IMF, World Bank facing critics from inside and outside

WASHINGTON -- If a worldwide economic slowdown and Argentina's default were not enough to worry about, the International Monetary Fund and the World Bank are enduring name-calling and fingerpointing -- even from the finance ministers who set the institutions' policy.

It's not always the case that the toughest language comes from anti-globalization protesters, who are expected to turn out in the thousands for this weekend's spring meetings.

For example, Clare Short, Britain's outspoken international development secretary, termed a U.S. proposal to shift World Bank loans to grants "crazy." Not to be outdone, the equally blunt Paul O'Neill, President Bush's Treasury secretary, labeled Short's counterproposal "just stupid."

Such tough talk in public is not the norm for finance ministers and central bank presidents who meet twice a year to set policy for the 183-nation IMF and its sister lending organization, the World Bank.

But in the wake of Sept. 11, the rich countries are feeling pressured as never before to do a better job of dealing with the 1 billion people in the world -- one in six -- who live in abject poverty, getting by on less than $1 per day.

President Bush and world leaders were in Monterrey, Mexico, last month to endorse development goals to deal with the economic despair that has proved a fertile breeding ground for terrorist groups.

Under the consensus reached in Monterrey, the wealthy countries will increase their foreign aid spending and be more selective about which countries get the assistance. Favored will be countries that adopt sound economic reforms and control corruption.

Much disagreement remain over just how these goals will be put into practice by organizations such as the World Bank, the world's biggest source of development assistance, and the IMF, which specializes in helping countries deal with financial crises.

At the meetings in Washington, anti-globalization protesters will be joined by anti-war demonstrators who plan to press their opposition to an expanded U.S. war on terrorism and the violence in the Middle East.

From within, the lending institutions are facing unaccustomed criticism.

William Easterly, an economist on leave from the World Bank, has written a searing indictment that the bank over its 57-year history has wasted billions in failed efforts to boost economic growth in many parts of the world.

A former chief economist at the IMF said this month in a study that the IMF had botched its handled of the economic crisis in Argentina. Michael Mussa, who left his IMF post last year, said the IMF did little to avert what became a disastrous default.

The Bush administration, led by O'Neill, often cites the various critics in the U.S. push for major changes at both institutions.

For the World Bank, the administration wants to see half of the loans to the poorest nations switched to grants that do not have to be repaid.