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The Fall Meetings of the IMF and the World Bank, 17-18 November 2001
By Peter Willetts, Professor of Global Politics, City University, London






The Global Economy and "The Impact of Recent Events"

Measures Against Money-Laundering and Terrorist Funds

The Future for Development Assistance

The International Financial Institutions and Globalisation

List of the main events at the 2001 Spring Meetings.


Links to Further Information



For a previous article on The Spring Meetings of the IMF and the World Bank, April 2001, which contains an introduction on "The Institutions",   click here.

List of Official Websites on the IMF and the World Bank

List of NGO Websites

List of the Bretton Woods institutions.

List of Other Important Organisations in the Politics of International Finance

To see a longer article, for the UNESCO Encyclopaedia of Life Sciences, on the IMF as an intergovernmental institution,   click here.


A shorter version of this article was published in the Social Development Review, Volume 5, Number 4, December 2001. The review is published by the International Council on Social Welfare.

Copyright Peter Willetts, 2001.
The text of this website is subject to Copyleft - it may be freely used for any non-commercial purpose provided that the author and the website address are cited.


The Fall Meetings of the IMF and the World Bank, November 2001
By Peter Willetts, Professor of Global Politics, City University, London


For the first time since the formation of the Bretton Woods Institutions, the Joint Annual Meetings of the International Monetary Fund and the World Bank, popularly known as the Fall Meetings, did not take place as planned. The session of the Boards of Governors was cancelled and the main committees were postponed from the end of September to mid-November. The International Monetary and Financial Committee (IMFC), which "advises" the Fund, met on 17 November and the Development Committee (DC), which "advises" the Fund and the Bank, met the next day.

The Fund and the Bank meetings in April 2000 in Washington and in September 2000 in Prague had attracted large anti-globalisation demonstrations, with some attendant violence. While the April 2001 meeting only faced some 300 demonstrators, a massive confrontation seemed to be inevitable for the September 2001 meetings. Mobilization for Global Justice had successfully built a network of networks, encompassing a diverse coalition of anti-debt, pro-development, environmental, trade union and anti-capitalist organisations, mainly from the USA, but also including several developing country networks. Their "Demands" papered over the divisions between those who want to reform the Fund and the Bank and those who want to close them down. The coalition was high on rhetoric and naive idealism, but low on knowledge of any of the issues concerning development. Their website managed to cram three major errors about the financial institutions into the single sentence describing the meetings and the expert NGOs did not give their support to the coalition. Nevertheless, up to 50,000 demonstrators were expected for the main event on 30 September. Although a commitment to non-violent action was agreed by all the networks, violence was widely expected and the Washington police were planning a massive operation to cordon off the demonstrators. In mid-August, it was announced the meetings would be severely curtailed. The prestigious seminar programme was cancelled and all the official meetings were to be consolidated into two days. The campaigners claimed a victory, but the other NGOs regretted the reduction in opportunities to lobby the policy-makers.

After the terrorist attacks on New York and Washington on 11 September, a variety of intergovernmental meetings were cancelled and it appeared that the Annual Meetings were also being abandoned. Finally, in mid-October, when the Canadians agreed to host the annual meeting of the Group of 20 on 16 November, it was agreed that the Fund and Bank committees would also take place in Ottawa on the following two days. Some of the normal preliminary events were held in Washington and the developing countries finance ministers held their meeting in Paris. Demonstrations did still occur on the streets of Ottawa, but with just a few thousand people, mainly from Canadian groups. In addition, the Canadian Finance Minister, Paul Martin, in his role as chairman of the G20, invited NGOs to a meeting with Gordon Brown of the UK and Yashwant Sinha of India, the chairmen of the two committees.

See below for a list of the main events at the 2001 Fall Meetings.


