Wolfensohn's future
Speculation is mounting that this could be James Wolfensohn's last annual meeting as World Bank president. His tenure expires next year, and there's a growing feeling that Wolfensohn, who's 71 in December, will not seek re-election for a third term. So far he has not made any announcement on his future, but after nearly 10 years in office, some of his closest associates are urging him to get out.
Even if he decides to carry on, Wolfensohn is likely to face a big fight to get re-elected. Traditionally, the US government has the biggest say over who leads the World Bank, and rumours suggest that whoever wins next month's presidential election will want a new face at the helm.
Sources say that if President Bush gets re-elected then Colin Powell could take charge. A Senator Kerry victory could see the return of Stan Fischer or Larry Summers to the Bank, where they were both previously chief economists.
What to watch out for: Wolfensohn's closing press conference on October 3. Will there be a valedictory tone to his remarks?
Rato's debut
While this could be James Wolfensohn's last annual meeting, it will definitely be Rodrigo Rato's first as managing director of the IMF. So far he has said little about how he intends to take the Fund forward. Clearly these meetings present him with an opportunity to outline his vision.
Those who know him say he has all the right credentials. As a former Spanish finance minister, his background is very different to those of his predecessors. “He comes with experience of leading a major ministry of finance and understands the process of dealing at ministerial level,” says one source.
He is also well travelled and knows many of the world's finance ministers personally. That type of exposure for a managing director has not been seen before, adds the source. Close observers reckon Rato will prove to be a strong leader. “He has a reputation for being a reformer and being very decisive. He will put his own mark on the Fund,” says Bill Rhodes, senior vice-chairman at Citigroup.
What to watch out for: Rato's opening press briefing at 9.00 am on September 30. It will be his first opportunity to outline his vision openly.
Argentina and Iraq
Twelve months on from Dubai and the Argentine authorities still haven't finalized their restructuring of nearly $100 billion in defaulted debt. Earlier in the summer, local press reports were suggesting that the economy ministry was planning to announce its final offer during this year's annual meeting. Now, no one is sure.
People will also be watching how relations between Argentina and the IMF develop after the Fund agreed to the Latin nation's request to postpone some $1 billion-worth of principal debt payments originally scheduled to be paid this year.
Iraq has about $120 billion in defaulted debt, of which $43 billion is Paris Club debt. This Paris Club debt can't be restructured until Iraq agrees an IMF programme. Finance Minister Adil Abdul Mahdi will be in Washington to talk to the Fund and with creditors. It's possible that an IMF programme will be announced.
Any decision on Argentina and Iraq will have important implications for sovereign debt restructuring in general.
What to watch out for: Argentina's debt restructuring proposal.
An IMF programme for Iraq.
The G7 finance ministers' meeting on October 1.
The global economy
This year's G7 finance ministers' meeting should prove to be a lively affair, with global economic growth, America's vast deficits, the high oil price, China's exchange rate, structural reform in Europe and the direction of G7 monetary policy all likely to be on the agenda.
While the global economy is growing, things aren't as rosy as they seemed at the beginning of the year. Most economists are scaling back their US growth forecasts, and the latest US employment figures also leave much to be desired. The US economy added 144,000 new jobs in August, much lower than the 300,000 forecast a few months ago.
At the same time, China looks to be heading for a slowdown, Japan's recovery is hitting the rocks, and growth in Western Europe is weak (except in the UK). Then there are fears over potential bubbles in oil and real estate prices. Are we heading for a downturn? “I don't think anyone is predicting that the renewed weakness will lead to a recession,” says Andrew Crockett, president of JP Morgan International. “Global growth this year is likely to be between 3% and 4%. I'm not worried about the prospects for growth over the next 12 to 18 months.”
“Everything is tied to the US economy,” says Rhodes. “The recent mixed US economic data may be just a blip.”
One important issue, says Mohamed El-Erian, managing director at Pimco, is to find a balance between fiscal and monetary policy. “We're getting fiscal policy loosened around the world, which is leading some central banks to make noises about raising interest rates. That could have an impact on growth,” he says.
In order to achieve sustainable balanced global growth, he adds, three things need to happen simultaneously: the US needs to address its huge fiscal deficits, Asian countries need to allow their currencies to appreciate, and Western Europe needs to implement structural reforms. These need to be done “in an orderly fashion through policy adjustments,” says El-Erian.
What to watch out for: G7 finance ministers' meeting on October 1 and International Monetary and Financial Committee meeting on October 2.
IMF and World Bank governance
Rodrigo Rato's appointment as managing director of the IMF brought sharp focus to the way in which the Bretton Woods institutions choose their leaders. Although not a formal rule, the Europeans typically select the head of the IMF, while the Americans pick the president of the World Bank.
Horst Kohler's unexpected resignation as IMF managing director in March presented the Fund with a great opportunity to break with tradition. The Fund's supporters argue that the selection process for Rato was the most transparent in its history. The board, for example, interviewed Mohamed El-Erian for the position after his name was put forward by Shakour Shaalan, an executive director at the Fund. Rato was appointed because he was the best candidate, they say.
The critics say, however, that the election process is still opaque. The arrangement is “blatantly undemocratic, reeks of colonialism and openly discriminates against some of the world's best candidates simply because they do not have the ‘correct' nationality,” says Moises Naim, editor of Foreign Policy magazine.
Another contentious issue is the voting structure at the two institutions. Many observers are urging that developing countries, especially Asia, should have a greater say in the running of the World Bank and IMF. “The current voting power primarily reflects the relative position of countries around the mid-20th century, taking little account of new nations and emerging economies,” says Nicolas Eyzaguirre, Chile's finance minister.
What to watch out for: The IMF/World Bank governors' meeting on October 3.