IMF's Rato keeps mum on vision

Rodrigo Rato has played his cards close to his chest since taking over as managing director of the International Monetary Fund, travelling extensively but keeping quiet on his vision for the fund.

It will take Mr Rato time to work himself into the job. But in an interview, it also appears that the experienced politician is not ready to show his hand quite yet.

Mr Rato has set up an internal strategic review of the fund's operations that will report its results and lay out his priorities at or before the annual meetings in October. It may just pre-empt the review of the Bretton Woods institutions being conducted by the Group of Seven leading industrial countries.

The immediate priority is Argentina, another matter on which Mr Rato has kept fairly quiet. ''I'm here to solve problems. You have to use different techniques for different problems. I am very happy to talk about problems but I am more interested in solving them'', he says.

He did not go out of his way to defend the fund's decision last September to agree a programme in the absence of multi-year fiscal targets, an unprecedented approach that is widely seen as reflecting pressure from the US.

''That was a decision made in the programme in 2003 but it is not a closed decision. We are now defining what the multi-year fiscal targets will be'', he explains. One implication of the delay in the third review of the loan is that next year's budget and the medium-term fiscal path have become part of the negotiations.

Mr Rato does not see Argentina's latest programme as setting a precedent for how the fund will deal with countries in arrears. ``A lending into arrears situation is itself an exceptional situation and a time-limited situation''.

He declines to discuss Argentina's negotiations with its creditors over its $100bn (82.8bn) of defaulted debt, pointing instead to Argentina's commitment in March to engage in negotiations. But his patience is limited: ``We do not have a policy of lending into arrears just to keep a country in a situation of being in arrears''.

The IMF is not making contingency plans for an Argentine default on its IMF debt. ``It is one thing to say that we know what the different options are and it is another to say that we are working on that''.

Mr Rato, whose appointment followed a controversial selection procedure, says he is a realist when it comes to the fund's relationship with its big shareholders. ``In any situation in which you have shareholders, you have big shareholders and small shareholders. That is a fact of life''.

But he says that unless there is a change in voting weights -- a decision for the shareholders -- ''we will have to use other tools to guarantee that voices are heard''. This includes insisting on a broad consensus at the board on policies. He pledged to listen to and represent the views of less powerful shareholders. Policies, he says, should ``reflect points of view that are not measured only by quotas''.

Mr Rato defers questions about crisis prevention and the role of the fund in low-income countries until the completion of the internal review. He says he will increase the fund's emphasis on regional and global surveillance to complement bilateral reviews, as part of its crisis prevention efforts. Contingent credit lines he sees as an essential part of the crisis prevention tool kit -- as long as they are accompanied by demanding criteria.

Mr Rato sees the main role of the fund as primarily limited to macroeconomic analysis, technical assistance and efforts to help poor countries absorb aid flows efficiently. ``I think the role of the fund in low-income countries is certainly defined by our core business of macroeconomic assistance. I think there is no poverty reduction without macroeconomic stability''.

[Source: The Miami Herald, Miami, Us, 31Jul04]

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