The Global Economy and "The Impact of Recent Events"

The terrorist attacks not only affected the convening of the meetings. They also had a major impact on the global economy. The United States economy was already moving towards recession before 11 September and afterwards the economy weakened further, despite a series of interest rate cuts in the USA, Britain and Europe. As always, a slowdown in the industrialised economies had a magnified impact on the developing countries, with a fall in demand for commodities, lower commodity prices and reductions in foreign investment. This particular crisis had the added effect of sharp reductions in tourism, which is now crucial for many developing countries. The increased level of risk aversion also immediately increased the spread on emerging market bonds (that is their extra cost of raising money) by 2%. On the other hand, the reduced interest rates somewhat alleviated the burden of servicing existing debt and the lower price of oil helped most countries. Overall, between October and November, the IMF reduced its forecast for global growth in 2002 from 3.5% to 2.4%, but Köhler admitted "an extraordinary degree of uncertainty", with the possibility of a worse scenario. Although 2.4% growth seems quite high, at the IMF an unofficial rule of thumb has been that anything less than 2.5% constitutes a global recession.

Against this background, it is surprising that the IMF forecast the developing countries of Africa and Asia would do much better than the global average. This was explained by the strength of the Chinese and Indian economies, by the ending of armed conflict in a number of countries and by optimism over benefits expected from recent economic reforms. However, the IMF pointed out that the aggregates understate the impact on poverty. Lower commodity prices hurt the rural poor, whereas lower oil prices mainly benefit those in urban areas. Despite the optimism, it was expected that in 2002 additional lending by the Poverty Reduction and Growth Facility would be up to $2 billion. Increased contributions by nine countries, notably including $1 billion from the Japanese, ensured that the Facility would have the minimum necessary funds. The President of the World Bank, Wolfensohn, presented a similar analysis of the factors in the global economy, but had a much more pessimistic tone about the prospects for Africa. He stressed the need for special assistance to countries that suddenly have to support large numbers of refugees or lose tourist income.

The IMFC responded by calling for further interest rate cuts, if the situation worsened, and for the Japanese to reform their banking system. They also said "the advanced economies should allow automatic stabilisers to operate". This technical jargon obscured a significant shift in IMF policy. Instead of continuing to endorse balanced budgets, they were saying governments should neither reduce expenditure nor increase taxes, to make up for lost revenue from decreased economic activity. Budget deficits should be a useful stimulus to the economies of the rich countries. The Development Committee stressed the role of the International Development Association in assisting the poorest countries to handle the recession, but was unable to carry forward the negotiations to agree a total sum for the IDA-13 replenishment.


Measures Against Money-Laundering and Terrorist Funds

The terrorist attacks also added a major new agenda item to the IMFC: action against financing for terrorism. The formal legal framework for international co-operation and a mandatory obligation upon all governments to freeze terrorist assets had already been provided by the UN under Security Council Resolution 1373 (2001) of 28 September 2001. In addition, international work to counter money laundering had been under way since 1989, when the G7 set up the Financial Action Task Force for this purpose. The IMFC took up this question at its Prague meeting in September 2000 and requested the Fund staff to prepare a joint paper with the Bank on their respective roles. The matter was discussed at the Executive Board on 13 April 2001, but the Directors rejected the idea of a general moral obligation for the IMF to prevent transnational criminal activity. Action by governments on money laundering should be voluntary and should be integrated into the Reports on the Observation of Standards and Codes. The issues could be addressed in the annual IMF surveillance of members when it might have macro-economic effects or threaten financial stability, but not otherwise. Ironically, the US government was criticised in July 2001 by the Board, in its review of the US economy, for failing to comply with eleven of the FATF Recommendations covering insurance companies and bureaux de change. The US was also criticised heavily by European countries for opposing adoption by FATF members of sanctions against non-members that failed to adopt FATF standards. US policy changed after the attacks and a new stronger Act was passed by Congress in October.

