The distressed to seek IMF funds but questions remain over 'conditionalities'

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From Fazle Rashid
NEW YORK, Oct 26: The International Monetary Fund (IMF) suddenly finds itself cast in the important role of a saviour. Several countries failing to obtain bilateral loans are knocking the door of the Fund. Iceland failed to convince Russia for a loan. China expressed its reluctance to part with its cash even to help 'a friend in need' that is Pakistan. Pakistan has been speeding towards an economic calamity, an analyst said.
Iceland is moving towards bankruptcy. Many other countries are facing the same problem because of the repatriation of private capitals by foreign investors or severe cut in credit line from Western banks now shorn of capital The financial turmoil has caused a growing list of nations to rush to the IMF for assistance.
The nations in trouble have previously shunned the IMF for its strict and stringent conditionalities. "Conditionality is a part of our business, since money without policies is a waste," Dominique Strauss-Kahn, IMF chief was quoted as saying. But under the changed financial scenario, the IMF is racing to produce new financing instruments with fewer conditions than those traditionally applied to its loan.
"We are not trying to fix the world. We are trying to fix the system," a senior Fund official said.
Experts complained that the US has weakened the IMF's credibility by bullying it into focusing attention on global exchange rate misalignment, a thinly disguised reinforcement of Washington's campaign to push China to allow its currency renminbi to rise. Raghuram Rajan, former chief economist of the IMF described it 'an unmitigated disaster' and went on to add, 'Not only did show the fund to be totally toothless but it also showed the fund to be biased.'
Robert Zoellick, the World Bank (WB) president has called for global governance. The others viewed that the IMF needs to make more friends.
Countries in distress for decades have turned to the IMF and great powers for cash infusions needed for debt payments or to meet budget shortfall. The money came with conditions known as 'Washington prescription'. The IMF loan to Iceland will be with fewer conditions than before.
China before the crisis set in lent billions of dollars to Africa
without any string attached. Hugo Chavez, the mercurial president of Venezuela ' drove the Americans crazy' as Bolivia, Argentina, Ecuador, Nicaragua, Honduras and Cuba accepted his aid.
Free market gurus and the US treasury are relearning an old free market lesson; competition. Unlike the moment when aggressive private sector lenders made the Fund seem redundant, the current shifts have significant geopolitical implications, an analysts wrote The balance of soft power is shifting. Western leaders should learn the lesson: the old system is outdated.
The powers that dominated it did not practise the medicine they preached to others. The new financial system that everybody is talking about should give bigger roles to emerging powers. It is incongruous to think that China does not have any say either in the WB or in the IMF. "If this does not happen, the new entities could start out even weaker than the damaged ones they replace," the columnist said.