Crisis lending is just one of many important jobs at the International Monetary Fund, the agency's number two official said yesterday, countering recent suggestions by U.S. Treasury Secretary Lawrence H. Summers and other critics that the IMF shift its focus to emergency loans.
Stanley Fischer, the IMF's deputy managing director, told reporters: "As we reexamine the role of the fund, we must not underestimate what is our bread and butter. Crisis lending is a critical part of what we do." But, he said, "it is far from being the main thing that we do."
In general, he added, "the fund is one of the most important ways, possibly the most important way, that the international community promotes good macro [economic] policies around the world."
Summers said in a London speech last month that borrowing from private sources should be the first resort for troubled countries. Only when that money is not available should the IMF step in, he said, and then only for the short term.
He made the remarks at a time when key members of Congress have been highly critical of the IMF's huge operations--it has $90 billion in loans outstanding to almost 90 countries--and of what they call the fund's lack of accountability.
As the fund's largest shareholder, accounting for about 17 percent of its capital, U.S. proposals carry heavy weight at the institution. Despite their apparent differences, Summers and Fischer are widely reported to have a close working relationship.
Many IMF watchers speculate that Fischer might become interim chief of the organization if members are unable to agree on a successor for Managing Director Michel Camdessus, who has announced his intention to leave next month. European members traditionally have picked the IMF director.
"A focused IMF, deciding what its priorities are, is something we should all welcome," Fischer said. "I don't necessarily interpret that as meaning a very small, a very much smaller IMF. This is a small institution, with a staff of under 3,000, and there are regional [Federal Reserve banks] which are larger than the IMF. So I don't think the institution is necessarily too large."
But Fischer said that "for every institution, it's a healthy move for it to reexamine what it's doing from time to time, particularly after it's come through a period as turbulent as this." That was a reference to the IMF's role in helping bail out country after country in the world financial crisis that began in 1997.
He acknowledged that the IMF made mistakes in its early response to the crisis after it began in Asia. The fund pressed governments there to cut back on spending and try to reduce their deficits, its usual prescription for countries in crisis. "Given the lack of demand from any other source as the crisis worsened . . . it was necessary, in fact, to have fiscal easing," he said. It took "just a few months to correct that," he added.
The world economy is coming back fast, Fischer said. "The Asian recovery now looks spectacular in most countries . . ." But in general he cautioned against complacence, noting that capital flows into emerging markets stand at only about a third of their pre-crisis levels.
CAPTION: Treasury Secretary Lawrence H. Summers, above, and the IMF's Stanley Fischer differ on the fund's role.