CHAPTER 5
Reform Agenda at the International Financial
Institutions
The speeches and
congressional testimony in this section trace out in real time the progress the
Bush Administration made in implementing a series of fundamental reforms at the
international financial institutions—the International Monetary Fund, the World
Bank, and the other development banks. They start with the Administration’s
proposals, which were made at the start of the Administration. They then move on to report on the successful
implementation and finally consider a series of next steps for the future.
Our reform agenda was
based on the principle that economic growth is essential for reducing poverty
and, in particular, that productivity growth comes from the private sector. The reform agenda
included the proposal to move from loans to grants and the incorporation of a system of measurable results at the World Bank. It also included a new policy to clarify the limits on exception access
to loans from the IMF and a requirement that the IMF focus on its core responsibilities in the macroeconomic
and banking areas. (The collective action clauses reform, which was a
reform to the international system
rather than to these institutions, is described in another section.) As
with many reforms, some of these were considered controversial at the start,
and a considerable amount of financial diplomacy was required to get
international agreement. Once implemented, however, they bolstered the case for
increased funding for the institutions from Congress, and indeed for the first
time in many years the Congressional funding for IDA, the window for the
poorest countries at the World Bank, increased.
The first three items
describe the Administration’s original reform proposals for the IMF and the
multilateral development banks and need little additional explanation. Item 4
requires a bit of background to understand: this is congressional testimony
proposing an approach to reform the North American Development Bank a joint
United States-Mexico institution designed to fund water projects on the
border. NADBANK, as it is called, was
originally created to get needed political support for NAFTA in the early 1990s,
but it never performed very well. After
much work we were eventually able to get the needed reform legislation passed
to implement these reforms.
Item 5 gave our support and encouragement to
the staff and leadership of the World Bank as it began to implement the
measurable results component of the reforms. In item 6 we began to make the
case for increased congressional support based on our reform proposals. Item 7
stresses our general theme of the private sector as a source of growth and
poverty reduction.
By the time the
speeches and testimony in items 8 and 9 were given, we had already made serious
progress in the gaining international agreement and indeed implementation of
the proposals. These speeches describe that progress. In item 10 I then make the case to the House
Foreign Operations Appropriations Subcommittee for additional funding based on
this successful implementation; during
the testimony I referred extensively to several trips I made to Africa to
observe the grants and measurable results first hand.
In item 11, a
presentation at the American Enterprise Institute, I endeavored to present our
analytical rationale for the reforms as a whole (an earlier attempt at this was
made in my paper for Guillermo Calvo’s festschrift
conference (Item 7). In item 12 I
reported to Senator Lugar’s committee how our measurable results agenda was an
important weapon in the fight against corruption at the institutions. Finally, the last two items build on our
success by suggesting additional reforms. In item 13 I described a new non-borrowing
program at the IMF, which I am pleased to say was approved by the G7 in April
of this year, and a proposal to completely cancel the debt of the heavily
indebted poor countries to the World Bank and the African Development
Fund. Item 14 was an endeavor to
continue to spread the word about the importance of measurable results, this
time in a small Davos audience that included Jeffrey
Sachs and Angelina Jolie.
1. Improving
the Bretton Woods Financial Institutions, Bankers
Association for Finance and Trade,
2. Grants
and Sovereign Debt Reconstructing, Joint Economic Committee,
3. Improving
the Regional Development Banks, Institute for International
Economics and Center for Global Development,
4. United
States and Mexico Economic Relations NADBANK Reform), Subcommittee
on
5. Better
Measuring, Monitoring, and Managing for Development Results, World
Bank,
6. Reauthorization
for the Multilateral Development Banks, Subcommittee on
International Economic Policy, Export, and Trade Promotion of the Senate
Committee on Foreign Relations,
7. Finding
New Business Models at the Multilateral Development Banks,
8. Policy Regime Change and the International Finance Institutions, International Monetary Fund, Washington , DC , April 16, 2004
9. The
Bush Administration's Reform Agenda at
the Bretton Woods Institutions: A Progress Report and
Next Steps, Senate Committee on Banking, Housing, and Urban
Affairs,
10. Budget
Request for Treasury International Programs for Fiscal Year 2005, Subcommittee
on Foreign Operations, Export Financing, and Related Programs of the House
Appropriations Committee,
11. New Directions for the International Financial Institutions, American Enterprise Institute, Washington, D.C., June 10, 2004
12. The
Multilateral Development Banks and the Fight Against
Corruption, Testimony before the Senate Foreign Relations
Committee,
13. Implementing
Reforms that Drop and Stop the Debt of Heavily Indebted Poor Countries,
Remarks at the Poverty and Debt Relief Photo Exhibit,
14. Statement
on Getting the Millennium Development Goals Back on Track, Remarks at the World Economic
Forum, Davos,