Date: Thu, 21 Aug 1997 10:59:18 -0500
From: Michael Novick <mnovick-AT-laedu.lalc.k12.ca.us>
Subject: AUT: World Bank, IMF Make Policy Change


World Bank, IMF Make Policy Change
>
>   By HARRY DUNPHY  Associated Press Writer
>  
>     WASHINGTON (AP) - Banks and governments handed over billions of
>  dollars to Zaire while now-deposed ruler Mobutu Sese Seko amassed a
>  fortune through graft and corruption. Kenya remained one of
>  Africa's largest aid recipients despite two big financial scandals.
>  
>     Now, the International Monetary Fund and the World Bank are
>  bluntly telling developing countries with bad governments to stamp
>  out graft or lose the money. For the first time, bankers are openly
>  challenging politicians.
>  
>     The new buzz words for the world's two biggest lenders are "good
>  governance" - bank talk for rooting out bribery, tax fraud, payoffs
>  to politicians' relatives and judges who can be bought.
>  
>     From 1970 to 1994 Zaire received an estimated $8.5 billion from
>  Western donors, including the two Washington-based financial
>  institutions. Through it all, critics were urging the IMF and the
>  bank to be tougher on Mobutu.
>  
>     But international lenders followed rules established by their
>  member governments that said they could only offer economic advice
>  and should stay out of anything that smacks of politics or a
>  nation's internal affairs.
>  
>     Both institutions are changing those rules and stepping up
>  efforts to combat corruption in developing countries.
>  
>     Earlier this month, nearly $300 million in loans and credits to
>  Kenya were suspended because the government failed to tackle high-
>  level corruption and mismanagement. The World Bank and IMF are
>  likely to coordinate more such actions in the future.
>  
>     World Bank President James D. Wolfensohn said that when he took
>  over two years ago "you didn't go in and talk about corruption"
>  with government officials. "Now it is an item in practically every
>  discussion you have."
>  
>     In the 50 countries he has visited, Wolfensohn said, "corruption
>  is the biggest issue on the minds of voters and the single largest
>  inhibiting factor" for private investment.
>  
>     Wolfensohn and IMF Managing Director Michel Camdessus say their
>  institutions can't be the world's economic police because they
>  don't have the power and couldn't do it effectively anyway.
>  
>     But since their last annual meeting they have made corruption a
>  high-profile issue.
>  
>     Encouraging countries to reduce inflation, undertake market
>  reforms and correct "marcroeconomic imbalances" is still the fund's
>  top priority, Camdessus said in a major policy speech.
>  
>     But countries that hope to attract private investment, he said,
>  "must come to grips with issues associated with good governance ...
>  the rule of law, improving the efficiency and accountability" of
>  government.
>  
>     To be sure governments get the message, each organization is
>  issuing formal guidelines warning that financial assistance will be
>  denied unless corrupt politicians and officials are reined in.
>  
>     As the world's finance ministers prepare for the annual meeting
>  of these two world financial institutions in Hong Kong next month,
>  they will assess the first results of the new efforts to make
>  better government a condition for economic help.
>  
>     In the past, when officials visited countries to consider loans,
>  they looked at measurable economic indicators such as inflation,
>  budget deficits, foreign exchange reserves or education, health
>  care and infrastructure projects such as roads and dams.
>  
>     Guidelines adopted by the fund's executive board, which
>  represents its member governments, say the fund can delay or
>  suspend loans unless a government makes "changes in management in
>  public institutions ... and (removes) individuals from operations
>  where corruption had occurred."
>  
>     When they draw attention to politicians or officials who may be
>  getting payoffs, fund officials are told "to be prepared to face
>  some tension in the working relationship with country authorities."
>  But they'll still be talking like bankers, and flak jackets have
>  not been made part of the traveling wardrobe.
>  
>     The bank's anti-corruption guidelines, due out next month, are
>  expected to be more selective because, unlike the fund, it usually
>  has several loans outstanding in various Third World countries.
>  
>     "We will make decisions on a project-by-project basis," said
>  Masood Ahmed, who is in charge of drawing up the bank's guidelines,
>  "We want our programs as corruption-free as possible. If we find
>  funds are not being spent for the purpose they were intended, we
>  will delay or suspend disbursement."
>  
>  {APWire:Business-0820.3}    8/19/97
>
>
>
>

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