7:48 AM Sep 30, 1994


Geneva 30 Sep (TWN) -- The papers of the Cartagena Conference of the G-24 on international monetary and financial issues, and the summary of suggestions and proposals there have called for a range of reforms of economic substance in the approaches of the IMF and the World Bank -- on their lending, conditionality, liquidity, capital market controls and commodity and trade policies.

The summary of the proposals and suggestions have been made in a personal capacity by Gerald Helleiner, the Research Coordinator of the UNCTAD-G24 Trust Fund projects.

In terms of issues of economic policy of substance, the Helleiner summary deals with:

* issues of need for global liquidity and new allocation of SDRs;

* establishment of a low conditionality IMF facility to enable countries to ride through short-run and temporary capital flows created by crises in financial markets (such a facility though would need large resources and may involve opportunity costs),

* the IMF augmenting its role of surveillance, in view of their new role, over the global private financial markets and interacting more with their participants than with governments;

* the problems of volatility of private capital flows and work by IFIs towards a new global regime in this -- since orderly foreign exchange markets and sustainable trade policy regimes require rules in this area which are as important as trade rules; and

* the need for IMF and World Bank devote research to market imperfections and failures in this area including prospects of 'bubbles' and 'runs' in financial markets and alternative means of reducing their negative effects; consideration of circumstances where capital controls may be appropriate, prospects for new swap arrangements among central banks;

* the debt overhand problems of some 60 developing countries and the problem of arrears to the IFIs and then growing problem of IMF/Bank debt overhand in many low-income developing countries;

* the issues relating to development finance, including the poor prospects of both public and private flows of longer-term finance to a large number of developing countries.

Also in this area are issues of global macroeconomic management -- coordinated macroeconomic management in the interest of all, and not just a few countries, with the IMF playing a great role in this area, with the issue of how this is to be achieved requiring more urgent and more serious study.

In the area of appropriate adjustment/development policy, the summary notes a significant convergence of views, with both orthodox and non-orthodox analysts and practitioners gaining some ground, but with significant remaining disagreements in the spheres of financial reform, trade policy and the efficacy of the "big bang" approach.

Since country-specific circumstances, economic and socio-political vary greatly, local 'ownership' of the policy is seen as critically important.

The IMF/Bank conditionality should be longer-term in its orientation, less rigid and more geared to results than to policy compliance. Also, conditions on politically-sensitive issues like human rights and income-distribution are inappropriate.

The summary adds: "Since trade matters will be handled in the WTO, and trade policy instruments are typically 'swamped' by exchange rate movements any way, trade policies may be inappropriate for Fund/Bank conditionality, and in any case there is need for thought to the prospect of emerging overlap in this sphere of international economic governance."

The Helleiner summary also underlines that there has been "improper neglect" of international commodity market problems and international policies for addressing them in the Fund and the Bank.

"In the light of their particular importance to low-income countries,, and fifty further years of experience since the important discussion of these issues in the runups to Bretton Woods (and Havana), a reconsideration of the Fund/Bank approaches in this sector are needed.