Sociology

1.  Introduction
This paper seeks to discuss the arguments for and against requiring accounting and economic reform as a condition for IMFWB by way of loansaids.  The arguments for requiring accounting and economic reforms basically take the position taken the Meltzer Commission proposal for the need to effect these reforms. On the other hand, the arguments against requiring accounting and economic reform would take the position of preserving the status quo and sustaining the functions of IMFWB as the latter have been existed since their creation or simply terminating them.

2. Analysis and Discussion
2.1   The arguments for the need to have accounting and economic reform for IMFWB by way of loans and aid.
       
The need for economic reforms are based on some the following arguments by Meltzer Commission.  One argument is that two financial institutions have not been accomplishing their economic objectives.
     
The Meltzer Commission has evaluated the performance of the IMF, the World Bank, and other development banks against the benchmark of these goals and principles and it found these institutions to be quite lacking in meeting what are expected from these institutions (Calomiris, 2000).   The commission cited evidences where the IMF and WB found to have often failed to achieve their goals, even by their own internal measures.  A poor track record was shown from studies in the manner that IMF has enforced its lending conditions. The commission cited by Sebastian Edwards (1989) which found that most of the time IMF lending conditions were violated and the separate studies of Brealy and Kaplanis (1999), Ul Haque and Khan (1999) and Bordo and Shawartz  (1999) which found no evidence of a positive effect of economic activity or domestic securities prices after having received IMF assistance (Calomiris, 2000).     The commission blamed IMFs ineffectiveness in its crisis lending mechanism for not being designed to fulfill the role of providing effective liquidity assistance. The argument has something to do with time to respond to problems regarding liquidity. The commission noted that IMF unsuccessful contingent credit facility is what its present mandates contain (Calomiris, 2000). The reform has something to do therefore in resorting to the sole alternative to have countries to prequalify for lines of credit if the IMF is to focus on liquidity assistance. It is only by prequalifying credit line that liquidity assistance can be effective.
         
The idea of prequalification has an economic element with a presumed idea of the market and as way of disciplined use of resources.  To manage resources effectively the basis would be accounting information that would demand accountability from the managers of IMF and WB. If these companies are to be successful in accomplishing their economic objectives, they must reflect profitability and ability collect debts and loans from debtor countries.  Economic organizations like the IMF and WB have to be accountable just like any other kind of organizations since they are using taxpayers money.
         
The need for accounting in society has never been more important that the role that former played in guiding the decision makers to arrive at more objective decision because of the presence of accurate and objective data. If present accounting information generated without the reform could not produce the required level of accuracy and objectivity in the financial information of the two institutions then the need for reform would become inevitable. To argue that there is no need for reform on the other hand would be staying with the status quo that present accounting information or system is not causing any problem to the IMF and WB in meeting their objectives.
       
After having identified the need for economic accounting reforms as found by the commission it is but logical to look as the proposals   for economic reforms. To justify its proposals for reform, the commission has laid down the principles from which is arrived at its strategy.  The fact that principles are identified that any credible reform strategy should satisfy, and which underlie the Meltzer Commission proposal should be a good reason to argue for economic and accounting reforms at IMF and WB.
       
One of the principles is respect for member countries sovereignty that may come by minimizing the instructiveness of membership requirements or conditions for receiving assistance. This principle is sound and should stand its ground since it is US policy to promote democratization of countries.   It would be consistent also with US constitution to follow this principle as one of worlds biggest democracy.  Trying to dictate on how debtor countries would behave and change their political decisions without the consent of the government would not be promoting this principle. What had been done in the past by IMF and World Bank would provide evidence of using the institutions as tools for ad-hoc diplomacy. Focusing on economic objectives would allow a more functional set for these institutions.
       
Another desirable principle that was used as basis by the commission is the need to ensure accountability of management through clear disclosure, accounting and internal governance rules, and independent evaluation of performance.  Accountability is closely related to responsibility. Without accountability, there would be no way of measuring success and would encourage abuse of authority by those entrusted with the funds to manage in accomplishing obviously economic objectives.
       
The political principles are also consistent with economic objectives defined by the commission for multi-lateral financial institutions. Some of the objectives include improving global market and alleviating poverty in the poorest countries. Improving global market is believed to be closely related to the second objective of alleviating poverty in the poorest countries. Since the WB and IMF appeared to have failed to a great extent on poverty alleviation of the confusion of the political and economic objectives, there must a strong and logical basis to effect this time economic reforms that could produce measurable results.  As stated earlier limiting the role of IMF to short-term learning could both improve global market and reduce poverty since many of the problems caused by liquidity would include increased unemployment which necessarily would cause reduced market for products and poorer standard of living for many of the citizens of debtor countries.