The IMF staff had not completed their review by mid-September, but work accelerated and changed course after the attacks. On 29-30 October, the FATF held an emergency meeting, agreed to extend its work to cover action against terrorism and adopted an action plan containing eight special recommendations. The IMF report was released on 5 November, but it was still constrained by the minimalist mandate from the April meeting. Authority was sought "to achieve a qualitative and quantitative intensification of the Fund's involvement", by moving beyond financial supervision principles to legal and institutional issues, action in the unsupervised financial sectors, more rapid completion of the assessment of off-shore financial centres, inclusion of new standards in annual Article IV surveillance of members and increased technical assistance. The Board discussed the report on 12 November and endorsed action in all these areas, but modified the language to lay emphasis on voluntary co-operation by governments with the programme. In its turn, the IMFC endorsed the Board's decision. It also called for all countries to establish financial intelligence units, with externally funded technical assistance to do so being made available, and for these units to share information. Urgency was added by setting a deadline of 1 February 2002 for the measures to be completed.

One way of interpreting the IMF measures is to see them as the system for implementing and monitoring the financial provisions of the Security Council resolution. However, the IMF's acceptance that it can only maintain a consensus on a voluntary approach does not match up to the overriding supranational authority claimed and exercised by the Security Council. The earlier insistence that the IMF should only deal with substantial flows of funds has been abandoned, but the mandate has not been extended to all forms of financial flows outside the banking system. At the press conference, Köhler was also evasive on whether compliance with the measures would become an additional conditionality for the receipt of IMF funds.


The Future for Development Assistance

En route to Ottawa on 16 November, Gordon Brown, the British finance minister and chairman of the IMFC, made a speech to the Federal Reserve Bank in New York. This was no technical event for bankers, but a major initiative to seize leadership in the debate about the financial aspects of globalisation and promote the philosophy behind the UK government's White Paper, Making Globalisation Work for the Poor. Brown asserted the need to resist two opposite temptations: retreat into protectionism and isolationism or recycling the old laissez faire. He proposed a new approach to poverty and a new deal for the global economy. The speech contained a long list of pragmatic proposals, each of major significance, that would collectively restructure the system. The news media covered the call for a new international development trust fund, providing an extra $50 billion a year in development assistance. This would supply the sums estimated in the Zedillo Report as being necessary to meet the Millennium Development Goals by 2015: in particular, achieving universal primary education, a two-thirds reduction in the child mortality rate and halving the number living below a poverty line of $1 a day. There were three other major "building blocks" - global regulation of financial markets to prevent crises, political processes to direct foreign direct investment towards poverty reduction and priority for development in trade negotiations. Most striking of all, several of the proposals would transform the role of transnational corporations in developing countries, by deterring corruption, regulating capital flows, allowing cancellation of unsustainable debts, creating investment forums and promoting corporate social responsibility. Few, if any, of the components of the building blocks were totally new, but their compilation within an idealistic framework of powerful rhetoric was no less than an assertion of a global agenda for social democracy, presented to the heart of the global capitalist system.

Little of the substance of Brown's speech was addressed in the official communiqués, but some of the ideas were clearly supported. All countries want to enhance the stability of the financial system and accept measures against corruption. Köhler specifically welcomed the proposal for IMF surveillance of economies to be more transparent and more independent, by separating the process from the work of the Executive Board. The US Treasury Secretary, Paul O'Neill, responded favourably to the idea of an international procedure for countries to be declared bankrupt. Köhler spoke in the Committee and at a press conference in very strong terms about "selfishness in the advanced economies and societies and their difficulty in speeding up their pace of structural reform" being a major problem in the fight against poverty. He illustrated the need for structural adjustment by the rich with references to subsidies on cotton production in the USA, on sugar in the European Union and on rice in Japan. Wolfensohn established education as one field that would be beyond the bounds of privatisation, by saying "our preferred choice is public education, without payment".

The greatest division was over Brown's call for extra development assistance. O'Neill refused to accept the need for what would become a doubling of ODA. He questioned whether Bank and Fund programmes were actually achieving results. Both the IMFC and the Development Committee responded by asserting the importance of their reviews of the Poverty Reduction Strategy processes. The clear presumption was that the value of the work of the Fund and the Bank would be demonstrated. The debate will be carried forward to the Financing for Development conference.

