Rodrigo Rato, the new managing director of the International Monetary Fund, signaled his intention yesterday to maintain the approach set by his predecessors.
At his first Washington news conference since being named to the IMF's top job, Rato said that "overall, the work of this institution has been very good." Countries that borrowed from the fund and followed its advice, he said, were generally in a "much better position today."
New heads of the IMF and World Bank have sometimes embarked on their new jobs proclaiming plans to take their institutions in new directions, but Rato, a former Spanish finance minister, suggested he is not inclined to depart much from past policies.
Concerning giant rescue loans for countries in crisis, for example, he indicated that he is not averse to lending sums that go beyond the fund's normal limits if the circumstances call for it. Critics complain that since the mid-1990s the IMF has virtually ignored its self-imposed lending limits, shoveling tens of billions of dollars in cash to financially strapped countries and bailing out private investors in the process. But Rato said that if the fund's executive board was confronted with a well-reasoned recommendation from the staff to make a giant loan, "it ought to act."
He did cite one instance in which the IMF had erred, urging reporters to read a report by the fund's staff on the collapse of the Argentine economy in 2001-2002. The report acknowledged that the IMF was too lax in allowing Argentina's debt to mushroom in the late 1990s and suggested that the fund shouldn't have lent more money to Buenos Aires in mid-2001, when its debt burden and currency policy were becoming impossible to maintain.
Quoting his immediate predecessor, Horst Koehler, Rato said the IMF "is a learning institution" that is capable of drawing lessons from such episodes.
Asked about global financial markets, which have been spooked in recent days by the specter of rising U.S. interest rates, Rato voiced the view that an abrupt upward move in U.S. rates is unlikely because there is scant evidence of inflationary pressure in the United States.
"U.S. monetary authorities are telling us that they don't see inflation risks in the U.S. economy," he said. Thus, he said, the outlook is for an "orderly and not at all extreme modification of the monetary stance."