- The Washington Times - Wednesday, April 19, 2000

"Spank the bank," could almost be taken for a rallying cry of conservatives opposed to international lending agencies, such as the World Bank and the International Monetary Fund (IMF). But those attuned to the recent drama on Washington streets know that "Spank the bank," along with "Defund the fund," and "Structurally adjust this" are all left-wing slogans for the motley groups opposed to the IMF and World Bank that managed to shut down much of downtown on Sunday and Monday.

Although these demonstrators and, say, the Meltzer Commission, appointed by Congress to review the performance of the fund and bank, may not have much in common ideologically, they do agree on some points. The institutions that spend billions of dollars a year on aid and bailouts have been ineffective in helping the Third World emerge from poverty. The fund and bank are now under attack from both sides of the political spectrum.

This is where the consensus ends. Jubilee 2000, one of the groups which took to the streets, is calling for unconditional debt forgiveness. This proposal invites profligacy. The indebted countries must implement sound economic policy before their slate is wiped clean. The IMF and World Bank should also take an accounting hit for this write-off. Both institutions seek to avoid a write-off by replacing their losses with funds coming from other countries or selling gold reserves to balance their books. The institutions want to boast a record of getting 100 percent of their credit paid back, even when recipient countries aren't the ones to pay it.

Poor countries' inability to pay back their debt is glaring proof that the fund and bank haven't put poor countries on the road to development. So they themselves must undertake some of the controversial "structural adjustment" that it requires of loan recipient countries. Over the weekend, the Group of Seven (G-7) leading industrialized countries rightly called on the IMF to give "temporary and appropriately conditioned support" on a shorter term basis, preventing the longer term dependence it has fostered in some countries. The G-7 also recommended that the IMF charge higher interest rates on loans to repeat borrowers. G-7 countries should have suggested instead that the IMF close the lending spigot to those countries.

The World Bank, meanwhile, should focus on improving levels of health care, education and physical infrastructure through grants made to suppliers, rather than to governments, to reduce the potential for corruption, as recommended by the Meltzer Commission. Independent auditors should confirm the quantity and quality of the project.

Clearly, the bank and the IMF need a good "spanking." The money they have lent has been squandered in the past and has increased countries' debt burden to unsustainable levels. Congress should keep up efforts to reform these institutions, and conservatives of the world should unite for this worthy cause.

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