Since the Spring Meetings, the debate on infectious diseases had moved forward substantially. Kofi Annan's call for a $10 billion fund and its endorsement by the General Assembly Special Session on AIDS moved the focus away from the Bank towards the UN. A Transition Working Group was due to have three meetings between July and December 2001. At the time of writing, it was agreed that a Global Fund for AIDS, Tuberculosis and Malaria will be established with the Bank having a role as the Trustee, providing a secretariat and financial administration. However, the Fund will be politically independent, by being located in Europe and having its own policy-making Board. The precedents from the boards for UNAIDS and for the Global Alliance for Vaccines and Immunisation will be extended, by having a small number of donors and of developing countries, with seats for NGOs, the private sector and foundations. Grants will support comprehensive country plans rather than specific projects, with a focus on outcomes. The plans must have "country ownership" and this will go beyond the government to include civil society. However, funding commitments were still only around $1.5 billion and the Development Committee was unable to mobilise any more funds. Like many of the items originally on the agenda, the matter did not receive sufficient attention in the truncated meetings dominated by the economic slowdown and the debates on terrorism.


The International Financial Institutions and Globalisation

Despite all the problems, there is now an overriding sense of the international financial institutions operating within a wider political context. The poverty agenda is firmly entrenched. Links to the UN system are steadily being strengthened. The Financing for Development conference and the setting of hard quantitative targets for the Millennium Development Goals have forced the beginnings of a holistic approach onto staff of the Fund and the Bank. Above all the terrorist attacks have promoted and legitimised the claim that economic globalisation cannot be allowed to continue in an unregulated world. Direct links have been made, notably by Brown and by Wolfensohn, between the struggle against terrorism and the elimination of poverty. Overseas issues have become domestic issues.

Copyright Peter Willetts, 2001.
The text of this website is subject to Copyleft - it may be freely used for any non-commercial purpose provided that the author and the website address are cited.


The Fund-Bank Fall Meetings in Ottawa, November 2001, and Associated Events Elsewhere

Saturday 6 October

  • Meeting of the Finance Ministers and Central Bank Governors of the Group of Seven, industrialised countries – held in Washington.

Tuesday 13 November

  • Press conference of African Finance Ministers, from Uganda, Burkina Faso, Niger, Nigeria and Madagascar – held in Washington..

Wednesday 14 November

  • Ministerial Meeting of the Group of 24, the financial sub-group of the G77 developing countries, followed by a press conference – held in Paris.

Thursday 15 November

  • Press conference with Horst Köhler, IMF Managing Director – held in Washington.

Saturday 17 November

  • Meeting of the Finance Ministers and Central Bank Governors of the Group of 20, followed by a press conference by the Canadian Finance Minister, Paul Martin.

  • Meeting of the International Monetary and Financial Committee, followed by a press conference with Gordon Brown, the IMFC Chairman, and Horst Köhler, IMF Managing Director.

  • Meeting of Paul Martin, Gordon Brown and Yashwant Sinha with NGOs.

  • IMFC and Development Committee joint dinner discussion with Kofi Annan on globalisation and preparations for the Financing for Development conference.

Sunday 18 November

  • Meeting of the Development Committee, followed by a press conference with the Chairman, Yashwant Sinha, the President of the World Bank, James Wolfensohn, and the IMF Deputy Managing Director, Anne Krueger.

The normal meeting of the leading Western industrialised economies, the Group of 10, the Joint Meeting of the IMFC and the Development Committee, the Boards of Governors, the seminar programme, the presentations of annual reports and specialised press conferences, all did not take place.

Copyright Peter Willetts, 2001.
The text of this website is subject to Copyleft - it may be freely used for any non-commercial purpose provided that the author and the website address are cited.



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Centre for International Politics, School of Social Science, City University, Northampton Square, London EC1V 0HB.
Page maintained by Peter Willetts

Article written on 3 December 2001.
Page created on 8 January 2002.
Last updated on 8 January 2002.