

And according to a new IMF forecast, the worldwide recession will be even longer and deeper than previously thought. NPR's John Ydstie has more on the IMF's new role.

JOHN YDSTIE: John Lipsky, the first deputy managing director of the IMF, was clearly pleased with the Fund's new assignment as he stepped up to a lectern at a public appearance in Washington earlier this week.

Mr. JOHN LIPSKY (Deputy Managing Director, International Monetary Fund): I yesterday went on the Web and discovered the title of this session…

(Soundbite of laughter)

Mr. LIPSKY: Can the IMF Really Save the World?

(Soundbite of laughter)

Mr. LIPSKY: Wow.

(Soundbite of laughter)

YDSTIE: Amazingly, it was just a year ago that the world seemed to be wondering whether the IMF was worth saving, says Simon Johnson, former chief economist of the fund. Central bankers and finance ministers had gathered in Washington for the spring meetings, just as they will this weekend.

Mr. SIMON JOHNSON (Former Chief Economist, International Monetary Fund): The general consensus among those people was, yes, we may be heading into something of a global slowdown, but it's not really a big crisis. And in any case, the IMF is no use, essentially, to anyone.

YDSTIE: That's because the IMF's reason for being was in doubt. Many of its former nation clients had quit borrowing from the fund. That's partly because they were viewed as economic basket cases when they did, and partly because money had become available in the private financial markets. So global finance officials voted to cut 20 percent of the Fund's budget and staff. They thought the IMF had become irrelevant, says Simon Johnson. But now that's been turned around.

Mr. JOHNSON: It's a huge change. It's a night-and-day change.

YDSTIE: At their London summit, the G-20 leaders agreed to increase the IMF's monetary resources by more than a trillion dollars and called on the IMF to take a greater role in monitoring the global economy and coordinating financial regulation.

The IMF's John Lipsky says the fund embraces its new role.

Mr. LIPSKY: The endorsement and the resources being provided to the fund represent an historic change and potentially gives us the tools to adequately address the challenges before us.

YDSTIE: Among the new tools the IMF has is a sort of platinum card credit line for countries with good economic policies. There's less stigma attached because economic basket cases don't qualify for the credit line. But when bad things happen to good countries, like a global economic crisis, they can access the credit lines and borrow what they need. Already, Mexico, Poland and Colombia have signed up.

But Simon Johnson worries the budget and staff cuts imposed on the IMF last year, which have not been restored, may hamper its ability to quickly implement programs to fight the crisis.

Mr. JOHNSON: It is striking and kind of surprising that the G-20 did not address the IMF budget issue. So they gave them a trillion dollars, but didn't give them the means, the staff, the personnel, head count that you need to deploy that money in a sensible fashion.

YDSTIE: A true resurgence of the IMF will also require more power for emerging nations like China, says Eswar Prasad, another former IMF official who's now a professor at Cornell and a scholar at the Brookings Institution. But, Prasad says, the current proposals to increase China's voice don't adequately reflect the size of its economy.

Professor ESWAR PRASAD (Cornell University, the Brookings Institution): This, to me, is absurd. I mean, at a time like this, when we are in a crisis, when we need to be making significant changes to the institution to make it more powerful, this is the time to make very drastic changes.

YDSTIE: On basic reforms like this one, says Simon Johnson, the IMF makes glaciers look fast. In any case, he says, no progress on this issue is likely to be made at this weekend's meetings. Most of the time will be spent consolidating the gains initiated at the G-20 summit.

John Ydstie, NPR News, Washington.

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