It is a pleasure to welcome the distinguished economic experts testifying before the Committee this morning. This hearing has been called to review the Administration's request for $18 billion for the International Monetary Fund (IMF).

      Over the last several weeks there have been a number of hearings on the Asian crisis and the IMF. Much of the focus has been on Asia instead of fundamental issues regarding the IMF itself. This is understandable given the circumstances, but more facts concerning the IMF are needed before Congress can make an informed decision on the IMF appropriation.

      For example, in presenting a case for increased resources for the IMF, little Administration testimony to date has presented basic financial information such as the current level of quotas, amount of outstanding loans, the interest rate paid on the quotas, and cost of overhead and related expenses. Furthermore, the Administration case relies heavily on the Asia crisis even though the IMF has sufficient funds to complete the announced Asian bailouts.

      This hearing has been called to focus on the IMF, its financing, procedures, administration, and economic impact. This is entirely appropriate in light of the Government Performance and Results Act. Under this bipartisan legislation, Congress is to review programs based on measurable and objective performance criteria.

      This Act fundamentally changes the way Congress and the Administration evaluate programs. Even if it is argued that the Act does not technically apply to the IMF, the IMF appropriation should be evaluated in the same spirit. This will require more transparency and responsiveness to Congress from the IMF in the future. As Sabastian Edwards, a former Chief Economist of the World Bank, has said, the pervasive secrecy of the IMF makes evaluating its performance extremely difficult if not impossible.

      The key question before Congress is whether the IMF should be significantly expanded into the future. The current quota increase before Congress is somewhat smaller than that favored by the IMF. The IMF has signaled that the U.S. should be prepared for an additional quota increase fairly soon. This indicates that the IMF expects rapid growth in its operations in coming years. The desirability of such a permanent structural increase in the IMF is the key issue before Congress.

      However, a convincing case for such IMF expansion is not at all clear and, in fact, has not been made. The IMF budget projections are not available because apparently the IMF does not produce such projections even for internal use. Thus, a case for future IMF growth cannot be substantiated by quantitative estimates of future IMF activities. Measurable and objective criteria for IMF functions are not available. Presumably, the growth of international capital flows in recent years might be used to justify an expansion of the IMF, but an alternative explanation might be a growing moral hazard problem associated with the bailouts of recent years.

      Aside from the specifics of the budget request, there are several major problems with existing IMF lending practices. These include moral hazard, lack of IMF transparency, excessive taxpayer exposure, subsidized interest rates, and counterproductive conditions attached to IMF loans. These are issues on which reasonable people may disagree, but they cannot be ignored. Meaningful structural reform of the IMF is needed whether or not an IMF expansion is financed in 1998.

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