*EPF412 02/07/2002
Treasury's Taylor Calls for Better Finance Performance Measures
(Says half of loans to poor countries should be grants) (540)

By Kathryn McConnell
Washington File Staff Writer

Washington -- The United States wants the international financial institutions (IFIs) to measure their performance better, an under secretary of the Treasury says.

In February 7 remarks to the Bankers' Association for Finance and Trade, John Taylor, under secretary for international affairs, also said the Bush administration wants the World Bank to convert at least 50 percent of its concessional loans to the poorest countries into grants.

Monitored grants will bring more transparency to developing countries' finance ministries, he said.

Referring to the rock star Bono, who champions debt reduction, Taylor said: "Why just try to drop the debt? Let's try to stop the debt."

Taylor said that grants for education and health projects, for instance, would be tied to measurable results. "If you don't get the kids in school, the grants don't continue. If pharmaceuticals aren't getting to sick people ... the grants don't continue."

He added that in some instances -- such as for programs dealing with HIV/AIDS, post-conflict areas and education in areas like Afghanistan -- "loans don't make sense."

Taylor said the administration wants to reverse the decline in the U.S. contribution to the World Bank's group that makes loans at concessionary rates, the International Development Agency (IDA). The administration is proposing "stepped results-based" funding for IDA over the next three years, he said, asking Congress for $850 million for 2003, $950 million for 2004 and $1,050 million for 2005. But funding "won't occur unless results are met," he said.

Taylor noted that the private sector is doing "significantly more work" with the World Bank. He said he'd like to see more World Bank loans to create small businesses in Russia, Eastern Europe and Central Asia, as the European Bank for Reconstruction and Development is doing. "Then we want to take that concept and expand it to Africa," he said.

Taylor said one of the Treasury Department's goals for the International Monetary Fund (IMF) is better crisis prevention. He said toward that goal the IMF is looking more for indicators of crisis. He added that countries also should do more to prevent crises.

Taylor said that contagion -- financial crisis spreading form one country to another -- is not automatic. He said that differences between countries and events should be considered when evaluating a country's financial stability. "We shouldn't act on irrational fears," he said.

Taylor said that IMF support of the government sector should be limited. "This is essential if we want to give incentives to investors." He argued that support should not be provided to programs that are "clearly unsustainable." But he said the IMF should find better ways to restructure a country's debt when it becomes unsustainable.

"We want to change some of the uncertainty [of a country's debt] into measurable risk," he added.

He said the "drastic decline" in funds going into emerging markets in recent years "is not a positive thing. Emerging markets need funds for investment and productivity," he said.

Taylor said the U.S. proposal for converting 50 percent of concessional loans into grants had drawn both support and opposition. He said he was confident a compromise among stakeholders will be reached.

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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