2.1.1. Arguments supporting IMF prequalification of debtor for liquidity assistance.  
What could make prequalification for providing liquidity assistance in the IMF desirable    Calomiris (2000) citing the work of Fischer (2000), used the testimony of IMFs acting  managing director, Stanley Fisher before the commission of the who recognized the desirability of prequalification for providing liquidity assistance.   Under the present formula, IMF may take weeks or even months to negotiate terms and conditions for liquidity assistance and eventually that assistance offered would be in stages over a long period of time, which could no longer address the country borrowers need  to mitigate or prevent liquidity crises.  As IMF and development lending ban are manage to transfer resources to debtor countries during severe economic crises but said transfers had not shown to improve securities markets or to spur growth (Calomiris, 2000).  This requirement of prequalification is material component therefore of economic reform if economic objectives are to be met

2.1.3. What are other features of the Proposals for Reform
The Meltzer Commissions recommended based on the perceived gap between actual performance of these institutions and the combination of genuine objectives and principles that it viewed undisputed.  The undisputed decision of the commission for IMF to end long-term lending would low the institution to concentrate on short-term lending which is more akin to addressing liquidity problems.  That the need is undisputed should convince any doubting Tomas to see the merit for the need for economic reform. This is consistent with the 8-3 majority vote in further, recommending for IMF to focus on maintaining liquidity for emerging economies (Calomiris, 2000).    One requirement however for IMF to do is for these debtor countries to meet minimal pre-established standards before actually providing them lines of credit to countries that meet minimal pre-established standards at penalty rate (Calomiris, 2000).  This would help the IMF to prevent unnecessary liquidity crises and sponsoring bailouts of banks at taxpayers expense.
       
The decision to lend at penalty rate would improve accountability of those charged with funds used and would correct IMFs current practice of lending at a markup over its cost of funds which can be considered as rather an implied substantial subsidy for many countries. This kind of rate allowed is therefore crucial to the success of the proposal by the commission in promoting accountability for public funds used in the IMF.
     
Under this arrangement countries that are under a bona fide liquidity crisis would have the chance of improving their fiscal discipline by avoiding unnecessary collapse. This would however prevent countries seeking financial assistance for bail-outs from senior IMF lending at a penalty rate.  By focusing on short-term liquidity of countries facing, the financially costly bailout of banks would be put to a stop and would correct mistakes that had happened in the past (Calomiris, 2000).  
       
The commission argued that countries which borrow on senior terms from the IMF at a penalty rate are not channeling subsidies to a country that choose to expand its public deficit by bailing out its banks but would instead hinder that countrys facility to raise and retain private funds (Calomiris, 2000).   Thus IMF complicity in bailout would be avoided by giving a limited function to IMF that would increase accountability since IMF could not use the excuse of use of the funds for bailout purposes.  
       
Given also the proposed prequalification requirements by the commission for IMF to lend such as  meeting IMF fiscal standards and prudential banking standards like the requirement to maintain adequate capital and liquid reserves, there are  more time and resources for IMF in setting and enforcing prequalification standards (Calomiris, 2000).  .

2.2. The arguments not to have accounting and economic reform for IMFWB by way of loans and aid.
The reluctance to implement economic reform is clouded by perceive important political goal of IMF and WB by having these institutions as tools of ad hoc diplomacy.  Under this condition, it is argued the IMF, the World Bank, and the other development banks should have narrowly defined economic objectives or alternatively and that instead, it should be used as tools of ad hoc diplomacy. This would therefore put economic objectives as subservient to economic objectives.  Since economic objectives are given its serious consideration, accountability is denied to those who have the right to demand how the funds of IMFWB are used. Persons or parties opposing the basic premises of the Meltzer Report do not want to get to the constructive phase of the reform by wanting reformers to just go away.  Thus the main argument is to forget economic which would also mean forgetting economic reforms.  This makes it difficult to effect any reform because one cannot take off in implementing economic reform without overcoming objectives on the real purpose of WB and IMF.  Should this argument be sustained Meltzer Report should not be faulted as the result since this would violate the one of principles used in formulating the strategy recommended.  To illustrate, attaining political objective with the US blocking its IMF program unless Pakistan sign a nuclear nonproliferation treaty would complicate meeting economic objectives with political objectives (Calomiris, 2000).   Since economic objectives in put into secondary importance, not meeting the same would as well remain acceptable. This kind of experience of using IMFWB to impose political goal has indeed cause much problems than good since meeting the political objective could be used an escape to meeting the economic objective of IMFWB.

3. Conclusion
To conclude this paper has studied the arguments for and against requiring accounting and economic reform as a condition for IMFWB by way of loansaids.  This researcher is taking the position of the arguments for the need to have these reforms on the basis of the plausibility of arguments and the supporting evidences presented to counter the arguments for not having these needed reforms.  The need to promote political independence of debtor countries, the need to improve global market and the alleviation of poverty may have more chances of being attained if the arguments of the commission are taken and some of its recommendations followed compared to the argument for using the IMF and WB for political goals primarily. It is unfair to taxpayers to have lost their money in the form of taxes if people in the WB and IMF will continue to exercise their functions without the required accountability.  The American people would surely refuse power without accountability.