The Hindu Business Line : Making sense of IMF?

World bodies can broadly be divided into two groups. The first comprises the United Nations (UN) and its numerous organs which are primarily meant for resolution of political, social, security and other issues bearing on relations among nations.

Into the second category fall professional institutions such as the International Monetary Fund, the World Bank and the World Trade Organisation which are taken to be knowledgeable in special fields such as banking, investment, balance of payments, project funding, trade, and aid and expected to cater to the requirements of countries in tiding over ticklish situations.

To whatever category they belong, they develop over a period their own peculiar lingo in which their analysis, advice and reports are couched. Its hallmarks are hedging, fudging and being all things to all persons. Whatever happens or doesn't, their write-ups should seem to have predicted it, or at least have an explanation for it.

No direction

Sometimes their stance seems like a signpost pointing in all directions for reaching the same destination. When you put down their report after reading, you wonder whether the answer is yes, no, will be, may be, could be or the opposite! Never get specific or pointed, always waffle, is their watchword.

The IMF, in particular, specialises in this kind of writing or dispensing advice.

For illustration, one need go no farther than its latest review of the outlook for Asia following the colossal financial muddle originating in the US. Just take this passage: "The possibility of significant deviations from the baseline scenario are (sic) much greater than usual. A severe global recession that is deeper and more protracted than expected, combined with a significant global credit squeeze, would have significant spillover repercussions for Asia." (Note the use of `significant' three times!) Can anyone make out what this means? The steps the IMF suggests are also equally hazily worded.

Sore straits

The South Asian meltdown of late 1990s is a classic example of the IMF tying into knots to explain away its default in not foreseeing it or its hasty jumble of remedies which proved worse than the disease. For a long time after it came into being, it undeviatingly, if unthinkingly, sought to thrust down the throats of hapless nations desperate for help the same nostrums going collectively by the name of Washington Consensus: Privatise, deregulate, devalue the currency, abolish subsidies, let prices find their level however high, remove exchange controls, pull down all barriers, open the doors, throw away the keys!

The sore straits in which the countries, especially Russia, previously forming part of the Soviet Union, found themselves after its break-up, was in a large measure due to its administering a `shock treatment' without thinking through its appropriateness or ultimate effects. Luckily, India had economists and policymakers who were more than a match to the IMF advisers who were mainly drawn from the insulated and isolated academic ivory towers, having little hands-on experience in dealing with complex and practical problems of member-countries.

Indian model

That was why India was able to manage its economy with a carefully calibrated strategy suited to the Indian context. Whether it was privatisation, deregulation, subsidies, exchange control, or capital account convertibility, India withstood the tremendous pressure of the IMF, working out its own solutions at its own pace.

Now, even the IMF advisers who had fancied themselves to be know-alls have been forced to admit their wrong judgments. Indeed, the Indian model has earned the admiration of the world as a telling corroboration of the two famous adages: Festina lente (make haste slowly) and slow and steady wins the race.

All that aside, the IMF should first learn to make its language simple and readable.

B. S. RAGHAVAN

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