International Monetary Fund managing director Michel Camdessus on Thursday spelt out a strategy for a global recovery, entailing a cut in interest rates in US and Europe, financial sector restructuring in Japan and replenishment of the Fund's resource base.
Addressing the customary curtain-raiser press conference, Camdessus was unusually defensive as he warded off criticism of the Fund's recent failures in detecting currency meltdowns and subsequently ensuring speedy revivals.
At a separate press conference, World Bank president James Wolfensohn noticeably distanced his organisation from the IMF. "The Bank is not a second IMF," he remarked.
Bank officials later said Wolfensohn was only making a clarification as there was a lot of confusion about the Bank's charter.
However, it was clear that there was considerable pressure on the Bretton Woods twins in the build-up to their annual meeting next week.
At the centre of the debate will be the issue of creating a new international financial architecture. This will include putting in place a mechanism (including private sector participation) to ensure a speedy debt restructuring programme.
Both Camdessus and Wolfensohn also dismissed claims that their institutions were facing bankruptcy after having locked up large sums of funds in economies recently afflicted by the global meltdown.
"There are absolutely no worries about the capital strength of the Bank. We have $105 billion in outstanding loans and about $200 billion of reserves that can be called up. Hence, the resource base is not threatened," the World Bank president said.
Responding to a question on the Fund's recent failures, Camdessus said, "In a universe of specialists which didn't see the crisis coming, you must admit that the IMF was there during each crisis advising the countries. What we have failed to anticipate is the virulence of the crisis. We have a lot to learn. But we're not the only one."
Camdessus also indicated he would push for making the interim committee_dominated by bureaucrats_a political body. "Today the world has changed. The responsibilities have also grown and go beyond the limited realm of economics. If approved, it would introduce an element of political endorsement," he said.
Speaking on a similar vein, Wolfensohn maintained the world financial system was not broken. "But issues like private sector, hedge funds need to be included and a fresh approach for surveillance is required," he said.
