Tuesday, June 29, 2010

IMF and World Bank gets pay raises and criticism

The World Bank and the International Monetary Fund have approved pay raises for it's employees. The decision to give pay raises were criticized by the banks major donors in the US and Europe. The donors are critical of the raises because governments world wide have had to freeze pay or make cut backs in the wake of the global recession.

From the Washington Post, writer Howard Schneider explains the controversy.

U.S. representatives on the IMF and World Bank boards abstained in the recent votes that approved raises of 4.9 percent and 3.7 percent, respectively. They were joined by European nations that felt the increases set the wrong tone when governments are being pushed to retrench. The IMF just released its "Ten Commandments for Fiscal Adjustment in Advanced Economies."

Raises at the World Bank were approved at a Wednesday board meeting, just a day after Britain released an austerity package featuring new taxes and spending cuts -- not the best timing for winning the British board member's support.

"We greatly value the hard work and expertise of bank staff," said Rob Kelly, a spokesman for Britain's Department for International Development. But "when governments worldwide are cutting public spending, increasing taxes, and reducing or freezing public-sector pay, to award an above-inflation pay rise risks making the bank appear out of touch."

The dispute mirrors some of the broader dynamics in the world economy. The United States and Europe remain the major financial backers of the IMF and World Bank, and they were recently tapped to help replenish the coffers of both institutions after the global crisis spurred record lending to support economies around the world. Salaries of top World Bank staff were frozen last year in recognition of the crisis.

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