[Congressional Record Volume 144, Number 152 (Thursday, November 12, 1998)]
[Extensions of Remarks]
[Page E2307]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

[[Page E2307]]



                     IMF REFORM IS URGENTLY NEEDED

                                 ______
                                 

                            HON. JIM SAXTON

                             of new jersey

                    in the house of representatives

                      Thursday, November 12, 1998

  Mr. SAXTON. Mr. Speaker, I rise in support of reforming the 
International Monetary Fund (IMF). The reforms to be included in the 
appropriations bill, and particularly the enforcement provisions, are 
not nearly as extensive as I would have liked. Nonetheless, if these 
reforms are permitted to take effect, they will be steps in the right 
direction toward a longer-term reform of the IMF.
  The implementation of the IMF reforms in this bill will be an 
important test of the good faith and credibility of the Treasury 
Department and IMF. We in Congress will also have to do our part to 
maintain vigilant and intensive oversight to ensure these reforms are 
implemented in accordance with congressional intent, and I am planning 
to establish a systematic way to do this while also advancing an agenda 
for further IMF reform.
  With regard to the reforms themselves, a review of their development 
from earlier legislation is critical to understanding congressional 
intent. The structure of the reforms pertaining to transparency and 
market interest rates is clearly based on the IMF Transparency and 
Efficiency Act, H.R. 3331, which I introduced with Majority Leader 
Armey and others last March. The reform proposals in the budget bill 
are essentially narrowed versions of the policy changes mandated in the 
IMF Transparency and Efficiency Act.
  The biggest change is in the enforcement mechanism in this act, which 
has been replaced by a much weaker enforcement provision in the 
appropriations bill. Obviously I am disappointed with these changes, 
particularly with the weaker enforcement provisions, because it is 
unclear how diligently the Treasury and IMF will implement the reforms 
without airtight enforcement. Further enforcement measures will be 
called for if this mechanism proves insufficient.
  With respect to the IMF transparency reforms in the appropriations 
bill, suffice it to say they reflect a strong congressional consensus 
that IMF documents be publicly released, and that IMF minutes of IMF 
board meetings should be publicly released in some form. Any abuse of 
the flexibility provided in this language would clearly not be 
acceptable.
  With regard to the interest rate provisions, the higher interest 
rates are required any time the defined conditions of a balance of 
payments problem emerge. The compromise language uses some terms to 
describe these conditions also used by the IMF to describe an existing 
IMF loan facility, but there are essential differences that are 
important to note. Most importantly, the reform is to apply to all 
situations where the defined and rather typical characteristics 
associated with a balance of payments problem are present, whereas the 
IMF loan facility is to be used only in ``exceptional'' circumstances.
  Furthermore, the clear intent of this reform initiative is to require 
interest rates comparable to market interest rates, as expressed in 
H.R. 3331. What I intended in my bill was the use of a basic reference 
market interest rate, with an adjustment for risk added, so as to 
approximate the market interest rate a particular borrower would face. 
This would be at least equal to the market interest rates available to 
a borrower just before a crisis.
  Prior to these negotiations, the staff of the Joint Economic 
Committee devised a floor to permit an objective limit on how low the 
rate could go for the sole purpose of limiting the potential for 
egregious abuse. What emerged in the reform was an interest rate 
formula providing a floor, whereas in the IMF lending facility this 
approach appears to be effectively a ceiling. The interest rates floor 
in the reform should not be viewed as determining the appropriate 
interest rate, which will vary depending on the risk factors present in 
different borrowing countries.
  In the course of four hearings held by the Joint Economic Committee 
(JEC) the issues involving transparency and an end to interest rate 
subsidies were explored in extensive detail, as well as other issues. A 
complete legislative history of the IMF reforms about to be enacted 
with a view toward establishing congressional intent must include not 
only H.R. 3331, but also the germane material covered in these JEC 
hearings, the only hearings held that examined these reforms in any 
detail.
  In summation, the broad congressional intent behind these IMF reforms 
is clear, and is reflected in the legislative history. A good faith 
effort to carry out these IMF reforms in keeping with the letter and 
spirit of the law will be as evident as the failure to do so.

                          ____________________