O'Neill calls on IMF to narrow focus, increase crisis prevention efforts

WASHINGTON (AFX) - Treasury Secretary Paul O'Neill said the IMF should narrow its focus on core objectives and raise its efforts to prevent financial crises from developing.

"We must make the tough decisions that will bring about these needed reforms," O'Neill said in remarks prepared for delivery to a Congressional hearing on international financial institutions.

"Crisis prevention is essential," he stressed, and the IMF and international community "need to make better efforts to prevent crises -- both through better monitoring and through better decision-making -- so that 

the IMF devotes less taxpayer money to resolving crises."

O'Neill explained that the IMF should raise its surveillance efforts of member countries, use its resources to ensure that financial systems adopt internationally recognised standards and codes, and be transparent to markets when it detects problems.

The IMF should further develop the most relevant indicators that would presage a crisis, and then ensure that once problems are detected, this information is transmitted publicly, he said.

He urged the IMF to ensure that its assessments of conditions in member countries reach the private sector quickly and in an easily understandable format. This is essential to allow markets to make informed investment 

decisions, he said.

"Holding back such information only means that the surprises are bigger when the information finally gets out. Big surprises lead to big changes in prices, and can trigger crises," the Treasury Secretary said.

O'Neill also endorsed a number of IMF reform efforts already underway, including streamlining its loan conditions, developing credit lines that require prior actions for qualification, and establishing an independent evaluation office.

Separately, he repeated his call for the World Bank and regional development banks to focus their resources on the basic objective of increasing productivity growth, and curtail non-essential lending for large 

infrastructure projects that could be privately financed.

"Cultural heritage" projects are also often peripheral to the institutions' central tasks, he added.

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