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Monday, 23 September, 2002, 20:08 GMT 21:08 UK
IMF meetings face global slowdown
Entrance to IMF heaquarters, Washington, DC
The meetings will focus on aid and stock-markets woes

Horst Koehler has enjoyed an extended honeymoon as head of the International Monetary Fund (IMF), praised for both his reforms and fresh attitude toward poor nations.

IMF Managing Director Horst Koehler
Mr Koehler is outspoken in his criticism of tariffs
But with economic crises hanging over Argentina and Brazil and the world verging on recession, this year's annual meeting of finance officials in Washington may end the romance.

Instead, he could find himself becoming a lightning rod for criticism - particularly if he does as some expect and criticise European countries, and perhaps the US, for failing to loosen their reins on monetary policy.

"The basic message there would be that the big guys aren't pulling their weight in the world economy and a lot of small and poorer countries are going to suffer," says Gary Hufbauer, senior fellow at the Institute for International Economics in Washington.

With the world's largest economies faltering, Mr Koehler may chide Western countries for failing to do more to revitalise their economies and challenge them to do so.

Big debt

But it may take more then a mild rebuke to get the European Union to take a difference stance on interest rates.

The EU has stubbornly refused to lower them fearing inflation would accelerate and stop any sign of recovery despite measly economic performance in recent months.

Annual Meeting topics
Financial markets meltdown
US policies toward developing nations
Aid to middle-income countries slipping through the cracks
Aid not linked to loans
Changes to world's financial structure
With the giant US economy the only engine moving forward, albeit haltingly, Europe remains particularly sensitive to changes in its monetary policy.

Another G7 member, Japan, remains stubbornly enmeshed in recession.

Its banks are still struggling with how to deal with a bad-loan burden of nearly $500bn (323bn).

And the US may find itself under considerable criticism by Mr Koehler for its recent stances on punitive steel tariffs and farm-aid package the international community has resoundly criticised.

US President George W Bush has done little to assuage concern over such tactics despite his current need for unanimity in his war on terror and dealings with Iraq's leader, Saddam Hussein.

Poorer countries, meanwhile, saddled with oppressive debt, struggle with balancing repayments on loans while asking for yet more money to develop their own economies.

Argentina and Brazil stepped forward loudly last week, damning the IMF's stance on economic reforms and calling them inflexible.

Their beef seems largely to be with Anne Krueger, a Bush IMF appointee who appears to be withholding a decision on loans to Argentina until after Brazil's 6 October elections.

Financial crises

Recent economic crises in Argentina and Brazil will no doubt be debated, examining how the IMF and the World Bank failed to stabilise two of South America's largest economies.

The message in recent meetings has been the loan-making bodies have learned their lessons in dealing with economic catastrophes following the Asian economic crises of the late 1990s.

Last spring, finance ministers unveiled a plan to avert such crises, a sort of early warning system that would alert the IMF to possible economic upheaval in developing countries.

US Treasury Secretary Paul O'Neill heavily promoted the idea, seeking to avert financial crises from developing in the first place.

Longer-term challenges also face finance ministers, including the ongoing scourge of HIV/Aids that some feel would be at the fore of this year's meetings if not for the current focus on combating terrorism.

Sub-Saharan Africa remains the part of the world where HIV infection rates continue to skyrocket, although China and other Asian countries now too are beginning to feel the economic impact of dealing with the deadly disease.

Developing countries

World economy
See also:

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