The White House and US Congress reached a budget deal last night that Republican leaders say requires sweeping IMF reforms, including increased transparency and loan restrictions. "We're going to have sunlight at the International Monetary Fund," Senate majority leader Mr Trent Lott told a press conference called to announce the federal budget agreement. "The IMF will no longer work in secret," House of Representatives majority leader Mr Dick Armey vowed. Republicans had tied approval of a White House request for $17.9 billion (£11.5 billion) for the International Monetary Fund to the IMF's agreement to changes in what they called imprudent lending practices.
IMF reforms are "a major step towards a more responsible international economic policy," Mr Armey said in a statement that outlined the proposed changes.
"Any IMF defiance, while still possible, would have the most severe repercussions," meaning the US would not fund the agency, according to the statement.
A Clinton administration official welcomed the IMF deal. "This is a good deal for the country. The administration is very supportive of the conditions in the legislation and the policy objectives they represent," the official said, under condition that he not be identified.
"In effect, the G-7 (industrial nations) governments must endorse our principles and agree to impose our reforms on the IMF or we withhold our contribution. This will be highly effective," Mr Armey said.
The accord mandates that IMF loan recipients liberalise trade, eliminate government lending to favoured industries and treat domestic and international creditors equally in bankruptcy proceedings, according to a draft copy of the IMF deal.
It also requires public disclosure of full written summaries of executive board meetings, letters of intent and policy framework papers, according to the draft.
The IMF since the start of the year has been publishing its assessments of national economies, although such documents depend on co-operation from the concerned countries. Letters of intent, containing details of IMF programs, are also now available to the public via the Internet.
IMF loans to nations with balance of payments troubles due to sudden loss of market confidence will be at rates at least three percentage points above market and be repaid within one to two-and-a-half years, the document said.
The reform would be consistent with a new facility unveiled by the Fund in its dealings with South Korea in December 1997.
The facility accords loans of one to one and a half years at 7.7 per cent, rather than the rate of 4.7 per cent prevailing at the end of 1997. So far the facility has only been used for South Korea.
The IMF, which helped arrange rescue packages last year for struggling economies in Thailand, Indonesia and South Korea, has been accused of coming to the aid of imprudent private investors in the three countries.
