Treasury Secretary G. William Miller yesterday gave a sweeping endorsement to enlargement of the role of the Interational Monetary Fund in financing balance-of-payments deficits, including a larger allocation beginning in 1982 of special drawing rights, the IMF paper currency distributed to its members.
In his address to the joint annual meeting of the IMF and World Bank, Miller also gave his blessing to the IMF's borrowing "on a moderate scale" from the private money markets. This may prove necessary if Arab nations, on whom the IMF was counting for loans of up to $8 billion a year in the next three years, withhold their assistance.
The American position contrasted with the more cautious approach of another leading industrial power within the IMF, West Germany. Addressing the international conference on Tuesday, Finance Minister Hans Matthoefer, while supporting a more important role for the IMF, held out a warning signal:
"I welcome the IMF's readiness to flexibly adjust to the changing needs of its members." Matthoefer said. "But it should be made clear that its monetary character must be preserved." Matthoefer is known to be highly critical of the proposal by IMF Managing Director Jacques de Larosiere for a new IMF operation to finance loans to alleviate crop failures, especially for cereals.
Miller and Matthoefer did agree on one thing: The dollar is strong and is likely to get stronger as the United States current account -- the balance on goods and services -- moves into surplus. At a press conference, Miller said that the U.S. current account is in approximate equilibrium this year and would show a small surplus in 1981.
The German current account, meanwhile, has moved into a substantial deficit, a condition that Matthoefer said "we can live with for a while."
Miller's total endorsement of a bigger IMF, which would lend on more flexible terms, reflects current American policy to rely more heavily on both the IMF and the World Bank in the wake of massively higher costs for oil being borne by the less developed countries.
His proposal for increased SDR allocation was made, he said, because of the "major developments" -- meaning oil price increases -- that had taken place since an allocation of 4 billion SDRs annually was approved in 1978 for 1979 through 1981.
The Interim Committee last weekend turned down a proposal by the bloc of poor nations for a supplemental allocation of 6 billion SDR's next year and for an issue of 10 billion SDR's a year during the five-year period 1982 through 1986. But the major nations agreed to study the matter, the implication being that there would be some kind of increase over the 4 billion figure.
Miller made the U.S. commitment to a larger issue explicit by saying that "in my view, the most effective approach to expanding the Sdr's role is a relatively steady expansion of allocations, from basic period to basic period as the world economy grows," A proposal along such lines by De Larosiere at the spring 1981 meeting of the IMF Interim Committee in Libreville, Gabon, will be considered "positively" by the United States, Miller said.
Matthoefer also warned that flexibility in loan terms could go too far. "It should be made clear that [the IMF's] monetary character must be preserved," he said. "The IMF was created as the guardian of internal and external monetary stability. It should resist all attempts that might call this mandate in question. The conditionality of its lending must be maintained."
Miller said that the prospect of the IMF borrowing in the Eurodollar and other private money markets raises the possibility of greater commercial use of SDR-denominated assets.
Miller also expressed a strong commitment to the work of the World Bank, pledging support for both the current general capital increase and the sixth replenishment of funds for the International Development Association (IDA), the Bank's soft-loan affiliate.
This expansion of funds, he said, "should meet developing country needs for Bank financing over the next few years." In effect, Miller withheld endorsement of Bank President Robert S. McNamara's pitch on Tuesday for further expansion of Bank lending, possibly by lowering the ratio of bank capital plus reserves to loans. Miller is anxious to get the IDA appropriation through Congress at this session and the capital increase appropriation next year before hitting Congress with any new demands for the international agencies.
The Palestine Liberation Organization, meanwhile, yesterday accused the United States of a "shameful act" and "moral bankruptcy" for keeping the PLO from being allowed to take an observer's seat at the IMF-Bank meetings, news services reported.
Hatem Hussaini, a PLO spokesman in Washington, was barred by IMF security personnel from holding a news conference in the press room at the hotel where the meetings are being conducted.
On the sidewalk outside the hotel he told reporters, "It is obvious that the U.S. government has used all kinds of pressures on small states to gain a quorum and thus prevent the PLO from attending the World Bank annual meetings."
[The PLO was turned down in its bid for an observer's seat at the meeetings, but Arab members of the organizations are contesting the vote.]